VA dramatically transformed its health care delivery system over the last decade. A central goal of this transformation has been to reduce the need for, and the length of, inpatient hospital stays by providing primary care in outpatient settings and taking advantage of technological advances that reduce the need for hospitalization. VA developed a continuum of care grounded in outpatient settings; made available a broader array of services, including preventive care; and opened hundreds of community-based outpatient clinics. As a result, VA reduced the length of inpatient stays while providing health care to a growing number of veterans. From fiscal year 1996 through fiscal year 2004, VA's national acute inpatient daily census fell by nearly 40 percent while the number of veterans who received health care from VA increased by about 76 percent (2 million). As VA increased its emphasis on outpatient care rather than inpatient care, VA was left with an increasingly obsolete infrastructure, including many hospitals built or acquired more than 50 years ago in locations that are sometimes far from where veterans live. To address its obsolete infrastructure, VA initiated its CARES process-- the first comprehensive, long-range assessment of its health care system's capital asset requirements since 1981. Since its inception in 1999, VA's CARES process has reached several major milestones (see table 1). The remaining steps in the CARES process include completing alignment decisions for inpatient services, implementing decisions that have been completed, and institutionalizing CARES. Institutionalizing CARES will involve integrating the CARES process--a systematic, data-driven framework for evaluating VA's capital assets in light of projected demand for VA health care services--into VA's ongoing strategic planning efforts. In the announcement of CARES decisions in May 2004, the Secretary of Veterans Affairs stated that through the CARES process VA had developed more complete information about the demand for VA health care and a more comprehensive assessment of its capital assets than it ever had before. The Secretary noted that this information, along with the experience gained through conducting CARES, positioned VA to continue to expand the accuracy and scope of its planning efforts. The Secretary stressed that VA would focus on integrating the CARES process into its annual strategic and capital planning efforts in order to ensure that VA uses the best information available when making plans to meet the health care needs of current and future veterans. VA faces a key challenge in developing sufficient information to complete inpatient service alignment decisions. VA did not complete all its inpatient alignment decisions in the CARES process because it concluded that it lacked sufficient information to do so. VA did not complete inpatient alignment decisions across VA for long-term care (including nursing home care) and mental health services (including acute and long-term psychiatry, residential rehabilitation, and domiciliary care). VA also lacked sufficient information to complete its inpatient alignment decisions for services at 12 facilities. Developing information needed to complete inpatient alignment decisions for long-term care and mental health services across VA will be difficult for three reasons. First, it is unclear whether VA has adequate information on the number of veterans who will need and seek inpatient long-term care and mental health services from VA on a daily basis because VA has not finalized models for projecting future demand for these services. In VA's May 2004 announcement of CARES decision, VA concluded that its models were inadequate to forecast demand. As a result, VA did not complete its inpatient alignment decisions for these services across VA. While VA officials told us that they have subsequently revised models and forecasts of demand for care from VA, these models and forecasts are not finalized. Second, VA has not made the policy determinations that would allow it to generate information concerning which veterans it will serve in the future among those seeking long-term care--including nursing home care--and the nursing home care services it will offer. Completing inpatient alignment decisions for nursing home care requires having a technical forecast of how many veterans will need and seek care from VA, and requires information generated from policy decisions concerning which veterans VA will serve and which nursing home services VA will provide. VA lacks this information because it has not determined criteria to be used to identify which veterans it will serve as a matter of policy, in addition to those required by law, criteria such as a veteran's level of service- connected disability or income. In addition, VA lacks information on which services will be provided, such as specifying to whom it will provide nursing home care for short-stay care rehabilitation of post-acute conditions such as hip replacement and to whom it will provide long-stay support and supervision for chronic conditions such as dementia. VA officials told us that such policy decisions have not been made and, as a result, VA's long-term care model cannot provide the forecasts of workload demand that are needed to make inpatient alignment decisions. Third, VA has not finalized its strategic plan for long-term care, which would provide information for determining where VA needs to provide these services and the types of services needed. Developing adequate models for forecasting likely demand and resolving policy issues for inpatient long-term care would provide key information needed to develop a long-term care strategic plan. According to the Secretary's May 2004 summary of CARES decisions, an important element of the strategic plan for long-term care will be the goal of ensuring that veterans' access to an appropriate range of these services is equitable. This plan would help VA decide whether its current facilities and inpatient services are in the best locations to meet future demand or whether changes are needed to better align these facilities and services with demand. Developing information needed to complete inpatient alignment decisions at 12 of VA's 172 facilities will be challenging because VA does not have sufficiently precise information to evaluate tradeoffs between the costs and benefits of various alignment options. (See table 2 for a list of these facilities and their corresponding networks.) In some cases, these alignment decisions include inpatient long-term and mental health services. In general, VA concluded in its May 2004 announcement of CARES decisions that it does not have sufficient information to determine whether to maintain inpatient services as currently aligned at these facilities or to realign the services. For example, in the Boston area, VA provides inpatient care in 4 outdated facilities. VA concluded that it did not have sufficient information about the cost-effectiveness and benefits of building a replacement hospital in the area. VA also lacked sufficient information about how to preserve veterans' access to nursing home services if such services in the Boston area are realigned. Similarly, VA faces a challenge developing sufficient information about the costs and benefits of options to make alignment decisions for inpatient services at its medical facility in Waco, Texas. In October 2003, network officials estimated that in the absence of a realignment of services at the Waco facility, which is primarily a psychiatric care hospital, VA will need about $1.5 million a year to maintain unused space at the facility, and that through 2022 the facility will require an additional $61 million for nonrecurring capital costs such as renovation. Options for realigning inpatient services at the Waco facility include moving some services, such as acute inpatient psychiatry, to other locations, such as VA's medical facility in Temple, Texas. VA faces a challenge weighing these options and completing its alignment decision because VA has concluded that it lacks sufficient information on the possible savings it would achieve through realignment and the likely costs of construction at the Temple facility if services are added there. VA also concluded that it lacked sufficient information on access to inpatient services and continuity of care for veterans who currently receive health care services at the Waco facility. This information could help VA weigh options for the alignment of inpatient services at the Waco facility. This could also help VA address the concerns of stakeholders--including veterans' service organizations, elected officials, and employee representatives--who will be affected by changes at the Waco facility. A group of stakeholders with concerns has asked to work with VA to develop alternatives for the facility and to assist in finding ways to lease the facility's unused buildings and excess property. VA could use information on the costs and benefits of various alignment options not only to complete its inpatient alignment decisions for the 12 facilities, but also to address the concerns of stakeholders and others. Stakeholders--including veterans' service organizations, affiliated medical schools, employee unions, and communities--as well as decision makers and veterans are more likely to have confidence in decisions at specific VA medical facilities when VA can present sufficient information about the key costs and benefits of alternative options for the alignment of inpatient services. Costs and benefits to be considered are the impacts these alternatives would have on the quality of and access to care; the cost to the government; VA's other strategic goals, such as the medical education of health care providers and research; and the local community's economy. If VA had this kind of information, it would be better positioned to make decisions and address concerns raised by veterans and stakeholders. In the past, some stakeholders have opposed proposed changes to VA's health care system that they felt were not in the best interests of their members, even when those changes could have benefited veterans. For example, medical schools' reluctance to change long- standing relationships with VA medical facilities has sometimes been a major factor inhibiting VA's asset management. Similarly, unions have been reluctant to support decisions that involve restructuring services when doing so could result in staffing reductions. VA has taken several steps to address the challenge of developing sufficient information to complete its remaining inpatient alignment decisions. These steps include developing information for completing inpatient alignment decisions for long-term care and mental health across VA and information for completing decisions for inpatient services at the 12 facilities. For long-term care and mental health, VA officials told us that VA has developed more adequate models to forecast the number of veterans who will need and seek these services from VA on a daily basis in the future than the models considered for use in the CARES process. However, VA officials have not finalized the long-term care and mental health models or forecasts and said that they will continue to refine these models. Regarding the policy determinations to generate information for inpatient long-term care, VA has included a proposal in its current appropriations request to revise its policy on which veterans it will provide nursing home services to and the extent to which it will provide short-stay and long-stay care beginning in fiscal year 2006. However, the proposal has not yet been made policy. VA officials told us that they are trying to address whether they can develop the information needed to incorporate into VA's nursing home model and projected demands for services before these policy issues are resolved. VA has taken several steps to develop the information it needs to complete decisions on the alignment of inpatient services at the 12 medical facilities where alignment decisions are not complete. VA hired a contractor in January 2005 who will be responsible for developing information on the costs and benefits of specific options for aligning inpatient services at these 12 facilities. To ensure stakeholder involvement in developing this information, VA gave notice of the establishment of the Advisory Committee for CARES Business Plan Studies in October 2004, under the Federal Advisory Committee Act, which includes an advisory subcommittee for each location. These committees include both network staff and local stakeholders and will help develop information about the concerns of veterans, employees, and other stakeholders or interest groups, for example, by holding public meetings. To further assist the contractor and carry out other responsibilities, in June 2004, VA established a new headquarters office, the Office of Strategic Initiatives, which will oversee the completion of these studies. Improving the management of VA's large inventory of excess real property--including 8.5 million square feet of vacant space--poses another key challenge to VA. This challenge results, in part, from the disincentives associated with the administrative complexity and costs of disposing of federal property. In addition, the lengthy process required to establish leases, along with some local managers' lack of expertise needed to negotiate these leases, adds to VA's challenge. VA has taken steps to address some of these difficulties. Managing excess property is challenging for VA in part because of the disincentives associated with the administrative complexity and costs involved in the disposal of federal property. Like all federal agencies that own facility space or other forms of real property, VA must comply with federal requirements governing property disposal that are intended to protect subsequent users of the property from environmental hazards and preserve historically significant sites. For example, federal agencies are required to assess and pay for environmental cleanup that may be needed before disposing of property--a process that can require years of study and result in significant costs. Moreover, federal agencies that own buildings designated as historic structures must comply with provisions of the National Historic Preservation Act, which requires agencies to manage historic properties under their control and consider the effects of their actions on historic preservation. About 30 percent of VA's buildings have been designated as historically significant. In addition, like other federal agencies, VA must generally make excess federal facilities available to other federal agencies and programs for the homeless when disposing of property. As valuable as these legal requirements are, their administrative complexity and the associated costs of complying with them create disincentives to the disposal of excess property. VA officials told us these requirements have contributed to some managers' decisions to retain excess property rather than pursue disposal. In general, disposal of VA property, until November 2004, was controlled by the General Services Administration (GSA). Since 1990, VA disposed of no properties through this process and few properties through other means. In November 2004, Congress gave VA greater discretion in managing the disposal of excess property. VA had requested changes in its disposal authority to address disincentives that VA managers believed impeded their progress in disposing of excess property. The disincentives included administrative complexity and a limitation that allowed use of disposal proceeds only for nursing home construction and renovation. Changes in VA's disposal authority included permitting VA to directly manage the disposal of excess property instead of using the disposal process managed by GSA. In addition, VA was granted the authority--to the extent specified in appropriations acts--to use proceeds from disposal not only for nursing home construction and renovation but for use in construction or renovation of other VA patient facilities or to defray expenses associated with their disposal requirements. VA officials acknowledge that direct management of the disposal process gives VA managers more flexibility in managing the disposal of excess buildings and land. However, they maintain that to dispose of excess property VA managers still face disincentives associated with legal requirements to address potential environmental hazards and the preservation of significant historical sites prior to disposal. In addition, VA officials acknowledge that even though VA may now use disposal proceeds for improving or disposing of other VA buildings, they believe the use of the funds for specific projects is subject to congressional approval in the appropriations process each year. VA officials also told us they believe that VA effectively derives no new funds from this authority because, in practice, funds obtained from the disposal process would be deducted each year from the amount that Congress appropriates. Unlike most federal agencies, VA has authority to enter into leases with other organizations, called enhanced-use leases, but VA managers face difficulties in leasing excess property to non-VA organizations under this authority. Specifically, the length of time needed to review and approve leases poses a challenge to VA in leasing excess property. For example, to establish leases, VA has had to negotiate with entities in the community that are interested in leasing VA property and obtain public comment and perform multiple rounds of review and approval by VA network and headquarters officials. The leases VA has established include, for example, partnerships for parking garages, child development centers, and senior housing. Contributing to the length of the leasing process is a requirement that VA quantify the benefits that veterans will likely derive from a lease-- a task that officials say can be difficult and time consuming. For example, if VA establishes a lease for a child development center that may help in the recruitment and retention of VA staff to provide health care, VA is required to quantify the benefits to veterans of the child development center. Another difficulty that has hindered VA's leasing activities has been that some local managers lacked the expertise needed to develop, negotiate, and finalize leases. Such expertise includes legal, real estate, marketing, and financial skills. The CARES Commission found that the lack of expertise made it difficult for VA to attract potential investors and navigate local zoning and land use requirements. Although the Commission noted that some VA networks had been successful in arranging leases for excess property, relatively few leases have been established since 1991, when VA was given authorization to lease excess property. VA has taken steps to address the difficulties associated with the disposal of excess property. For example, VA created a new position--the capital asset manager--in each of its networks to strengthen its management of excess property. These managers will be responsible for a number of tasks involving capital assets, including facilitating the disposal of excess property. The capital asset managers will also be responsible for ensuring that VA has current data on the condition and the use of its buildings and land. VA officials reported that they sought capital asset manager candidates with experience in the disposal of federal real property as a means to improve VA's ability to manage its own disposal process. In addition, VA is developing an agencywide capital asset disposal policy that is designed to guide managers' efforts to reduce VA's inventory of unneeded property. VA is also taking steps to address the difficulties it faces in developing enhanced-use leases of its excess property. To streamline VA's preparation of leasing proposals, VA recently granted authority to its capital asset managers to make some enhanced-use leasing decisions, such as conducting feasibility studies, creating enhanced-use lease business plans, and writing leases and memoranda of understanding. VA expects this will expedite its leasing process. The new capital asset managers will also be responsible for identifying leasing opportunities and negotiating leases. To facilitate leasing activities, including some that were identified in CARES, VA is making real estate, legal, marketing, financial, and other types of expertise available to network managers through a contract awarded in April 2005. According to VA officials, this expertise will help network managers develop key information, such as the potential market value of VA's excess property. VA faces another key challenge in determining priorities for the purchase of inpatient services from non-VA providers to improve access to care by making these services available closer to where veterans live. While VA determined that in 25 markets purchasing acute and tertiary inpatient services from non-VA providers would be a reasonable option for providing these services closer to where veterans live, VA's network managers, who are responsible for making such decisions, have to balance these efforts against competing priorities. Improving veterans' access to inpatient acute and tertiary care through purchased care is one of many priorities that VA managers may support with their available resources. As a result, VA managers have to weigh the costs and benefits of various uses of their resources to determine whether, when, and to what extent they should purchase acute and tertiary care services from non-VA providers and to what extent resources should be spent instead, for example, on improving access to long-term care, mental health, and primary care services. VA determined that in 25 markets a large number of enrolled veterans face driving times that exceed VA standards in order to obtain inpatient acute and tertiary care services at the nearest VA-owned or VA-affiliated medical facility. VA also determined that in these 25 markets the number of veterans facing lengthy driving times was not sufficient to justify building a new VA facility and that a reasonable option for reducing these driving times would be to purchase inpatient services from non-VA providers. (See app. I for a list of the 25 markets and a description of the geographic areas that each market covers.) About 800,000 enrolled veterans could potentially benefit from the purchase of these inpatient services, according to our estimate using VA data for fiscal year 2001. The number of enrolled veterans potentially affected in any one of the 25 markets ranged from about 13,000 to 76,000. The number of these enrolled veterans who would actually need inpatient services in a given year would be substantially less than the total number of enrollees and would depend on a variety of factors such as age, gender, and health status. VA's experience in Chattanooga, Tennessee, although not located in one of the 25 markets, illustrates the challenge network managers face in balancing competing priorities. VA does not have an inpatient facility in Chattanooga, and most veterans in the Chattanooga area face drives of 2 or more hours to obtain inpatient care at VA's medical centers in Murfreesboro and Nashville, Tennessee. To reduce these driving times, VA contracted for acute inpatient services with a non-VA medical center in Chattanooga from September 2000 through August 2002. This arrangement did not, however, substantially improve veterans' access to inpatient care because network managers restricted referrals to the non-VA facility to veterans with relatively less severe medical conditions, such as veterans who did not require surgery or hospital stays longer than 5 days. Although network managers purchased inpatient services from non-VA providers in Chattanooga, the managers had to reconcile this effort with other needs. For example, network managers told us that the restrictions they placed on referrals to the non-VA facility were necessary to manage resources effectively as well as to ensure that patient workload at VA's Murfreesboro facility remained sufficient to support another priority--graduate medical education. As a result of the restrictions placed on the referrals, less than 5 percent of Chattanooga veterans' inpatient workload was provided in Chattanooga in fiscal year 2002. VA provided most of its inpatient hospital workload for Chattanooga-area veterans in its medical facilities in Murfreesboro and Nashville. VA is developing guidance to address the challenge VA's network managers face in determining priorities for purchasing inpatient care. This guidance specifies information that networks are to provide to headquarters when seeking approval of contracts with non-VA providers, including the inpatient services the network will purchase, the amount of resources needed to purchase these services, a timetable for when the services will be available, and the source of funding for these services. The guidance also requires network managers to provide evidence of the cost effectiveness of the proposed contract as well as a discussion of the potential impact of contracting on other health care services in the network. Through the CARES process, VA has undertaken a critically important effort to address long-standing problems with the management of its capital assets. If it completes and successfully implements CARES decisions, VA may be able to enhance veterans' health care by reinvesting resources now spent on excess property. Achieving this will depend on VA's success in dealing with the challenges of developing sufficient information to complete inpatient alignment decisions, improving the management of excess property, and determining priorities for the purchase of inpatient services from non-VA providers to improve access to care. It is too early to know whether the steps VA is taking to address these challenges will be successful. VA's ability to meet the goal of providing high-quality, accessible, cost- effective health care to the nation's veterans will depend largely on the extent to which VA is successful in institutionalizing the CARES process into its ongoing strategic and capital planning efforts. In the short term, institutionalizing the capacity to assess VA services and real property would provide a framework for making decisions about the alignment of long-term care and mental health services as VA develops and refines models for these services. An essential step in completing alignment decisions is finalizing the models and demand forecasts for long-term care and mental health services as well as finalizing the long-term care strategic plan. In the longer term, institutionalizing the CARES process would help ensure that VA has a systematic, data-driven framework for evaluating options for managing its real property in order to better meet the future health care needs of veterans. Such a framework could contribute to VA's effectiveness as a steward of national resources and provider of health care services for our nation's veterans. In written comments on a draft of this report, VA concurred with our findings and conclusions and provided a technical correction and additional information on the CARES process, which we incorporated where appropriate. VA comments are reprinted in appendix II. We are sending copies of this report to the Secretary of Veterans Affairs, appropriate congressional committees, and other interested parties. We will also make copies available to others upon request. This report will be available at no charge on GAO's Web site at http://www.gao.gov. If you or your staff have any questions, please contact me at (202) 512-7101 or bascettac@gao.gov. Contact points for our Offices of Congressional Relations and Public Affairs may be found on the last page of this report. GAO staff who made major contributions to this report are listed in appendix III. 7--South Carolina This market includes most of South Carolina and part of Georgia. VA owns two inpatient medical facilities in this market, located in Charleston and Columbia, S.C. This market includes part of southwestern Florida. VA owns one inpatient medical facility in this market, located in Bay Pines, Fla. This market includes most of northern Florida and part of southern Georgia. VA owns two inpatient medical facilities in this market, located in Gainesville and Lake City, Fla. This market includes the southern central portion of Ohio. VA owns one inpatient medical facility in this market, located in Chillicothe, Ohio. This market includes northeastern Ohio. VA owns two inpatient medical facilities in this market, located in Cleveland, Ohio (Brecksville and Wade Park). This market includes the eastern central portion of Illinois and part of western Indiana. VA owns one inpatient medical facility in this market, located in Danville, Ill. This market includes parts of southern Alabama and western Florida. VA does not own any inpatient medical facilities in this market. This market includes the central portion of Texas. VA owns two inpatient medical facilities in this market, located in Temple and Waco, Tex. This market includes southern Texas. VA does not own any inpatient medical facilities in this market. This market includes New Mexico, western Texas, and parts of southern Colorado and western Oklahoma. VA owns three inpatient medical facilities in this market, located in Albuquerque, N. Mex., and Amarillo and Big Spring, Tex. This market includes eastern Colorado, southeastern Wyoming, and parts of both Kansas and Nebraska. VA owns two inpatient medical facilities in this market, located in Denver, Colo., and Cheyenne, Wyo. This market includes most of Montana and part of western North Dakota. VA owns two inpatient medical facilities in this market, located in Fort Harrison and Miles City, Mont. This market includes Alaska. VA owns one inpatient medical facility in this market, located in Anchorage, Alaska. Geographic area covered by market and the VA inpatient medical facilities within it 20--Inland North This market includes eastern Washington, northern Idaho, northeastern Oregon, and part of northwest Montana. VA owns two inpatient medical facilities in this market, located in Spokane and Walla Walla, Wash. 20--Inland South This market includes parts of eastern Oregon and southern Idaho. VA owns one inpatient medical facility in this market, located in Boise, Idaho. This market includes western Oregon, southwestern Washington, and part of northwestern California. VA owns four inpatient medical facilities in this market, located in Portland, Roseburg, and White City, Oreg., and Vancouver, Wash. This market includes northeastern California and western Nevada. VA owns one inpatient medical facility in this market, located in Reno, Nev. 21--South Coast This market includes part of central California. VA owns three inpatient medical facilities in this market, located in Livermore, Menlo Park, and Palo Alto, Calif. This market includes most of Iowa and parts of Illinois and Missouri. VA owns three inpatient medical facilities in this market, located in Des Moines, Iowa City, and Knoxville, Iowa. This market includes most of Minnesota and part of northwestern Wisconsin. VA owns two inpatient medical facilities in this market, located in Minneapolis and St. Cloud, Minn. 23--North Dakota This market includes most of North Dakota and parts of both Minnesota and South Dakota. VA owns one inpatient medical facility in this market, located in Fargo, N. Dak. 23--South Dakota This market includes most of South Dakota and parts of five other states: Iowa, Minnesota, Nebraska, North Dakota, and Wyoming. VA owns three inpatient medical facilities in this market, located in Fort Meade, Hot Springs, and Sioux Falls, S. Dak. VA health care facilities are organized into 21 regional networks, known as Veterans Integrated Service Networks, that are to coordinate the activities of and allocate resources to VA health care facilities. VA had 22 networks until January 2002, when it merged Networks 13 and 14 to form a new network, Network 23. VA defines a health care market as a geographic area having a sufficient population and geographic size to benefit from the coordination and planning of health care services and to support a full health care delivery system. Each VA network includes from 2 to 6 markets; nationwide, VA has 77 markets. In addition to the contact named above, James C. Musselwhite, Assistant Director; Kristen Joan Anderson; Frederick Caison; Krister Friday; Clare Mamerow; and Paul Reynolds made key contributions to this report. Federal Real Property: Further Actions Needed to Address Long-standing and Complex Problems. GAO-05-848T. Washington, D.C.: June 22, 2005. VA Health Care: Important Steps Taken to Enhance Veterans' Care by Aligning Inpatient Services with Projected Needs. GAO-05-160. Washington, D.C.: March 2, 2005. High-Risk Series: An Update.GAO-05-207. Washington, D.C.: January 2005. VA Health Care: Access for Chattanooga-Area Veterans Needs Improvements. GAO-04-162. Washington, D.C.: January 30, 2004. Budget Issues: Agency Implementation of Capital Planning Principles Is Mixed. GAO-04-138. Washington, D.C.: January 16, 2004. Federal Real Property: Vacant and Underutilized Properties at GSA, VA, and USPS. GAO-03-747. Washington, D.C.: August 19, 2003. VA Health Care: Framework for Analyzing Capital Asset Realignment for Enhanced Services Decisions. GAO-03-1103R. Washington, D.C.: August 18, 2003. Department Of Veterans Affairs: Key Management Challenges in Health and Disability Programs. GAO-03-756T. Washington, D.C.: May 8, 2003. VA Health Care: Improved Planning Needed for Management of Excess Real Property. GAO-03-326. Washington, D.C.: January 29, 2003. Major Management Challenges and Program Risks: Department of Veterans Affairs. GAO-03-110. Washington, D.C.: January 2003. High-Risk Series: Federal Real Property. GAO-03-122. Washington, D.C.: January 2003. VA Health Care: VA Is Struggling to Address Asset Realignment Challenges. GAO/T-HEHS-00-88. Washington, D.C.: April 5, 2000. VA Health Care: Improvements Needed in Capital Asset Planning and Budgeting. GAO/HEHS-99-145. Washington, D.C.: August 13, 1999. VA Health Care: Challenges Facing VA in Developing an Asset Realignment Process. GAO/T-HEHS-99-173. Washington, D.C.: July 22, 1999. VA Health Care: Capital Asset Planning and Budgeting Need Improvement. GAO/T-HEHS-99-83. Washington, D.C.: March 10, 1999.

Summary:
The Department of Veterans Affairs (VA) operates one of the nation's largest health care systems. In 1999, GAO reported on VA's aged, obsolete capital assets, noting that better management of these assets could significantly reduce VA's operating costs. GAO also noted that VA could reinvest the savings to enhance veterans' health care. In response, VA initiated its Capital Asset Realignment for Enhanced Services (CARES) process to identify what health care services it should provide in which locations through fiscal year 2022. CARES resulted in decisions to realign inpatient services at some VA facilities and to leave services as currently aligned at others. VA did not complete inpatient alignment decisions across VA for long-term care and mental health services and for inpatient services at some facilities because VA lacked sufficient information on demand for such care and other factors. GAO was asked to examine key challenges VA will face in completing and implementing CARES. This report discusses three key challenges: (1) developing information to complete inpatient alignment decisions, (2) improving management of excess property, and (3) determining priorities for purchasing care to improve access. GAO's analysis is based on its prior CARES work, review of CARES documents, and interviews with VA officials. VA faces a key challenge in developing sufficient information to complete inpatient service alignment decisions. VA concluded that it did not have sufficient information to complete such decisions across VA for long-term care (including nursing home care) and mental health services (including acute psychiatric care). VA also concluded that it did not have sufficient information to complete alignment decisions for inpatient services at 12 facilities. VA faces this challenge for several reasons. For example, it is unclear whether VA has adequate information on the number of veterans who will seek nursing home care and inpatient mental health services from VA on a daily basis because it concluded that its models were inadequate to forecast demand and it has not finalized revised models. VA has taken steps to address the challenge of developing the information needed such as working to develop improved models of demand for these services. Improving the management of VA's large inventory of excess property--including 8.5 million square feet of vacant space--poses another key challenge. This challenge results from disincentives associated with administrative complexity and costs of the disposal of federal property. Like all federal agencies, VA must comply with federal requirements governing property disposal that are intended, for example, to protect subsequent users of the property from environmental hazards. Some VA managers have retained excess property because the complexity and costs of complying with these requirements were disincentives to disposal. Congress has given VA authority to use disposal proceeds for construction and renovation of VA patient facilities and disposal activities, to the extent specified in appropriations acts. VA is taking steps to address this challenge, including hiring network-level capital asset managers to facilitate disposal. VA faces another key challenge in determining priorities for the purchase of inpatient services to improve access to care. While VA determined that purchasing inpatient services from non-VA health care providers in 25 health care markets would be a reasonable option for providing care closer to where veterans live, VA's network managers have to balance the costs and benefits of purchasing care against competing priorities. VA has taken steps to facilitate managers' development of information they need to decide among priorities, including information on the cost effectiveness of proposed contracts and their impact on other health care priorities. To improve its management of capital assets and enhance veterans' health care by reinvesting resources now spent on excess property, VA must overcome challenges in completing and implementing decisions reached through CARES. Furthermore, institutionalizing the CARES process into its ongoing strategic planning will be crucial to VA's effectiveness as a steward of national resources and a health care provider for the nation's veterans. VA concurred with GAO's findings and conclusions.