As part of a uniform set of benefits provided to all veterans who enroll in its health care system, VA, through PSAS, provides prosthetic items to veterans. PSAS has budget and management responsibilities for VA’s provision of prosthetic items, including allocating funding for prosthetic items to VISNs and VAMCs and ensuring veterans receive prescribed prosthetic items in a timely manner. According to PSAS officials, several factors—including expansions in the types of items VA defines as prosthetic items—contributed to an increased demand for prosthetic items between fiscal years 2005 and 2009. VA, through VHA, operates one of the nation’s largest health care systems. VA provides a range of services to veterans who are enrolled in its health care system, such as preventive and primary health care, a full range of outpatient and inpatient services, and prescription drugs. VA’s outpatient care includes providing prosthetic items to those veterans disabled as a result of amputation or permanent impairment of a body part or function. VA classifies a variety of medical devices and equipment as prosthetic items, including artificial arms and legs, eyeglasses, hearing aids, hearing aid batteries, home dialysis equipment and supplies, home respiratory aids, hospital beds, orthoses (orthotic braces, supports, and footwear), pacemakers, telehealth equipment, and wheelchairs. These items range in price, including a cane tip that costs about $2 as well as a microprocessor-controlled knee which can cost more than $100,000. In addition, while the vast majority of prosthetic items are purchased from outside vendors, VA fabricated nearly 4 percent of the artificial limbs and orthoses provided to veterans in fiscal year 2009. Table 1 shows the types of prosthetic items VA provides and specific examples of each type. In fiscal year 2009, the type of prosthetic items for which VA spent the largest amount was surgical implants, which accounted for 27 percent of the more than $1.6 billion VA spent for prosthetic items that year. (See fig. 1.) See appendix I for information on the total costs of and number of prosthetic items provided to veterans in fiscal years 2005 through 2009. The funding VA uses to procure prosthetic items for veterans is made available as part of the appropriations process for VA’s health care services. Each year, VA formulates its annual health care budget by developing estimates of its likely spending for all of its health care services, including prosthetic items. We have previously noted that the formulation of VA’s budget is challenging, as it is based on assumptions and imperfect information on the health services VA expects to provide. For example, VA is responsible for anticipating the service needs of very different veteran populations—including an aging veteran population and a growing number of veterans returning from military operations in Afghanistan and Iraq—and for calculating future costs associated with providing health care services to these populations. VA uses an actuarial model to develop its budget estimates for most of its health care services, including estimates for prosthetic items, and incorporates these estimates in the department’s annual congressional budget justification to the appropriations subcommittees. Rather than receiving an appropriation for each individual health care service it provides, VA receives an appropriation for all its health care services—the Medical Services appropriation. As a result, VA has considerable discretion in how it allocates appropriated funding among its various health care services. VA allocates the Medical Services appropriation either as specific purpose funding or general purpose funding. Where specific purpose funding is restricted to the purposes of individual health care services, such as organ transplant services or readjustment counseling, general purpose funding may be used to cover costs related to any health care service, including services for which specific purpose funding may be insufficient. While most of the funding from the Medical Services appropriation is distributed among the VISNs and ultimately to the VAMCs, according to VA officials, VA also maintains a national reserve to provide additional funding, when needed, to VISNs and VAMCs, as well as for those health care services for which VA allocates specific purpose funds. In addition, during the course of a fiscal year, VA may reallocate funding—that is, adjust how the department allocates its funding—to match spending needs, including redesignating specific purpose funds as general purpose funds or vice versa. Citing significant decreases in the level of care and timely delivery of prosthetic items, VA designated funding for prosthetic items as specific purpose funding in 2001. In general, VA allocates specific purpose funds to PSAS, which in turn allocates them to VISNs; VISNs then allocate funds to VAMCs. These specific purpose funds are for the procurement of prosthetic items as well as the procurement of various components for VA- fabricated or VA-repaired prostheses and orthoses. According to VA officials, these funds do not cover administrative and clinical costs, such as the salaries and benefits of PSAS personnel or labor costs associated with VA fabrication of prosthetic items. Typically, these administrative and clinical costs are covered by a VISN’s or VAMC’s general purpose funds. In addition, VISNs and VAMCs may use their general purpose funds for prosthetic items if spending needs exceed the amount available in specific purpose funds. After physicians and other clinicians at VA medical facilities determine the prosthetic needs of veterans and prescribe specific prosthetic items to meet those needs, PSAS is responsible for processing the prescriptions and providing the prescribed prosthetic items to individual veterans. According to PSAS officials, purchasing agents, generally located at VAMCs, perform administrative actions to process prescriptions for prosthetic items. These administrative actions include activities such as requesting and obtaining additional information from a prescribing clinician, obtaining a price quote from a contractor, and creating a purchase order to authorize the procurement and shipment of an over-the- counter item or the fabrication of a custom-ordered item. PSAS officials stated that the processing of the prescription is considered complete when a prosthetic item has been issued to the veteran from PSAS’s inventory or a purchase order is created for the item. PSAS also has some clinical staff—prosthetists and orthotists—who provide clinical services related to the provision of artificial limbs and orthoses, including participating in the evaluations of prosthetic needs for amputees and, subsequently, designing, fabricating, fitting, and adjusting artificial limbs and custom orthoses. PSAS officials reported that they provide varying levels of services related to the design, fabrication, fitting, and delivery of artificial limbs and orthoses at 77 locations. PSAS officials are also responsible for the overall administration of VA’s provision of prosthetic items. Specifically, PSAS officials in VA’s central office establish national policies and procedures on VA’s provision of prosthetic items; allocate VA specific purpose funding for prosthetic items among the 21 VISNs; monitor the spending of this specific purpose funding and, if appropriate, facilitate the reallocation of funding among the VISNs; and establish and monitor mechanisms, such as performance measures and goals, to evaluate VA’s performance in providing prosthetic items. VISN prosthetic representatives (VPR), located within each of VA’s 21 VISNs, further allocate specific purpose funding among their VAMCs and, with the assistance of local prosthetics chiefs, support central office efforts to monitor VA’s spending for prosthetic items and VA’s performance in providing prosthetic items. Between fiscal years 2005 and 2009, the annual number of veterans who received prosthetic items through PSAS increased about 50 percent and the total amount VA spent on those items grew by about 60 percent. According to VA officials, a number of factors have contributed to this growth and may contribute to expected increases in the future. These factors include the following: VA has expanded the medical devices and equipment it classifies as prosthetic items. For example, during fiscal year 2008, VA classified biological implants, such as bone and tissue grafts, as prosthetic items. In fiscal year 2009, VA spent about $21 million on biological implants. New technologies in prosthetic items available to veterans may increase costs. For example, in the fall of 2010, PSAS plans to begin providing the X2 microprocessor knee—the latest generation of components for prosthetic legs—to some veterans. According to PSAS officials, this component is expected to add about $40,000 to the cost of each prosthesis using this technology. VA guidance clarifying veteran eligibility for certain prosthetic items expanded the number of veterans receiving prosthetic items. For example, in October 2008, VA released a directive restating the department’s policy on veteran eligibility for eyeglasses. As result, the number of eyeglasses VA provided to veterans increased by nearly 22 percent, from about 830,000 pairs in fiscal year 2008 to more than 1 million pairs in fiscal year 2009. In addition, VA expanded eligibility for enrollment in its health care system. In 2009, VA raised the income thresholds that define certain veterans’ eligibility for VA health care services, resulting in approximately 260,000 additional veterans gaining eligibility. This may also have increased the number of prosthetic items provided. In each of fiscal years 2005 through 2009, VA’s actual spending needs for prosthetic items differed from the estimates VA reported in its congressional budget justifications for those years, on which the initial allocation to PSAS for prosthetic items was based. As shown in figure 2, VA spent less for prosthetic items than it had estimated in its justifications for fiscal years 2006 and 2007. These differences—about $82 million in fiscal year 2006 and about $150 million in fiscal year 2007—represented 7 and 12 percent, respectively, of VA’s actual spending for prosthetic items during those fiscal years. In fiscal years 2005, 2008, and 2009, VA spent about $91 million, $83 million, and $183 million more, respectively, than originally estimated (9, 6, and 11 percent, respectively, of VA’s spending for prosthetic items in those fiscal years). VA officials from the VHA Office of Finance and PSAS central office said that they did not perform analysis to determine the specific reasons for the differences between VA’s budget estimates and its actual spending for prosthetic items in a given fiscal year. PSAS officials reported that they do perform some analysis to identify new trends in VA’s spending for prosthetic items, which are taken into account when allocating specific purpose funding for prosthetic items. According to officials, to develop the budget estimates, VHA’s Office of Finance uses the most recently available spending and utilization data in its actuarial model. They noted, however, that these data are 3 years old at the time VA begins to develop budget estimates for a new fiscal year—for example, the actuarial model in VA’s 2010 budget estimate used spending and utilization data from fiscal year 2007. This, coupled with the increased demand for prosthetic items, makes it more difficult to accurately estimate year-to-year PSAS funding needs, according to VA officials. PSAS central office officials reported that they depend upon staff at the VISNs and VAMCs to identify local factors, such as a new surgical service, that could increase demand for prosthetic items, in order to develop more up-to-date estimates for the purpose of allocating specific purpose funding for prosthetic items to VISNs and VAMCs. PSAS officials at each of the 13 VAMCs in our sample identified numerous local factors that can affect spending for prosthetic items during a particular fiscal year. For example, at one VAMC, the prosthetics chief said that the hiring of a new surgeon was expected to increase local spending for certain surgical implants, such as pacemakers, by more than $300,000. This same prosthetics chief also noted that recent increases in the diagnosis and treatment of sleep apnea resulted in an increase of nearly $380,000 in local spending for prosthetic items. In 4 of the 5 fiscal years we reviewed, VA reallocated the funding available for prosthetic items—that is, adjusted the amount of the specific purpose funding for these items—in an effort to better match specific purpose funds for prosthetic items with actual spending needs. Specifically, in fiscal years 2006, 2007, and 2009, VA reduced the amount of specific purpose funding for prosthetic items. During fiscal year 2008, VA allocated an additional $56 million in specific purpose funds from the department’s national reserve in order to meet a request from PSAS for additional funding. (See table 2.) VA based these reallocations on projections of annual spending for prosthetic items developed throughout each fiscal year using year-to-date information on spending. Each year during the third quarter of the fiscal year, for example, VA uses the amount spent on prosthetic items through the first two quarters of the fiscal year to project spending for the rest of the fiscal year and reallocates funding to adjust the amount of specific purpose funding available for prosthetic items accordingly. In addition to the efforts VA made at the national level to reallocate funds to better match specific purpose funding for prosthetic items with actual spending needs, for 3 of the 5 fiscal years we reviewed, some VISNs and VAMCs used general purpose funds for prosthetic items. VA policy requires that VISNs provide additional funding to PSAS, when necessary, from general purpose funding to ensure the provision of prosthetic items is not delayed for lack of funding. In fiscal years 2005, 2007, and 2008, VISNs and VAMCs provided $91 million, $5 million, and $27 million, respectively, from their general purpose funds to address the difference between allocated specific purpose funding and actual spending needs for prosthetic items. (See fig. 3.) While VHA and PSAS officials acknowledge the use of general purpose funds for prosthetic items reduced the funding available for other purposes, they emphasized that this use did not compromise any veteran’s medical care. PSAS has performance measures that monitor the timeliness of its processing of prosthetic prescriptions and a number of veteran feedback mechanisms to identify problems in how it provides prosthetic items to veterans. In fiscal year 2009, PSAS’s performance measures showed that nearly all of its prescriptions for prosthetic items met its performance goals. While in many cases, PSAS’s performance measures serve as a reasonable proxy for monitoring the timeliness of veterans’ receipt of their prosthetic items, they may miss some instances in which veterans experience long wait times. Recognizing this shortcoming, PSAS officials rely on a number of other mechanisms—such as feedback submitted through telephone calls from veterans and receipt of veteran evaluation cards—to obtain information on veteran satisfaction that may alert them of timeliness or other problems not reflected in its performance measures. During fiscal years 2005 through 2009, PSAS had in place and monitored two performance measures that assessed the timeliness of administrative actions related to processing prosthetic prescriptions. The first measure, called “delayed orders,” assessed the percentage of prosthetic prescriptions for which the first administrative action related to the prescription, such as researching the cost of the prosthetic item from different commercial vendors, occurred more than 5 business days after the clinical provider submitted it. PSAS’s performance goal related to this measure was to have no more than 2 percent of orders categorized as delayed orders. The second measure, called “consults pending,” assessed the percentage of prosthetic prescriptions that took more than 45 business days to complete the administrative process associated with ordering the prosthetic item; that is, from the time the first administrative action was taken to the time PSAS determined that the order was complete. PSAS’s related performance goal was to have no consults pending; that is, to administratively process all prescriptions within 45 business days. For fiscal year 2009, PSAS basically met both of its goals related to the delayed orders and consults pending performance measures. PSAS calculated its performance relative to these performance measures for processing all prosthetic prescriptions submitted at each of its VAMCs and VISNs during the year. Based on its calculations, PSAS met its delayed order goal of no more than 2 percent delayed orders, and slightly missed its goal of having no consults pending by about 0.3 percent. According to VA, the delayed order and consults pending measures in many cases accurately reflected the timeliness of processing of prosthetic items. However, because of a weakness in PSAS’s consults pending measure, some prescriptions that took longer than 45 business days to process were not detected by the measure. Specifically, PSAS officials found that prescriptions could be cancelled and reentered, effectively resetting the clock on their processing time. In one VAMC we visited, for example, the prosthetics chief noted that the VAMC was receiving a number of complaints from veterans on the timely receipt of their prosthetic items. Upon further investigation, she identified more than 3,000 unprocessed prosthetic prescriptions that were not reflected in the VAMC’s consults pending measure because the computer system used to process prescriptions allowed purchasing agents to cancel and reenter the prescriptions that were not meeting the 45 business day goal. According to PSAS officials, there are a number of legitimate reasons why processing the prescription for prosthetic items can take longer than 45 days to complete. However, this prosthetics chief told us that, due to high purchasing agent workloads, some of the delays she identified most likely represented orders for prosthetic items that fell through the cracks, and veterans may not have received their prosthetic items until 5 or 6 months after their prescriptions were submitted. Recognizing the limitation in its consults pending measure, PSAS started— at the beginning of fiscal year 2010—to use a new measure, called the “timeliness monitor,” which according to PSAS officials was designed to better assess the timeliness of the complete administrative process of providing a prosthetic item to a veteran and provide better assurance that a prosthetic item was provided in a timely manner. Specifically, PSAS officials said that the timeliness monitor assesses whether both the goals for the delayed order and consults pending measures were met, and whether the prescription was completed by either issuing a prosthetic item directly to the veteran from PSAS’s inventory, or generating a purchase order for the item. PSAS’s goal related to the new timeliness monitor is to have 95 percent of prosthetic prescriptions meet the timeliness monitor performance measure, according to PSAS officials. In the first quarter of fiscal year 2010, PSAS’s timeliness monitor showed that less than 83 percent of prescriptions for prosthetic items met the time frames in the timeliness monitor performance measure. According to PSAS officials at two VISNs, one factor that played a significant role in PSAS not meeting its goal for the timeliness monitor was that the new measure may recognize some prescriptions as incomplete when actually they have been completely processed by PSAS staff. For example, if a veteran does not return to the VAMC to pick up a custom-fit item, such as a pair of orthopedic shoes, the item would not be recorded on the veteran’s prosthetic record even though PSAS staff had completed the administrative process related to the item and it was available for pick up. PSAS officials told us that they are updating their system to allow purchasing agents to close prescriptions that were processed by PSAS but not recorded in a veteran’s record for legitimate reasons, effectively excluding these prescriptions from being considered in the timeliness monitor. According to PSAS officials, once the system is updated, PSAS’s timeliness monitor scores should improve considerably. An additional weakness of VA’s performance measures—both with the new “timeliness monitor” and the former “consults pending” measure—is that these measures do not always identify cases in which a veteran waits a long time to receive an item. In many cases, the administrative actions related to prosthetic prescriptions do serve as a reasonable proxy for monitoring the timeliness of when veterans received their prosthetic items. For example, when a veteran receives an item out of inventory at a VAMC, the time the prescription is recorded as complete reflects the time that the veteran received their prosthetic item. However, the completion of processing of a prescription does not always correspond with the time at which the veteran receives the item. In particular, delays that occur for items that must be fabricated for the veteran or are back-ordered by a vendor are not reflected in VA’s performance measures. For example, according to the prosthetics chief at one VAMC we visited, veterans routinely waited 10 to 12 weeks to receive eyeglasses because of manufacturing delays at the facility that produced the eyeglasses—even though PSAS processed the eyeglass prescriptions in a timely manner. That is, once the purchase order was sent to the facility to manufacture the eyeglasses, VA’s system considered the processing of the prescription to be complete. Officials reported that the VA optical laboratory could not meet the unexpected increase in demand that followed guidance that VA issued in October 2008. This guidance restated the department’s policy that veterans whose vision impairment interferes with their participation in their own medical treatment are eligible to receive eyeglasses. The prosthetics chief at the VAMC explained that through feedback from veterans, they became aware of these delays. The VA optical laboratory has since taken steps to improve wait times, including authorizing overtime and using commercial vendors. Further, officials told us that they are planning a renovation of the optical laboratory to improve its operations. PSAS officials stated that they recognize their performance measures have limitations and that they rely on a number of feedback mechanisms— described below—to alert them of timeliness or other problems not reflected in PSAS’s performance measures. At a national level, PSAS uses additional mechanisms to identify timeliness or other problems which are not captured by its performance measures. These include the following: Comments or complaints on VA’s Web site. When VA receives comments, complaints, or other inquiries related to prosthetics through its Web site, the department directs the information to PSAS’s central office, according to PSAS officials. PSAS’s central office either handles the inquiry directly, or routes it to the relevant location or service, such as a VISN or VAMC, to resolve. As of July 2010, PSAS central office officials reported that they have responded to and closed more than 2,085 inquiries received through VA’s Web site. Direct contact with PSAS staff. PSAS central office, VISNs, and VAMCs receive letters, in-person visits, and telephone calls from veterans about complaints or problems with prosthetic items, according to VA officials we spoke with. If these complaints come in through contacts with PSAS staff at the central office, VISN, or VAMC leadership, the complaints or problems are generally passed on to PSAS staff at the VAMC level for direct action. PSAS officials told us that it is PSAS’s policy to handle complaints and problems in the most direct manner. For example, in one VAMC we visited, officials said that when they receive a complaint, they pass it on to the PSAS purchasing agent responsible for ordering the prosthetic item. The purchasing agent is then responsible for contacting the patient to resolve the complaint or problem. PSAS central office officials reported that while individual VISNs and VAMCs may, to varying degrees, track patient complaints made in person or by letter or telephone, PSAS central office does not systematically track these complaints. In addition to efforts initiated nationally, some VISNs and VAMCs we visited reported that they have developed local mechanisms to further monitor veteran satisfaction with VA’s processing and providing prosthetic items: VISN-sponsored surveys. One VISN we visited conducts patient satisfaction surveys of veterans who receive prosthetic items from the VAMCs in the VISN. On a quarterly basis, PSAS personnel at the VISN send these surveys directly to a sample of veterans who have received prosthetic items requesting veterans to rate aspects of PSAS’s performance such as the quality of the prosthetic items they received, the instructions they received, the courtesy and knowledge of the prosthetic staff that they came in contact with, and the time it took to deliver the prosthetic items. The patients return the surveys to the VISN, where PSAS staff summarize the results of the surveys and provide quarterly reports to the prosthetics chiefs and leadership in each of the VAMCs. The VISN requires prosthetics chiefs at VAMCs with a patient satisfaction score below the VISN’s established goal to develop improvement plans. VISN PSAS staff told us that the surveys have enabled them to identify problems and make improvements in how PSAS staff at the VAMCs interact with veterans, how PSAS staff process prosthetic prescriptions, and in the timeliness and quality of the services provided by vendors, such as home oxygen suppliers. Vendor evaluation cards. PSAS officials at one VISN reported that their VISN required some of their vendors—such as vendors for home oxygen and durable medical equipment—to include a patient comment card with the delivery of the prosthetic items. Veterans return these comment cards to the VISN where VISN PSAS officials review the comments and forward relevant information to VAMC prosthetics offices on at least a quarterly basis. VAMC comment cards. Several VAMCs in our sample provided their own comment cards. Typically, these cards are or will be made available at the PSAS counter and waiting area. PSAS officials at these VAMCs told us that they collect and review the comment cards they receive and address the comments veterans make concerning VA’s processing and providing of prosthetic items on a case-by-case basis. Letters informing veterans to expect delivery of prosthetic items. Officials at two of the five VISNs we visited told us that they use a feature in PSAS’s system for processing prescriptions to generate and send a letter to a veteran each time a prescription is processed. These letters provide information such as the date the prosthetic item was ordered from a vendor, the date the veteran can expect to receive the prosthetic item, and contact information for the PSAS staff responsible for monitoring the order. PSAS officials expressed confidence that, together, the mechanisms they have in place would alert them of serious timeliness and veteran satisfaction issues. Officials at PSAS’s central office, the VISNs, and the VAMCs in our sample told us about a number of local, regional, and national efforts to enhance management effectiveness and efficiency and improve prosthetic services for veterans. PSAS staff at the 13 VAMCs in our sample reported that they had undertaken local efforts to improve performance. For example, PSAS personnel at one VAMC were working to obtain funding from VA’s Office of Rural Health to place orthotic fitters—technicians who fit orthoses—at community-based outpatient clinics. By placing fitters in these clinics, PSAS officials hope to improve access for veterans—for example, to eliminate the need for veterans to travel for several hours to a VAMC to be fitted for and obtain their orthotic shoes—as well as to relieve the workload of prosthetists and orthotists at the VAMCs in this VISN. In addition, 6 of the 13 VAMCs in our sample had recently completed renovations, were in the process of renovating, or were planning renovations of their laboratories and clinical space. PSAS officials explained that the purpose of these renovations was to provide greater patient privacy or increase their capacity to fabricate artificial limbs within the VAMCs. Some officials further explained that increasing the capacity of their prosthetic laboratories would allow more veterans to receive their prosthetic limbs directly from the VA rather than from outside vendors, which could increase convenience for veterans and reduce costs for VA. At the regional level, according to PSAS central officials, 7 of VA’s 21 VISNs have chosen to centralize the management of PSAS within the VISN. Under a centralized PSAS management structure, the VPR is in charge of managing all aspects of the provision of prosthetic items in the VAMCs within their VISN, including the hiring and firing of PSAS personnel such as prosthetics chiefs and purchasing agents, and resolving veterans’ complaints. PSAS’s central office has recommended that VISNs adopt this management structure for PSAS for more than a decade, but as part of VA’s overall decentralized management structure, each VISN’s leadership has the authority to determine how PSAS is managed in its region. Although PSAS’s central office has not collected performance data conclusively showing the benefits of centralized management, officials we spoke with identified several potential benefits. PSAS central office officials stated that a centralized management structure allows for resource sharing within the VISN—for example, PSAS purchasing agents at one VAMC performing duties for other VAMCs within the VISN—and helps ensure greater uniformity of supervision and services. PSAS and VISN officials at three VISNs we visited that had centralized management noted that because centralization shifts costs and decisions related to PSAS personnel from the VAMCs to the VISN, PSAS avoids competing with other health care services within VAMCs for staff resources. Officials in two of these VISNs also stressed that centralization not only improved efficiency by facilitating the development and implementation of standardized procedures for processing prosthetic prescriptions across the VISN, but also enhanced veteran care by moving some of the day-to- day administrative tasks up to the VISN, thus freeing PSAS staff at the VAMCs to devote more time to meeting veterans’ needs. While in general, the officials we spoke with—both at PSAS’s central office and at VISNs that had adopted a centralized approach to managing PSAS—supported centralization, a few VAMC officials in some centralized VISNs expressed some concerns. For example, VAMC officials at two VAMCs we visited said that although PSAS was currently meeting the needs of veterans at their facilities, they were concerned that under a centralized management structure local leadership might not have the authority to take appropriate action if the performance of local PSAS staff was not satisfactory. In addition, one of these officials noted that under a prior director, centralization had contributed to a lack of communication between PSAS personnel and VAMC leadership. Specifically, it was their understanding that, since PSAS staff reported directly to the VISN rather than the leadership at that VAMC, the previous VAMC leadership had at times not included PSAS staff in management meetings and decisions that affected PSAS. PSAS has a number of national efforts to improve the delivery of prosthetic items across VA. These efforts include developing national contracts, conducting site visits to poorly performing VAMCs, providing clinical practice recommendations for physicians who prescribe prosthetic items, obtaining accreditation and certification for prosthetic laboratories and staff, and training new management staff. National contracts. PSAS uses national contracts that, according to PSAS officials, provide prosthetic items to veterans across the country in a more consistent, timely, and cost-efficient manner. PSAS first used national contracts to purchase prosthetic items in fiscal year 2002, and in fiscal year 2009, PSAS had 49 national contracts for prosthetic items ranging from orthopedic shoes and diabetic socks to implantable joints and cardiac pacemakers. According to PSAS officials, national contracts can improve efficiency and timeliness because the specifications, price, and shipping requirements for prosthetic items are determined by the contract rather than by individual purchasing agents. These contracts also help ensure that the quality of the prosthetic items provided to veterans is consistent across the country. According to PSAS officials, PSAS’s use of national contracts has resulted in substantial cost savings since fiscal year 2002. Site visits. Officials from PSAS central office told us that they have begun to conduct site visits to review PSAS operations in a number of VAMCs. Specifically, PSAS officials told us that they are conducting site visits to identify staffing or other problems that lead to poor performance and to make recommendations that should lead to faster and more consistent prosthetic services for veterans at these facilities. For the initial visits, PSAS selected VAMCs and VISNs that performed poorly on PSAS’s performance measures, such as its consults pending measure. As of June 2010, PSAS staff had conducted 42 site visits, and PSAS officials said they plan to conduct reviews in all 153 VAMCs. Clinical practice recommendations. PSAS has developed 40 clinical practice recommendations, which are guidance documents to help VA clinical staff make appropriate decisions about prosthetic prescriptions. These include prescribing recommendations for orthotic devices, home oxygen equipment, pacemakers, and hip and knee joint replacements. According to PSAS officials, these recommendations help ensure that prosthetic items are provided to veterans in a more consistent manner across the country. Accreditation and certification. PSAS has implemented an initiative to provide additional assurance that VA is providing high-quality prosthetic services and to develop the technical and management skills of PSAS staff. In fiscal year 2007, PSAS established a policy to obtain accreditation for its orthotic and prosthetic laboratories, and certification for all clinical personnel. According to PSAS officials, as of September 2010, PSAS had obtained accreditation, or the accreditation was pending, for nearly all of its 77 orthotic and prosthetic service locations, and certification for 165 of its 172 orthotists, prosthetists, and fitters. Management training. PSAS created a technical intern program to train prospective managers on the operations of PSAS at the VAMC level. According to VA officials, this program is important because a large number of the prosthetics chiefs are nearing retirement and in many cases there are few experienced staff who could replace them. We provided a draft of this report to VA for review. We received technical comments from VA, which we incorporated as appropriate. We are sending copies of this report to the Secretary of Veterans Affairs, appropriate congressional committees, and other interested parties. In addition, the 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 about this report, please contact me at (202) 512-7114 or williamsonr@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 II. This appendix provides the results of our analysis of data from the National Prosthetic Patient Database (NPPD)—an internal database used by the Department of Veterans Affairs (VA) to administer its provision of prosthetic items that contains information on prosthetic items furnished to veterans. This appendix presents the total costs and number of prosthetic items provided to veterans in fiscal years 2005 through 2009. Table 3 shows the total costs and number of prosthetic items provided to veterans by type of prosthetic item. For fiscal year 2009, the total cost for various types of prosthetic items ranged from about $93 million for orthoses to about $439 million for surgical implants. Table 4 shows the total costs and number of prosthetic items provided to veterans by Veterans Integrated Service Network (VISN). For fiscal year 2009, the total costs for prosthetic items for VISNs ranged from about $34 million in VISN 5 (Capitol Health Care Network) to about $164 million in VISN 8 (VA Sunshine Healthcare Network). Table 5 shows the total costs and number of prosthetic items provided to veterans by VA station. For fiscal year 2009, the total costs of prosthetic items at individual stations that provided any prosthetic items ranged from less than $1 million at Pittsburgh HCS-Highland Dr., Chattanooga, and several other stations to about $39 million at the San Antonio VAMC. In addition to the contact named above, Kim Yamane, Assistant Director; Susannah Bloch; Matthew Byer; Aaron Holling; Lisa Motley; Daniel Ries; and Said Sariolghalam made key contributions to this report.

Summary: In fiscal year 2009, the Department of Veterans Affairs (VA) provided more than 59 million prosthetic items to more than 2 million veterans. After VA physicians and other clinicians prescribe prosthetic items, VA's Prosthetic and Sensory Aids Service (PSAS) is responsible for processing prescriptions and providing prosthetic items to veterans. PSAS is also responsible for managing VA's spending for prosthetic items--more than $1.6 billion in fiscal year 2009. In fiscal year 2008, this spending exceeded VA's budget estimates. Each year, VA makes an initial funding allocation for prosthetic items, and may reallocate by increasing or decreasing the funding available for prosthetic items during the fiscal year. GAO was asked to examine (1) how, for fiscal years 2005 through 2009, VA's spending for prosthetic items compared to budget estimates, and the extent to which VA reallocated funding for prosthetic items; (2) how PSAS monitors its performance in processing and providing prosthetic items to veterans; and (3) the efforts VA has undertaken to improve PSAS's performance. GAO reviewed VA's spending and funding allocation data for fiscal years 2005 through 2009. GAO also reviewed documents and interviewed VA officials at headquarters, 5 of VA's 21 regional health care networks, called VISNs, and 13 VA medical centers (VAMC). VA spending for prosthetic items for each of fiscal years 2005 through 2009 differed from budget estimates, varying in amounts--both under and over budget estimates--ranging from 6 to 12 percent of VA's overall spending for prosthetic items during the 5 fiscal years. In fiscal years 2005, 2008, and 2009, VA spent about $91 million, $83 million, and $183 million more, respectively, than VA originally estimated for its congressional budget justification. Conversely, in fiscal years 2006 and 2007, VA spent about $82 million and about $150 million less, respectively, for prosthetic items than estimated. VA officials reported that they did not perform analysis to determine the specific causes of these differences, but that new trends are taken into account when allocating funding to be used for prosthetic items. In an effort to more closely match funds available for prosthetic items to actual spending needs, VA reallocated the funding available to PSAS and relied on VISNs and VAMCs to address the need for additional funding for prosthetic items at specific VA locations. For example, in fiscal year 2008, when an additional $83 million in funding was required for prosthetic items, VA reallocated $56 million to PSAS and VISNs and VAMCs covered $27 million in spending for prosthetic items. PSAS has performance measures that monitor the timeliness of its processing of prosthetic prescriptions and a number of veteran feedback mechanisms to identify problems in how it provides prosthetic items to veterans. In fiscal year 2009, PSAS's performance measures showed that nearly all of its prescriptions for prosthetic items met its performance goals. While in many cases, PSAS's performance measures serve as a reasonable proxy for monitoring the timeliness of veterans' receipt of their prosthetic items, they may miss some instances in which veterans experience long wait times. Recognizing this shortcoming, PSAS officials rely on a number of other mechanisms--such as telephone calls from veterans and receipt of veteran evaluation cards--to obtain information on veteran satisfaction that may alert them to timeliness or other problems not reflected in their performance measures. VA is making a number of efforts at various levels to improve its performance in providing prosthetic items to veterans. For example, in 7 of VA's 21 VISNs, PSAS personnel at the VISN level centrally manage the provision of prosthetic items at all of the VAMCs in their region. According to VA officials in several VISNs that have adopted this centralized management structure, giving VISN-level PSAS personnel more authority has allowed local PSAS personnel at the VAMCs to devote more time to meeting veterans' needs, and in some cases, has enhanced management effectiveness and efficiency. At the national level, in fiscal year 2009, PSAS had 49 national contracts for prosthetic items, which, according to PSAS officials, help ensure that the quality of prosthetic items provided to veterans is consistent across the country. VA provided technical comments that GAO incorporated as appropriate.