The mission of VA is to serve America’s veterans and their dependents. All VA programs are administered through three major administrations— VHA, Veterans Benefits Administration, and the National Cemetery Administration. VA provides medical services to various veteran populations—including an aging veteran population and a growing number of younger veterans returning from the military operations in Afghanistan and Iraq. In general, veterans must enroll in VA health care to receive VA’s medical benefits package—a set of services that includes a full range of hospital and outpatient services, prescription drugs, and long-term care services provided in veterans’ own homes and in other locations in the community. VHA is responsible for overseeing the delivery of care to enrolled veterans, as well as the health care professionals and support staff that deliver that care. VHA is also responsible for managing all VA medical facilities. VA organizes its system of care into regional networks called VISNs. In September 2015, there were 21 VISNs nationwide, but VA is in the process of merging VISNs that will result in 18 VISNs when completed. Each VISN is responsible for coordination and oversight of all administrative and clinical activities within its specified geographic region. Medical services are provided in inpatient/residential medical facilities and outpatient medical facilities, including: Inpatient/residential care medical facilities as of January 2017: VA medical centers: A medical facility that provides at least two types of care, such as, inpatient, outpatient, residential, or institutional extended care. There are 168 VA medical centers. Extended care site (community living center): A medical facility that provides institutional care, such as nursing home beds, for extended periods of time. There are 135 community living centers. Residential care site: A medical facility that provides residential care, such as a domiciliary, for extended periods of time. There are 48 domiciliaries. Outpatient care medical facilities as of October 1, 2016: Community-based outpatient clinics (CBOC): A medical facility that provides primary care and mental health services, and in some cases, specialty services such as cardiology or neurology, in an outpatient setting. There are 737 CBOCs. Health care center: A medical facility that provides the same services as CBOCs, but also ambulatory surgical procedures that may require moderate sedation. There are 22 health care centers. Other outpatient service: A medical facility that provides care to veterans but is not classified as a CBOC or health care center, such as a mobile treatment facility. There are 305 other outpatient services sites. In order to meet the needs of the veterans it serves, VA is authorized to pay for veteran health care services from non-VA providers through both the Non-VA Medical Care Program and clinical contracts. In fiscal year 2015, VA obligated about $10.1 billion to purchase care from non-VA providers. The Non-VA Medical Care Program, including the Choice Program and Patient-Centered Community Care, is referred to as “care in the community” by VA, and allows VA to offer care to veterans in non-VA facilities, such as physicians’ offices and hospitals in the community, and pay for this care using a fee-for-service arrangement. Clinical contracts are used by VA to bring non-VA providers—such as physicians, pharmacists, and nurses—into VA facilities to provide services to veterans. VA works with the VISNs, and medical facilities to manage its real property assets through VA’s capital-planning process. The SCIP process—established in 2010 to assess and identify long-term capital needs—is VA’s main mechanism for planning and prioritizing capital- planning projects, but is affected by the VA’s budgetary resources, which will determine how many projects will be funded. The goal of SCIP is to identify the full capital need to address VA’s service and infrastructure gaps, and to demonstrate that all project requests are centrally reviewed in an equitable and consistent way throughout VA, including across market areas within VA’s health care system given competing capital needs. The SCIP process for that particular fiscal year’s projects begins approximately 23 months before the start of the fiscal year with VA providing a set of guidelines to the VISNs and medical facilities. SCIP uses information from models to identify excesses and deficits in the services at the local level—called “gaps” within VA—and justify capital investments. For example, SCIP uses data from the EHCPM, a model for projecting veteran enrollment, utilization of VA health care, and the associated expenditures VA needs to meet the expected demand for most of the health care services it provides. VA officials at the VISNs and medical facilities play a major role in the capital-planning process. Each VISN has a Capital Asset Manager and a planner who are responsible for coordination and oversight of facility alignment activities, and work with individual facility planners and engineering staff. Annually, planners at the medical facilities develop a 10-year action plan for their respective facilities, which include capital or non-capital improvement projects to address gaps in service identified by the SCIP process. According to VA, these long-range plans allow the department to adapt to changes in demographics, and health care and benefits delivery, while at the same time incorporating infrastructure enhancements. Medical facility officials then develop more detailed business plans for the capital improvement projects that are expected to take place in the first year of the 10-year action plan. These projects are validated, scored, and ranked centrally based on the extent to which they address the annual VA-approved SCIP criteria using the assigned weights. (See fig. 1 for VA’s capital decision-making process for evaluating and funding capital projects.) Another tool available for use by some VISNs and medical facilities is the VAIP Process, which was implemented in fiscal year 2011 as a pilot project. The goal was to identify the best distribution of health care services for veterans, where the services should be located based on the veterans’ locations and referral patterns, and where VA should adapt services, facilities, and health care delivery options to better meet these needs as determined by locations and referral patterns. Data from the VAIP Process are designed to drive the VISNs’ and VA medical facilities’ operational decisions including costs, challenges, and local preferences, but the VAIP Process’s findings can also result in future SCIP projects. The VAIP Process produces a market-level health services delivery plan for the VISN and a facility master plan for each medical facility within the VISN. (See fig. 2 for an overview of the VAIP Process.) After completing a pilot of the program, VA officials began formally implementing the VAIP Process across VISNs and their medical facilities, utilizing multiple contractors. As of January 2017, VA officials told us they had mostly completed the VAIP Process in 6 of the 18 VISNs and had plans to start or complete the remaining VISNs by October 2018. According to officials who oversee the program, the entire cost of the VAIP process is expected to be about $108 million. Over time, VA has recognized the need to modernize its facilities and align its real property portfolio to provide accessible, high-quality, and cost-effective access to services. In addition, VA has been the subject of several assessments focusing on facility alignment, and planning efforts to modernize its facilities. In 1999, VA initiated the CARES process to assess federally owned buildings and land ownership in response to changing veterans’ inpatient and outpatient demand for care. CARES was the first comprehensive, long-range assessment of VA’s health care capital-asset priorities since 1981 and was designed to assess the appropriate function, size, and location of VA facilities. In May 2004, VA issued the CARES Decision report to Congress and other stakeholders. The decision report listed projects and actions that VA planned to take over the next 20 years, as well as the tools and principles that the agency planned to use to align its infrastructure and upgrade its facilities. VA officials told us that the implementation of CARES recommendations was monitored through fiscal year 2010. In July 2011, VA released an implementation and monitoring report on seven areas highlighted in the CARES report. In this report, VA stated that excess space was reduced through mechanisms such as the demolition of vacant buildings and the realignment of underutilized space. VA also reported that since fiscal year 2009, 509,247 square feet of space was disposed. VA officials stated that as of June 2016, some of the CARES recommendations were not fully implemented, and the process was essentially replaced when the SCIP process was implemented in fiscal year 2012. In a more recent effort, the Choice Act required VA to contract with a private entity to conduct an independent assessment of 12 areas of VA’s health care delivery system and management processes, including its facilities in 2014. Among the 12 areas, an assessment of facilities examined VA’s processes for facility planning, funding, maintenance, and construction. The Independent Assessment identified four systemic findings: 1. A disconnect in the alignment of demand, resources, and authorities. 2. Varying bureaucratic operations and processes. 3. Non-integrated variations in clinical and business data and tools. 4. Leaders are not fully empowered due to a lack of clear authority, priorities, and goals. The Choice Act also established the Commission on Care to examine veterans’ access to VA health care and to examine and report on how best to organize VA, locate health resources, and deliver health care to veterans during the next 20 years. The Commission on Care assessed the results of the Independent Assessment as part of its work. The Commission on Care’s report included 18 high-level recommendations, and was submitted to the President on June 30, 2016. For example, the one recommendation in the Commission on Care’s report related to facility management was for the enactment of legislation, which would authorize a process similar to the Base Realignment and Closure process to facilitate facility realignment decisions. While VA did not fully agree with the specifics of the recommendation, it did agree with the concept of a realignment commission to focus solely on VA’s infrastructure needs once the mission services were determined. Long-standing factors, such as shifts in the veteran population and the delivery of care, as well as an aging infrastructure affect VA’s efforts to fully align its real property portfolio with the veteran population. A decrease and a shift in the veteran population, impact the agency’s ability to fully align its real property portfolio with veterans’ needs. For example, VA’s VetPop2014 projected a 14 percent decrease in the overall veteran population by 2024. It also projected a geographic shift with veterans continuing to migrate from the Northeast and Midwest areas of the United States to areas in the south and west. Figure 3 shows projected percentage population changes through 2024, by county. These shifts in the veteran population—which also mirror general population trends—may result in a misalignment of services relative to veterans’ needs and insufficient capacity in some locations and excess capacity in other locations. As the population continues to shift, VA will need to make decisions on how to best address these capacity issues. For example, planning officials from three medical facilities said that facilities located in areas with a declining veteran population—and thus, most likely a general population decrease—may experience challenges recruiting and retaining certain types of specialty providers. In addition, a planning official at one medical facility told us that in order for a facility’s providers to maintain clinical proficiency, there needs to be sufficient patient volume. With such shifts, these areas could experience space that is underutilized because of a lack of veteran demand and health care providers. Although there is a projected decrease in the overall veteran population, VA’s EHCPM projects that nationally the number of enrolled veterans will increase through 2024, after which it will decline. However, this trend varies by region, and generally mirrors the overall veteran population trends with decreases in the northeast and increases in the south. In addition to a projected enrollment increase in the short term, enrollee demographics and acuity levels are also projected to change—which will affect the amount and type of health care VA is projected to provide. According to VA officials who oversee the EHCPM, the aging of enrolled veterans and the increasing prevalence of service-connected disabilities (either through these disabilities appearing later in life or through VA changing its scope for eligibility) are driving significant increases in projected utilization and financial expenditures. For example, Vietnam era veterans are expected to account for an increased utilization of long-term care services. In addition, these enrollees also tend to have increased rates of transition into the higher acuity priority groups for benefits. Overall, the number of veterans in these higher acuity priority groups is projected to continue to increase and is a key driver of utilization for VA health care services, including in-home and community- based services. As a result of this projected short-term growth in demand, followed by an eventual decline in veteran enrollment, VA must balance the expansion of services to meet the near-term demand with the potential excess capacity in the long-term. Shifts in the type of care that VA provides and where its veterans obtain that care affect VA’s efforts to align its facilities to meet the changing veteran population. Similar to trends in the health care industry overall, VA’s model of care has shifted away from providing care in an inpatient setting, to that of an outpatient setting, which VA largely houses in converted inpatient space, or in a growing number of CBOCs. This reflects, in part, the shift in demand from inpatient to outpatient services. According to the Independent Assessment, between 2007 and 2014, outpatient visits increased 41 percent while inpatient bed days declined 9 percent. Further, it reported that inpatient bed days have dropped as much as 21 percent in some VISNs and, over the next 20 years, are expected to decline an additional 50 percent or more. This shift in the utilization of inpatient to outpatient services will likely result in underutilized space once used for inpatients, as a majority of VA medical facilities were originally designed for the delivery of inpatient care. Officials who oversee SCIP as well as some of the planners at medical facilities in our review told us that they can close portions of facilities that are underutilized. However, these planners also told us that the savings are small when compared to closing an entire building. For example, a medical facility in our review temporarily closed one of its inpatient wings due to decreased utilization. Although the unused space was technically closed, the wing still had beds and equipment, and used electricity and utilities, including lights in the hallways and power to operate computers. (See fig. 4.) In addition to shifts in the veteran population and the type of care provided, changes to VA’s use of care in the community affect facility alignment. Although VA has traditionally provided care primarily through its own facilities, it has, and does also use its statutory authority to purchase care from providers in the community. VA’s purchased care accounted for a small but growing proportion of VA’s health care budget in the past decade. For example, in fiscal year 2015, VA obligated about $10.1 billion for care in the community for about 1.5 million veterans. Three years earlier, in fiscal year 2012, VA spent about $4.5 billion on care in the community for about 983,000 veterans. VA officials who oversee the EHCPM told us that although under VA’s care in the community programs, a portion of health care utilization may potentially move from VA facilities to community care, the costs of VA facilities— costs such as staffing, utilities, transportation, and laundry—do not decrease proportionally when this shift occurs. As a result, VA may be expanding care in the community while simultaneously operating underutilized and vacant space at its medical facilities. According to the Independent Assessment, if purchased care continues to increase then VA will need to realign resources by reducing its facilities. As VA expands its care in the community programs, questions remain regarding its impact on facility alignment. Planning officials at two of the seven medical facilities in our review told us that there is uncertainty surrounding the extent to which care in the community, as it currently exists, will continue in the future. These officials added that the uncertainty affects capital planning because capital projects are planned years in advance. For example, a planning official from one medical facility told us that in planning for future renovations to address SCIP utilization gaps, officials are hesitant to send entire clinical service lines to the community because if the Choice Act and its associated funds are not re-authorized, the facility may be financially responsible for providing that service through non-VA providers. Aging infrastructure affects facility alignment because many VA facilities are no longer well suited to providing care in the current VA system, and VA will need to make decisions about how it can adapt to current needs. For example, the average VHA building is approximately 60 years old— five times older than the average building of a not-for-profit hospital. Planning officials at five of the seven medical facilities in our review told us it is often difficult and costly to modernize, renovate, and retrofit older facilities—including converting inpatient facilities into outpatient facilities. These challenges have contributed to the presence of vacant and underutilized buildings. VA reported in 2016 that its inventory includes 370 buildings that are vacant or less than 50 percent occupied, and 770 buildings that are underutilized, requiring it to expend funds designated for patient care to maintain more than 11.5 million square feet of unneeded or underutilized space costing $26 million annually to operate and maintain. As veterans continue to use more outpatient care and less inpatient care, VA’s need to make decisions about its aging infrastructure and how it can adapt it to current needs will continue to grow. Planning officials from two VISNs and four medical facilities in our review told us that outdated building configurations—such as low ceilings and small distances between support columns—could prevent facilities from fully complying with more recent VA health care delivery standards. A planning official from one medical facility told us it is difficult to reconfigure a facility in accordance with these new standards after it is already built, and instead, these standards would have to be incorporated in the preliminary design phase. We observed at various locations where despite renovations, VA was unable to fully reconfigure existing spaces to meet newer care standards. See figures 5 and 6 for examples of these challenges to current health care delivery standards. We previously reported that the historic status of certain VA property can add to the complexity of converting or disposing of outdated facilities. In 2014, VA reported having 2,957 historic buildings, structures, or land parcels—the third most in the federal government after the Department of Defense and the Department of the Interior. In some instances it may be more expensive to do renovations then it would be to demolish and rebuild. However, the option to demolish may not always be an option because of restrictions due to these buildings’ designation as historic. For example, planning officials at four of the medical facilities told us that state historic preservation efforts prevented them from demolishing vacant buildings, even though these buildings require upkeep costs and pose potential safety hazards. (See figs. 7-9.) In addition, some VA medical facilities were built as large medical campuses with multiple unattached buildings. This configuration no longer meets modern health care delivery standards where services are more concentrated in one building or a series of attached buildings. For example, three facilities we visited had large campuses that included portions of vacant land and buildings designated as historic. Figure 10 illustrates the historic Chillicothe, Ohio VA medical center campus, which has numerous vacant buildings that the medical facility would like to dispose of. SCIP has several limitations in the scoring and approval process, time frames, and access to information that can limit its utility to effectively facilitate the alignment of facilities with veterans’ needs. Planning officials at VA medical facilities submit projects annually to SCIP, where they are centrally scored against a set of department- approved criteria and priority categories. To score high enough to be approved for funding, a project’s narrative portion of the evaluation must demonstrate how it addresses predetermined VA priorities—this narrative portion represents about one-third of a project’s overall score. Planning officials at two of the VISNs and three of the medical facilities in our review told us that the narrative portion is a limitation of the SCIP’s project-scoring and approval process because it relies on facility planning officials’ ability to write an accompanying narrative that addresses more of the priorities. This introduces subjectivity to the process, where the writer’s ability to demonstrate how the project’s narrative addresses more of the priorities can affect scoring independent of project merits. This can undermine SCIP’s goal of ensuring all project requests are reviewed equitably and consistently. The Independent Assessment also found that some facilities have learned to place considerable emphasis on the ability to write a project’s narrative tailored to perceived high value criteria— often using both in-house staff and consultants to try and maximize the scores. For example, planning officials from one medical facility told us that they needed a SCIP project to expand a women’s health center but did not think that it would score highly. Therefore, they told us they wrote the narrative carefully so that it linked back to more priority areas that they would not have originally thought of, such as “increasing patient privacy,” in order for it to score higher. In addition, another limitation to SCIP is that it allows facility planners to gain credit for closing service gaps by proposing capital projects that they have no intention of implementing. Specifically, planners at VA medical facilities must demonstrate within SCIP that they plan to address all service gaps within the 10-year action plan. However, planners can show that they are addressing a gap by including such a project in future or ‘out’ years of their 10-year plan but then continue to delay the project into future years without implementing the project or addressing the service gap. Such actions can undermine the department’s goal of using SCIP to strategically manage its health care facilities. Although the extent to which this is occurring is unclear, facility planners at two of the facilities in our review told us that they routinely enter projects for future years that they have little or no intention of actually pursuing. For example, planning officials from one medical facility told us that in instances where they did not agree with the gaps that SCIP identified, they would include construction or demolition projects in the later years of their SCIP submission. They said they did this because (1) they could include a general project description without having to be too specific, and (2) demolition projects would most likely not score high enough to obtain funding. Planning officials from another medical facility told us that they continue to promote demolition projects to the out years of their SCIP plan as a way of appearing to address an excess space gap in SCIP plans without actually implementing the project. Even though some facility-level planning officials told us they did not think demolition projects would score high enough to get funding, officials who oversee SCIP told us it is possible if the projects’ narratives linked back to several different priority areas, such as “safety” or “reducing facility condition assessment deficiencies.” As a result, they said facilities will only submit a demolition project in SCIP if it is part of a demolition-and- rebuild type project that links back to more priority areas. Figure 11 shows an example of a non-clinical building on a medical facility campus that the facility’s planning officials would like to demolish due to structural issues. In addition, the SCIP scoring and approval process is limited in that it does not have a mechanism in place to correctly sequence projects. Specifically, planning officials at three of the seven medical facilities in our review told us that the SCIP approval process does not allow for, or ensure that projects will be approved in the chronological order they determined to be appropriate. For example, planning officials at one of the medical facilities said that they have been submitting projects in SCIP to try and collocate specialty outpatient clinics that were in separate areas of the campus. On several occasions, a project that needed to start after a predecessor project was finished was approved and funded first because the project addressed a higher priority area. Out of fear that they would lose the funding if they waited for the first project to get approved, these planning officials told us they changed the planned location of one clinic to a less desirable location instead of their initial goal of collocating the clinics. According to OMB guidance, improper funding of segments of a project can lead to poor planning or higher costs. VA officials told us that this problem could be addressed through better training for facility planners, but budget thresholds may also play a role. Specifically, VA officials told us, and the Independent Assessment reported that VA facility planners often divide a larger project into several smaller projects so that they stay under the statutorily-defined threshold for major medical facility projects ($10 million)—a threshold that the Independent Assessment recommended eliminating. SCIP’s lengthy project-development and approval timeframes can hinder capital project planning. Specifically, the time between when planning officials at VA medical facilities begin developing the narratives for projects that will be scored in SCIP and when they are notified that a project is funded has taken between 17 and 23 months over the past 6 fiscal-year SCIP submissions. As such, facility planning officials routinely submit their next year’s planned projects before knowing the outcomes of those from the previous year. In one instance, for example, facility planning officials were required to begin working on the narratives for the projects planned for fiscal year 2015 before they learned which projects for fiscal years 2013 or 2014 were approved for funding. In another example, facility planning officials had to wait about 18 months to officially learn that VA only funded 2 of the 1,403 projects submitted for fiscal year 2017. Officials who oversee the program told us that while they recognize that this is a concern, some information for unfunded projects is automatically loaded into the next year’s SCIP submission, reducing rework. Long time frames can also exacerbate SCIP’s inability to correctly sequence projects in the desired order. For example, under current time frames and SCIP guidelines, a facility planner may have to delay submitting subsequent projects in a sequenced group of projects for up to 2 years each while planners wait to ensure the predecessor project was funded. Figure 12 shows the overlapping timelines of the last 6 fiscal- year SCIP submissions. An official from the office that oversees SCIP told us that the timing of the budgeting process that is outside VA’s control contributes to these delays. While aspects of the process are outside VA’s control, over the last 6 fiscal-years’ SCIP submissions, VA has chosen to wait about 6 to 10 months to report the results of the SCIP scoring process to the medical facilities. This situation makes it difficult for local officials to understand the likelihood that their projects will receive funding. Federal standards for internal control note that agencies should ensure that quality information—such as information about approved projects—should be provided on a timely basis. A VA official said that for future SCIP cycles, VA plans to release the scoring results for minor construction and non- recurring maintenance projects to local officials earlier in the process. At the time of our review, however, the official did not have a timeframe as to when this would be done. SCIP has limitations in its ability to provide planners with important information they need in the initial steps of planning capital needs. VA subdivides each VISN into a number of smaller “market areas.” However, SCIP limits facility planners’ access to the projects proposed by other markets and VISNs. According to federal standards for internal control, agencies should identify quality information and ensure that it is accessible. Planning officials from four of the medical facilities told us that these access limitations to SCIP information make it difficult to obtain a comprehensive understanding of their needs for capital-planning purposes. For example, planning officials at one of the medical facilities told us that as a result of the lack of access to information about nearby projects, a VA medical facility in a neighboring VISN had plans for a new CBOC near its VISN boundary progress farther than it should have before VA officials determined that it would have been too close to an existing CBOC just over the VISN boarder. VA is aware of many of the limitations of the SCIP process—as the Independent Assessment found many of the same limitations and made recommendations to address them—but has taken little action. Specifically, in 2015, the Independent Assessment found that SCIP’s scoring and approval processes and time frames, among other things, undermined VA’s capital-planning and prioritization process. In addition, the Independent Assessment made several recommendations to address those limitations, including: (1) refining the SCIP processes to simplify scoring methods; (2) strengthening the business case submission process; and (3) developing mechanisms to ensure projects met promised objectives. Officials who oversee SCIP told us that they were aware of, and mostly agreed with the Independent Assessment’s findings in the facilities section. In order to address all of the Independent Assessment’s recommendations, including most of the same SCIP limitations we found, VA created a task force called the Integrated Project Team, as we reported in September 2016. According to VA officials, the task force identified several actions to enhance and restructure the department’s infrastructure based on the facility section of the Independent Assessment. However, after 6 months of work, the task force disbanded before it developed an implementation plan for those initiatives. VA officials said that they were instead focused on addressing other priorities such as those in the Commission on Care’s report—which built upon the Independent Assessment—and proposed legislation that could affect VHA operations. However, the Commission on Care did not address facility management issues on the level of the Independent Assessment’s recommendations. Not addressing important, known limitations runs counter to federal standards for internal control, which note that agencies should evaluate and determine appropriate corrective action for identified limitations and deficiencies on a timely basis. In addition, managing federal real property is on GAO’s High Risk List, and our High Risk report notes that agencies should have a corrective action plan with steps to implement solutions to recommendations in order to be removed from the list. Without ensuring that recommendations from internal and external reviews are evaluated, decided upon, documented, and promptly acted on, VA does not have reasonable assurance that SCIP can be used to identify the full capital needs to address VA’s service and infrastructure gaps. VA’s ongoing VAIP Process (estimated by VA officials to cost $108 million upon completion) was designed to provide a more strategic vision for aligning VA’s medical facilities and services with veterans’ needs. However, the facility master-planning process has several limitations, including that it assumes that all future growth in services will be provided directly through VA facilities without considering alternatives, including the status quo and purchasing care from the community. This assumption runs counter to VA guidance from November 2016 that notes the need for using taxpayer resources wisely by avoiding building facilities that create 100-year commitments if they could use community capacity. Nonetheless, facility master plans produced by the VAIP Process make construction recommendations that directly contradict this policy because the plans do not adequately consider care in the community, for example: To address one medical facility’s master plan would require about $762 million to relocate and renovate spaces within a building, acquire adjacent land, demolish inadequate buildings, construct a new medical tower, and provide seven clinical services that are currently provided elsewhere. No analysis was done to determine if these services could be better or more cost effectively purchased through care in the community. Another medical facility’s master plan indicated a need to construct five new structures estimated to cost about $100 million to provide clinical services that veterans were already obtaining elsewhere. Similarly, no cost-benefit analyses were done to consider care in the community as an option. This construction was recommended in addition to an unrelated major construction upgrade costing in excess of $366 million. Because these plans do not consider that care could be provided in the community, if implemented, they increase the risk for spending more than necessary to provide the services. OMB’s acquisition guidance notes that investments in major capital assets should be made only if no alternative private sector source can support the function at a lower cost. Long- term costs for capital assets are particularly relevant for VA as its data project that the number of enrolled veterans will begin to fall after 2024. VA officials told us that operations and maintenance represent 85 to 90 percent of the total life-cycle costs for VA health care facilities. Officials who oversee the VAIP Process told us that the facility master plans’ lack of analyses regarding care in the community was because they were awaiting further guidance from VA on the proportion of care and types of services to obtain from the community versus in VA facilities. VA released this guidance in November 2016. That guidance requires individual analyses at the local level in order to determine the mix of services provided in VA facilities versus those in community care, a requirement that is not in the facility master-planning process. We also identified other limitations that limit the utility of the VAIP Process: Lack of standardization: According to VA officials, they have mostly completed the VAIP Process for 6 of the 18 VISNs, but in part because it is conducted by several contractors, VA has not fully standardized the process across VISNs. As such, the results are also not comparable across VISNs. Officials who oversee the program said that they are proposing an enhancement to the Health Service Delivery Plan portion of the process that would allow for standardized analyses, planning, and reporting. But the proposal was still in its early stages, and at the time of our review, there was no timeline for completion. Lack of accountability for implementing VAIP recommendations: Officials who oversee the program told us that there is no requirement that the facilities or VISNs implement recommendations based on the VAIP Process’s Health Services Delivery Plans or the facility master plans—although VA officials said there have been discussions about requiring this accountability in the future. As a result, there is no accountability for evaluating or responding to the VAIP recommendations. Incomplete cost estimates: The VAIP Process’s facility master plans include estimates for construction and design, but do not include any long-term estimates for operating costs. OMB’s Capital Programming Guide notes that these life-cycle costs, such as operations and maintenance, should be included in a credible life-cycle cost estimate. As previously noted, VA officials said that operating and maintenance cost for VA medical facilities can represent 85 to 90 percent of total facility costs. According to officials who oversee the program, the intent was only to provide costs for completing the identified projects. The limitations of the VAIP Process’s facility master plans reduce its utility for the VA’s planning officials to the point where some local officials said that they do not use VAIP results and planning officials from five of the seven medical facilities in our review told us that they already contract for their own facility master plans, separate from VAIP. According to federal standards for internal control, agencies should take steps to identify, analyze, and respond to risks related to achieving the defined objectives, an approach that in this case, could reduce risks to the VAIP facility master plans’ success. Although officials who oversee the VAIP Process told us that the VAIP-produced master plans uniquely incorporate the Health Care Service Delivery Plan’s recommendations from the first step of the process, and would therefore be different from the facilities’ master-planning efforts, the potential for duplication exists as separate entities could be undergoing strategic planning for the same facility. The magnitude of these limitations and the potential for planning duplication raise questions about the need for and utility of the VAIP facility master plans as they are currently being developed. VA does not always include stakeholders in facility alignment decisions that affect veterans’ health care. VA may align its facilities to meet veterans’ needs by expanding or consolidating facilities or services. Stakeholders—including, veterans, local, state, and federal officials, VSOs, historic preservation groups, VA staff, and Congress—often view changes as working against their interests or those of their constituents, when services are eliminated or shifted from one location to another. We have previously identified best practices for stakeholder involvement in facility consolidation actions and recommended agencies identify relevant stakeholders and develop a two-way communication strategy that begins well in advance of any facility changes and addresses concerns and conveys through data the rationale and overarching benefits behind decisions. Failure to effectively engage with stakeholders in these ways can undermine or derail facility alignment. These best practices suggest that VA leadership should engage both external stakeholders, such as veterans groups and local politicians, and internal stakeholders, such as VA employees. However, we found that two-way communication did not always occur when VA engaged stakeholders. External stakeholders: VA often takes steps to involve external stakeholders, but those efforts often fall short of the best practice of developing a two-way communication strategy. VA requires VISN leadership to hold quarterly town hall meetings with external stakeholders to promote ongoing communications. Planning officials from each of the five VISNs and seven medical facilities in our review told us that they meet regularly with external stakeholder groups, usually through quarterly town hall meetings or roundtables. However, in speaking with external stakeholders, we found that, in large part, these meetings were for VA to communicate information, not necessarily to involve stakeholders in the decision-making process. For example, a local VA official said that the monthly stakeholder meetings were primarily a mechanism for VA officials to announce projects after decisions were made. Officials from two local veterans’ organizations agreed with this characterization, and representatives from one stopped attending the meetings as a result. In one of these locations, the breakdown in two-way communication resulted in picketing when veterans’ organizations opposed the closure of a facility. We also found that when stakeholders were not always engaged consistently with best practices, VA’s facility alignment efforts were challenged by external stakeholders. For example, one area that has a declining number of veteran enrollees also has three medical facilities within 25 miles of each other. According to the CARES report, the veteran population and enrollment in this area did not justify multiple inpatient facilities. Based on the CARES recommendation, VA considered a consolidation of services. Officials from a local veterans group told us that due to the one-way nature of communication with VA officials, they did not fully trust that VA would follow through on plans to replace the services following the consolidation and feared this VA property would be sold or disposed of and not replaced with a new VA facility. This alignment proposal prompted members of Congress and of the city council and VSOs to conduct a campaign that resulted in all three facilities remaining operational 13 years after the CARES report was issued. We found that local facility alignment efforts in which VA officials better followed best practices—building transparency by providing data-driven information and utilizing two-way communication strategies—with external stakeholders were more successful. For example, planning officials from one medical facility—which successfully implemented a CARES recommendation to consolidate inpatient beds in a neighboring facility— told us that they communicated with external stakeholder groups as far in advance as they could and presented data to support any proposed change. Planning officials from another medical facility were able to close an underutilized inpatient wing, a leased CBOC that had experienced decreased utilization and increased costs, and relocate a domiciliary from one campus to another. During this process, facility officials developed a communication plan and held meetings with external stakeholders to present their data and explain the reasoning behind the change. Internal stakeholders: Best practices also include engaging internal stakeholders to build consensus for facility alignment actions. Facility alignment can mean job loss, relocation, or changes in the way employees perform their duties. VA officials told us that employees have sometimes challenged the facility alignment process and in some instances, affected the outcomes where these best practices were not incorporated. Specifically, effective communication with internal stakeholders can foster trust and an understanding of the planned changes, potentially defusing opposition while strengthening commitment to the effort. For example, as part of a consolidation and closure at one medical facility, planning officials addressed concerns, as well as presented data-driven information that highlighted the benefits and rationale to employees. Facility officials developed a communication plan and held a meeting with employees to present their data and explain the reasoning behind the change. In this meeting, they also addressed employee concerns by reassuring them that no one was going to lose their job. VA does not provide officials at VISNs and medical facilities with guidance that incorporates best practices on fully engaging both internal and external stakeholders about facility alignment decisions, or evaluate the effectiveness of local stakeholder engagement efforts. VA provides guidance on communicating changes to stakeholders, but this guidance does not conform to best practices in that it does not provide details about how and when to communicate. Without official guidance VA cannot be assured that the VISNs and medical facilities are consistently applying best practices that integrate stakeholders into the decision-making process in a way that better ensures the success of alignment efforts. Further, existing VA guidance does not instruct VISNs and facilities to involve stakeholders throughout the decision-making process. Some of the guidance cites required notification procedures, but does not address general best-practice strategies for engaging and building consensus with stakeholders. For example, in April 2016, VA provided guidance to VISNs regarding notification procedures for any changes in clinical services. This memorandum includes direction to the VISN for a communication plan that includes creating congressional notification, patient notification letters, talking points, and a press release 30 days prior to opening a new facility. However, VA’s guidance lacks specific directions on timelines, data, and the extent to which external stakeholders should be a part of the decision-making process. A VA official told us that they do not have such guidance because it is implicitly understood that local officials should engage stakeholders. However, this outcome is not always occurring due, in part, to this lack of specificity in the guidance, we described earlier in this report. We found variation both in the ways local officials engaged external and internal stakeholders in facility alignment efforts and in the results of those efforts. In addition, VA officials stated that they do not monitor and evaluate their communication methods for best practices or for the methods’ effectiveness in reaching their intended audiences. This runs counter to federal standards for internal control, which note that agencies should monitor and evaluate their activities. We observed variation in the involvement of stakeholders and the impact on facility alignment outcomes. As noted earlier, in some cases, we observed one-way communication that resulted in adversarial relationships that reduced VA’s ability to better align facilities to the needs of the veteran population. In other areas, such as with the medical facility that was able to close an underutilized inpatient wing, close a leased CBOC, and relocate a domiciliary, two-way communication with stakeholders resulted in more productive relationships and effective alignment efforts. Evaluating the effectiveness of stakeholder outreach efforts would help VA officials identify and internalize lessons for future activities. However, VA lacks a process for evaluating its stakeholder outreach efforts. Without guidance that adheres to best practices about fully integrating stakeholders and the lack of monitoring and evaluation about this process, VA increases its risk that stakeholders are not appropriately involved in its facility alignment efforts nor can it determine the effectiveness of its efforts, or learn lessons from previous efforts. The shifts in veteran demographics and demand for health services combined with antiquated facilities create an imperative for VA to better align its medical facilities and services. However, some of the recommendations from VA’s last major alignment effort—CARES—were not fully implemented and its current efforts to facilitate realignment—the SCIP and VAIP processes—are hindered by key limitations. For example, SCIP is unable to ensure that medical facilities are not adding projects in out years to address gaps that they do not intend to implement. In addition, relying on project narratives for one-third of the project score can introduce subjectivity into the process, a process that was intended to ensure that all projects are reviewed equitably and consistently. If these deficiencies remain, VA’s SCIP process for prioritizing capital projects will continue to limit the agency’s ability to effectively facilitate decisions to correctly align its medical facilities with veterans’ needs and thereby deliver the best and most cost-effective health care to the veteran population. The VAIP facility master plans also have significant limitations as a planning aid. If their trend toward not analyzing the benefits of utilizing medical capacity in the community is continued, the VAIP facility master plans’ recommendations could result in spending more than necessary to provide the services. The level of potential overspending on VA medical centers will become an even more significant issue if the number of enrolled veterans begins to decline after the year 2024 as predicted. Finally, because VA has not consistently followed best practices for effectively engaging stakeholders, stakeholders may not fully support alignment efforts—a situation that poses a risk to success. Also, VA does not have a process for monitoring and evaluating its communication methods, which runs counter to federal standards for internal control. Without this, VA does not know if the local officials are meaningfully or effectively engaging internal and external stakeholders in the capital alignment decisions that affect them. To improve VA’s ability to plan for and facilitate the alignment of its facilities with veteran needs, we recommend that the Secretary of Veterans Affairs direct the appropriate offices and administrations to take the following four actions: 1. Address identified limitations to the SCIP process, including limitations to scoring and approval, and access to information. 2. Assess the value of VAIP’s facility master plans as a facility-planning tool. Based on conclusions from the review, either 1) discontinue the development of VAIP’s facility master plans or 2) address the limitations of VAIP’s facility master plans. 3. Develop and distribute guidance for VISNs and facilities using best practices on how to effectively communicate with stakeholders about alignment change. 4. Develop and implement a mechanism to evaluate VISN and facility communication efforts with stakeholders to ensure that these communication efforts are working as intended and align with guidance and best practices. We provided a draft of this report to VA for comment. Its written comments are reproduced in appendix II. VA partially concurred with our first recommendation. Specifically, VA said that it generally concurred with the recommendation to address limitations in SCIP process, but limited its concurrence to addressing the limitations that are within VA’s control. We edited our report to indicate that some parts of the process are outside VA’s control and focused our findings on those elements for which VA does have control. VA fully concurred with the other three recommendations and outlined a plan to implement them. VA also provided technical comments, which we incorporated as appropriate. As agreed with your offices, unless you publicly announce the contents of this report earlier, we plan no further distribution until 30 days from the report date. At that time, we will send copies of this report to the appropriate congressional committees and the Secretary of Veterans Affairs. In addition, the report will be available at no charge on the GAO website at http://www.gao.gov. If you or your staff have any questions regarding this report, please contact David J. Wise at (202) 512-2834 or wised@gao.gov, or Debra A. Draper at (202) 512-7114 or draperd@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 key contributions to this report are listed in appendix III. Table 1 lists the 168 VHA-operated buildings over 10,000 square feet in size that, according to VA, had been designated for potential disposal at the end of fiscal year 2014, organized by state and medical center. 1. VA stated that many of the items noted in the draft report mischaracterized the intended outcomes of the SCIP process, such as the fact that SCIP was not designed as a mechanism to force realignment. We did not intend to characterize the SCIP process’s intention as a mechanism to force realignment of VA facilities and clarified our report to reflect this approach. 2. VA stated that many of the items we found that needed to be addressed through the SCIP process were outside of the SCIP program and that VA had limited ability to influence. We agree and have edited the report: to reflect that some elements of the process are outside VA’s control and to re-focus on the aspects that VA does control. Please see comments 3, 4, and 5 below for our responses. Regarding how we characterized the intention of the SCIP process, see comment 1. 3. In regard to our finding that the SCIP process does not have a mechanism in place for ensuring that future-year projects are implemented, VA stated that this was not an intentional limitation resulting from the SCIP process, but was instead an outcome stemming from VA not having enough capital to meet all of the needs identified in the SCIP plan. We agree and clarified the report. However, in our review, planners at two medical facilities told us that they enter projects for future years that they have little or no intention of actually pursuing—which is different than not having enough capital to pursue the project. As such, we continue to believe that SCIP has a limitation in that it does not have a mechanism in place to prevent facility planners from gaining credit for closing service gaps by proposing capital projects that they have no intention of ever implementing. 4. In regard to our finding that SCIP’s development and approval timeframes can hinder capital planning, VA stated that it agrees that the planning process is lengthy, but added that the timeliness of the SCIP process is driven by the government-wide budget process, which is outside of VA’s control. We agree that there are elements of the timeframes that are outside of VA’s control and clarified our report to address this situation and focus on what is within VA’s control. Specifically, over the last 6 fiscal-year SCIP submissions, VA has chosen to wait about 6 to 10 months to report the results of the SCIP scoring process to the medical facilities. 5. In regard to our finding that the SCIP process’s scoring and approval process relies on facility planning officials’ ability to write an accompanying narrative that addresses more of the priorities, VA stated that it disagreed that the scoring was highly based on narrative and/or subjective information. We clarified our report to note that the narrative portion represents about one-third of a project’s overall score, but as VA states, it relies on the planners’ ability to articulate the business need for the project. GAO continues to believe that that relying on planners’ abilities to articulate the business need for a project introduces subjectivity to the scoring process. David J. Wise at (202) 512-2834 or wised@gao.gov, or Debra A. Draper at (202) 512-7114 or draperd@gao.gov. In addition to the contacts named above, Keith Cunningham, Assistant Director; Jeff Mayhew, Analyst-in-Charge; Colleen Taylor; Laurie F. Thurber; and Michelle Weathers made key contributions to this report. Also contributing were Jacquelyn Hamilton, John Mingus, Sara Ann Moessbauer, Malika Rice, and Crystal Wesco.

Summary: VA operates one of the largest health care systems in the United States, with 168 VA medical centers and more than 1,000 outpatient facilities. Many of these facilities are underutilized and outdated. A previous effort aimed at modernizing and better aligning facilities was not fully implemented. GAO was asked to review the current alignment of VA medical facilities with veterans' needs. This report examines: (1) the factors that affect VA facility alignment with veterans' needs, (2) the extent to which VA's capital-planning process facilitates the alignment of facilities with the veteran population, and (3) the extent to which VA has followed best practices by integrating stakeholders in facility alignment decisions. GAO reviewed VA's facility- planning documents and data, and interviewed VA officials in headquarters and at seven medical facilities selected for their geographic location, population, and past alignment efforts. GAO also evaluated VA's actions against federal standards for internal control and best practices for capital planning. Geographic shifts in the veteran population, changes in health care delivery, and an aging infrastructure affect the Department of Veterans Affairs' (VA) efforts to align its services and real property portfolio to meet the needs of veterans. For example, a shift over time from inpatient to outpatient care will likely result in underutilized space once used for inpatient care. In such instances, it is often difficult and costly for VA to modernize, renovate, and retrofit existing facilities given the challenges associated with these older facilities. VA relies on the Strategic Capital Investment Planning (SCIP) process to plan and prioritize capital projects, but SCIP's limitations—including subjective narratives, long time frames, and restricted access to information—undermine VA's ability to achieve its goals. Although VA acknowledges many of these limitations, it has taken little action in response. Federal standards for internal control state that agencies should evaluate and determine appropriate corrective action for identified limitations on a timely basis. Without doing so, VA lacks reasonable assurance that its facility-alignment reflects veterans' needs. A separate planning process—VA Integrated Planning (VAIP)—was designed to supplement SCIP and to provide planners with a more strategic vision for their medical facilities through the creation of facility master plans. However, GAO found limitations with this ongoing effort, which VA estimated to cost $108 million. Specifically, the facility master plans assume that all future growth in services will be provided directly through VA facilities without considering alternatives, such as purchasing care from the community. However, VA's use of care in the community has increased to an obligated $10.1 billion in fiscal year 2015. Federal capital-acquisition guidance identifies inefficient spending as a risk of not considering other options for delivering services. This consideration is particularly relevant as VA's data project that the number of enrolled veterans will begin to fall after 2024. Officials who oversee the VAIP process said that they were awaiting further analyses required by recently released VA guidance on the proportion of care and types of services to obtain from the community. As a result of this and other limitations, some local VA officials said that they make little use of the VAIP facility master plans and contract for their own facility master plans outside the VAIP process. Although VA instructs local VA officials to communicate with stakeholders, its guidance is not detailed enough to conform to best practices. VA has not consistently followed best practices for effectively engaging stakeholders in facility consolidation efforts—such as in utilizing two-way communication early in the process and using data to demonstrate the rationale for facility alignment decisions. GAO found that when stakeholders were not always engaged consistently with best practices, VA's efforts to align facilities with veterans' needs were challenged. Also, VA officials said that they do not monitor or evaluate these communications efforts and, therefore, have little assurance that the methods used effectively disseminate information to stakeholders. This approach runs counter to federal standards for internal control, which instruct agencies to monitor and evaluate activities, such as communications methods. GAO made four recommendations, including that: VA improve SCIP's scoring and approval process among other limitations and discontinue or improve the utility of the VAIP facility master plans, and improve guidance to effectively communicate facility alignment decisions with stakeholders and to evaluate these efforts. VA partially concurred with the first recommendation and fully concurred with the other recommendations. GAO believes the recommendations are sound, as described in the report.