Most VA providers—including full- and part-time providers—are eligible for performance pay, but they may choose not to participate. Performance pay is given annually in a lump sum and may not exceed the lesser amount of $15,000 or 7.5 percent of a provider’s combined base and market pay, under the statute that defines the elements of provider pay. However, according to VHA officials, VA headquarters and each network and medical center have discretion to set a lower annual cap for their providers, and the amounts awarded may also depend on VA’s budget. Under the statute, performance pay is given on the basis of a provider’s achievement of specific goals and performance objectives, referred to in this report as goals. According to policy, performance pay goals can be established by medical center and network officials. As a result, the goals may be the same for all providers in the network, at a particular medical center, or within a particular specialty, or they may vary by individual provider. The amount of performance pay depends on the extent to which it is determined that a provider met his or her performance pay goals. Performance pay goals may include, for example, achieving a specific patient panel size, and are required by VA policy to be established within 90 days of the beginning of each fiscal year. VA’s performance pay policy requires medical centers to use form 10-0432 for each provider to document the goals and the provider’s achievement of them. When completed, the form is given to the medical centers’ respective human resources offices, which process the performance pay. Most providers are eligible for performance awards, although these awards are not required. The awards are lump-sum payments that are made annually and are based on providers’ annual performance reviews. VA policy requires that all providers—including full- and part-time providers—who have worked at VA medical centers receive annual performance reviews. For nonsupervisory providers, the reviews consist of a standard set of measures, including clinical, educational, and administrative competence; research and development; and personal qualities, such as dependability. A provider can receive an overall rating of unsatisfactory, low satisfactory, satisfactory, high satisfactory, or outstanding on an annual performance review. Service chiefs and chiefs of staff at VA medical centers, and providers at headquarters and networks who are in supervisory positions, also receive annual performance reviews based on measures outlined in VHA’s managerial performance plan. For nonsupervisory providers, the policy specifies that performance award amounts should not exceed $7,500. However, as with performance pay, VA headquarters, networks, and medical centers have discretion to determine the level of performance that would merit an award and the award amount within the $7,500 limit. For example, one medical center may grant performance awards to all providers who receive an overall performance rating of satisfactory or higher, while another medical center may only grant performance awards for an overall rating of outstanding, or not give them at all. VA policy states that VA medical centers may take actions, such as major adverse and disciplinary actions, against providers to address and correct deficiencies related to providers’ clinical performance. These actions range in severity from admonishment to termination of employment. In addition, VHA also has the option of taking privileging action—that is, reducing, revoking, denying, or failing to renew a provider’s clinical privileges—against medical center providers to address performance deficiencies. Medical centers have discretion in determining the type of action appropriate for each provider’s performance issue. Performance- related personnel actions may serve as an indication that the provider has not delivered high-quality, safe health care. VA’s performance pay policy gives VA’s 21 networks and 152 medical centers discretion in the establishment of performance pay goals for providers. The policy, issued in 2005 and revised in 2008, states that providers who meet established goals should receive performance pay. However, the policy does not provide an overarching purpose that the goals should support. VA’s Under Secretary for Health at the time the performance pay law was being considered stated in a congressional hearing that this pay would recognize providers’ achievements in quality, productivity, and support of the overall goals of the department. The Senate committee report and statements by members of Congress at the time the bill was passed provided that performance pay would recognize outstanding contributions to the medical center, to the care of veterans, or to the practice of medicine or dentistry, and it would motivate providers and ensure quality of care through the achievement of specific goals or objectives set for providers in advance.responsible for writing the performance pay policy also told us that the In addition, VA officials purpose of performance pay is to improve health care outcomes and quality; however, these goals are not documented in the policy. Officials at the four medical centers we visited differed in their views of what constituted appropriate goals for performance pay. The following are examples of the factors these officials thought should be considered when establishing performance pay goals. According to these officials, the goals should be objective and measurable, measure only clinical achievements, recognize performance that is above and beyond expectations, or be measured at the individual provider level to ensure that the provider has direct control over the achievement of the goals. As a result of these differing views, our review of the goals established for a mental health provider at each of four medical centers we visited found similarities as well as differences in the fiscal year 2011 goals. For example, one medical center used clinical goals exclusively, while others used a combination of goal types, such as clinical, patient satisfaction, and research. Table 1 includes examples of the types of goals established for a mental health provider at each of the four medical centers we visited. VHA officials told us that they have not formally reviewed the various goals that have been established by individual medical centers and networks to determine the purpose or purposes these goals support. In 2009, the Principal Deputy Under Secretary for Health asked that a group be convened to solicit and compile performance pay goals in order to review the types of goals being developed for each physician specialty and dental service across VA’s health care system. VHA officials told us at the time of our review that they had not yet done this, but planned to begin compiling and discussing a list of useful goals sometime in 2013. Because VHA has not reviewed the goals that have been set across medical centers and networks, it cannot have reasonable assurance that the goals established make a clear link between performance pay and providers’ performance. This condition is inconsistent with federal standards for internal control activities, which includes management of human capital. Of the eight providers who were the subject of performance-related personnel actions in fiscal year 2010 or 2011 at the four medical centers visited, three providers were not eligible for performance pay during the same fiscal year. Two of the three providers were not eligible because they were terminated or resigned before the end of the fiscal year, and the third was not eligible because the provider was placed on indefinite suspension without pay and was not practicing as of the end of the fiscal year. $7,663 in performance pay, 67 percent of the amount for which the provider was eligible. Another provider was reprimanded for refusing to see assigned patients waiting in the emergency department because the provider believed that patients had been triaged inappropriately. As a result, wait times increased. Documentation provided by the medical center indicated that, of the 98 patients who were triaged to the emergency department that day, 15 patients waited for over 6 hours to be seen and 9 patients left without being seen. That same fiscal year, this provider received $7,500 out of a maximum of $15,000 in performance pay. Specifically, this provider had 13 performance pay goals, which included becoming a member of a committee, attending staff meetings, and ensuring that all provider notes were signed in accordance with medical center policy. The provider met 1 of the 13 goals, which was assigned a weight of 50 percent. This goal was not specific to the individual provider, but instead was based on the achievements of all emergency department providers; it included meeting performance measures, such as maintaining productivity despite reduced resources, and adhering to the medical center policy for length of stay for patients in the emergency room. Since the medical center determined that the emergency department providers, which included this provider, met this goal, the provider received 50 percent of the maximum amount of performance pay. The service chief told us that his preference would have been to deny performance pay to this provider altogether, but he was told that the provider was entitled to the pay. In contrast to the performance pay policy, VA’s performance award policy clearly states the purpose of these awards—specifically, that they are to recognize sustained performance of providers beyond normal job requirements as reflected in the provider’s most recent performance rating. VA policy also lists the measures supervisors are to use to determine the performance rating for providers in nonsupervisory positions, such as clinical competence. VA’s performance pay policy is unclear about how to document compliance with two requirements—the goal-setting discussion between the supervisor and provider and the approval of the performance pay amount. For the documentation of goal-setting discussions, the policy states that supervisors are to discuss established goals with individual providers within 90 days of the beginning of the fiscal year, but it does not specify how medical centers are to demonstrate compliance with this requirement. VA’s policy specifies that form 10-0432 is to be used for documenting performance pay. The form has space at the top for listing the goals that a provider must meet to receive performance pay. The form includes a signature and date box for the supervisor and for the provider, respectively. (See fig. 1, section A.) The VA officials who wrote the policy, and VHA officials who are responsible for helping medical centers implement it, told us they expect that provider and supervisor signatures on the top of the form would indicate that goals have been discussed and the date would indicate when this discussion took place. The officials told us that this date is to verify that the 90-day requirement was met, but they have not documented or provided this guidance to the medical centers.