VA dramatically transformed its health care delivery system over the last decade. A central goal of this transformation has been to reduce the need for, and the length of, inpatient hospital stays by providing primary care in outpatient settings and taking advantage of technological advances that reduce the need for hospitalization. VA developed a continuum of care grounded in outpatient settings; made available a broader array of services, including preventive care; and opened hundreds of community-based outpatient clinics. As a result, VA reduced the length of inpatient stays while providing health care to a growing number of veterans. From fiscal year 1996 through fiscal year 2004, VA’s national acute inpatient daily census fell by nearly 40 percent while the number of veterans who received health care from VA increased by about 76 percent (2 million). As VA increased its emphasis on outpatient care rather than inpatient care, VA was left with an increasingly obsolete infrastructure, including many hospitals built or acquired more than 50 years ago in locations that are sometimes far from where veterans live. To address its obsolete infrastructure, VA initiated its CARES process— the first comprehensive, long-range assessment of its health care system’s capital asset requirements since 1981. Since its inception in 1999, VA’s CARES process has reached several major milestones (see table 1). The remaining steps in the CARES process include completing alignment decisions for inpatient services, implementing decisions that have been completed, and institutionalizing CARES. Institutionalizing CARES will involve integrating the CARES process—a systematic, data-driven framework for evaluating VA’s capital assets in light of projected demand for VA health care services—into VA’s ongoing strategic planning efforts. In the announcement of CARES decisions in May 2004, the Secretary of Veterans Affairs stated that through the CARES process VA had developed more complete information about the demand for VA health care and a more comprehensive assessment of its capital assets than it ever had before. The Secretary noted that this information, along with the experience gained through conducting CARES, positioned VA to continue to expand the accuracy and scope of its planning efforts. The Secretary stressed that VA would focus on integrating the CARES process into its annual strategic and capital planning efforts in order to ensure that VA uses the best information available when making plans to meet the health care needs of current and future veterans. VA faces a key challenge in developing sufficient information to complete inpatient service alignment decisions. VA did not complete all its inpatient alignment decisions in the CARES process because it concluded that it lacked sufficient information to do so. VA did not complete inpatient alignment decisions across VA for long-term care (including nursing home care) and mental health services (including acute and long-term psychiatry, residential rehabilitation, and domiciliary care). VA also lacked sufficient information to complete its inpatient alignment decisions for services at 12 facilities. Developing information needed to complete inpatient alignment decisions for long-term care and mental health services across VA will be difficult for three reasons. First, it is unclear whether VA has adequate information on the number of veterans who will need and seek inpatient long-term care and mental health services from VA on a daily basis because VA has not finalized models for projecting future demand for these services. In VA’s May 2004 announcement of CARES decision, VA concluded that its models were inadequate to forecast demand. As a result, VA did not complete its inpatient alignment decisions for these services across VA. While VA officials told us that they have subsequently revised models and forecasts of demand for care from VA, these models and forecasts are not finalized. Second, VA has not made the policy determinations that would allow it to generate information concerning which veterans it will serve in the future among those seeking long-term care—including nursing home care—and the nursing home care services it will offer. Completing inpatient alignment decisions for nursing home care requires having a technical forecast of how many veterans will need and seek care from VA, and requires information generated from policy decisions concerning which veterans VA will serve and which nursing home services VA will provide. VA lacks this information because it has not determined criteria to be used to identify which veterans it will serve as a matter of policy, in addition to those required by law, criteria such as a veteran’s level of service- connected disability or income. In addition, VA lacks information on which services will be provided, such as specifying to whom it will provide nursing home care for short-stay care rehabilitation of post-acute conditions such as hip replacement and to whom it will provide long-stay support and supervision for chronic conditions such as dementia. VA officials told us that such policy decisions have not been made and, as a result, VA’s long-term care model cannot provide the forecasts of workload demand that are needed to make inpatient alignment decisions. Third, VA has not finalized its strategic plan for long-term care, which would provide information for determining where VA needs to provide these services and the types of services needed. Developing adequate models for forecasting likely demand and resolving policy issues for inpatient long-term care would provide key information needed to develop a long-term care strategic plan. According to the Secretary’s May 2004 summary of CARES decisions, an important element of the strategic plan for long-term care will be the goal of ensuring that veterans’ access to an appropriate range of these services is equitable. This plan would help VA decide whether its current facilities and inpatient services are in the best locations to meet future demand or whether changes are needed to better align these facilities and services with demand. Developing information needed to complete inpatient alignment decisions at 12 of VA’s 172 facilities will be challenging because VA does not have sufficiently precise information to evaluate tradeoffs between the costs and benefits of various alignment options. (See table 2 for a list of these facilities and their corresponding networks.) In some cases, these alignment decisions include inpatient long-term and mental health services. In general, VA concluded in its May 2004 announcement of CARES decisions that it does not have sufficient information to determine whether to maintain inpatient services as currently aligned at these facilities or to realign the services. For example, in the Boston area, VA provides inpatient care in 4 outdated facilities. VA concluded that it did not have sufficient information about the cost-effectiveness and benefits of building a replacement hospital in the area. VA also lacked sufficient information about how to preserve veterans’ access to nursing home services if such services in the Boston area are realigned. Similarly, VA faces a challenge developing sufficient information about the costs and benefits of options to make alignment decisions for inpatient services at its medical facility in Waco, Texas. In October 2003, network officials estimated that in the absence of a realignment of services at the Waco facility, which is primarily a psychiatric care hospital, VA will need about $1.5 million a year to maintain unused space at the facility, and that through 2022 the facility will require an additional $61 million for nonrecurring capital costs such as renovation. Options for realigning inpatient services at the Waco facility include moving some services, such as acute inpatient psychiatry, to other locations, such as VA’s medical facility in Temple, Texas. VA faces a challenge weighing these options and completing its alignment decision because VA has concluded that it lacks sufficient information on the possible savings it would achieve through realignment and the likely costs of construction at the Temple facility if services are added there. VA also concluded that it lacked sufficient information on access to inpatient services and continuity of care for veterans who currently receive health care services at the Waco facility. This information could help VA weigh options for the alignment of inpatient services at the Waco facility. This could also help VA address the concerns of stakeholders—including veterans’ service organizations, elected officials, and employee representatives—who will be affected by changes at the Waco facility. A group of stakeholders with concerns has asked to work with VA to develop alternatives for the facility and to assist in finding ways to lease the facility’s unused buildings and excess property. VA could use information on the costs and benefits of various alignment options not only to complete its inpatient alignment decisions for the 12 facilities, but also to address the concerns of stakeholders and others. Stakeholders—including veterans’ service organizations, affiliated medical schools, employee unions, and communities—as well as decision makers and veterans are more likely to have confidence in decisions at specific VA medical facilities when VA can present sufficient information about the key costs and benefits of alternative options for the alignment of inpatient services. Costs and benefits to be considered are the impacts these alternatives would have on the quality of and access to care; the cost to the government; VA’s other strategic goals, such as the medical education of health care providers and research; and the local community’s economy. If VA had this kind of information, it would be better positioned to make decisions and address concerns raised by veterans and stakeholders. In the past, some stakeholders have opposed proposed changes to VA’s health care system that they felt were not in the best interests of their members, even when those changes could have benefited veterans. For example, medical schools’ reluctance to change long- standing relationships with VA medical facilities has sometimes been a major factor inhibiting VA’s asset management. Similarly, unions have been reluctant to support decisions that involve restructuring services when doing so could result in staffing reductions. VA has taken several steps to address the challenge of developing sufficient information to complete its remaining inpatient alignment decisions. These steps include developing information for completing inpatient alignment decisions for long-term care and mental health across VA and information for completing decisions for inpatient services at the 12 facilities. For long-term care and mental health, VA officials told us that VA has developed more adequate models to forecast the number of veterans who will need and seek these services from VA on a daily basis in the future than the models considered for use in the CARES process. However, VA officials have not finalized the long-term care and mental health models or forecasts and said that they will continue to refine these models.