VA operates one of the nation’s largest health care systems at a cost of more than $16 billion a year. The system has 173 hospitals and 220 clinics that are geographically remote from a VA hospital. VA hospitals typically operate these clinics themselves and staff them with VA personnel. Since its inception in 1930, the VA health care system has developed into a direct delivery system, with the government owning and operating its own health care facilities, in response to a time when there was virtually no public or private health insurance. Traditionally, many veterans traveled long distances to use VA facilities. About one-half of all veterans live more than 25 miles from a VA hospital, including 6 percent who live more than 100 miles from one. Over one-third of all veterans live 25 miles or more from a VA clinic. Currently, VA serves about 10 percent of the 27 million veterans eligible for care including many who travel long distances. Other veterans have often said that they do not use VA facilities for their health care because they live too far from the nearest hospital or clinic. Until 1995, VA required its hospitals to meet rigid criteria to establish outpatient facilities located apart from the hospitals. These criteria included a minimum number of veterans to be served in a clinic and a minimum distance that clinics must be from the VA hospitals. For example, community-based clinics were required to (1) have a projected workload of at least 3,000 visits annually, (2) be 100 miles or 3 hours travel time away from the nearest VA facility, and (3) have more than one-half of the counties in the targeted veteran population in health manpower shortage areas. In anticipation of national health care reform, VA determined that it needed to expand its ability to provide outpatient care, especially for veterans who are geographically distant from VA hospitals. The Amarillo VA hospital is recognized as the first facility to establish access points. Amarillo’s first access point began operations in January 1994. In February 1995, VA encouraged all its hospitals to consider establishing access points, like those that Amarillo operates. In doing this, VA eliminated many of its restrictions concerning the workload and location of proposed clinics. In addition, VA policy encouraged hospitals to provide care not only in VA-operated facilities, but also by contracting with other providers. VA gave hospital and veterans integrated service network (VISN) directors the authority to propose and approve access points. When developing new access points, directors are to consider the (1) eligible veteran population, (2) services to be provided, (3) costs of available alternatives, and (4) sources of funds. To date, nine VA hospitals have opened 12 access points (see fig. 1). VISN directors have considerable freedom to develop their own goals and objectives as well as their own implementation strategies; however, they are encouraged to discuss plans with interested parties as well as inform VA headquarters. Each of the 12 new access points generally shares four common operating characteristics. They each have a (1) designated health care provider, (2) prescribed package of medical services, (3) target veteran population, and (4) predetermined cost. VA staff operate four of the access points and contract with county or private clinics to operate the remaining eight. During a veteran’s initial visit, access points that have contracted with VA “enroll” the veteran in the facility. The contract access point agrees to care for the veteran for 1 year. For that care, the access point is paid a capitated fee—a one-time payment to cover the veteran’s care for a 12-month period, regardless of how many times the veteran seeks care. When new access points are established, VA encourages veterans currently receiving VA health care to enroll along with veterans who have not previously received care. However, some VA hospitals have limited enrollment to veterans with service-connected conditions or current VA users. As of March 1996, the 12 access points had enrolled nearly 5,000 veterans. Veterans receive primary care at access points comparable to that available during visits to a private physician’s office. With the exception of emergencies, enrolled veterans are referred to VA hospitals, not local hospitals, for inpatient or specialized care. In early 1996, VA notified the Congress that 47 hospitals (including 5 of the 9 hospitals that already had access points) were ready to open an additional 58 access points. Another 200 were under development and could be operating by December 1996. Subsequently, the 22 VISN directors began developing 1-year tactical, 2- or 3-year strategic, and 5-year target plans. VA expects that new access points will be an important element of the networks’ tactical/strategic plans. VA has drafted guidance to be used by VISN directors when planning for new access points. This draft guidance states that the intent of access points is to primarily enroll current users who find it difficult due to location or medical condition to travel to a VA facility. Toward this end, the guidance suggests that directors provide a more thorough analysis of such key factors as eligible veteran population, costs, and source of funds when submitting proposals to establish new or realign existing access points. For example, directors are to complete a workload analysis that describes and distinguishes those patients that will be redirected from the existing service population and those that are new. The guidance also provides a specific set of desirable characteristics that should be considered when siting an access point, including that it be generally within 30 minutes travel time of veterans’ residences. Historically, the Congress has limited VA’s authority to provide medical care to veterans, expanding it in a careful and deliberate manner. Although VA’s authority has increased significantly over the years, important limitations were not recognized by VA in establishing and operating the access points we visited. “for the mutual use, or exchange of use of specialized medical resources . . . only if such an agreement will obviate the need for a similar resource to be provided in a [VA] health care facility.” Specialized medical resources are equipment, space, or personnel that—because of cost, limited availability, or unusual nature—are unique in the local medical community. VA officials asserted that primary care provided at access points is a specialized medical resource because its limited availability to veterans in areas where VA facilities are geographically inaccessible (or inconvenient) makes it unique. One significant aspect of VA’s reliance on this authority is that it effectively broadens the eligibility criteria for contract outpatient care, thus allowing some veterans, who would otherwise be ineligible, to receive treatment. In our view, this statute does not authorize VA to provide primary care through its access points. The absence of a VA facility close to veterans in a particular area does not make primary care physicians unique in the local medical community, within the meaning of the statute. The purpose of allowing VA to contract for services under the specialized medical resources authority is not to expand the geographic reach of its health care system, but to make available to eligible veterans services that are not feasibly available at a VA facility that presently serves them. Furthermore, contracting for the provision of primary care at access points does not obviate the need for primary care physicians at the parent VA facility. VA has specific statutory authority (38 U.S.C. 1703) to contract for medical care when its facilities cannot provide necessary services because they are geographically inaccessible. This authority could be relied on to authorize contracting for the operation of access points. However, both the types of services available and the classes of veterans eligible for care under this authority are more limited than those under the authority upon which VA relies (38 U.S.C. 8153). For example, under 38 U.S.C. 8153, a veteran who has income above a certain level and no service-connected disability is eligible for pre- and posthospitalization medical services and for services that obviate the need for hospitalization. But under 38 U.S.C. 1703, that same veteran is not eligible for prehospitalization medical services or for services that obviate the need for hospitalization. If access points are established in conformance with 38 U.S.C. 1703, VA would need to limit the types of services provided to all veterans except those with service-connected disabilities rated at 50 percent or higher (who are eligible to receive treatment of any condition). All other veterans are generally eligible for VA care based on statutory limitations (and to the extent that VA has sufficient funds). For example, veterans with service-connected disabilities are eligible for all care needed to treat those conditions. Those with disabilities rated at 30 or 40 percent are eligible for care of nonservice-connected conditions at contract access points to complete treatment incident to hospital care. Furthermore, veterans with disabilities rated at 20 percent or less and those with no service-connected disability may only be eligible for limited diagnostic services and follow-up care after hospitalization. Most veterans currently receiving care at access points do not have service-connected conditions and, therefore, do not appear to be eligible for all care provided. VA is required to assess each veteran’s eligibility for care on the merits of his or her situation each time that the veteran seeks care for a new medical condition. We found no indication that VA requires access point contractors to establish veterans’ eligibility or priority for primary care or that contractors were making such determinations for each new condition. Last year, VA proposed ways to expand its statutory authority and veterans’ eligibility for VA health care. A bill has been passed in the Congress that, if signed by the President, would authorize VA hospitals to establish contract access points and provide more primary care services to veterans in the same manner as the access points are now doing. Access points have significant financial implications for VA hospitals, veterans, and non-VA health care providers. In general, VA hospitals will probably experience these effects only after access points have operated for a few years. In contrast, veterans and non-VA providers could experience financial effects immediately. VA hospital directors are likely to experience a series of financial challenges as they establish new access points.