VA’s health care system was established in 1930 primarily to provide rehabilitation and continuing care for veterans injured during wartime. Now, VA’s health care system serves about as many low-income veterans with medical conditions unrelated to wartime service as service-connected veterans. VA’s system comprises one of the nation’s largest networks of direct delivery health care providers. It includes 173 hospitals, 376 outpatient clinics, 133 nursing homes, and 39 domicilaries. These facilities are organized into a system of medical centers that typically include one or more hospitals as well as some of the other types of health care facilities. These facilities provided care to about 2.2 million veterans at a cost of about $16 billion in fiscal year 1995. VA has experienced a dramatic decline in its hospital inpatient workload. Over the past 25 years, the average daily workload in VA hospitals dropped by about 56 percent (from 91,878 in 1969 to 39,953 in 1994). VA reduced its operating beds by about 50 percent, closing or converting to other uses about 50,000 hospital beds. A number of factors could lead to a continued decline in VA hospital inpatient workload. For example: The veteran population is estimated to decline by one-half over the next 50 years. The downsizing of the military will likely make the decline even more dramatic. The number of veterans with health insurance coverage is expected to increase, which will likely decrease demand for VA acute hospital care. The nature of insurance coverage is changing. For example, increased enrollment in health maintenance organizations—from 9 million in 1982 to 50 million in 1994—is likely to reduce the use of VA hospitals. VA hospitals too often serve patients whose care could be more efficiently provided in alternative settings. The major veterans service organizations noted in their 1996 Independent Budget that a recent study indicated that VA could reduce its hospital inpatient workload by up to 44 percent if it treated patients in more appropriate settings. VA’s Under Secretary for Health testified in April 1995 that it will not be that many years before acute care hospitals become primarily intensive care units taking care of only the sickest and most complicated cases, having switched all other medical care to other settings, including ambulatory care settings, hospices, and extended care facilities. For fiscal year 1996, VA medical centers proposed to headquarters more than $3 billion in funding requests for major construction projects. VA headquarters officials reviewed and prioritized these projects. In the fiscal year 1996 budget request, the President asked the Congress to appropriate $514 million for nine projects. The projects range in size from $9 million to renovate nursing units in one hospital to $211.1 million to build a new medical center, as shown in table 1. On March 17, 1995, VA’s Under Secretary for Health announced a plan called “Vision for Change” to restructure the Veterans Health Administration. Essentially, VA’s central office and regional office structure would be replaced with veterans integrated service networks (VISN) supported by VA headquarters and such other infrastructures as management assistance councils. The plan calls for 22 VISNs, each headed by an accountable director and consisting of 5 to 11 medical centers. Each network would cover areas that reflect patient referral patterns and aggregations of patients and facilities to support primary, secondary, and tertiary care. The plan is designed to increase the efficiency of VA-provided health care by trimming unnecessary management layers, consolidating redundant medical services, and using available community resources. VA began implementing the plan on October 1, 1995. On August 29, 1995, the Under Secretary requested input from top VA health officials and others on a draft paper containing criteria for use in realigning medical facilities and programs as well as for siting new VA health care facilities. The paper was developed to help VA management identify opportunities for efficiencies. For example, it suggests that medical center directors use community providers if the same kind of services of equal or higher quality are available either at lower cost or equal cost but in more convenient locations for patients. It also encourages medical center directors to use nearby VA facilities and to merge, integrate, or consolidate duplicative or similar services if doing so would yield significant administrative or staff efficiencies or projected demand for services is expected to significantly decrease. The nine projects would, for the most part, benefit veterans needing VA inpatient care. The two new medical centers are intended to reduce veterans’ travel distances or times to access VA care. The seven renovation projects are intended to improve delivery of veterans’ health care at existing medical centers by correcting fire and safety deficiencies, improving patient environment, and increasing efficiency. The renovation projects would not correct all the deficiencies at the seven medical facilities. (See app. II for detailed project information.) The proposed medical centers in Brevard County, Florida, and at Travis Air Force Base in Fairfield, California, are intended to improve veterans’ geographic access to VA health care in east central Florida and northern California, respectively. As we reported in August 1995, the Brevard project, which includes a 470-bed hospital, a 120-bed nursing home, and an ambulatory care clinic, would improve access to VA health care facilities for many of the 258,000 veterans living in a six-county target area. The target area currently is served by VA medical centers in Gainesville, Tampa, Bay Pines (psychiatric care only), and West Palm Beach that are, respectively, 175, 125, 155, and 120 miles from the Brevard site. Our analysis of VA documents showed that the Travis project would provide VA with 243 hospital beds and an outpatient clinic and is intended to improve access to VA health care facilities for many of the 447,000 veterans living in a 32-county target area. Veterans in the area currently receive outpatient care from NCHCS’s clinics in Berkeley, Martinez, Oakland, Redding, and Sacramento; a day treatment facility in Martinez; and some inpatient care from the Travis Air Force Base Hospital, with which VA has negotiated for the use of 55 interim beds in anticipation of the Travis project. They also receive inpatient care from VA medical centers in San Francisco, Palo Alto, Livermore, and Fresno, California; and Reno, Nevada. NCHCS officials said that northern California veterans find these facilities difficult to access due to distance, congested highways, poor public transportation, and such geographic obstacles as the Sierra Nevada mountain range and San Francisco Bay. Two VA studies showed that inpatient utilization of northern California and northern Nevada VA medical centers has decreased since VA closed its Martinez medical center in 1991 for earthquake safety concerns. The studies recognized that several factors could have influenced utilization but had no evidence to indicate the extent to which the decline in utilization was caused by the lack of access to VA facilities. NCHCS’s acting director believes, however, that the decline is significantly attributable to the lack of access. All seven renovation projects would enhance the delivery of health care for patients at existing VA medical centers in the seven target areas, as shown in table 2. Medical center officials said that all seven projects would correct safety deficiencies and five would correct fire deficiencies. For example, two projects would widen patient room doors that are too narrow for beds, thereby allowing bed-ridden patients to be easily evacuated in case of fire and transported for treatment and other services without the risk of being dropped when removed from their beds. Most projects also would install sinks in patient rooms, reducing the risk of spreading infection and disease. One project would extend fire stairs from the fourth to the top floor of a five-story hospital, providing an escape route for patients in case of fire. Medical center officials told us that fire or safety deficiencies had been identified by the Joint Commission on Accreditation of Healthcare Organizations (JCAHO)—the organization that assesses medical facilities’ capabilities to provide quality care. Officials in three centers said that their centers were not cited because they planned to correct the deficiencies with their proposed projects. Officials at three medical centers said that accreditation might be jeopardized if deficiencies are not corrected. According to one medical center director, losing JCAHO accreditation would make attracting medical staff difficult and could jeopardize the center’s affiliation with its neighboring medical school. Officials at another medical center said that they would correct deficiencies with minor construction funds if the project is not funded. Medical center officials also expected all the projects to improve patient environment. For example, all would increase patient privacy, primarily by converting patient rooms now containing as many as nine beds and congregate bath and toilet facilities to single and double rooms with private and semiprivate bathrooms. Five would improve handicapped accessibility by such modifications as installing hand and wheelchair rails and increasing the number of wheelchair-accessible bathrooms. And most would upgrade heating and air conditioning, improving air quality and increasing patient comfort. Finally, all the projects are expected to increase the medical centers’ efficiency. For example, officials at two medical centers said that nursing staff should save time and energy spent escorting patients to remote congregate bath and toilet facilities when such facilities are replaced with private and semiprivate bathrooms. Staff at two facilities should save time spent escorting patients to dining and treatment rooms in remote buildings when these rooms are relocated to the buildings where patients reside. In addition, staff at one medical center would no longer use intensive care beds for patients requiring only routine monitoring when monitoring equipment is installed in patient rooms. Our analysis of VA documents shows that VA has identified major construction needs in addition to the proposed projects. We reported in August 1995 that, along with the new Brevard medical center, VA plans to spend $14 million to convert a former Naval hospital into a VA nursing home for veterans in east central Florida. VA studies indicate that, in addition to the new Travis medical center, VA plans to build a new 120-bed nursing home and a replacement outpatient clinic in Sacramento, California. Also, the 5-year facility plans for the seven medical centers with proposed renovation projects show that, in addition to the proposed projects, the facilities need about $308 million for other major and minor projects.