VA’s Veterans Benefits Administration (VBA) is responsible for administering benefit programs, such as disability compensation and pension. Veterans and their families can apply for benefits at any of VA’s 58 VAROs. Significant differences exist among VAROs; for example, as of September 30, 1994, their claims processing staffs ranged in size from 11 to 219. Likewise, performance varies considerably; for example, the time needed to process initial disability claims ranged from 86 to 367 days in 1994. VA’s ability to process claims for benefits in a timely way has been a major topic of concern for many years. In 1990, VA took steps to fundamentally change the way services are provided to veterans. A key element of those changes is modernization of VBA’s automated information systems, projected to be completed in 1998. Progress on this effort has been slow, and we have raised significant concerns about the adequacy of planning and implementation. In response to our initial work, VA agreed with the Director of the Office of Management and Budget (OMB) to, among other things, increase project oversight, establish outcome-oriented performance measures and document the system’s effect on service, and update the project’s economic analysis. The OMB agreement included timeliness goals to be met by the end of fiscal year 1998—as well as interim goals—for selected types of claims, including initial disability compensation and initial pension claims. In 1990 the Secretary of VA also asked all VAROs to identify and implement innovative changes aimed at speeding up claims processing and reducing the growing backlog. In response, some VAROs undertook major restructuring initiatives, but most continued using the traditional “assembly-line” approach to processing. Under this approach, each claim passes through several individuals, each of whom performs a specific task. One person enters the claim into the computerized system and opens the claims file. Another then determines what information is needed and develops requests for that information. Another communicates with VA hospital staff if a physical examination is needed. These steps continue until an “authorizer” approves the decision. Often, files are centrally located and are sent back and forth from the central files to various claims processors many times before a claim is decided. The claims backlog and processing times did not decrease but grew from 1990 to 1993. The backlog of compensation and pension claims grew from about 378,000 to about 528,000 during that period. Table 1 shows that, during the same period, average processing time increased for the four types of claims specifically included in VA’s agreement with OMB. VA attributed its claims processing difficulties to several factors, including significantly increased workloads resulting from downsizing of the military, increased complexity of claims, and expanded responsibility resulting from decisions by the U.S. Court of Veterans Appeals created in 1988. “There is no ownership or accountability associated with the process. The claim physically moves from one location to the next, with each person responsible for a small part of the process and each movement contributing to further delay in the claim.” The panel’s recommendations addressed what it saw as three key problem areas in claims processing: (1) inadequate claims development, (2) excessive response time for obtaining evidence, and (3) an unacceptably long time to rate cases. (See app. I for a list of the panel’s recommendations.) The recommendations were based, in part, on initiatives already implemented in one or more VAROs and on panel members’ judgment. The panel was composed of people from both inside and outside VA with extensive experience and knowledge of VA operations and relied on expertise and judgment to identify root causes and develop recommended changes. Our work and the work of others have also identified these three areas as significant problems for VA. During 1994 some VAROs continued or began making changes intended to improve claims processing, and VA worked to develop guidance and policies for implementing the Blue Ribbon Panel recommendations. During that year the number of claims awaiting a decision decreased somewhat, from 528,000 in 1993 to about 485,000 in 1994. However, average processing times increased and VA moved further away from, rather than closer to, the 1998 timeliness goals. Officials told us that processing times increased because, during the later part of the year, VA focused on reducing the backlog of old claims, thus increasing the average age of claims closed. Table 2 shows the average 1994 processing times for the four types of claims included in the OMB agreement compared with the average time in 1993 and the 1998 goals. To determine VA’s plans for implementing change, we examined ongoing and planned efforts to change claims processing structures and procedures in seven VAROs (see app. II). We judgmentally selected VAROs that differed in size and the number and type of changes already made. At these locations we discussed the impact of changes with officials, analyzed pertinent processing data and reports, and observed claims processing activities. We also visited VA’s eastern and western area offices, where we discussed the initiatives that VAROs in each area had implemented and the area offices’ role in implementing and monitoring those and future initiatives.In addition, we analyzed the findings and recommendations of VA’s Blue Ribbon Panel and headquarters’ plan for implementing them. To evaluate VA’s plans for determining the effectiveness of VARO changes, we discussed plans for assessing the impact of changes with officials from VBA’s Compensation and Pension Service and Program Analysis and Evaluation staff. We also discussed how VA plans to ensure that VAROs implement those initiatives that offer the greatest promise for solving their claims processing problems. Our work focused on changes in VAROs’ claims processing structures and procedures and not on VBA’s computer system modernization effort or VBA’s reengineering task force—which is charged with looking beyond compensation and pension issues to improving operations throughout VBA. An ongoing GAO study is addressing VA’s systems modernization efforts and their relationship to the changes in VARO structures and procedures discussed in this report and to VBA’s reengineering task force. Additionally, at VA’s request, the Center for Naval Analyses is conducting an independent assessment of the coordination, control, and integration of key modernization activities, including their relationship to other initiatives aimed at improving claims processing. Our review was conducted between October 1993 and August 1994 in accordance with generally accepted government auditing standards. VA has developed several model claims processing structures that incorporate some key Blue Ribbon Panel recommendations. In addition, VA is working to modify regulations and other claims processing policies to encourage and allow a variety of procedural changes. VAROs will have flexibility in deciding which initiatives to implement, given their individual circumstances. However, our review showed that some VAROs are not likely to implement some initiatives. They may be reluctant to make changes or face logistical obstacles to doing so. Also, they may not have knowledge of the experiences of other VAROs, knowledge that could overcome reluctance or show ways to get past obstacles. The Blue Ribbon Panel concluded that VA’s traditional assembly-line claims processing system should be completely restructured. The goals of the revised structures represented in the models, as described by VA officials, are to put fewer resources into clerical functions and more into decisionmaking—especially rating claims—and to ensure good service as required by the Government Performance and Results Act. To replace the current assembly-line system, VA developed models that reorganize staff along two basic types of team structures, one based on a case management approach and the other on a functional alignment approach. The case management approach organizes staff into small work teams responsible for all claims processing steps for all or most types of claims. This approach reduces the number of staff involved in processing each claim. The functional alignment approach organizes staff into two types of work teams. One team handles the processing of all claims that require a rating decision, thereby allowing some specialization of staff responsible for the most complex claims VA processes. The other team performs all claims-related activities for claims that do not require a rating decision. Implementation of each approach could follow one of two paths. Option one would integrate some of the VAROs’ staff responsible for all direct contact with customers—Veterans Services Division staff—with staff responsible for processing claims—Adjudication Division staff. This would allow a veteran to talk directly, in person or by telephone, to the individuals most knowledgeable about his or her specific claim. Option two would keep the functions of the two divisions separate during a transitional phase, after which the two divisions would be fully integrated. In addition to changing the claims processing structure, VA is planning a variety of other initiatives—not specifically related to any one model—to improve processing procedures. These initiatives include, for example, allowing claims examiners to contact claimants by telephone, developing a system to better track and locate claim files, and having claims examiners specialize by type of claim such as initial disability compensation or pension. Although empirical data were often not available to show a positive impact from these initiatives, VARO officials we spoke to who were implementing them believed the initiatives were improving timeliness or other aspects of service. Four VAROs that we visited allowed claims processors to contact sources of evidence by telephone rather than by the standard practice of sending a letter. Officials at all four VAROs found that using telephones was helpful. Officials at one VARO said that contacting sources by telephone shortens the time required to obtain the evidence and helps ensure that claimants and other sources of evidence understand exactly what VA needs. Officials at another VARO noted that applications frequently come in lacking critical information such as social security numbers. In such instances, processors simply telephone applicants to obtain the missing information. Locating files is a continuing problem in VA, one that regional officials acknowledged takes considerable staff time. One VARO modified VA’s existing computer system to better track claim files. The files at this VARO were well organized, and officials said they have almost eliminated the problem of lost and misplaced files. Two other VAROs planned to modify their systems in a similar manner.