VA Health Care

Actions Needed to Control Major Construction Costs Gao ID: HRD-93-75 February 26, 1993

Between fiscal years 1985 and 1992, the Department of Veterans Affairs (VA) received nearly $4 billion to build and modernize facilities; cost overruns during this period totaled more than $224 million. Although VA has tried to strengthen its construction program, the costs of the program are still too high because (1) factors affecting demand for VA health care services, such as incomes and insurance coverage of local veterans, are not considered in determining the need for VA construction; (2) less costly alternatives to VA construction, such as joint ventures with military facilities and use of state and local resources, are given short shrift in planning VA construction projects; and (3) projects exceed program needs, containing too many beds, too much space, or too costly designs. Also, projects increasingly receive construction funding before design development is complete and adequate cost estimates are developed. GAO believes that because of the likelihood of national health care reform, VA should consider limiting construction of additional acute care capacity until future demand for VA health care services can be determined.

GAO found that: (1) VA uses reasonable methods to identify needed construction and renovation projects and set funding priorities, but it does not consider veterans' income and insurance coverage, or lower-cost alternatives such as use of state and community resources and joint ventures with the Department of Defense (DOD); (2) a universal health care system could reduce the demand for VA inpatient care and create excess hospital capacity, which could be converted to nursing home beds at a lower cost than new construction; (3) VA construction projects often exceed program needs because of VA overestimates, excess space, or numerous costly design changes; (4) VA nursing home construction costs are higher than private-sector costs because VA adapts the facilities' designs to fit on medical center grounds and designs the facilities to meet hospital criteria rather than nursing home criteria; and (5) appropriating construction funds for projects before design completion can lead to unnecessary spending or insufficient funding.

Recommendations

Our recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.

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