Defense Health Care
DOD Needs to Address the Expected Benefits, Costs, and Risks for Its Newly Approved Medical Command Structure Gao ID: GAO-08-122 October 12, 2007The Department of Defense (DOD) operates one of the largest and most complex health systems in the nation and has a dual health care mission--readiness and benefits. The readiness mission provides medical services and support to the armed forces during military operations. The benefits mission provides health care to over 9 million eligible beneficiaries, including active duty personnel, retirees, and dependents worldwide. Past Government Accountability Office (GAO) and other reports have recommended changes to the military health system (MHS) structure. GAO was asked to (1) describe the options for structuring a unified medical command recommended in recent studies by DOD and other organizations and (2) assess the extent to which DOD has identified the potential impact these options would have on the current MHS. GAO analyzed studies and reports prepared by DOD's Joint/Unified Medical Command Working Group, the Defense Business Board, and the Center for Naval Analyses, and interviewed department officials.
DOD considered options to address the department's dual health care mission that differed in their approaches to both command structure and operations. In April 2006, the Joint/Unified Medical Command Working Group identified three options: (1) establishing a unified medical command on par with other functional combatant commands; (2) establishing two separate commands--a Medical Command, which would provide operational/deployable medicine, and a Healthcare Command, which would provide beneficiary health care through the military treatment facilities and civilian providers; and (3) designating one of the military services to provide all health care services across the department. Subsequently, in November 2006, a fourth option was presented that would consolidate key common services and functions, which are currently performed within each of the services, such as finance, information management and technology, human capital management, support and logistics, and force health sustainment. This option would leave the existing structures of the Army, Navy, and Air Force medical departments over all military treatment facilities essentially unchanged. The Deputy Secretary of Defense approved this fourth option in November 2006. Although DOD initiated steps to evaluate the impact that some restructuring options might have on the MHS, it did not perform a comprehensive cost-benefit analysis of all potential options. GAO's Business Process Reengineering Assessment Guide establishes that a comprehensive analysis of alternative processes should include a performance-based, risk-adjusted analysis of benefits and costs for each alternative. The working group used several methods to determine some of the benefits, costs, and risks of implementing its three proposed options. For example, it used the Center for Naval Analyses to determine the cost implications for each option, and it solicited the views of key stakeholders. However, based on the working group's methodology, the group intended to conduct a more detailed cost-benefit analysis of whichever of the three options senior DOD leadership selected, but the group's work ceased once the fourth option was formally approved. While DOD approved the fourth option, DOD has not demonstrated that its decision to move forward with the fourth option was based on a sound business case. Based on GAO's review of DOD's business case, DOD has described only what it believes its chosen option will accomplish. The business case does not demonstrate how DOD determined the fourth option to be better than the other three in terms of its potential impact on medical readiness, quality of care, beneficiaries' access to care, costs, implementation time, and risks because DOD does not provide evidence of any analysis it has performed of the fourth option or a sound business case justifying this choice. Without such analysis and documentation, DOD is not in a sound position to assure the Secretary of Defense and Congress that it made an informed decision when it chose the fourth option over the other three or that its chosen option will have the desired impact on DOD's MHS.
RecommendationsOur 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.
Director: Team: Phone:GAO-08-122, Defense Health Care: DOD Needs to Address the Expected Benefits, Costs, and Risks for Its Newly Approved Medical Command Structure
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Report to Congressional Committees:
United States Government Accountability Office:
GAO:
October 2007:
Defense Health Care:
DOD Needs to Address the Expected Benefits, Costs, and Risks for Its
Newly Approved Medical Command Structure:
Defense Health Care:
GAO-08-122:
GAO Highlights:
Highlights of GAO-08-122, a report to congressional committees.
Why GAO Did This Study:
The Department of Defense (DOD) operates one of the largest and most
complex health systems in the nation and has a dual health care
mission”readiness and benefits. The readiness mission provides medical
services and support to the armed forces during military operations.
The benefits mission provides health care to over 9 million eligible
beneficiaries, including active duty personnel, retirees, and
dependents worldwide. Past GAO and other reports have recommended
changes to the military health system (MHS) structure. GAO was asked to
(1) describe the options for structuring a unified medical command
recommended in recent studies by DOD and other organizations and (2)
assess the extent to which DOD has identified the potential impact
these options would have on the current MHS. GAO analyzed studies and
reports prepared by DOD‘s Joint/Unified Medical Command Working Group,
the Defense Business Board, and the Center for Naval Analyses, and
interviewed department officials.
What GAO Found:
DOD considered options to address the department‘s dual health care
mission that differed in their approaches to both command structure and
operations. In April 2006, the Joint/Unified Medical Command Working
Group identified three options: (1) establishing a unified medical
command on par with other functional combatant commands; (2)
establishing two separate commands”a Medical Command, which would
provide operational/deployable medicine, and a Healthcare Command,
which would provide beneficiary health care through the military
treatment facilities and civilian providers; and (3) designating one of
the military services to provide all health care services across the
department. Subsequently, in November 2006, a fourth option was
presented that would consolidate key common services and functions,
which are currently performed within each of the services, such as
finance, information management and technology, human capital
management, support and logistics, and force health sustainment. This
option would leave the existing structures of the Army, Navy, and Air
Force medical departments over all military treatment facilities
essentially unchanged. The Deputy Secretary of Defense approved this
fourth option in November 2006.
Although DOD initiated steps to evaluate the impact that some
restructuring options might have on the MHS, it did not perform a
comprehensive cost-benefit analysis of all potential options. GAO‘s
Business Process Reengineering Assessment Guide establishes that a
comprehensive analysis of alternative processes should include a
performance-based, risk-adjusted analysis of benefits and costs for
each alternative. The working group used several methods to determine
some of the benefits, costs, and risks of implementing its three
proposed options. For example, it used the Center for Naval Analyses to
determine the cost implications for each option, and it solicited the
views of key stakeholders. However, based on the working group‘s
methodology, the group intended to conduct a more detailed cost-benefit
analysis of whichever of the three options senior DOD leadership
selected, but the group‘s work ceased once the fourth option was
formally approved. While DOD approved the fourth option, DOD has not
demonstrated that its decision to move forward with the fourth option
was based on a sound business case. Based on GAO‘s review of DOD‘s
business case, DOD has described only what it believes its chosen
option will accomplish. The business case does not demonstrate how DOD
determined the fourth option to be better than the other three in terms
of its potential impact on medical readiness, quality of care,
beneficiaries‘ access to care, costs, implementation time, and risks
because DOD does not provide evidence of any analysis it has performed
of the fourth option or a sound business case justifying this choice.
Without such analysis and documentation, DOD is not in a sound position
to assure the Secretary of Defense and Congress that it made an
informed decision when it chose the fourth option over the other three
or that its chosen option will have the desired impact on DOD‘s MHS.
What GAO Recommends:
GAO is recommending that DOD address the expected benefits, costs, and
risks for implementing the fourth option and provide Congress the
results of its assessment. In commenting on a draft of this report, DOD
concurred with GAO‘s recommendations.
To view the full product, including the scope and methodology, click on
GAO-08-122. For more information, contact Henry L. Hinton, Jr. at (202)
512-4300 or hintonh@gao.gov.
[End section]
Contents:
Letter:
Results in Brief:
Background:
DOD Considered Different Options for the Command Structure and
Operations of Its Military Health System:
DOD Initiated Steps to Evaluate Options, but Did Not Perform a
Comprehensive Analysis of All Options:
Conclusions:
Recommendations for Executive Action:
Agency Comments and Our Evaluation:
Appendix I: Scope and Methodology:
Appendix II: Comments from the Department of Defense:
Appendix III: GAO Contact and Staff Acknowledgments:
Figures:
Figure 1: Current Military Health System Organizational Structure:
Figure 2: Notional Structure for a Unified Medical Command:
Figure 3: Notional Structure for a Separate Medical Command and
Healthcare Command:
Figure 4: Notional Structure for a Single Service Medical Command:
Figure 5: Notional Structure for a Joint/Unified Medical Command:
Abbreviations:
ASD (HA): Assistant Secretary of Defense (Health Affairs):
BRAC: Base Realignment and Closure:
CNA: Center for Naval Analyses:
DBB: Defense Business Board:
DOD: Department of Defense:
MHS: military health system:
MTF: military treatment facility:
USD P&R: Under Secretary of Defense for Personnel and Readiness:
United States Government Accountability Office:
Washington, DC 20548:
October 12, 2007:
The Honorable Carl Levin:
Chairman:
The Honorable John McCain:
Ranking Member:
Committee on Armed Services:
United States Senate:
The Honorable Ike Skelton:
Chairman:
The Honorable Duncan L. Hunter:
Ranking Member:
Committee on Armed Services:
House of Representatives:
The Department of Defense (DOD) operates one of the largest and most
complex health systems in the nation and has a dual health care
mission--readiness and benefits. The readiness mission provides medical
services and support to the armed forces during military operations and
involves deploying medical personnel and equipment as needed to support
military forces throughout the world. The benefits mission provides
health care to over 9 million beneficiaries, including active duty
personnel, retirees, and dependents worldwide. DOD's health care
mission is carried out through military hospitals and clinics, commonly
referred to as military treatment facilities (MTF), such as Walter Reed
Army Medical Center in Washington, D.C; National Naval Medical Center
in Bethesda, Maryland; and Landstuhl Regional Medical Center, in
Landstuhl, Germany, as well as civilian providers. Each military
service, under a surgeon general, is responsible for managing its own
MTFs. The Army and Navy each have a medical command, which manages each
service's MTFs and other activities through a regional command
structure. The Navy's medical department supports both the Navy and
Marine Corps. The Air Force Surgeon General, through the position as
medical advisor to the Air Force Chief of Staff, exercises essentially
the same authority as the other surgeons general. Each service also
recruits and funds medical personnel to administer its medical programs
and to provide medical services to beneficiaries.
Past GAO reports have highlighted a range of long-standing issues
surrounding the military health system (MHS) structure. For example, in
a 1995 report on defense health care, we found that interservice
rivalries and conflicting responsibilities hindered MHS improvement
efforts.[Footnote 1] We further noted that the services have
historically resisted efforts to change the way military medicine is
organized, including consolidating the services' medical departments,
in favor of maintaining their own health care systems, primarily on the
grounds that each service has unique medical activities and
requirements. We also noted that the lines of authority and
accountability between hospital commanders, the services, the service
surgeons general, and the Assistant Secretary of Defense (Health
Affairs) (ASD (HA)) are complicated and sometimes conflict. In 2001, a
RAND Corporation study[Footnote 2] on reorganizing the MHS uncovered at
least 13 studies that had addressed military health care organization
since the 1940s. All but 3 of those studies had either favored a
unified system or recommended a stronger central authority to improve
coordination among the services.
In our February 2005 report on key challenges facing the U.S.
government in the 21st century,[Footnote 3] we identified DOD's health
care system as an example of an area in which DOD could achieve
economies of scale and improve delivery by combining, realigning, or
otherwise changing selected support functions. That report also noted
that while DOD's civilian and military leaders appear committed to
reform, DOD must overcome cultural resistance to change and the inertia
of various organizations, policies, and practices that became well
rooted in the Cold War era--along with long-standing organizational and
budgetary problems, such as the existence of stovepiped or siloed
organizations and the involvement of many layers and players involved
in decision making. DOD's February 2006 Quadrennial Defense Review
Report acknowledges the department's need to reform its defense
enterprise, including the MHS.
In December 2004, DOD directed the Under Secretary of Defense for
Personnel and Readiness (USD P&R), to work with the Chairman of the
Joint Chiefs of Staff to develop an implementation plan for a joint
medical command by the fiscal years 2008-2013 program/budget review. In
2005, the USD P&R and the Director, Joint Staff established the Joint/
Unified Medical Command Working Group, which developed options with the
goal of improving DOD's MHS by eliminating unnecessary duplication;
streamlining organizational structures; and aligning authority,
responsibility, and financial control.
The House Armed Services Committee[Footnote 4] directed us to review
the various unified medical command studies that DOD and other
organizations have undertaken and provide an analysis of the various
unified medical command structures under consideration. This report (1)
describes the options for structuring a unified medical command that
have been recommended in recent studies by DOD and other organizations
and (2) assesses the extent to which DOD has identified the potential
impact these options would have on the MHS. We provided a briefing to
congressional committees on our preliminary observations in March 2007.
This report expands on the information delivered in that briefing and
includes recommendations to the Secretary of Defense.
To identify and describe the options for structuring a unified medical
command, we obtained and reviewed studies and reports undertaken by
DOD's Joint/Unified Medical Command Working Group, the Center for Naval
Analyses (CNA), and the Defense Business Board (DBB). We also obtained
and reviewed a concept plan presented by the USD P&R and the ASD (HA).
To gain a better understanding of the structure and organization of
each option and how each differs from the current MHS's structure, we
interviewed officials from DOD's Joint/Unified Medical Command Working
Group, the Office of the ASD (HA), the Joint Staff Logistics
Directorate, and the Offices of the Surgeons General of the Army, Navy,
and Air Force. To determine the extent to which DOD has identified the
potential impact these options would have on the MHS, we analyzed
studies and documents obtained from the Joint/Unified Medical Command
Working Group, the Joint Staff Logistics Directorate, the Office of the
ASD (HA), and CNA. In addition, we interviewed officials from DOD's
Joint/Unified Medical Command Working Group, the Office of the ASD
(HA), and the Joint Staff Logistics Directorate, and CNA to discuss the
implications of each option and to identify any limitations in their
assessments. We also reviewed GAO's Business Process Reengineering
Assessment Guide[Footnote 5] to determine guidelines for assessing
reengineering efforts. Other issues, such as determining the
appropriate command and control structure within DOD to manage the MHS,
did not fall within the scope of this review nor did evaluating the
validity of the cost implications developed by CNA. We conducted our
work from December 2006 through September 2007 in accordance with
generally accepted government auditing standards. Further details on
our scope and methodology can be found in appendix I.
Results in Brief:
DOD considered options to address the department's dual health care
mission that differed in their approaches to both command structure and
operations. In April 2006, the Joint/Unified Medical Command Working
Group identified three options. These options were (1) establishing a
unified medical command on par with other functional combatant
commands; (2) establishing two separate commands--a Medical Command,
which would provide operational/deployable medicine, and a Healthcare
Command, which would provide beneficiary care through MTFs and civilian
providers; and (3) designating one of the military services to provide
all health care services across the department. Subsequently, in
November 2006, the USD P&R and the ASD (HA) presented a fourth option
that would consolidate key common services and functions, which are
currently being performed within each of the services, such as finance,
information management and technology, human capital management,
support and logistics, and force health sustainment. This option would
leave the existing structures of the Army, Navy, and Air Force medical
departments over all MTFs essentially unchanged. In November 2006, the
Deputy Secretary of Defense approved the latter option.
Although DOD initiated steps to evaluate the impact that some
restructuring options might have on the MHS, it did not perform a
comprehensive cost-benefit analysis of all potential options. GAO's
Business Process Reengineering Assessment Guide[Footnote 6] emphasizes
that an organization should explore each alternative thoroughly enough
to convincingly demonstrate its potential to achieve the desired
performance goals. The Guide has also established that a comprehensive
analysis of alternative processes should include a performance-based,
risk-adjusted analysis of benefits and costs for each alternative. The
working group used several methods to determine some of the benefits,
costs, and risks of implementing its three proposed options. For
example, it used CNA to determine the cost of implementing each option,
and it solicited the views of key stakeholders. However, DOD did not
comprehensively analyze any of the four options. According to the
working group methodology, the group intended to conduct a more
detailed cost-benefit analysis of whichever of the three options senior
DOD leadership selected, but the group's work ceased once the fourth
option was formally approved by the Deputy Secretary of Defense.
Moreover, DOD has not demonstrated that its decision to move forward
with the fourth option was based on a sound business case. A sound
business case should include detailed qualitative and quantitative
analyses in support of selecting and implementing the new process in
terms of benefits, costs, and risks. We have not evaluated the pros and
cons of DOD's chosen approach. However, based on our review of DOD's
business case, DOD only described what it believes its chosen option
will accomplish. The business case does not demonstrate how DOD
determined the fourth option to be better than the other three in terms
of its potential impact on medical readiness, quality of care,
beneficiaries' access to care, costs, implementation time, and risks
because DOD does not provide evidence of any analysis it has performed
of the fourth option or a sound business case justifying this choice.
Without such analysis and documentation, DOD is not in a sound position
to assure the Secretary of Defense and Congress that it made an
informed decision in choosing the fourth option over the other three or
that its chosen option will have the desired impact on DOD's MHS.
Furthermore, the business case does not document any performance
measures that will be used to assess whether the fourth option will
meet the goals for improving DOD's MHS--eliminating unnecessary
duplication; streamlining organizational structures; and aligning
authority, responsibility, and financial control--or whether it will
achieve the promised benefits.
We are recommending that DOD address the expected benefits, costs, and
risks for implementing the fourth option and provide Congress the
results of its assessment. We are also recommending that DOD develop
performance measures to monitor the progress of its chosen plan toward
achieving the goals of the transformation. In written comments on a
draft of this report, DOD concurred with our recommendations. DOD's
comments are reprinted in appendix II.
Background:
DOD operates one of the largest, most complex health systems in the
nation. DOD's MHS has a dual health care mission--readiness and
benefits. The readiness mission provides medical services and support
to the armed forces during military operations and involves deploying
medical personnel and equipment as needed to support military forces
throughout the world. Additionally, activities that ensure the
readiness of medical and other military personnel to deploy also
contribute to the medical readiness mission. The benefits mission
provides medical services and support to members of the armed forces,
their family members, and others entitled to DOD health care. The ASD
(HA) is responsible for executing DOD's dual health care mission and
exercises authority, direction, and control over the medical personnel,
facilities, funding, and other resources within DOD.
DOD's dual health care mission is carried out through military
hospitals and clinics, commonly referred to as MTFs, and civilian
providers. MTFs comprise DOD's direct care system for providing health
care to beneficiaries. Within the direct care system, each military
service, under its surgeon general, is responsible for managing its
MTFs. The Army and Navy each have a medical command, headed by a
surgeon general, who manages MTFs and other activities through a
regional command structure. The Navy's medical department supports both
the Navy and Marine Corps. The Air Force Surgeon General, through the
position as medical advisor to the Air Force Chief of Staff, exercises
essentially the same authority as the other surgeons general. Each
service also recruits and funds its own medical personnel to administer
the medical programs and provide medical services to beneficiaries.
DOD also operates a purchased care system that uses civilian managed
care support contractors to develop networks of civilian primary and
specialty care providers. The TRICARE Management Activity, under the
ASD (HA), is responsible for awarding, administering, and overseeing
these contracts.
Figure 1 shows the current organizational structure of the MHS.
Figure 1: Current Military Health System Organizational Structure:
[See PDF for image]
Source: GAO analysis of DOD information.
[End of figure]
DOD Considered Different Options for the Command Structure and
Operations of Its Military Health System:
DOD considered options to address the department's dual health care
mission that differed in their approaches to both command structure and
operations. In April 2006, the Joint/Unified Medical Command Working
Group identified three options: the establishment of a unified medical
command; establishing two separate commands, one to provide
operational/deployable medicine and another to provide beneficiary care
through MTFs and purchased care providers; and designating one of the
military services to provide all health care services across the
department. Subsequently, senior DOD officials presented a fourth
option, which consolidates key common services and functions that are
currently being performed within each of the services. In November
2006, the Deputy Secretary of Defense approved the latter option.
Joint/Unified Medical Command Working Group Identified Three Options:
In April 2006, the Joint/Unified Medical Command Working Group proposed
three options for restructuring the MHS.[Footnote 7] According to the
working group, each of its options was designed to promote
effectiveness and efficiency by increased sharing of resources, use of
common operating processes, and reduction in duplicative functions and
organizations. However, each differs in its approach to both command
structure and operations.
Option 1: Establish a Unified Medical Command:
This option would establish a unified medical command on par with other
functional combatant commands. As the single organization for managing
both halves of DOD's dual health care mission--readiness and benefits-
-the unified medical command would oversee four subordinate commands:
the Operational Health Care Command, the Modernization Command, the
Force Health Protection Command, and the Medical Education and Training
Command. Figure 2 illustrates the proposed unified medical command
structure.
Figure 2: Notional Structure for a Unified Medical Command:
[See PDF for image]
Source: GAO analysis of Joint/United Methodist Command Working Group
Information.
[End of figure]
Under the unified medical command option, operational responsibilities
would be divided across the following four subordinate commands:
* The Operational Health Care Command would exercise command and
control over MTFs, which are currently being operated by each of the
services through the direct care system. It would also manage the
purchased health care for beneficiaries that the TRICARE Management
Activity, under the ASD (HA), currently oversees through a network of
contracted civilian providers.
* The Modernization Command would develop joint medical combat and
medical doctrine, in addition to overseeing acquisition, contracting,
and medical research and development.
* The Force Health Protection Command would have command and control
over institutional force health protection assets that have both
medical surveillance[Footnote 8] and preventive medicine[Footnote 9]
capabilities.
* The Medical Education and Training Command would work with the
services to set standards for all medical training and conduct initial
military medical training and professional medical training for both
officers and enlisted personnel. This command would also be responsible
for joint medical training and specialized training to meet unique
mission requirements, with the exception of the joint interoperable
medical training and standards currently overseen by the Special
Operations Command.
This option is similar to a recommendation made by DBB. In July 2006,
the Deputy Secretary of Defense requested that DBB form a task group to
give an independent and objective assessment and make actionable
recommendations regarding the most rational model for the MHS. DBB
unanimously approved the task group's recommendation that the Secretary
of Defense establish a unified medical command, and included it in its
September 2006 report.[Footnote 10]
Option 2: Establish Two Separate Commands:
This option proposed establishing a command structure for each of DOD's
two medical missions--a Medical Command, which would provide
operational/deployable medicine, and a Healthcare Command, which would
provide beneficiary health care through MTFs and purchased care
providers.
The Medical Command was designed as a unified command headquarters with
the same four subordinate commands as under the first option. The
responsibilities of three of its four subordinate commands would be the
same as under the first option. The Operational Health Care Command,
now called the Operational Medical Command, would be responsible only
for the readiness mission--providing medical services and support to
the armed forces during military operations. Under the Medical Command,
the services would provide information on planning and programming to
ensure that service-specific issues are addressed.
The Healthcare Command would be responsible for the benefits mission--
providing both direct and purchased health care to all beneficiaries.
Under this command, the services would identify clinical training needs
for deployable personnel. Also, the services would exercise
administrative control for personnel assigned to the different
commands. Figure 3 shows the proposed general organizational structure
for the two commands and highlights the relationships between the
services and their subordinate commands.
Figure 3: Notional Structure for a Separate Medical Command and
Healthcare Command:
[See PDF for image]
Source: GAO analysis of Joint/United Medical Command Working Group
information.
[End of figure]
Option 3: Designate One Military Service to Provide All Military Health
Care:
The single medical service option designates one of the services--the
Army, the Navy, or the Air Force--to serve as a single unified medical
commander that would provide all health care services across the
department. This structure would operate much like the current
arrangement between the Navy and Marine Corps, in which the Navy
provides all health care for the Marine Corps. As shown in figure 4,
the single service proposal includes the same four subordinate commands
as the first two options.
Figure 4: Notional Structure for a Single Service Medical Command:
[See PDF for image]
Source: GAO analysis of Joint/United Medical Command Working Group
information.
[End of figure]
Under this option, the subordinate commands would have the same
responsibilities as in the first option. However, the single service
would assume administrative control over all medical personnel
regardless of service affiliation. Nevertheless, each of the services
would retain a surgeon general with only a small support staff to
monitor and advocate for service-specific requirements.
Under each of the preceding three options, the command and control of
medical forces would change during deployment and transition to war. In
all three instances, commanders would transfer operational control of
deployable elements to the relevant joint force commander.
Senior DOD Officials Proposed a Fourth Option:
In November 2006, the USD P&R and the ASD (HA) presented a fourth
option. Although senior officials described this option as a refinement
to the working group's three options to achieve the goals of
eliminating unnecessary duplication; streamlining organizational
structures; and aligning authority, responsibility, and financial
control, it leaves the existing command structure governing DOD's MTFs
essentially unchanged. As shown in figure 5, the fourth option's
principal feature is the creation of a new Joint Military Health
Services Directorate.
Figure 5: Notional Structure for a Joint/Unified Medical Command:
[See PDF for image]
Source: GAO analysis of DOD information.
[End of figure]
The proposed Joint Military Health Services Directorate would
consolidate key common services and functions, which are currently
being performed within each of the services, such as finance,
information management and technology, human capital management,
support and logistics, and force health sustainment under a joint
senior flag officer who will report to the ASD (HA). Another innovation
proposed by this option is the combination of all medical research and
development assets and programs under the Army Medical Research and
Material Command. As figure 5 also shows, this option includes several
actions that were previously recommended by the 2005 Base Realignment
and Closure (BRAC) round, including establishing joint medical markets-
-one in the National Capital Area and the other in San Antonio, Texas;
establishing a Joint Medical Education and Training Center; and
colocation of services' medical headquarters.
This option essentially leaves the current service-centric medical
command structures in place--with separate Army, Navy, and Air Force
medical departments. Each military service, under a surgeon general,
will continue to be responsible for managing its own MTFs.
Although the fourth option helps to consolidate some services and
functions, it does not fundamentally alter the way DOD provides health
care services to servicemembers and their beneficiaries. In November
2006, the Deputy Secretary of Defense approved the fourth option. In
the memorandum approving the fourth option, the Deputy Secretary of
Defense established a 3-year timeline, beginning in fiscal year 2007,
for establishing a transition team and beginning the phased
implementation of the fourth option. According to DOD officials, the
phased implementation of the fourth option is currently under way.
DOD Initiated Steps to Evaluate Options, but Did Not Perform a
Comprehensive Analysis of All Options:
Although DOD initiated steps to evaluate the impact that some
restructuring options might have on the MHS, it did not perform a
comprehensive analysis of all proposed options. Although DOD's working
group determined some of the benefits, costs, and risks of implementing
its three options, it did not complete a comprehensive analysis.
DOD's Working Group Determined Some of the Benefits, Costs, and Risks
for the First Three Options:
DOD's working group took steps to determine some of the benefits,
costs, and risks of implementing its three options, but it did not
complete a comprehensive analysis. GAO's Business Process Reengineering
Assessment Guide emphasizes that an organization should explore each
alternative thoroughly enough to convincingly demonstrate its potential
to achieve the desired performance goals.[Footnote 11] The Guide has
also established that a comprehensive analysis of alternative processes
should include a performance-based, risk-adjusted analysis of benefits
and costs for each alternative. An organization should also factor into
its analysis a consideration of barriers and risks of implementing each
alternative.
The working group used several methods to evaluate its proposed
options. First, the working group's Navy representative commissioned
CNA to determine the cost implications of its three options. In May
2006, CNA issued a report on the cost of the working group's three
options.[Footnote 12] Based on CNA's report estimates, DOD could
achieve savings from $254 million to $417 million annually,[Footnote
13] depending on which of the three options it implemented. Based on
our discussion with a CNA official and our review of CNA's report
findings, we concluded that CNA's analysis was generally logical, well-
documented, and reasoned given its assumptions, which focused primarily
on the potential annual savings from changes in personnel levels in the
long run. CNA's methodology did not include any transition costs,
except for an estimated annual cost of adopting a single accounting and
finance system, which would be necessary for implementing the first two
options. In addition, CNA's methodology did not include cost
implications associated with infrastructure changes or possible changes
in clinical operations. Therefore, the actual cost implications of any
option will remain uncertain without more rigorous analysis.
Second, the working group solicited the views of key stakeholders in 23
different DOD offices, including the Joint Staff, the military
services' departments, and the combatant commands. The stakeholders
were asked whether the working group should proceed with restructuring
the MHS and, if so, which of the working group's three options would
they support. According to working group officials, the results showed
that the majority (15 of 23) of the stakeholders contacted endorsed
implementing option one--a unified medical command.
The working group also used the military medical judgment of its
members to identify the benefits and risks of each option. The group
was made up of representatives from the offices of the joint staff, ASD
(HA), and each of the services. As a result of these quantitative and
qualitative assessments, the working group chose option one, the
unified medical command, as its preferred option.
DOD Did Not Comprehensively Analyze Costs, Benefits, or Risks of Any
Options:
DOD did not comprehensively analyze the costs, benefits, or risks of
any of the four options. According to the working group methodology,
the group intended to conduct a more detailed cost-benefit analysis of
whichever of the three options senior DOD leadership selected, but the
group's work ceased once the fourth option was formally approved by the
Deputy Secretary of Defense. In addition, DOD has not demonstrated that
its decision to move forward with the fourth option was based on a
sound business case.
While there is no one approach to business process reengineering, such
as DOD's efforts to restructure its MHS, GAO's Guide advocates a
business case as a key document for agency executives to use in
deciding whether to go ahead with implementing a new process.[Footnote
14] A sound business case should include detailed qualitative and
quantitative analyses in support of selecting and implementing the new
process in terms of benefits, costs, and risks.
According to DOD's business case, its preferred approach to
restructuring its MHS:
* takes incremental and achievable steps that will yield efficiencies
of operations,
* achieves true economies of scale by combining common functions,
* provides structural changes enabling MHS transformation initiatives
outlined in the Quadrennial Defense Review,
* preserves service-unique culture for each of the services' medical
components,
* supports the principles of unity of command and effort under joint
operations,
* maintains USD P&R and ASD (HA) oversight of the Defense Health
Program,
* facilitates consolidation of medical headquarters under 2005 BRAC
law,
* creates a joint environment for the development of future MHS
leaders, and:
* positions the MHS for further advances, if warranted, toward more
unification.
Although we have not evaluated the pros and cons of DOD's chosen
approach, based on our review of DOD's business case DOD only described
what it believes its chosen option will accomplish. DOD's business case
does not, however, document how it determined the fourth option to be
better than the other three in terms of its potential impact on medical
readiness, quality of care, beneficiaries' access to care, costs,
implementation time, and risks. In addition, DOD has not provided
documentation to show that the stated benefits of the fourth option
were obtained based on any quantitative analysis. DOD officials told us
that the fourth option takes incremental and achievable steps that will
yield efficiencies of operations. The officials acknowledged that the
business case lays the foundation for future analysis. Until DOD
provides documentation of any analysis of the fourth option and a sound
business case with specific information for implementing this fourth
option along with a cost-benefit analysis justifying this choice, DOD
will not be in a sound position to assure the Secretary of Defense and
Congress that it made an informed decision when it chose the fourth
option over the other three or that its chosen option will have the
desired impact on DOD's MHS.
Furthermore, the business case does not document any results-oriented
performance measures that will be used to assess progress toward
achieving the goals of restructuring DOD's medical command structure.
The Government Performance and Results Act of 1993[Footnote 15]
requires federal agencies to develop performance plans with goals and
indicators to measure or assess the outcomes of program activity and
provide a basis for comparing actual program results with established
performance goals. DOD's business case outlines broad goals the fourth
option will accomplish, but does not provide measures by which to judge
the relative success of the option in achieving the goals. For example,
although DOD cites that the fourth option will yield efficiencies of
operations and achieve true economies of scale, it does not provide an
indicator or target by which to measure the success of this effort in
reducing costs and improving efficiencies. As a result, the department
is not in a position to assure itself or Congress whether the fourth
option will achieve the promised benefits.
Conclusions:
As DOD begins to restructure its MHS, it is important that DOD be able
to make informed decisions when selecting and implementing the way
ahead. Although DOD initiated steps to evaluate options for
restructuring its system and selected one option to implement, it has
not demonstrated that its decision to move forward with the option was
based on a sound business case that includes detailed qualitative and
quantitative analyses in support of its decision. Without such a
business case, DOD is not in a sound position to assure the Secretary
of Defense and Congress that it made an informed decision or that its
chosen options will have the desired impact on DOD's MHS. Further,
until DOD develops results-oriented performance measures that focus on
the outcome of DOD's chosen fourth option, the department will not be
well-positioned to determine or assure Congress that its chosen option
is achieving the desired impact.
Recommendations for Executive Action:
To improve visibility over its decision-making process related to the
establishment of a unified medical command structure, we recommend that
the Secretary of Defense direct the Deputy Secretary of Defense to take
the following two actions:
* demonstrate a sound business case for proceeding with its chosen
option, including detailed qualitative and quantitative analyses of
benefits, costs, and risks associated with implementing the
transformation, and:
* provide Congress with the results of that assessment.
Furthermore, to monitor whether the transformation is meeting its goals
of eliminating unnecessary duplication; streamlining organizational
structures; and aligning authority, responsibility, and financial
control, we recommend that the Secretary of Defense direct the Deputy
Secretary of Defense to establish and monitor outcome-focused
performance measures to help guide the transformation.
Agency Comments and Our Evaluation:
DOD provided written comments on a draft of this report and concurred
with our recommendations.
DOD concurred with our first recommendation to demonstrate a sound
business case for proceeding with its chosen option, stating that an
implementation team will conduct comprehensive planning to include an
assessment of implications for doctrine, organization, training,
material, leadership, personnel, and facilities. According to DOD, the
implementation team will then write a comprehensive business case for
DOD's chosen option, including a qualitative and quantitative analysis
of the risks, benefits, and change management challenges. DOD further
stated that Congress will be provided with the results of the analysis.
While DOD's response is encouraging, we remain concerned that the
department's description of its planned actions does not include what
actions, if any, DOD plans to take to document how it determined the
fourth option to be better than the other three in terms of its
potential impact on medical readiness, quality of care, beneficiaries'
access to care, costs, implementation time, and risks. In the absence
of more specific details on its planned actions, we continue to
emphasize the department's need for a sound business case with specific
information for implementing the fourth option along with a cost-
benefit analysis justifying this choice. Without such information, DOD
will not be in a sound position to assure the Secretary of Defense and
Congress that it made an informed decision when it chose the fourth
option over the other three options.
In an overall comment discussing the basis for its decision, DOD noted
that once the review of the three options proposed by the Joint Unified
Command Working Group was completed, there remained very strong
objection to proceeding with full implementation of a unified medical
command. DOD noted that in the opinion of the department, this
reluctance to proceed with wholesale change was an indicator of the
strength of the cultural challenges to successful implementation. DOD
further noted that as in GAO's Business Process Reengineering
Assessment Guide, failure to address change management issues can
result in failure of transformation efforts.
While DOD's response correctly identified cultural challenges as a
potential barrier to implementing a unified medical command, DOD's
business case only described what it believes its chosen option will
accomplish. GAO's Guide cites numerous potential implementation
barriers--including cultural resistance to change--that need to be
considered when deciding among various business options. GAO's Guide,
however, makes clear that the potential impact of these barriers and
the costs of addressing them are to be factored into the cost-benefit
analyses before the decision--not simply used as justifications for not
carrying out the suggested analyses of those options, as DOD has done.
The department's view that there is a strong cultural challenge to
successful implementation should underscore the need for department
leadership to address the challenge rather than be used to justify a
decision by the department to avoid necessary change. While we agree
that there are occasions when incremental improvements are appropriate
to address change management issues, such as when an organization is
not prepared to undergo dramatic change, a crucial step for the
department is to comprehensively analyze and document the costs,
benefits, and risks of all proposed options and provide a sound
business case justifying its decision to choose one option over the
others. We believe that it is very important that DOD include the
outcome of this analysis in the assessment results provided to Congress
as we recommended.
With regard to our second recommendation to monitor whether the
transformation is meeting its goals, DOD concurred with our
recommendation, noting that it will implement specific outcome-focused
performance measures.
DOD's comments are reprinted in appendix II. DOD also provided
technical comments, which we have incorporated in the final report
where appropriate.
We are sending copies of this report to the appropriate congressional
committees. We are also sending copies to the Secretary of Defense; the
Deputy Secretary of Defense; the Under Secretary of Defense for
Personnel and Readiness; the Assistant Secretary of Defense (Health
Affairs); the Vice Chairman of the Joint Chiefs of Staff; the Secretary
of the Air Force; the Secretary of the Army; the Secretary of the Navy;
the Executive Director, Defense Business Board; and the Director,
Center for Naval Analyses. This report will also be available at no
charge on GAO's Web site at [hyperlink, http://www.gao.gov].
Should you or your staff have any questions concerning this report,
please contact me at (202) 512-4300 or hintonh@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. GAO staff members who made major
contributions to the report are listed in appendix III.
Signed by:
Henry L. Hinton, Jr.:
Managing Director:
Defense Capabilities and Management:
[End of section]
Appendix I: Scope and Methodology:
To address our objectives, we obtained and reviewed documents, reports,
and other information, as available, related to the development of
options for a unified medical command structure within the Department
of Defense (DOD). We also interviewed officials within the Office of
the Assistant Secretary of Defense (Health Affairs); the Offices of the
Surgeons General of the Air Force, Army, and Navy; the Joint Staff
Logistics Directorate; the Defense Business Board; and the Center for
Naval Analyses.
To identify and describe the options for structuring a unified medical
command that have been recommended in recent studies by DOD and other
organizations, we obtained and analyzed various reports, studies, and
DOD documents outlining options and proposals to reconfigure the
military health system (MHS). In conducting our review, we limited our
focus to studies for a unified medical command structure within the
last 3 years. Specifically, we reviewed concepts of operations for
three unified medical command structure options developed by DOD's
Joint/Unified Medical Command Working Group and a concept plan
presented by the Under Secretary of Defense for Personnel and Readiness
and the Assistant Secretary of Defense (Health Affairs). We also
reviewed recent reports issued by the Center for Naval Analyses and the
Defense Business Board related to reconfiguring the MHS. In addition,
we reviewed relevant sections of Program Budget Decision 753, Military
Health System Strategic Plan, 2006 Quadrennial Defense Review Roadmap
for Medical Transformation, and Medical Joint-Cross Service Group 2005
Base Closure and Realignment Report. To gain a better understanding of
the structure and organization of each option, we interviewed officials
from DOD's Joint/Unified Medical Command Working Group, the Office of
the Assistant Secretary of Defense (Health Affairs), and the Joint
Staff Logistics Directorate. We also interviewed officials from the
Defense Business Board to discuss their effort related to the
restructuring of DOD's MHS and their recommendation to implement a
unified medical command structure.
To determine the extent to which DOD has identified the potential
impact of the options for a unified medical command under
consideration, we analyzed the documents and studies obtained from
DOD's Joint/Unified Medical Command Working Group, the Joint Staff
Logistics Directorate, and the Center for Naval Analyses to identify
their assessments of the implications for each option on quality of
care, access to care, and medical readiness. We reviewed and analyzed
the DOD Joint/Unified Medical Command Working Group briefings, point
papers, organizational charts, and any other documents that were
available that pertained to DOD's MHS restructuring efforts, plans, and
status. Additionally, we reviewed and analyzed the cost implications
study performed by the Center for Naval Analyses for the three options
developed by DOD's Joint/Unified Medical Command Working Group and
interviewed its chief author to determine the extent of the analyses
performed, the basis of the analyses, and any limitations of the study.
We did not independently review the validity of the estimates that the
Center for Naval Analyses developed, but we concluded that its study
was logical, well-documented, and reasonable given its assumptions and
focus. We interviewed officials from DOD's Joint/Unified Medical
Command Working Group, the Office of the Assistant Secretary of Defense
(Health Affairs), and the Joint Staff Logistics Directorate to discuss
the implications of each option and identify any limitations in their
assessments. We also reviewed GAO's Business Process Reengineering
Assessment Guide to determine guidelines for assessing reengineering
efforts. Other issues, such as determining the appropriate command and
control structure within DOD to manage the MHS, did not fall within the
scope of this review.
We conducted our work from December 2006 through September 2007 in
accordance with generally accepted government auditing standards.
[End of section]
Appendix II: Comments from the Department of Defense:
The Assistant Secretary Of Defense:
1200 Defense Pentagon:
Washington, Dc 20301-1200:
Health Affairs:
September 27, 2007:
Mr. Henry L. Hinton, Jr.:
Managing Director, Defense Capabilities and Management:
U.S. Government Accountability Office:
441 G Street, N.W.:
Washington, DC 20548:
Dear Mr. Hinton:
This is the Department of Defense's (DoD) response to the Government
Accountability Office (GAO) draft report, GAO 07-1190, "Defense Health
Care: DoD Needs to Address the Expected Benefits, Costs, and Risks for
Its Newly Approved Medical Command Structure," dated September 5 (GAO
Code 350934).
Thank you for the opportunity to review and comment on the draft
report. Overall, the Department concurs with the report's findings and
conclusions. Our responses to the recommendations are enclosed.
Included in our comments are Technical Corrections for your
consideration. The three Military Departments, the Joint Staff, and
Pacific Command also reviewed the draft report and concur with the
report's conclusions and recommendations. Among the suggested technical
changes is a recommendation to change the title of the report to more
accurately reflect the beneficial progress made to date in redesigning
the Military Health System (MHS). The GAO's overall finding was that
the Department initiated steps to review the various options to
evaluate the MHS redesign implementation options but did not complete a
sound comprehensive analysis of the chosen option to support its
decision. In addition, the Department should develop performance
measures to monitor the progress of its plan.
While we agree with the description of the decisional process used by
the Department, we would like to clarify one step in the path. Once the
review of the three options proposed by the Joint Unified Command
Working Group was completed, there remained very strong objection to
proceeding with full implementation of a unified medical command. In
the opinion of the Department, this reluctance to proceed with
wholesale change was an indicator of the strength of the cultural
challenges to successful implementation. As noted in the GAO Business
Process Reengineering Assessment Guide, failure to address change
management issues can result in failure of transformation efforts.
After internal dialogue and further review the chosen course of action
was approved by the Deputy Secretary of Defense. The approved framework
is, in fact, a set of initiatives that will result in improvements in
effectiveness and efficiency by achieving increased unity of effort and
economies of scale in providing support functions.
Taken together these initiatives will provide the foundation for
further improvements and could be an intermediate step towards future
unification of command in the MHS. By taking this approach we are
specifically designing a system that can be monitored and tested. If
economies are not achieved or mission effectiveness is compromised, the
Department will be able to reassess and change course.
The plan to move forward includes establishment of an Implementation
Team (I-Team). This team will be tasked with developing a complete
Doctrine Organization Training Materiel Leadership Personnel and
Facilities analysis of the proposed plan. The I-Team will write the
comprehensive business case for the way forward to include an analysis
of each of the organizational elements (education and training, shared
services, research and development, multi-service markets) including
qualitative and quantitative analyses of risks, benefits and change
management challenges.
The MHS has adopted the balanced scorecard methodology to monitor
success in achieving the goals of transformation. The scorecard
includes a mixture of outcome, output, and efficiency measures. In
addition to this set of agency measures, the I-Team will propose and
the Department will implement specific measures to monitor the success
of the implementation of governance improvements.
Again, thank you for your review of this critically important issue to
the Department and the opportunity to provide these comments.
My points of contact on this audit are COL Thom Kurmel (Functional) at
(703) 697-2111 and Mr. Gunther Zimmerman (Audit Liaison) at (703) 681-
4360.
Sincerely,
Signed by:
S. Ward Casscells, MD:
Enclosure:
As stated:
Government Accountability Office Draft Report–dated:
September 5:
(Government Accountability Office Code 350934/government:
Accountability Office 07–1190):
"Defense Health Care: Department Of Defense Needs To:
Address The Expected Benefits, Costs, And Risks For Its Newly:
Approved Medical Command Structure":
Department Of Defense Comments To The GAO:
Recommendations:
Recommendation 1: To improve visibility over its decision-making
process related to the establishment of a unified medical command
structure, we recommend that the Secretary of Defense direct the Deputy
Secretary of Defense to take the following two actions: a) demonstrate
a sound business case for proceeding with its chosen option, including
detailed qualitative and quantitative analyses of benefits, costs, and
risks associated with implementing the transformation; and, b) provide
Congress with the results of that assessment.
DoD Response: Concur. The Department will implement an I-team to assist
in the planning for whichever "option" is approved by the Deputy
Secretary of Defense. That team will conduct comprehensive planning to
include assessment of implications for doctrine, organization,
training, material, leadership, personnel and facilities. The results
of that qualitative and quantitative analysis will be an implementation
plan including a sound business case. Congress will be provided with
the results of the analysis.
Recommendation 2: Furthermore, to monitor whether the transformation is
meeting its goals of eliminating unnecessary duplication; streamlining
organizational structures; and aligning authority, responsibility, and
financial control, we recommend that the Secretary of Defense direct
the Deputy Secretary of Defense to establish and monitor outcome-
focused performance measures to help guide the transformation.
DoD Response: Concur. The Military Health System (MHS) has adopted the
balanced scorecard methodology to monitor success in achieving the
goals of transformation. The scorecard includes a mixture of outcome,
output, and efficiency measures. In addition to this set of agency
measures, the I-Team will propose and the MHS will implement specific
outcome-focused measures to monitor the success of the implementation
of governance improvements.
[End of section]
Appendix III: GAO Contact and Staff Acknowledgments:
GAO Contact:
Henry L. Hinton, Jr., (202) 512-4300 or hintonh@gao.gov:
Acknowledgments:
In addition to the contact named above, Derek B. Stewart (retired
Director); Sandra B. Burrell, Assistant Director; Rebecca S. Beale;
Benjamin A. Bolitzer; Grace A. Coleman; Susan C. Ditto; Steve J. Fox;
Julia C. Matta; Clara C. Mejstrik; Ty B. Mitchell; Charles W. Perdue;
and Terry Richardson made key contributions to this report.
[End of section]
Footnotes:
[1] GAO, Defense Health Care: Issues and Challenges Confronting
Military Medicine, GAO/HEHS-95-104 (Washington, D.C.: Mar. 22, 1995).
[2] Rand Corporation, Reorganizing the Military Health System: Should
There Be a Joint Command?, MR-1350-OSD (2001).
[3] GAO, 21st Century Challenges: Reexamining the Base of the Federal
Government, GAO-05-325SP (Washington, D.C.: February 2005).
[4] H.R. Rep. No. 109-452, at 343 (2006).
[5] GAO, Business Process Reengineering Guide, GAO/AIMD-10.1.15
(Washington, D.C.: May 1997).
[6] GAO/AIMD-10.1.15.
[7] The Joint/Unified Medical Command Working Group initially developed
a range of options and eventually proposed three options for
restructuring the MHS.
[8] DOD defines "medical surveillance" as the ongoing, systematic
collection, analysis, and interpretation of health data.
[9] DOD defines "preventive medicine" as the anticipation,
identification, and control of preventable diseases, illnesses, and
injuries while on duty at home or during deployment.
[10] Defense Business Board, Military Health System--Governance,
Alignment and Configuration of Business Activities Task Group Report
(Washington, D.C.: September 2006).
[11] GAO/AIMD-10.1.15.
[12] Center for Naval Analyses, Cost Implications of a Unified Medical
Command (Alexandria, Va.: May 2006).
[13] CNA reported its estimates in 2005 dollars.
[14] GAO/AIMD-10.1.15.
[15] Pub. L. No. 103-62 (1993).
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