Managing for Results
Efforts to Strengthen the Link Between Resources and Results at the Veterans Health Administration Gao ID: GAO-03-10 December 10, 2002Encouraging a clearer and closer link between budgeting and planning is essential to improving federal management and instilling a greater focus on results. Through work at various levels within the organization, this report on the Veterans Health Administration (VHA)--and its two companion studies on the Administration on Children and Families (GAO-03-09) and the Nuclear Regulatory Commission (GAO-03-258)--documents (1) what managers considered successful efforts at creating linkages between planning and performance information to influence resource choices and (2) the challenges managers face in creating these linkages.
VHA's budget formulation and planning processes are centrally managed, but are not closely linked. Resource distribution to VHA's health care networks is mostly formulaic, determined primarily by the distribution of the veterans being served. VHA offices involved in budget formulation and strategic planning provide guidance to health care networks in developing their financial and strategic plans. Integrating performance information into resource allocation decisions is apparent at the health care network level during budget execution. Health care network managers told us that they use an internal data system as a tool to decide how to allocate resources to their facilities and programs. They also use various communication methods to share information on performance measures, and are held responsible for meeting those measures. Network managers provided specific examples where performance information influenced their resource allocation decisions. For example, one performance target specifies that all diabetic veterans are expected to receive retinal eye exams. An ophthalmologist must interpret the results of such an exam; however, most outpatient clinics do not have the resources to maintain an ophthalmologist on staff. One network invested in machines that record test results and transmit them to an ophthalmologist at another location, thereby increasing the network's capacity for meeting this performance target. While budget and performance integration has improved, VHA managers still face additional challenges. VHA's budgeting and planning processes are not directly linked, but VHA officials noted that steps are being taken to better integrate them. Also, VHA does not use the most complete information available when making resource allocation decisions to its health care networks, so the link between resources and results could be improved.
GAO-03-10, Managing for Results: Efforts to Strengthen the Link Between Resources and Results at the Veterans Health Administration
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Report to the Chairman, Subcommittee on Government Efficiency,
Financial Management and Intergovernmental Relations, Committee on
Government Reform, House of Representatives:
December 2002:
MANAGING FOR RESULTS:
Efforts to Strengthen the Link Between Resources and Results at the
Veterans Health Administration:
GAO-03-10:
GAO HIGHLIGHTS:
Highlights of GAO-03-10, a report to the Chairman, Subcommittee on
Government Efficiency, Financial Management and Intergovernmental
Relations, Committee on Government Reform, U.S. House of
Representatives.
MANAGING FOR RESULTS
Efforts to Strengthen the Link Between Resources and Results at the
Veterans Health Administration:
WHY GAO DID THIS STUDY:
Encouraging a clearer and closer link between budgeting and planning
is essential to improving federal management and instilling a greater
focus on results. Through work at various levels within the
organization,
this report on the Veterans Health Administration (VHA)”and its two
companion studies on the Administration on Children and Families
(GAO-03-09)
and the Nuclear Regulatory Commission (GAO-03-258)”documents (1) what
managers considered successful efforts at creating linkages between
planning
and performance information to influence resource choices and (2)
the
challenges managers face in creating these linkages.
WHAT GAO FOUND:
VHA‘s budget formulation and planning processes are centrally
managed, but
are not closely linked. Resource distribution to VHA‘s health
care networks
is mostly formulaic, determined primarily by the distribution of
the veterans
being served. VHA offices involved in budget formulation and
strategic
planning provide guidance to health care networks in developing
their
financial and strategic plans. Integrating performance information
into
resource allocation decisions is apparent at the health care network
level
during budget execution. Health care network managers told us
that they use
an internal data system as a tool to decide how to allocate resources
to their
facilities and programs. They also use various communication methods
to share
information on performance measures, and are held responsible for
meeting
those measures. Network managers provided specific examples where
performance
information influenced their resource allocation decisions. For
example,
one
performance target specifies that all diabetic veterans are expected
to receive
retinal eye exams. An ophthalmologist must interpret the results of
such an
exam; however, most outpatient clinics do not have the resources to
maintain an
ophthalmologist on staff. One network invested in machines that
record test
results and transmit them to an ophthalmologist at another location,
thereby
increasing the network‘s capacity for meeting this performance target.
While
budget and performance integration has improved, VHA managers still
face
additional challenges. VHA‘s budgeting and planning processes are
not directly
linked, but VHA officials noted that steps are being taken to better
integrate
them. Also, VHA does not use the most complete information
available when
making resource allocation decisions to its health care networks,
so the link
between resources and results could be improved.
To view the full report, including the scope and methodology, click
on the
link above. For more information, contact Paul Posner at (202)
512-9573
or PosnerP@gao.gov
Letter:
Results in Brief:
Background:
Scope and Methodology:
Budget Formulation and Planning Efforts Are Centrally Managed, While
Budget Execution and Planning Are Linked in Networks:
Performance Information Influences Resource Allocation Decisions in a
Variety of Ways at These Networks:
Challenges:
Agency Comments and Our Evaluation:
Appendix:
Appendix I: Comments from the Department of Veterans Affair:
Figures:
Figure 1: Veterans Health Administration Organizational Chart:
Figure 2: VHA‘s Budget and Planning Processes:
Figure 3: Example of Linkage Between VHA Strategies, Performance
Measures, and Network Strategies/Actions:
CBOC: Community Based Outpatient Clinic:
CEO: Chief Executive Officer:
CFO: Chief Financial Officer:
COO: Chief Operating Officer:
DSS: Decision Support System:
ELC: Executive Leadership Council:
GPRA: Government Performance and Results Act of 1993:
MCCF: Medical Care Collections Fund:
NCA: National Cemetery Administration:
OMB: Office of Management and Budget:
OPP: Office of Policy and Planning:
OQP: Office of Quality and Performance:
PART: Program Assessment Rating Tool:
PMWG: Performance Management Work Group:
PSL: Patient Service Line:
QMO: Quality Management Officer:
TSPQ: Transforming Systems Performance & Quality Council:
VA: Department of Veterans Affairs:
VBA: Veterans Benefits Administration:
VERA: Veterans Equitable Resource Allocation system:
VHA: Veterans Health Administration:
Letter December 10, 2002:
The Honorable Stephen Horn
Chairman, Subcommittee on Government Efficiency, Financial Management
and Intergovernmental Relations
Committee on Government Reform
House of Representatives :
Dear Mr. Chairman:
During the past decade, the Congress and the executive branch have
sought to improve federal management and instill a greater focus on
results. Through enactment of a number of major management reforms, the
Congress has created a statutory framework with the Government
Performance and Results Act of 1993 (GPRA) as its centerpiece.[Footnote
1] One of GPRA‘s major purposes is to encourage a closer and clearer
linkage between planning, performance--i.e., results--and the budget
process. Each administration takes a slightly different approach to
implementing results management. Improving the integration of budget
and performance is a high priority initiative included in the
President‘s Management Agenda.[Footnote 2] A central piece of that is
the Office of Management and Budget‘s (OMB‘s) new diagnostic tool, the
Program Assessment Rating Tool (PART). PART is designed to provide a
consistent approach to reviewing program design, planning, and goals
development as well as program management and results. OMB expects to
use PART assessments in considering department and agency budget
submissions for the fiscal year 2004 President‘s Budget request to the
Congress.[Footnote 3]
In a number of different reports to the Congress, GAO has examined
different aspects of the resources-to-results linkage. A series of
three reports described agencies‘ progress over a 4-year period in
linking performance plans, budgets, and, in the most recent report,
financial statements.[Footnote 4] We found that between fiscal years
1999 and 2002, agencies made significant progress in showing a direct
link between expected performance and requested program activity
funding levels through structural changes or cross-walks--the first
step in defining the performance consequences of budgetary decisions.
We concluded that additional effort was needed to more clearly describe
the relationship between performance expectations, requested funding,
and consumed resources. Furthermore, we said that the uneven extent and
pace of developing these relationships were reflective of mission
complexity and differences in operating environments across the
government. Finally, we observed that describing the planned and actual
use of resources in terms of measurable results was an essential long-
term effort that would take time, and adaptation on the part of all
agencies.
In another approach to defining performance and resource integration,
we developed a framework of budget practices that we believe can
contribute to an agency‘s capacity to manage for results.[Footnote 5]
We viewed these practices as desirable dimensions of budgeting that
could be implemented in many different ways to reflect the
characteristics and circumstances of a particular agency. Both our
assessments of performance and budget account alignments and the
framework of budget practices have led to the next phase of work and
the subject of this report. This report--one of a group of three--looks
at the resources-to-results link from the perspective of agency
managers charged with making the linkage happen.
The objectives of this report on the Veterans Health Administration
(VHA), and its two companion studies on the Administration for Children
and Families and the Nuclear Regulatory Commission, are to document
what managers in these three agencies considered successful efforts at
creating linkages between planning and performance information to
influence resource choices and the challenges they face in doing so. We
neither evaluated their choices nor critiqued their processes. Instead,
we asked managers to describe when and how planning and performance
information was included in the budget cycle, to explain what
strategies were used and why, and to provide evidence that there was a
related programmatic effect. A third purpose was to show that there are
multiple ways to get at these linkages, and that there can be
successful applications even if progress in budget and performance
integration is uneven.
Budgeting is and will remain an exercise in political choice, in which
performance can be one, but not necessarily the only, factor underlying
decisions. However, efforts to infuse performance information into
resource allocation decisions can more explicitly inform budget
discussions and focus them--both in the Congress and in agencies--on
expected results, rather than on inputs. We believe that showcasing
agencies‘ successes with and challenges in integrating budgeting and
planning may prove useful to other agencies; congressional authorizing,
appropriation, and oversight committees; and OMB in the shared goal of
strengthening the link between program performance and resources.
Results in Brief:
VHA‘s budget formulation and planning processes are centrally managed
but are not closely linked. Through fiscal year 2003, VHA‘s budget was
prepared centrally and reflected an incremental approach, primarily
taking prior years‘ appropriations and making some adjustments for
projected increases in workload, efficiency, and new policies. Resource
distribution from central office to VHA‘s 21 health care networks is
mostly formulaic, determined primarily by the distribution of the
veterans being served. Planning documents, used in the development of
performance measures, show relationships between agency goals, outcome
measures, and performance targets. VHA offices involved in budget
formulation and strategic planning provide guidance to health care
networks in developing their financial and strategic plans. Budgeting
and performance are more closely associated at health care networks
during the budget execution phase, that is, after VHA receives its
appropriation and the funds are allotted to the networks.
Integrating performance information into resource allocation decisions
during budget execution is apparent at the two health care networks we
visited. Managers at these networks told us that they use an internal
data system as a tool to make resource allocations to their health care
facilities and programs. They also use various communication methods to
share information on performance measures and are held responsible for
meeting those measures. The managers provided specific examples where
they used performance information to make resource allocation
decisions.
Although budget and performance integration has improved, managers
still face additional challenges. VHA‘s budgeting and planning
processes are not directly linked, but VHA officials noted that steps
are being taken to better integrate them. Also, VHA does not use the
most complete information available to make its resource allocation
decisions from central office to its networks.
In commenting on our draft report, the Department of Veterans Affairs
(VA) agreed with our observations but stated that our report does not
give the reader an adequate grasp of the depth and breadth of managing
such a large health care system. Our review focused on VHA‘s efforts to
create linkages between planning and performance information to
influence resource choices, and was not intended to address all the
complexities inherent in managing the entire VA health care system.
Background:
VHA, an administration of VA,[Footnote 6] is primarily a direct service
provider of primary care, specialized care, and related medical and
social support services to veterans through an integrated health care
system. Headed by the Under Secretary for Health, VHA employed
approximately 180,000 health care professionals to serve about 4.3
million veterans in fiscal year 2002. VHA‘s fiscal year 2002 budget
included $21.3 billion in discretionary funds from the VA/HUD
(Department of Housing and Urban Development) appropriations act and an
additional $142 million from an emergency supplemental enacted in
August 2002.
VHA developed its six strategic goals to support VA‘s GPRA goals. These
strategic goals are as follows:
* put quality first until first in quality;
* provide easy access to medical knowledge, expertise, and care;
* enhance, preserve, and restore patient function;
* exceed patients‘ expectations;
* maximize resource use to benefit veterans; and:
* build healthy communities.
VHA‘s strategic planning document describes strategies to show how each
goal will be met. The administration then develops performance measures
to support the strategies identified.
VHA is headquartered in Washington, D.C. and has 21 Veteran Integrated
Service Networks (networks) located throughout the country. The
networks are the basic budgetary and decision-making units of VA‘s
health care system. They have responsibility for making a wide range of
decisions about health care delivery options, including contracting
with private providers for health care services and generating revenue
by selling excess services. A network director, who reports to the
Deputy Under Secretary for Health for Operations and Management, heads
each network. This organization is illustrated in figure 1, with
offices we talked to regarding VHA‘s budget and planning processes
shaded.
Figure 1: Veterans Health Administration Organizational Chart:
[See PDF for image]
[End of figure]
The VHA Office of Quality and Performance develops and recommends
performance measures (mentioned above) to the Under Secretary for
Health. A Performance Management Work Group, comprised of a variety of
VHA staff with different subject matter expertise, provides overall
guidance with regard to the measures and helps to prioritize them.
VHA‘s Office of Policy and Planning prepares VHA‘s contribution to VA‘s
5-year Strategic Plan, as well as the Network Strategic Planning
Guidance, which is used by networks to prepare their strategic planning
documents. Among other responsibilities, VHA‘s Office of Finance is
responsible for policy and operational issues relating to budget
formulation and execution, financial management, and financial
analyses.
As a consequence of VHA‘s field structure reorganization, decision
making is currently more decentralized. In 1995, the 172 independent VA
Medical Centers were reorganized into 22 networks, headed by network
directors. Network directors are accountable for a variety of
functions, such as contracting, budgeting, and planning for the medical
facilities within their purview. Under this reorganization, VHA
management anticipated that network directors could manage the
distribution of the networks‘ resources to maximize the advantages to
veterans within their service areas. Furthermore, the administration
expected to perform less operational decision making and oversight at
the central office level. Along with the decentralization, VHA shifted
its service delivery focus from inpatient hospital care to outpatient
care; between fiscal years 1995 and 2001, the average number of
hospital inpatients declined from 31,137 per day to 13,452 per day. The
number of annual outpatient visits increased from 26 million to 41
million during the same period.
Scope and Methodology:
To address the report‘s objectives, we interviewed senior officials in
VHA and VA to find out how they used performance information in the
budget process. We reviewed several network managers‘ performance
contracts and information on network performance measures to learn
about the level of accountability VHA expects from its networks. We
reviewed VA guidance on preparing budget requests, budget submissions,
and other related documents for information on the budget process and
the use of performance information. To learn about the planning process
within VHA and assess its integration with the budget process, we read
VA strategic plans and other planning documents. We attended
congressional hearings and reviewed related documents to learn about
VHA‘s budget requests, use of performance information, and VA/
Department of Defense resource sharing. We did not assess the
appropriateness of VHA‘s performance measures or budget requests, or
the accuracy of VHA‘s performance management information.
We conducted interviews in Washington, D.C. with senior officials from
the VA Office of Budget, VHA Office of Finance, VHA Office of Policy
and Planning, VHA Office of Quality and Performance, VHA Management
Support Office, and the Liaison Staff Office to learn about VHA‘s
budget process and performance measures.
Because we found the most evidence of a linkage between budget and
performance during budget execution at the network level, we focused
our work on that process at that level. We selected two networks--
Network 2, in Albany, New York and Network 13, in Minneapolis,
Minnesota--that VHA officials believed made the best use of performance
information in managerial decision making. Networks 13 and 14 were
combined and renamed Network 23 in January 2002, leaving 21 operational
networks; there is a break in numerical sequence. We chose to focus on
Network 13 rather than Network 23 since the structure of Network 23 had
not yet been finalized at the time of our review, and we were
interested in looking at processes that were already in place. Just as
findings at individual federal agencies cannot be generalized across
all agencies, the 2 networks selected for review are not representative
of the other 19 networks. However, the observations of the network
managers we interviewed are useful in understanding the different
approaches taken to integrate budget and performance.
We reviewed network-specific budget and planning documents, such as
strategic plans, annual performance plans, performance reports, and
tactical plans for the two networks we visited. We interviewed over 20
network officials, including senior network management, care and
patient service line managers, facility managers, information
technology managers, quality management officials, and strategic
planners to learn about network structures and the use of performance
information in decision making at the networks.
We also reviewed a number of background documents on administration
initiatives and performance budgeting implementation, as well as recent
public administration literature and GAO reports for general background
and context.
We conducted our work between January 2002 and June 2002 in accordance
with generally accepted government auditing standards.
Budget Formulation and Planning Efforts Are Centrally Managed, While
Budget Execution and Planning Are Linked in Networks:
Although VHA‘s budget formulation and planning processes are both
centrally managed, they are not closely linked. The agencywide budget
request is based primarily on the previous year‘s appropriations with
some adjustments for workload and new policies. Distribution of funds
to networks is largely driven by a system that is heavily based on the
veteran population served at each network. Budget and performance are
more clearly linked at the networks we visited. See figure 2 for an
overview of VHA‘s budget and planning processes.
Figure 2: VHA‘s Budget and Planning Processes:
[See PDF for image]
[End of figure]
[A] May occur throughout the fiscal year.
VHA‘s Budget Formulation and Planning Processes Are Centralized but Not
Integrated:
VHA reported that its budget formulation processes for fiscal years
2002 and 2003 were developed centrally with limited input from the
networks and reflected an incremental approach, with some adjustments
in fiscal year 2003 for projected workload increases and administrative
efficiency assumptions. Prior to the development of the fiscal year
2003 budget, senior budget officials told us that VHA sought selected
information from the networks, such as estimates of collections and
long-term care expenditures. In preparing the budget that would
eventually be included in VA‘s submission to OMB, VHA generally used
the current appropriations levels as a baseline and added an adjustment
for workload, as well as an increase for new programmatic initiatives.
One VHA official commented that the process was very ’top down.“ For
fiscal year 2003, the main change to this process was the introduction
of some enrollment growth projections from an actuarial model and
administrative efficiency adjustments for reducing resource
requirements.
VHA receives guidance on how to formulate its budget through a budget
call memorandum issued by VA in April. This memorandum includes VA
strategic goals and objectives and stresses the need to focus on
outcome and performance goals and measures. Once VHA‘s Office of
Finance formulates the administration‘s budget, it is sent to VA‘s
Office of Budget where the VHA request is reviewed and recommendations
are made by VA senior staff, culminating in a department budget request
for VHA and the other two administrations. This submission is sent to
OMB in September. Decisions made by OMB are incorporated into the
President‘s Budget presented to the Congress. Following congressional
action and enactment of the appropriations bill, OMB apportions and VA
allots the funding provided in the VHA appropriations, thus beginning
the execution phase of VHA‘s budget cycle.
While the VHA-related information in VA‘s annual Performance Plan
describes goals, strategies, and performance measures, the relationship
to the budget formulation process is unclear. VHA officials told us
that they use strategic planning information as source material for
departmental reports (e.g., the Accountability Report and VA‘s Annual
Performance Plan), to review networks‘ policies for consistency, and
generally to have the information on hand in an organized format. VA‘s
Annual Performance Plan outlines resource requirements by strategic
goal, and each strategic goal is accompanied by performance goals and
measures. However, a VHA official told us that planning documents are
typically finalized after VHA‘s budget is formulated.
VHA Resource Allocation Is Largely Formula-Driven:
About 90 percent of VHA‘s medical care appropriation, which is
approximately 86 percent of VHA‘s total budgetary resources, is
allocated to networks through the Veterans Equitable Resource
Allocation system (VERA), which uses a formula that calculates resource
allocation based on workload.[Footnote 7] The remainder of the
appropriated funds is allocated to networks either through Specific
Purpose Funding,[Footnote 8] which is designated for certain programs
such as state home funds or Vietnam veterans‘ readjustment counseling.
Monies in the no-year Medical Care Collections Fund (MCCF), as well as
other small nonappropriated funds, are also available to the
networks.[Footnote 9]
Network Planning and Budget Execution Processes Are More Closely
Related:
Decisions regarding resource allocation and planning are closely
aligned at both networks we visited. The same officials are involved in
strategic planning and budget execution, and network-produced documents
show some alignment between planning efforts and resource allocation.
The Office of Policy and Planning prepares VHA Network Strategic
Planning Guidance, directing networks on how to develop their
individual strategic plans. According to the guidance, strategic plans
must associate performance measures with each strategic objective. For
example, the fiscal years 2003-2007 Guidance for Strategic Objective 1,
’Put Quality First Until First in Quality,“ identifies the first
strategy as, ’Systematically measure and communicate the outcomes and
quality of care,“ and the related performance measure as ’Improve
performance on the Chronic Disease Care Index II.“ Networks must then
identify their plans to meet each performance measure.
VHA‘s Office of Finance issued guidance that required networks to
provide financial or operating plans for a range of possibilities.
According to officials, networks prepare plans in anticipation of final
appropriations actions. Once VHA receives its appropriations and VERA
allocations are calculated, networks submit plans to the Office of
Finance that lay out the networks‘ spending plans for their VERA funds.
The two networks we visited, Network 2 and Network 13, are structured
somewhat differently with regard to resource allocation authority. At
Network 2, service delivery is organizationally divided into Care
Lines;[Footnote 10] Care Line Directors have resource allocation
authority across all medical facilities in the network. For example,
according to network officials, the Geriatrics and Extended Care
manager can make resource allocation decisions concerning nursing home
care at all Network 2 facilities. Network 13, on the other hand, is
structured around Patient Service Lines (PSLs).[Footnote 11] PSL Chief
Executive Officers (CEOs)[Footnote 12] share resource allocation
authority with the Chief Operating Officers (COO) at each medical
center. PSL CEOs make allocation decisions for the facilities that
support their PSL at the beginning of the fiscal year, while day-to-day
smaller resource decisions during the fiscal year are handled primarily
by each medical center COO. CEOs and COOs collaborate on larger budget-
related decisions across the PSL. The subject of the resource decision
determines which PSL CEO is involved; for example, the PSL CEO for
Mental Health is involved with decisions regarding psychiatric care.
Annual budgets are developed by the PSL CEOs in conjunction with site
COOs and Chief Financial Officers (CFOs).
At Network 2, network leadership works with Care Line Directors in
developing and prioritizing strategic goals and targets. Network 2‘s
strategic plan shows a link between VHA strategies and performance
measures, and network-specific actions to achieve them. (See fig. 3 for
an example of this linkage.) The plan also shows how expected increases
in annual funding will be used by program line.
Figure 3: Example of Linkage Between VHA Strategies, Performance
Measures, and Network Strategies/Actions:
[See PDF for image]
[End of figure]
Network 13 senior managers told us about annual 2-day tactical planning
meetings that were designed to provide an outlet for stakeholders to
plan and share information on performance and strategic planning, cost
information, performance measures, successful practices, and lessons
learned. Participants include PSL CEOs, a PSL COO, PSL managers under
COO control, union representatives, and congressional stakeholders. A
network official stated the purpose of including managers with resource
allocation authority in tactical planning meetings was to strengthen
the link between the processes of resource allocation decisions and
planning.
Performance Information Influences Resource Allocation Decisions in a
Variety of Ways at These Networks:
Integrating performance information into resource allocation decisions
is apparent at the network level during budget execution. At the two
networks we visited, managers told us that they use an internal data
system that compares cost and performance data across facilities as a
tool to make resource allocation decisions. Network performance is
monitored by VHA, and networks establish their own processes to monitor
their performance. Network managers also use various communication
methods, both within their networks and across other networks, to share
information on performance measures and ways to meet those measures.
Managers reported that they were accountable for performance and
provided examples where they used performance information to make
resource allocation decisions.
Cost and Performance Data Used in Managerial Decision Making:
Network managers told us that they use data from the Decision Support
System (DSS) to make resource allocation decisions to their facilities
and programs. DSS is an executive information system designed to
provide VHA managers and clinicians with data on patterns of patient
care and patient health outcomes. It is also used to analyze resource
utilization and the cost of providing health care services. For
example, a manager in Network 2 said that he uses DSS data for
comparisons of facilities, population and market share data, and
veterans‘ length of stay in inpatient units. Since veterans are staying
in inpatient units for fewer days in certain facilities, the manager
has been able to reallocate money across facilities because of DSS
data.
Networks‘ Performance Monitored:
As we noted in ’Results-oriented Budget Practices in Federal
Agencies,“[Footnote 13] it is important for agency management to
monitor performance. VHA leadership uses several methods to monitor
network performance and hold network officials accountable for that
performance. At its quarterly meeting, the VHA Executive Leadership
Council (ELC), which includes the deputy secretary, managers from all
three administrations, network directors, other key staff, interest
groups, and the public, monitors the status of performance measures at
each network. In addition, the Deputy Secretary of Veterans Affairs
began holding monthly meetings in late 2001 with the Under Secretary of
VHA and all the network directors. At these meetings, the senior
officials provide information on each network‘s successes in meeting
VHA-established performance measures and share best practices in
meeting performance measures. Networks must provide remedial action
plans at these meetings for measures that are not being met. For
example, one network was deemed deficient in testing patients for
Hepatitis C. Its action plan included a review of patients who had not
been tested and an electronic clinical reminder to help service
providers identify patients who have risk factors but were not tested.
To make sure network directors understand the importance VHA places on
performance, directors sign an annual performance agreement with the
Under Secretary for Health called the Network Performance Plan. The
agreement includes expectations regarding VHA-level performance
measures and their associated strategic goals. According to VHA
guidance, a network director‘s appraisal is affected by his or her
network‘s performance in relation to agency goals. As a result, the
director‘s compensation may also be affected. For example, in 2001 a
network director received a bonus because his network exceeded VHA-
established performance goals.
Networks Establish Their Own Processes to Monitor Performance:
The two networks we visited each had its own ELC to review performance
measures on a network level and commissioned task teams to work on
areas where performance has not met the intended goal. Quality
Management Officers (QMOs) also serve as performance monitors. The QMO
at Network 2 keeps track of the network‘s action plans to improve upon
deficient performance measures, and reports on performance-related data
at the Transforming Systems Performance & Quality Council (TSPQ), a
forum to address issues across care lines and facilities to work
collaboratively toward addressing performance measure issues, quality
management, information systems, and related operational issues.
Membership includes top network management, care line managers, and
network office staff.
Network 2 uses its Web site in various ways to maintain up-to-date
information on performance measures. For example, Network 2 managers
told us about the Web-based Pulse Points, which are performance
indicators that assist management in monitoring achievement of
performance measures. Additional performance-related information is
available to network staff on the intranet.
Communication Important to Help Managers Meet Performance Measures:
Sharing information about lessons learned and strategies to achieve
performance measures can lead to more informed resource allocation
decisions. Between networks, managers have a number of opportunities to
learn from each other via regularly scheduled meetings and conference
calls. Network managers told us about periodic meetings where they
interact with managers from other networks and share lessons learned
with regard to cost-saving measures and approaches to performance
measures. Within a network, staff may also use a variety of
communication tools to share information to improve performance. For
example, two Network 2 care line managers jointly established a team to
discuss ways that the network could better meet performance goals for
length-of-stay rates. This team, which spanned multiple care lines,
worked on the issue and communicated its recommendations quarterly.
Also, VA sponsors a ’Lessons/Innovations“ database on the Internet,
where network managers can read ideas for performance improvement.
Network Managers Reallocate Resources in Response to Performance
Measures:
In both of the networks we visited, managers provided examples where
performance information and the responsibility to meet performance
targets affected the way in which they allocated resources. The
examples incorporated a number of different approaches to improve
performance, including investing in telemedicine and technology
advancements, resource reallocation, low-tech methods to improve
performance, and the use of outside contractors.
Performance target: 100 percent of diabetic veterans should receive
retinal eye exams to decrease the potential incidence of blindness.
Network manager approach: Use telemedicine and special equipment to
allow diabetic veterans who receive care at locations that do not have
ophthalmologists the ability to have their exam results read by
qualified specialists.
An initial investment of network resources in advanced telemedicine
techniques led to an increased percentage of diabetic veterans
receiving a necessary test. To reduce the potential for blindness later
in life, all diabetic veterans are supposed to have retinal eye exams
to monitor their vision. However, this requires the services of an
ophthalmologist who must interpret the exam results. The network did
not have resources to maintain an ophthalmologist on staff at each
site, so many diabetics were not being tested. A Network 2 manager
found that a particular piece of equipment could record test results,
then transmit them to an ophthalmologist at another location. Thus, the
network invested resources in a number of these machines for Community
Based Outpatient Clinics (CBOCs) to use, thereby increasing the
network‘s capacity for meeting this performance target.
Performance target: Annual cost per patient must be below a given
threshold.
Network manager approach: Moved $100,000 from one facility that was not
taking on as many patients as expected to another facility with an
increased workload.
A manager at Network 13 noted that facilities are expected to keep
their average cost per patient down. Regular monitoring revealed that
one facility was not taking on as many patients as planned, which led
to higher average costs. To reinforce his expectation that this
performance target should be met, the manager chose to transfer
financial resources from this facility to another facility that
required additional staffing to meet other performance targets.
According to the manager, the facility that received the funds was able
to improve its outcomes in the targeted area.
Performance measures: Reducing the number of falls out of bed and the
use of restraints.
Network manager approach: Buying lower beds (9“ off ground).
A Network 13 manager noted that veterans were falling out of their beds
and thus incurring injuries, and the manager searched for a way to
reduce this incidence. He also wanted to reduce the use of restraints,
another performance measure. Based on staff recommendations, the
manager agreed to invest in beds that were only 9 inches off the
ground. This investment prevented more serious injuries from occurring,
reduced the need for restraints, and directly improved the network‘s
performance in these areas.
Performance target: Veterans should be able to obtain appointments with
mental health professionals within 30 days of request.
Network manager approach: Reviewed various staff practices and made
recommended improvements.
A PSL manager in Network 13 noted that wait times for veterans to
obtain appointments with mental health specialists exceeded the
performance target. The manager hired an outside consultant who looked
at a variety of factors, including (1) how physicians‘ time was being
spent, (2) physicians‘ practices regarding rescheduling appointments,
and (3) hiring psychiatrists instead of contracting for them. According
to the manager, after the network adopted the consultant‘s
recommendations, including hiring (instead of contracting for)
psychiatrists and hiring administrative staff to prescreen patients,
Network 13 met the performance target by eliminating wait time
completely.
Challenges:
VHA has undergone a cultural shift over the past 7 years that has
helped to integrate budget and performance, but managers face
continuing challenges to further integration and in defining areas for
improvement. The agency‘s budgeting and planning processes are not
directly linked, so opportunities are missed to fully use planning
information in the budget process. Additionally, VHA does not use the
most complete information available when making resource allocation
decisions.
Planning and Budgeting Linkage Could Improve:
VHA‘s planning and budgeting processes are not fully integrated (see
fig. 2 for an overview of these processes). VHA officials acknowledged
the offices in charge of these processes did not work closely together
in the past, but steps are being taken to improve this linkage. For
example, a member of VHA‘s Office of Finance now works in the Office of
Policy and Planning on the agency‘s demand model, which will be used to
project costs for fiscal year 2004. According to VHA, this model
projects workload for VHA nationwide and was partially used to prepare
the fiscal year 2003 budget request. Future workload is projected
through the use of a detailed formula that includes enrollment,
anticipated utilization, and reliance on VA services. It does not
assume an incremental increase over current workload.
Performance Information is Available but Not Included in Resource
Allocation Decisions:
VHA does not include the most complete information available when
allocating resources. As we noted in VA Health Care: Allocation Changes
Would Better Align Resources with Workload (GAO-02-338), VA does not
adequately account for important variations in patients‘ health care
needs across networks nor does it include all veterans who use health
care services in its resource allocation decisions. Without complete
information, it is difficult for agencies to consider fully the
relative priorities of programs and activities and, when funding
tradeoffs are necessary, where adjustments can be best made. Producing
reliable funding estimates requires an agency to include reasonable
assumptions about factors affecting program costs or budgetary
resources, assess the accuracy of previous estimates, and if necessary,
make appropriate adjustments to its estimating methods.
Agency Comments and Our Evaluation:
In its comments, VA agreed with our observations but asserted that our
report does not give the reader an adequate grasp of the depth and
breadth of managing such a large health care system. VA also included
three enclosures: the first was intended to clarify certain points in
the draft report, the second provided information on VA‘s actuarial
model, and the third outlined VA‘s new budget account structure.
In the first enclosure, VA suggested three clarifications regarding our
report language.
1. VA stated that the fiscal year 2003 budget was based on actuarial
projections of workload broken down by specific disease and veteran
priority level using prior years‘ costs; it also noted that
administrative efficiency assumptions were further included for
reducing resource requirements. During our interviews, officials told
us that the process was generally incremental, but actuarial
projections were used only to calculate potential increases in workload
for fiscal year 2003; these projections were not used to reassess the
base. For the fiscal year 2004 budget and beyond, officials expected to
use the actuarial projections to calculate the entire workload, not
just the potential increase. We made changes in our report language to
reflect this process.
2. VA noted that it does not include all Priority 7 veterans[Footnote
14] in its VERA calculations because it does not want to provide
financial incentives that encourage network managers to provide care to
Priority 7 veterans at the expense of higher-priority veterans. As we
recommended in our February 2002 report,[Footnote 15] networks with a
disproportionately large number of Priority 7 veterans already have
fewer resources under VERA to treat higher-priority veterans on a per-
patient basis. To remedy this problem, we recommended that VA align
measures of workload with actual workload served, regardless of veteran
priority group. Doing so will help provide comparable resources for
comparable workload. Thus, we maintain that complete information allows
agencies to better consider the relative priorities of programs and
activities.
3. VA also noted that the funds it received under the Emergency
Supplemental appropriation were not intended for homeland security-
related activities. We changed our report language appropriately.
VA‘s second enclosure was a report that describes the actuarial model
it uses to project the demand for health services. This report was
prepared for the Senate Appropriations Committee, in response to a
congressional mandate identified in S. Rpt. 107-156. During our
fieldwork, we were told that there was no documentation available
regarding this model. We received the documentation when the draft
report was sent for agency comment and therefore did not review the
model and its ability to project VA‘s workload.
The third enclosure focuses on VA‘s budget account restructuring for
its fiscal year 2004 budget submission. VA notes that this structure
will allow it to more readily determine the full cost of each of VA‘s
programs and make resource decisions based on programs and their
results rather than on other factors. We did not review this new
structure or its ability to more effectively link resources with
results since the outcome will not be available until the
administration‘s budget proposal is released in early 2003.
As agreed with your office, we will distribute copies of this report to
the Secretary of Veterans Affairs, appropriate congressional
committees, and other interested parties. We will make copies available
to others upon request. In addition, the report will be available at no
charge on the GAO Web site at http://www.gao.gov.
Please contact me on (202) 512-9573 or Denise Fantone, Assistant
Director, on (202) 512-4997 if you or your staff have any questions
about this report. Major contributors to this report are Kimberly
Gianopoulos, Kelli Ann Walther, and James Whitcomb.
Sincerely yours,
Paul L. Posner
Managing Director, Federal Budget Analysis
Strategic Issues:
Signed by:
Paul L. Posner:
[End of section]
Appendixes:
Appendix I: Comments From the Department of Veterans Affairs:
THE SECRETARY OF VETERANS AFFAIRS WASHINGTON:
November 14, 2002:
Mr. Paul Posner Managing Director U. S. General Accounting Office 441 G
Street, NW:
Washington, DC 20548:
Dear Mr. Posner:
The Department of Veterans Affairs (VA) has reviewed your draft report,
MANAGING FOR RESULTS: VHA‘s Efforts to Strengthen the Link Between
Resources and Results (GAO-03-10). The report describes the Veterans
Health Administration‘s (VHA) process in integrating its budgeting and
planning efforts to meet the health care needs of our Nation‘s
veterans. However, in doing so, it provides only a limited description
that does not give the reader an adequate grasp of the depth and
breadth of managing a health care system unmatched in complexity and
size in the free world.
To address this huge challenge, VHA has developed and continues to
reformulate its method of identifying current and future health care
demands: the Veterans Equitable Resource Allocation (VERA) model. Using
VERA, VHA distributes its resources across a nationwide system of over
1,000 health care delivery points. It must be recognized that this
budget form ulationlexecution system is in the context of the ever-
changing nature of modern medicine.
VA is in overall agreement with the General Accounting Office‘s (GAO)
observations but believes additional description would be useful in
helping the reader to understand the unique challenge of planning for
and managing the largest health:
system in the United States. Enclosure 1 contains information for GAO
to improve its description of VHA‘s linking its resources and results
as well as clarifications to some inaccuracies in the draft report.
Enclosure 2 provides information on the Milliman actuarial model. In
September, VHA prepared and transmitted this white paper to Congress to
describe actions VA is taking, and expects to take, to ensure that
accurate estimate of workload and resource needs are met. VA believes
GAO‘s report should provide more emphasis on how the actuarial model
will improve the accuracy and reliability of VHA‘s budget forecasts.
Enclosure 3 provides information on VA‘s efforts to more effectively
link resources with results through the implementation of a new budget
account structure.
Thank you for the opportunity to comment on your draft report.
Sincerely yours,
Anthony J. Principi:
Signed by Anthony J. Principi:
Enclosures:
FOOTNOTES
[1] Other significant legislation includes the Chief Financial Officers
Act of 1990 (CFO Act) and related legislation, which created a
structure for the management and reporting of the government‘s
finances; and the Clinger-Cohen Act of 1996 and Paperwork Reduction Act
of 1995, which required agencies to take an orderly, planned approach
to their information technology needs.
[2] The President‘s Management Agenda, which by focusing on 14 targeted
areas--5 governmentwide goals and 9 program initiatives--seeks to
improve the management and performance of the federal government.
[3] Office of Management and Budget, Program Performance Assessments
for the FY 2004 Budget, M-02-10 (Washington, D.C.: July 16, 2002).
[4] U.S. General Accounting Office, Performance Budgeting: Initial
Experiences under the Results Act in Linking Plans with Budgets, GAO-
AIMD/GGD-99-67 (Washington, D.C.: Apr. 12, 1999); U.S. General
Accounting Office, Performance Budgeting: Fiscal Year 2000 Progress in
Linking Plans with Budgets, GAO-AIMD-99-239R (Washington, D.C.: July
30, 1999); and U.S. General Accounting Office, Managing for Results:
Agency Progress in Linking Performance Plans with Budgets and Financial
Statements, GAO-02-236 (Washington, D.C.: Jan. 4, 2002).
[5] U.S. General Accounting Office, Results-Oriented Budget Practices
in Federal Agencies, GAO-01-1084SP (Washington, D.C.: August 2001).
[6] VA includes three administrations: VHA, Veterans Benefits
Administration (VBA), and National Cemetery Administration (NCA).
[7] Most of the elements in the VERA formula are contingent upon
workload (the number and type of veterans served).
[8] This designation may come about as a result of a legislative
mandate or VHA determination.
[9] MCCF monies, mainly veterans‘ copayments and third-party insurance
payments, can be used by networks for a wide variety of purposes.
[10] Network 2‘s care lines include Medical, Diagnostics and
Therapeutics, Geriatrics and Extended Care, and Behavioral Health.
[11] The PSLs include Primary Care, Specialty Care, Extended Care and
Rehabilitation, and Mental Health. Even though Networks 13 and 14
combined in January 2002 to become Network 23, the new network‘s
structure had not yet been determined at the time of our audit work;
thus, we focused on the processes of Network 13.
[12] PSL CEOs are now called PSL Directors.
[13] GAO-01-1084SP.
[14] Priority 7 veterans are veterans who have either incomes or net
worths above a certain threshold, no service-connected disability that
results in monetary benefits from VA, and no other recognized statuses
such as former prisoners of war.
[15] See GAO-02-338.
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