VA Health Care
Framework for Analyzing Capital Asset Realignment for Enhanced Services Decisions Gao ID: GAO-03-1103R August 18, 2003On May 14, 2003, as requested, we briefed Congress on our preliminary views on the Capital Asset Realignment for Enhanced Services (CARES) process initiated by the Department of Veterans Affairs (VA). On July 29, 2003, we shared our additional perspectives, which Congressional Staff indicated would be helpful to the Commission as it considers the draft National CARES Plan that VA presented on August 4, 2003. For this reason, we are providing an overview of the approach that we plan to use during our continuing review of CARES.
In summary, our approach for analyzing CARES decisions will focus on a series of fundamental questions regarding whether appropriate alternatives were considered and key impacts of competing alternatives were appropriately evaluated. Our framework examines whether choices about the development of capital asset realignment alternatives ensure consideration of alternatives that potentially provide the greatest payoffs, particularly in comparison to the status quo, that is, maintaining VA's existing real property infrastructure for the delivery of health care. It also examines the impacts of such alternatives, focusing on comparisons of their key costs and benefits in a manner consistent with OMB and CARES guidelines. In our view, the success of CARES depends on ensuring that the best alternatives for meeting veterans' needs within a market are recommended and a transparent public record is developed that sufficiently documents the justification supporting CARES decisions. A complete, fact-based public record can facilitate political consensus by allowing the Congress and other stakeholders to focus their deliberations on tradeoffs among the benefits and costs of alternatives for realigning health care assets and enhancing care.
GAO-03-1103R, VA Health Care: Framework for Analyzing Capital Asset Realignment for Enhanced Services Decisions
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August 18, 2003:
The Honorable Everett Alvarez, Jr.
Chairman, CARES Commission Department of Veterans Affairs:
Subject: VA Health Care: Framework for Analyzing Capital Asset
Realignment for Enhanced Services Decisions:
Dear Mr. Chairman:
On May 14, 2003, at your request, we briefed you on our preliminary
views on the Capital Asset Realignment for Enhanced Services (CARES)
process initiated by the Department of Veterans Affairs (VA). On July
29, 2003, we met with your staff to share our additional perspectives,
which they indicated would be helpful to the Commission as it considers
the draft National CARES Plan that VA presented on August 4, 2003. For
this reason, we are providing, for your consideration, an overview of
the approach that we plan to use during our continuing review of CARES.
As you know, VA operates one of the nation's largest health care
systems, having provided health care services to almost 4.3 million
veterans in fiscal year 2002. In 1999, we reported that better
management of VA's large, aged capital assets--consisting of a real
property infrastructure that includes over 4,700 buildings and
structures and 15,000 acres of land--could significantly reduce funds
used to operate and maintain underused, unneeded, or inefficient
properties.[Footnote 1] We also noted that these funds could be used to
enhance health care services for veterans. Specifically, we recommended
that VA develop market-based asset-restructuring plans[Footnote 2] that
are consistent with guidelines from the Office of Management and Budget
(OMB), which provide key principles and concepts for disciplined, cost-
effective management of real property.[Footnote 3] In response, VA
initiated the CARES process in October 2000.
The challenge of misaligned infrastructure is not unique to VA. We
identified federal real property management as a high-risk area in
January 2003 because of the nationwide importance of this issue for all
federal agencies.[Footnote 4] We did this to draw attention to the need
for broad-based transformation in this area, which, if well
implemented, will better position federal agencies to achieve mission
effectiveness and reduce operating costs. But VA and other agencies
face common challenges, such as competing stakeholder interests in real
property decisions. In VA's case, this involves achieving consensus
among such stakeholders as veterans' service organizations, affiliated
medical schools, employee unions, and communities. Recently, bills have
been introduced in the Senate and House that would require a minimum
60-day period for congressional committees to review and consider CARES
decisions before implementation.[Footnote 5]
VA's draft National CARES Plan proposes a wide range of health care
asset realignments and service enhancements based on analysis of VA's
current capacity and accessibility to veterans and projections of the
capacity necessary to meet the future health care needs of veterans.
This plan includes recommendations for realigning clinical services
from certain VA locations to existing VA-owned, new VA-owned, or non-
VA-owned health care delivery locations and includes proposals to open
some new VA delivery locations and close others. The Commission will
play a critical role in:
reviewing the draft national plan and documents that support it,
collecting information through site visits and public hearings, and:
making specific recommendations to the Secretary based on its
acceptance, modification, or rejection (with supporting comments) of
VA's draft recommendations.
Like the Commission, our continuing review of CARES is intended to help
assure that veterans' health care needs are met effectively and
efficiently. In developing our approach, we relied on our prior
testimonies and reports,[Footnote 6] OMB's guidelines for capital
planning, VA's CARES guidelines and other documents, VA's capital
investment guidelines, and Commission documents. In addition, we spoke
with Commission staff and VA's CARES staff. We conducted our work from
February through August 2003 in accordance with generally accepted
government auditing standards.
In summary, our approach for analyzing CARES decisions will focus on a
series of fundamental questions regarding whether
appropriate alternatives were considered and
key impacts of competing alternatives were appropriately evaluated.
As shown in the figure below, our framework examines whether choices
about the development of capital asset realignment alternatives ensure
consideration of alternatives that potentially provide the greatest
payoffs, particularly in comparison to the status quo, that is,
maintaining VA's existing real property infrastructure for the delivery
of health care. It also examines the impacts of such alternatives,
focusing on comparisons of their key costs and benefits in a manner
consistent with OMB and CARES guidelines.
Figure 1: GAO's Framework for Analyzing CARES Decisions:
[See PDF for image]
[End of figure]
In our view, the success of CARES depends on ensuring that the best
alternatives for meeting veterans' needs within a market are
recommended and a transparent public record is developed that
sufficiently documents the justification supporting CARES decisions. A
complete, fact-based public record can facilitate political consensus
by allowing the Congress and other stakeholders to focus their
deliberations on trade-offs among the benefits and costs of
alternatives for realigning health care assets and enhancing care.
Ensuring That Appropriate Alternatives Are Considered:
OMB guidelines state that when evaluating capital assets, a comparison
of alternatives is critical for ensuring that the best alternative is
selected. In its guidance, OMB challenges decision makers to consider
the different ways in which various functions, most notably health care
service delivery in VA's case, can be performed. Moreover, OMB
encourages the use of imagination, tempered with experience, to develop
ideas that could have the greatest payoffs. In this regard, OMB labeled
the development of alternatives the single most important element in
that process.
OMB's guidelines also suggest that alternatives include an assessment
of the continued viability of existing capital assets. VA currently
owns and operates significant investments in real property at 173
health care delivery locations. For CARES purposes, VA designated 77
geographic areas as health care markets with the goal of ensuring the
availability of an appropriate continuum of care for veterans in each
market. Thus, in the CARES context, assessing the desirability of VA's
existing assets would mean evaluating the contribution of VA's current
delivery locations to their respective markets' continuum of care. A
full assessment of alternatives for any market will require
consideration of alternatives to the status quo for each location,
including whether some existing locations might need to be supplemented
or enhanced and whether it might be better to replace some existing
locations with a more effective and efficient configuration of assets.
VA's CARES process also targets higher priority situations that warrant
special attention, including
markets with the largest increases or decreases in predicted workload
(such as the number of days of inpatient care and outpatient visits)
over the next 20 years, markets with the largest proportions of
veterans who have long travel times to existing VA health care
delivery locations, individual health care delivery locations that are
proximate to each other, and individual inpatient care delivery
locations that are predicted to have small workloads.
Consistent with OMB and CARES guidelines, our approach will examine
whether alternatives considered by VA and the Commission represent the
best CARES service realignment outcomes that are potentially available
for each individual health care delivery location within the CARES-
designated markets. Toward that end, we plan to review whether the
evidence indicates that consideration was given to realignment
alternatives that reflect an appropriate range of alternatives
involving health care services, delivery locations, and capital
investments. In terms of the health care services offered at individual
locations, alternatives range from maintaining the status quo to
closing a delivery location. Intermediate alternatives could involve
realigning one or more clinical services (such as vascular surgery or
hemodialysis) or groups of related services (such as acute inpatient
care or inpatient surgery) from one location to another. In terms of
delivery locations, alternatives include maintaining existing or
developing new VA-owned delivery locations, collaborating with other
federal agencies such as the Department of Defense (DOD), or purchasing
care from nonfederal providers such as community hospitals. In terms of
capital investment decisions, alternatives include renovating existing
assets, acquiring new assets, and disposing of unneeded assets.
Potentially viable alternatives would depend on the individual
circumstances within CARES-designated markets, most notably, whether VA
owns and operates assets at more than one health care delivery location
in a market. Of the 74 CARES markets currently under
consideration,[Footnote 7] 24 have a single delivery location with
significant real property investments, 47 have two or more such
locations, and 3 have no locations with significant real property
investments. For example, the best alternatives in VA's 24 single-
location markets could include the status quo, establishment of a new
VA delivery location, collaborating with federal agencies, or
purchasing care from private providers. In the 47 markets where VA
operates multiple delivery locations, the best alternatives for
delivery locations could also involve realigning individual services,
groups of services, or all services to nearby VA delivery locations.
Ensuring That Key Impacts of Competing Alternatives Are Evaluated:
OMB guidelines state that robust comparisons of costs and benefits
facilitate selection among competing alternatives and that information
regarding such analyses of competing alternatives should be provided in
a simple, easy to understand format. Doing so involves identifying the
likely consequences of specific alternatives on key impact areas and
then comparing the costs and benefits of competing alternatives to
determine which alternative best meets veterans' health care needs
effectively and efficiently. Consistent with OMB guidelines, CARES
guidelines call for impact analyses of specific costs and benefits to
be considered when evaluating health care service realignment
alternatives. Our approach to reviewing competing alternatives will
focus on whether evidence is available for decision makers and
stakeholders to understand the trade-offs among key impact areas--
quality of care, access to care, cost to the government, support for
VA's other strategic goals, and economic impact on the local community.
Quality of care includes continuity and coordination of care and
patient safety. We will examine evidence documenting how alternatives
are likely to preserve or improve the quality of care, for example, by
ensuring that the volume of procedures will be sufficient to maintain
the proficiency of providers, such as surgeons. Similarly, we will
examine documentation indicating how outcomes could be affected if
there are changes in interdependent services, such as cardiac surgery
and intensive care.
Access to health care services is also a key impact area. For CARES, VA
defines reasonable access in terms of travel times to its health care
delivery locations. We will examine evidence to determine how the
percentage of patients currently meeting VA's access goals compares to
the expected percentage of patients meeting VA goals under each
competing alternative and whether CARES realignments bring services
closer to where veterans live. CARES also addresses access to health
care in terms of capacity and projected workloads. We will examine
evidence of the likely effects of realignment alternatives on ensuring
that capacity will match projected demand, an important factor in
ensuring reasonable access in terms of waiting times for appointments.
In addition, the cost to the government, which involves one-time,
recurring, and opportunity costs, is another key area in which
alternatives can have varying impacts. We will examine evidence
documenting how alternatives differ in their life cycle costs--the
discounted present value of all one-time capital costs, continuing
costs of operation and maintenance, and cost offsets available through
potential revenue generation. A focus on life cycle costs is especially
critical to assessing the efficiency of resource use when there is
significant variation across competing alternatives in the initial one-
time capital investment requirements and ongoing costs of operation and
maintenance.
Another key element is support of other VA strategic goals. These
strategic goals include educating health care professionals, conducting
research, and serving as a primary backup to DOD in the event of a
national emergency or natural disaster, and other strategic goals
related to providing disability compensation and ensuring that
veterans' burial needs are met. For example, we will examine evidence
documenting how alternatives affect education programs, research
opportunities and funding, and VA's ability to meet DOD contingency
needs in the event of national emergency.
Economic impact on communities, including employees and local health
care delivery systems, is the final key element we will review. For
example, we will examine evidence to determine how alternatives could
affect employment opportunities and the viability of other health care
providers and related businesses and how VA plans to mitigate likely
adverse consequences of CARES decisions.
OMB guidelines state that once the impacts on these key elements have
been identified for each alternative developed, the best alternative
can be identified through an explicit comparison of their relative
expected costs and benefits. We will examine evidence to determine
whether descriptions of such comparisons demonstrate how the
recommended alternative better ensures appropriate quality of care,
reasonable access to care, reasonable cost to the government, effective
support for other VA strategic goals, and acceptable economic impact on
communities. Because decisions will typically involve trade-offs
between benefits and costs, we will focus especially on whether the
priorities that influenced trade-off choices were clearly articulated.
Finally, we will examine the explanations to determine if decisions in
different markets were based on different priorities and if so, whether
such differences were well documented.
Concluding Observations:
Veterans and stakeholders such as affiliated medical schools, employee
unions, communities, and the Congress will likely be more confident
that CARES service realignments and enhancements represent the best
alternatives for meeting veterans' health care needs if the public
record provides transparent and well-supported answers to the types of
questions we are using in our approach. Reaching consensus on the
realignment of VA's health care capital assets as expeditiously as
possible depends on the sufficiency of the information provided in
support of CARES decisions and the clarity of that documentation.
We will send copies of this report to interested congressional
committees and the Secretary of Veterans Affairs. The report will also
be available at no charge on GAO's Web site at http://www.gao.gov. We
will make copies available to others upon request. If you have
questions, please contact me at (202) 512-7101 or Paul Reynolds at
(202) 512-7109. Kristen Joan Anderson and Frederick Caison also
contributed to this report.
Sincerely yours,
Cynthia A. Bascetta:
Director, Health Care--Veterans' Health and Benefits Issues:
Signed by Cynthia A. Bascetta:
Related GAO Products:
Department of Veterans Affairs: Key Management Challenges in Health and
Disability Programs. GAO-03-756T. Washington, D.C.: May 8, 2003.
VA Health Care: Improved Planning Needed for Management of Excess Real
Property. GAO-03-326. Washington, D.C.: January 29, 2003.
High-Risk Series: Federal Real Property. GAO-03-122. Washington, D.C.:
January 2003.
Major Management Challenges and Program Risks: Department of Veterans
Affairs. GAO-03-110. Washington, D.C.: January 2003.
VA Health Care: Community-Based Clinics Improve Primary Care Access.
GAO-01-678T. Washington, D.C.: May 2, 2001.
VA Health Care: VA Is Struggling to Address Asset Realignment
Challenges. GAO/T-HEHS-00-88. Washington, D.C.: April 5, 2000.
VA Health Care: Improvements Needed in Capital Asset Planning and
Budgeting. GAO/HEHS-99-145. Washington, D.C.: August 13, 1999.
VA Health Care: Challenges Facing VA in Developing an Asset Realignment
Process. GAO/T-HEHS-99-173. Washington, D.C.: July 22, 1999.
Veterans' Affairs: Progress and Challenges in Transforming Health Care.
GAO/T-HEHS-99-109. Washington, D.C.: April 15, 1999.
VA Health Care: Capital Asset Planning and Budgeting Need Improvement.
GAO/T-HEHS-99-83. Washington, D.C.: March 10, 1999.
Executive Guide: Leading Practices in Capital Decision-Making. GAO/
AIMD-99-32. Washington, D.C.: December 1998.
VA Health Care: Closing a Chicago Hospital Would Save Millions and
Enhance Access to Services. GAO/HEHS-98-64. Washington, D.C.: April 16,
1998.
(290321):
FOOTNOTES
[1] See U.S. General Accounting Office, VA Health Care: Capital Asset
Planning and Budgeting Need Improvement, GAO/T-HEHS-99-83 (Washington,
D.C.: Mar. 10, 1999), and VA Health Care: Improvements Needed in
Capital Asset Planning and Budgeting, GAO/HEHS-99-145 (Washington,
D.C.: Aug. 13, 1999).
[2] VA subsequently defined a health care market as a geographic area
having a sufficient population and geographic size to benefit from the
coordination and planning of health care services and to support a full
health care delivery system.
[3] Office of Management and Budget, Capital Programming Guide, Version
1.0 (Washington, D.C.: July 1997).
[4] See U.S. General Accounting Office, High Risk Series: Federal Real
Property, GAO-03-122 (Washington, D.C.: January 2003) .
[5] S. 1283, H.R. 2659, and H.R. 2808, 108TH Cong. (2003).
[6] See Related GAO Products at the end of this report.
[7] Three of VA's markets are not currently being considered because VA
made realignment decisions for those markets during a pilot phase of
the CARES process. These markets cover parts of Indiana, Illinois,
Wisconsin, and Michigan.
