VA Health Care
Resource Allocations to Medical Centers in the Mid South Healthcare Network Gao ID: GAO-04-444 April 21, 2004Since fiscal year 1997, the Department of Veterans Affairs (VA) has relied primarily on its 21 health care networks to allocate resources to its medical centers. VA headquarters also directly allocates some resources to the medical centers. In addition, medical centers collect resources from third-party insurance payments and other sources. VA provides general guidance to\ networks for resource allocation to medical centers, but permits variation in networks' allocation methodologies. Representatives from veterans groups and others have expressed concerns regarding resource allocations to medical centers in Network 9 (Nashville) known as the Mid South Healthcare Network. GAO was asked to report for fiscal year 2002 (1) the amount of resources medical centers in the network received and the source of those resources and (2) the basis on which medical centers in the network received these resources. GAO was also asked to supplement findings for fiscal year 2002 with information for fiscal years 1997 through 2003.
The six medical centers in Network 9 (Nashville), known as the Mid South Healthcare Network, received a total of about $1 billion in resources in fiscal year 2002. The network allocated 83 percent of the total, or $825 million, to its medical centers. The medical centers received smaller amounts from VA headquarters (9 percent of the total or about $93 million) and resources from collections (7 percent of the total or about $73 million). As in fiscal year 2002, the network allocated more than 80 percent of medical center resources each year from fiscal years 1997 through fiscal year 2003. Medical centers in Network 9 (Nashville) received about 77 percent of their resources, or $760 million, in fiscal year 2002 based on fixed-per-patient amounts, referred to as fixed-capitation amounts, for patient workload and case mix. Patient workload is the number of patients treated, and case mix is a classification of patients into categories based on health care needs and related costs. The largest portion of these resources allocated on this basis came from the network while a smaller portion came from VA headquarters. Medical centers in the network received about 23 percent of their total resources, or $232 million, in fiscal year 2002 based on a variety of other factors such as network managers' determination of the financial needs of medical centers during the course of the year. These resources came from the network, VA headquarters, and collections. Since VA changed its resource allocation system in fiscal year 1997, the medical centers in the network received about the same portions of their resources based on fixed capitation amounts and on a variety of other factors each year from fiscal years 1997 through 2003. VA agreed with GAO's findings.
GAO-04-444, VA Health Care: Resource Allocations to Medical Centers in the Mid South Healthcare Network
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Report to Congressional Requesters:
United States General Accounting Office:
GAO:
April 2004:
VA Health Care:
Resource Allocations to Medical Centers in the Mid South Healthcare
Network:
GAO-04-444:
GAO Highlights:
Highlights of GAO-04-444, a report to congressional requesters
Why GAO Did This Study:
Since fiscal year 1997, the Department of Veterans Affairs (VA) has
relied primarily on its 21 health care networks to allocate resources
to its medical centers. VA headquarters also directly allocates some
resources to the medical centers. In addition, medical centers collect
resources from third-party insurance payments and other sources.
VA provides general guidance to networks for resource allocation to
medical centers, but permits variation in networks‘ allocation
methodologies. Representatives from veterans groups and others have
expressed concerns regarding resource allocations to medical centers in
Network 9 (Nashville) known as the Mid South Healthcare Network.
GAO was asked to report for fiscal year 2002 (1) the amount of
resources medical centers in the network received and the source of
those resources and (2) the basis on which medical centers in the
network received these resources. GAO was also asked to supplement
findings for fiscal year 2002 with information for fiscal years 1997
through 2003.
What GAO Found:
The six medical centers in Network 9 (Nashville), known as the Mid
South Healthcare Network, received a total of about $1 billion in
resources in fiscal year 2002. The network allocated 83 percent of the
total, or $825 million, to its medical centers. The medical centers
received smaller amounts from VA headquarters (9 percent of the total
or about $93 million) and resources from collections (7 percent of the
total or about $73 million). As in fiscal year 2002, the network
allocated more than 80 percent of medical center resources each year
from fiscal years 1997 through fiscal year 2003.
Medical centers in Network 9 (Nashville) received about 77 percent of
their resources, or $760 million, in fiscal year 2002 based on fixed-
per-patient amounts, referred to as fixed-capitation amounts, for
patient workload and case mix. Patient workload is the number of
patients treated, and case mix is a classification of patients into
categories based on health care needs and related costs. The largest
portion of these resources allocated on this basis came from the
network while a smaller portion came from VA headquarters. Medical
centers in the network received about 23 percent of their total
resources, or $232 million, in fiscal year 2002 based on a variety of
other factors such as network managers‘ determination of the financial
needs of medical centers during the course of the year. These resources
came from the network, VA headquarters, and collections. Since VA
changed its resource allocation system in fiscal year 1997, the medical
centers in the network received about the same portions of their
resources based on fixed-capitation amounts and on a variety of other
factors each year from fiscal years 1997 through 2003.
VA agreed with GAO‘s findings.
Percentage, Amounts, and Basis of Approximately $1 Billion In Resources
Received by Medical Centers in Network 9 (Nashville), Fiscal Year 2002:
[See PDF for image]
[End of section]
www.gao.gov/cgi-bin/getrpt?GAO-04-444.
To view the full product, including the scope and methodology, click on
the link above. For more information, contact Cynthia A. Bascetta at
(202) 512-7101.
[End of section]
Contents:
Letter:
Results in Brief:
Background:
Medical Centers in Network 9 (Nashville) Received About $1 Billion in
Fiscal Year 2002 from the Network and Other Sources:
Medical Centers in Network 9 (Nashville) Received Most of Their
Resources Based on Allocations Using Fixed-Capitation Amounts for
Patient Workload and Case Mix:
Expenditures Made by the Network 9 (Nashville) Office Increased by
Approximately $22 Million Since Fiscal Year 1997:
Agency Comments:
Appendix I: Objectives, Scope, and Methodology:
Appendix II: Staffing Resources Available at the Tennessee Valley
Healthcare System's Nashville and Murfreesboro Locations:
Appendix III: Network 9 (Nashville) Office Staff and Their
Responsibilities, Fiscal Years 1997 through 2002:
Appendix IV: Comments from the Department of Veterans Affairs:
Appendix V: GAO Contact and Staff Acknowledgments:
GAO Contact:
Acknowledgments:
Related GAO Products:
Tables:
Table 1: Network 9 (Nashville) Medical Centers, Patients, and Staff,
Fiscal Year 2002:
Table 2: Resources Provided to Network 9 (Nashville) Medical Centers in
Fiscal Year 2002, by Source:
Table 3: Allocations to Medical Centers from the Network 9 (Nashville)
Reserve Fund, Fiscal Year 2002:
Table 4: Expenditures Made by the Network 9 (Nashville) Office, Fiscal
Year 2002:
Table 5: Number of Network 9 (Nashville) Office Staff Positions, Fiscal
Years 1997 through 2002:
Table 6: Largest Administrative and Medical Center Support Staff
Decreases at Nashville and Murfreesboro, Fiscal Year 2000 to Fiscal
Year 2002:
Table 7: Largest Changes in Patient Care Staff at Nashville and
Murfreesboro Locations, Fiscal Year 2000 to Fiscal Year 2002:
Table 8: Tennessee Valley Healthcare System's Patients and Patient Care
Staff, Fiscal Year 2000 and Fiscal Year 2002:
Table 9: Other Staff Located at Murfreesboro, Fiscal Year 2002:
Table 10: Position Titles and Responsibilities for Network 9
(Nashville) Office Positions, Fiscal Years 1997 through 2002:
Figures:
Figure 1: Percentage and Amounts of Approximately $1 Billion in
Resources Medical Centers Received Based on Fixed-Capitation Amounts
for Patient Workload and Case Mix, Fiscal Year 2002:
Figure 2: Percentage and Amounts of Approximately $1 Billion in
Resources Medical Centers Received Based on a Variety of Factors Other
Than Fixed-Capitation Amounts for Patient Workload and Case Mix, Fiscal
Year 2002:
Figure 3: Number of Staff at Nashville and Murfreesboro Locations,
Fiscal Year 2000 and Fiscal Year 2002:
Figure 4: Number of Administrative and Medical Center Support Staff at
Nashville and Murfreesboro Locations, Fiscal Year 2000 and Fiscal Year
2002:
Figure 5: Number of Patient Care Staff at Nashville and Murfreesboro
Locations, Fiscal Year 2000 and Fiscal Year 2002:
Abbreviations:
CMOP: Consolidated Mail Outpatient Pharmacy:
DODDepartment of Defense:
DRG: diagnostic related group:
DSS: Decision Support System:
ELC: Executive Leadership Council:
FTEE: full time equivalent employees:
MCAC: Mid South Customer Accounts Center:
PTSD: post-traumatic stress disorder:
TVHS: Tennessee Valley Healthcare System:
VA: Department of Veterans Affairs:
VERA: Veterans Equitable Resource Allocation:
VHA: Veterans Health Administration:
United States General Accounting Office:
Washington, DC 20548:
April 21, 2004:
The Honorable Bart Gordon:
House of Representatives:
The Honorable Jim Cooper:
House of Representatives:
The Department of Veterans Affairs (VA) has changed the way it
allocates resources to its medical centers[Footnote 1] in recent years.
Since fiscal year 1997, VA has moved from a centralized allocation
system--in which VA headquarters allocated resources directly to VA
medical centers--to a more decentralized system in which VA
headquarters allocates most of its resources to VA's 21 health care
networks. The networks then allocate these resources to their
respective medical centers. VA headquarters also directly allocates
some additional resources to the medical centers. In addition, medical
centers collect resources from third-party insurance payments and other
sources. While implementing this new resource allocation process, VA
increased the number of patients it treated from 3.1 million to 4.7
million from fiscal years 1997 through 2002 and received annual
appropriations for medical care programs that increased from $17
billion to $21 billion.
We and others have examined how VA uses the Veterans Equitable Resource
Allocation (VERA) system to allocate resources to the
networks.[Footnote 2] VERA is a national, formula-driven approach that
VA uses to allocate most of its resources to networks based primarily
on two factors that experts generally recognize as key principles of
health care resource allocation--patient workload and case mix. Patient
workload is the number of veterans treated. Case mix is a
classification of patients into categories based on their health care
needs and related costs. Using workload and case-mix data, VERA
allocates a fixed amount of resources for each veteran in a case-mix
category. These amounts are often referred to as capitation. By
contrast, VA does not require that networks use a formula-driven
approach, like VERA, to allocate resources to medical centers. Instead,
VA provides general guidance to networks for allocating resources to
medical centers that permits variation in the network allocation
methodologies to take into account varying local conditions.
Representatives from veterans groups and others in Network 9
(Nashville), also known as the Mid South Healthcare Network, have
expressed concerns about the allocation of resources to the medical
centers in Network 9 (Nashville). These concerns have focused on the
total amount of resources allocated to the network's largest medical
center, the Tennessee Valley Healthcare System (TVHS), which is located
in Nashville and Murfreesboro; the basis on which medical centers in
the network receive their resources; and to what extent network office
expenditures have increased in recent years.
You asked us to determine for fiscal year 2002 (1) the amount of
resources medical centers in the network received and the source of
those resources, (2) the basis on which medical centers in the network
received these resources, and (3) the extent to which network office
expenditures were greater than in fiscal year 1997 and the primary
reasons accounting for any increase. To place this information in
context, you asked us to supplement our findings for fiscal year 2002,
the most recent year for which complete data were available at the time
of our analysis, with information for fiscal years 1997 through 2003.
To determine the amount of resources medical centers in the network
received and the sources of those resources in fiscal year 2002, we
categorized information in VA and Network 9 (Nashville) financial
reports on resources available to medical centers by the source of
those resources: Network 9 (Nashville), VA headquarters, and
collections. Because resources for the TVHS medical center and the
Network 9 (Nashville) office are combined in the same financial
accounts, we used financial reports maintained by TVHS to separate out
financial information for the TVHS medical center. We developed
estimates on similar information for fiscal years 1997 through 2001 and
2003 based on these and other data. To determine the basis on which
medical centers in the network received resources in fiscal year 2002,
we obtained and analyzed documents that described the allocation
methodology used by the network and VA headquarters. We relied on VA
data, interviews with VA officials, and on our prior work to calculate
the extent of allocations based on fixed-capitation amounts for patient
workload and case mix. We developed estimates on similar information
for fiscal years 1997 through 2001 and 2003 based on these and other
data. We limited our review to how resources were allocated to medical
centers and did not analyze how medical centers in the network spent
their allocations to deliver health care. To examine the extent to
which network office expenditures were greater than in fiscal year
1997, we used financial reports maintained by TVHS to separate out
financial information for the network office from the TVHS medical
center resources and other data we obtained from the network office. We
used these data to analyze changes in network staffing and other
network office functions from fiscal years 1997 through 2002. We also
interviewed network and VA headquarters officials about the roles and
responsibilities of network office staff. To better understand the
issues of concern for all three objectives, we conducted a site visit
to interview officials at the network office located in Nashville and
at the TVHS locations in Nashville and Murfreesboro. In doing our work,
we tested the reliability of the data and determined they were adequate
for our purposes. For a complete description of our scope and
methodology, see appendix I. We conducted our work from March 2003
through April 2004 in accordance with generally accepted government
auditing standards.
Results in Brief:
The six medical centers in Network 9 (Nashville) received a total of
about $1 billion in resources in fiscal year 2002. These resources came
from three sources: the network, VA headquarters, and resources
collected by the medical centers. The network allocated the largest
amountæ83 percent of the total or $825 millionæto its medical centers.
VA headquarters allocated the next largest amount--9 percent of the
total or approximately $93 millionædirectly to medical centers in
Network 9 (Nashville). In addition to these allocations, the medical
centers collected other resources--7 percent of the total or about $73
million--from third-party insurance payments, copayments, and
reimbursements for services provided to non-VA health care providers.
The combined resources from the network, VA headquarters, and resources
from collections for each medical center ranged from about $93 million
for the Huntington medical center to about $291 million for TVHS.
Medical centers in the network have relied on the network to provide
most of their resources since VA changed its resource allocation system
in fiscal year 1997. From fiscal year 1997 through fiscal year 2003,
Network 9 (Nashville) allocated more than 80 percent of medical center
resources each year.
Medical centers in Network 9 (Nashville) received about 77 percent of
their resources, or $760 million, in fiscal year 2002 based on fixed-
capitation amounts for patient workload and case mix. The network
allocated a large portion of these resources, about $742 million, to
its medical centers on this basis. To allocate these resources, the
network classified its patient workload into three categories based on
case mix, which resulted in medical centers receiving higher fixed-
capitation amounts for patients with greater health care needs. VA
headquarters also allocated about $19 million in resources directly to
medical centers based on fixed-capitation amounts for patient workload
and case mix. In addition to these resources, medical centers received
about 23 percent of their resources, or $232 million, based on a
variety of factors other than fixed-capitation amounts for patient
workload and case mix. Of these $232 million in resources, $84 million
came from Network 9 (Nashville), $75 million came from VA headquarters,
and $73 million came from collections. For example, the network
allocated about $33 million from its network reserve fund for
unexpected contingencies based on network managers' determination of
the financial needs of medical centers during the course of the year.
Since VA changed its resource allocation system in fiscal year 1997,
medical centers in Network 9 (Nashville) received about three-quarters
of their resources based on fixed-capitation amounts and about one-
quarter based on a variety of other factors each year from fiscal years
1997 through 2003.
Expenditures made by the network office increased from about $1 million
to about $23 million from fiscal years 1997 through 2002, driven
largely by spending for the consolidation of information technology and
for staffing expenditures. Network office expenditures for information
technology increased, in part, because the network assumed the costs of
contracts the medical centers had previously paid for software licenses
and information technology services. These expenditures represented
$9.6 million or approximately 41 percent of total network office
expenditures in fiscal year 2002. Expenditures for network office staff
increased primarily because the network consolidated positions formerly
located at the medical centers to a central location and added
positions to handle an increased volume of insurance collections. The
network consolidated its collections operations at Murfreesboro,
Tennessee to increase the efficiency of collection operations. In
addition to collections staff positions, the network increased the
number of other network staff to improve network operations. Total
network office staff expenditures accounted for $8 million of the
network office's total expenditures in fiscal year 2002--$5 million for
collections staff and $3 million for other network office staff.
In commenting on a draft of this report, VA agreed with our findings.
Background:
Network 9 (Nashville) is composed of a network office in Nashville,
Tennessee; six medical centers located in three states; and 27
community-based outpatient clinics. In fiscal year 2002, about 1
million veterans lived in the area served by the network. In that year,
the six medical centers in the network treated about 208,000 patients
or 20 percent of the veterans who lived in the area served by the
network. (See table 1.) The largest medical center in the network is
TVHS, which has two main locations--one in Nashville and the other in
Murfreesboro, Tennessee. TVHS served more than twice as many patients
and had more than three times the number of employees as the smallest
medical center in the network in fiscal year 2002. For more detailed
information on staff resources at TVHS's two locations, which were
integrated to form TVHS in fiscal year 2001, see appendix II.
Table 1: Network 9 (Nashville) Medical Centers, Patients, and Staff,
Fiscal Year 2002:
Medical center: Tennessee Valley Healthcare System (TVHS), Tenn;
Patients[A]: 61,120;
Inpatients treated[B]: 9,490;
Outpatient visits[B]: 463,578;
Staff (full-time employees): 2,321.
Medical center: Memphis, Tenn;
Patients[A]: 35,440;
Inpatients treated[B]: 7,559;
Outpatient visits[B]: 294,373;
Staff (full-time employees): 1,723.
Medical center: Louisville, Ky;
Patients[A]: 31,281;
Inpatients treated[B]: 4,800;
Outpatient visits[B]: 317,863;
Staff (full-time employees): 1,121.
Medical center: Mountain Home, Tenn;
Patients[A]: 28,187;
Inpatients treated[B]: 5,401;
Outpatient visits[B]: 247,170;
Staff (full-time employees): 1,288.
Medical center: Lexington, Ky;
Patients[A]: 26,963;
Inpatients treated[B]: 5,391;
Outpatient visits[B]: 267,327;
Staff (full-time employees): 1,245.
Medical center: Huntington, W. Va;
Patients[A]: 25,378;
Inpatients treated[B]: 3,570;
Outpatient visits[B]: 252,887;
Staff (full-time employees): 697.
Medical center: Total;
Patients[A]: 208,369;
Inpatients treated[B]: 36,211;
Outpatient visits[B]: 1,843,198;
Staff (full-time employees): 8,395.
Source: VA.
[A] The number of patients using health care services as counted by
unique or unduplicated social security numbers. Each patient is counted
one time, regardless of how many visits each patient makes.
[B] The number of inpatients treated and the number of outpatient
visits are not based on unique or unduplicated social security numbers.
[End of table]
Network 9 (Nashville) has received increased allocations each year
under VERA to provide resources for medical centers to treat their
growing patient workload. From fiscal year 1997 to fiscal year 2002,
the number of patients medical centers in the network treated increased
by 27 percent. To meet patient health care needs, the network received
$700 million in resources from VERA in fiscal year 1997, and by fiscal
year 2002 the network's allocations from VERA had risen to $849
million--a 21 percent increase. The network has been responsible for
developing a method to allocate these VERA resources to its medical
centers. VA headquarters provides general guidance to networks on the
principles they should use when developing their allocation
methodologies, but does not require that networks use patient workload
or case mix in their allocation methodologies.[Footnote 3]
Using fixed-capitation amounts for patient workload and case mix are
guiding principles recognized by experts on the design of health care
payment systems and implemented in practice by major health care
programs such as Medicare and Medicaid.[Footnote 4] Medicare and
Medicaid, for example, use fixed-capitation amounts to provide managed
care plans with an incentive to operate efficiently by placing them at
risk if their expenses exceed the payment amount. Our report on VERA in
February 2002 also concluded that VERA provides a reasonable approach
to resource allocation, in part because VERA allocates resources to the
networks based primarily on the use of fixed-capitation amounts for
patient workload and case mix.[Footnote 5] VERA provides fixed-
capitation amounts for each case-mix category that are the same for
each network and are intended to reflect VA's average costs instead of
historical local costs.
In addition to resources that VA allocates to its medical centers from
the network and headquarters, medical centers also collect other
resources that they use in providing health care to veterans. VA
medical centers collect third-party insurance payments and copayments
from veterans.[Footnote 6] VA collects insurance payments for treatment
of veterans' conditions that are not a result of injuries or illnesses
incurred or aggravated during military service. In addition, some
veterans are charged copayments for certain health care services and
prescription drugs obtained at a VA pharmacy. VA medical centers also
collect resources for a variety of services VA provides to non-VA
health care providers such as hospital laundry services and outpatient
care provided to Department of Defense active duty military personnel.
Medical Centers in Network 9 (Nashville) Received About $1 Billion in
Fiscal Year 2002 from the Network and Other Sources:
The six medical centers in Network 9 (Nashville) received about $1
billion in fiscal year 2002 from three sources: the network, VA
headquarters, and resources from collections. (See table 2.) The
network allocated the largest share of this total--83 percent or about
$825 million of the total resources received by the six medical
centers. VA headquarters allocated directly to the medical centers the
next largest share, which was about 9 percent or $93 million of the
total resources the network's medical centers received. Finally, the
six medical centers also collected about 7 percent of the total
resources medical centers received or $73 million in resources from
collections of third-party insurance payments, veteran copayments, and
reimbursements primarily for services provided to non-VA healthcare
providers.
Table 2: Resources Provided to Network 9 (Nashville) Medical Centers in
Fiscal Year 2002, by Source:
Medical center: Tennessee Valley Healthcare System (TVHS), Tenn;
Total resources: $291;
Resources provided by network (percent of total medical center
resources): $240 (82%);
Resources provided by VA headquarters (percent of total medical center
resources): $33 (11%);
Resources from collections (percent of total medical center
resources): $18 (6%).
Medical center: Memphis, Tenn;
Total resources: 185;
Resources provided by network (percent of total medical center
resources): 156 (84%);
Resources provided by VA headquarters (percent of total medical center
resources): 17 (9%);
Resources from collections (percent of total medical center
resources): 12 (6%).
Medical center: Louisville, Ky;
Total resources: 143;
Resources provided by network (percent of total medical center
resources): 117 (82%);
Resources provided by VA headquarters (percent of total medical center
resources): 11 (8%);
Resources from collections (percent of total medical center
resources): 14 (10%).
Medical center: Lexington, Ky;
Total resources: 141;
Resources provided by network (percent of total medical center
resources): 116 (82%);
Resources provided by VA headquarters (percent of total medical center
resources): 15 (11%);
Resources from collections (percent of total medical center
resources): 10 (7%).
Medical center: Mountain Home, Tenn;
Total resources: 139;
Resources provided by network (percent of total medical center
resources): 119 (86%);
Resources provided by VA headquarters (percent of total medical center
resources): 8 (6%);
Resources from collections (percent of total medical center
resources): 12 (8%).
Medical center: Huntington, W. Va;
Total resources: 93;
Resources provided by network (percent of total medical center
resources): 78 (83%);
Resources provided by VA headquarters (percent of total medical center
resources): 8 (9%);
Resources from collections (percent of total medical center
resources): 7 (8%).
Medical center: All medical centers;
Total resources: $992;
Resources provided by network (percent of total medical center
resources): $825 (83%);
Resources provided by VA headquarters (percent of total medical center
resources): $93 (9%);
Resources from collections (percent of total medical center
resources): $73 (7%).
Source: GAO analysis of VA data.
Notes: Includes about $15.6 million from the fiscal year 2001 VERA
allocation that the network allocated to the medical centers in fiscal
year 2002. Dollar amounts and percents may not add due to rounding.
[End of table]
The amount of resources that the network, VA headquarters, and
resources from collections provided, in total, to each medical center
in fiscal year 2002 ranged from about $93 million for Huntington to
about $291 million for TVHS. The network provided the largest portion
of each medical center's total resources in fiscal year 2002. Network
allocations as a percentage of total medical center resources ranged
from 82 percent at TVHS and two other medical centers to 86 percent at
Mountain Home. TVHS and Lexington received the highest percentage of
resources directly from VA headquarters (11 percent), and TVHS and
Memphis received the lowest percentage of resources from collections (6
percent).
The percentage of resources that medical centers in the network
received in fiscal year 2002 from the three sources varied because of
several factors. For instance, TVHS received a lower percentage of its
resources from the network than three other medical centers, in part,
because it received a larger percentage of its resources from VA
headquarters than most medical centers in the network. The larger
allocation from VA headquarters was used, in part, for the TVHS
transplant program, the only one of its kind in the network. Louisville
also received a lower percentage of its resources from the network than
three other medical centers, in part, because the medical center
received a higher percentage of its total resources from collections
than any other network medical center. This resulted from agreements
the medical center had--and resources it collected--for the delivery of
outpatient and family practice care to active duty military personnel
and their dependents at Ft. Knox, Kentucky.
Medical centers in the network have relied on the network to provide
most of their resources since VA changed its resource allocation system
in fiscal year 1997. From fiscal year 1997 through fiscal year 2003,
Network 9 (Nashville) allocated more than 80 percent of medical center
resources each year. We estimate that on average the network provided
87 percent of the resources medical centers received during this
period.
Medical Centers in Network 9 (Nashville) Received Most of Their
Resources Based on Allocations Using Fixed-Capitation Amounts for
Patient Workload and Case Mix:
Medical centers in Network 9 (Nashville) received most of their
resources in fiscal year 2002 based on allocations using fixed-
capitation amounts for patient workload and case mix. A large portion
of the resources allocated on the basis of fixed-capitation amounts for
patient workload and case mix came from the network and a smaller
portion came from VA headquarters. The other resources that medical
centers received in fiscal year 2002 were based on a variety of other
factors such as network managers' determination of the financial needs
of medical centers during the course of the year. These resources came
from the network, VA headquarters, and collections. Since VA changed
its resource allocation system in fiscal year 1997, medical centers in
Network 9 (Nashville) received about three-quarters of their resources
based on fixed-capitation amounts and about one-quarter based on other
factors each year from fiscal years 1997 through 2003.
Medical Centers Received About Three-Quarters of Their Resources from
Allocations Based on Fixed-Capitation Amounts for Patient Workload and
Case Mix:
Medical centers received about 77 percent of their approximately $1
billion in total resources in fiscal year 2002--or $760 million--based
on allocations using fixed-capitation amounts for patient workload and
case mix. (See fig. 1.) The $760 million allocated on the basis of
fixed-capitation amounts for patient workload and case mix came
primarily from the network. The network allocated $742 million to
medical centers on this basis. VA headquarters allocated the remainder
of the resources based on fixed-capitation amounts for patient workload
and case mix--$19 million--directly to medical centers in Network 9
(Nashville). The portion of medical center resources based on fixed-
capitation amounts for patient workload and case mix was similar in
other years. For each of fiscal years 1997 through 2003, we estimated
that medical centers received about three-quarters of their resources
based on fixed-capitation amounts for patient workload and case mix.
Figure 1: Percentage and Amounts of Approximately $1 Billion in
Resources Medical Centers Received Based on Fixed-Capitation Amounts
for Patient Workload and Case Mix, Fiscal Year 2002:
[See PDF for image]
Note: Dollar amounts do not add due to rounding.
[End of figure]
Network 9 (Nashville) Allocated Largest Portion of Resources Based on
Fixed-Capitation Amounts for Patient Workload and Case Mix in Fiscal
Year 2002:
The network allocated the largest portion of medical centers'
resources--$742 million--based on fixed-capitation amounts for patient
workload and case mix in fiscal year 2002. To calculate its patient
workload, the network, like VERA, used two methods. The network
calculated the number of patients who received a relatively limited
amount of health care during a previous 3-year period, and calculated
the number of patients who received relatively more care during a
previous 5-year period. In its workload calculation for this 3-year
period, the network's resource allocation methodology, like VERA,
excluded a group of veterans, known as Priority 7 veterans,[Footnote 7]
but included them in its 5-year workload calculation.[Footnote 8] The
network made an exception in the way it calculated 3-year workload for
a one-time $5 million allocation, its share of a supplemental
appropriation VA received in fiscal year 2002. For this allocation the
network included all Priority 7 veterans in its workload calculation.
To calculate case mix in fiscal year 2002, the network classified
patient workload into different categories, depending upon estimates of
the patients' health care needs and associated costs for treating them.
The network, like VERA, used three case-mix categories: basic non-
vested, basic vested, and complex.[Footnote 9] Basic non-vested and
basic-vested categories included patients who have relatively routine
health care needs and are principally cared for in an outpatient
setting. Basic non-vested patients receive only part of their care
through VA and are less costly to VA than basic-vested patients. Basic-
vested patients, by contrast, rely primarily on VA for meeting their
health care needs. Patients in the basic non-vested and basic-vested
category represented about 97 percent of the network's patient workload
in that year. The complex category included patients who generally
required significant high-cost inpatient care as an integral part of
their rehabilitation or functional maintenance, and represented about 3
percent of the network's workload in that year. For patients in each
case-mix category, the network paid medical centers a capitation rate,
which is based on the average cost of care in VA for a patient in that
category. The capitation rates that the network used for each of these
categories were the same as those used in VERA: basic non-vested
($197), basic vested ($3,121), and complex ($41,667). The network also
allocated about $9 million to medical centers based on other patient
case-mix categories.[Footnote 10]
Medical centers in Network 9 (Nashville) with larger patient workloads
generally received more resources than medical centers with smaller
patient workloads. In fiscal year 2002, for example, TVHS had the
largest patient workload and received the most resources. However, if
two medical centers had similar patient workloads but the two had
differences in the case mix of their patients, one may have received
more resources than the other. For example, Mountain Home and
Huntington medical centers had almost identical patient workloads in
fiscal year 2002, but Mountain Home received a larger allocation from
the network ($119 million) than Huntington ($78 million), in part,
because of an important difference in their respective patients' case
mix. Mountain Home had more patients whose health care needs required
more expensive care as indicated by the number of complex care
patients. In that year, Mountain Home had almost 1,200 complex patients
compared to 400 complex patients in Huntington.
VA Headquarters Allocated a Small Portion of Resources Based on Fixed-
Capitation Amounts for Patient Workload and Case Mix in Fiscal Year
2002:
VA headquarters allocated the remainder of resources that medical
centers received based on fixed-capitation amounts for patient workload
and case mix in fiscal year 2002, which was about $19 million. The
largest resource allocation VA headquarters made to medical centers in
Network 9 (Nashville) on this basis--$13 million--was to pay a portion
of the costs for veterans receiving care in state veterans' nursing
homes, which are operated in several locations in Network 9
(Nashville), including Murfreesboro, Tennessee and Hazard,
Kentucky.[Footnote 11] VA paid the same amount for veterans receiving
this service, about $53 per day per veteran, without adjusting for
differences in veterans' health care needs. The second largest resource
allocation VA headquarters made to medical centers in Network 9
(Nashville) based on fixed-capitation amounts for patient workload and
case mix in fiscal year 2002 was about $5 million for its transplant
program.[Footnote 12] VA headquarters allocated these resources based
on the number of patients needing transplants and the type of
transplant needed: kidney, liver, heart, and bone marrow transplants.
The capitation amounts for transplants ranged from $50,000 to $138,000
in fiscal year 2002. TVHS received all the VA headquarters transplant
resource allocation in Network 9 (Nashville) because it is the only
medical center in the network performing transplants. VA also allocated
about $1 million to medical centers through a per diem rate per veteran
to support housing programs for homeless veterans operated by nonprofit
community-based organizations.
Network 9 (Nashville) Changed Its Patient Workload and Case-Mix
Measures During the Fiscal Year 1997-2003 Period:
Network 9 (Nashville) changed how it determined patient workload in
fiscal year 2003 to allocate resources to its medical centers. For that
year, the network calculated patient workload based on a 1-year period-
-or the total number of patients who used network medical centers in
fiscal year 2002. In addition, the network included all veterans,
including Priority 7 and 8 veterans, in its patient workload. According
to a network official, the network made these changes in determining
patient workload to better account for the costs involved in treating
its patients. By contrast, in fiscal years 1997 through 2002, the
network determined workload based on the same measures that VERA used
by calculating the number of patients who received a relatively limited
amount of health care during a previous 3-year period, and calculating
the number of patients who received relatively more care during a
previous 5-year period. And like VERA, the network also generally
excluded Priority 7 veterans from its 3-year workload calculation but
included them in its 5-year calculation from fiscal years 1997 through
2002.
Network 9 (Nashville) also changed the way it calculated its case mix
for allocating resources to medical centers several times during this
period. In fiscal years 1997 and 1998, the network used the same 2
case-mix categories that VERA used--basic and special.[Footnote 13] In
fiscal year 1999, the network did not use the 3 case-mix categories
that VERA converted to in that year but instead used the 44 classes
that VA used to construct VERA's 3 case-mix categories. In fiscal years
2000 through 2002, the network used the 3 case-mix categories that VERA
used: basic non-vested, basic vested, and complex care. In fiscal year
2003, the network made a significant change by increasing the number of
case-mix categories from 3 used in fiscal year 2002 to 644 case-mix
categories. The fiscal year 2003 case-mix approach classified the
health care needs of hospital inpatients into the 511 diagnostic
related groups (DRGs) used by Medicare to pay hospitals for inpatient
care.[Footnote 14] For outpatient care, the approach used 121 different
categories to classify the type of visit and account for the amount of
resources the visit consumed. Additionally, the network used 12
different categories to measure the intensity of care in long-term care
settings. According to a network official, these changes were made to
better account for medical centers' cost for treating patients.
The Network 9 (Nashville) decision to use more case-mix categories in
fiscal year 2003 is consistent with a recommendation we made to VA in
February 2002 to improve VERA's allocation of comparable resources for
comparable workloads among networks.[Footnote 15] In that report, we
recommended that VA adopt more case-mix categories to better account
for differences in patient health care needs and that VA make other
improvements. We also pointed out that the literature and experts we
consulted suggested that a large increase in the number of case-mix
categories--such as the increase in the number of Network 9 (Nashville)
case-mix categories from 3 to 644 in fiscal year 2003--has advantages
and disadvantages. Specifically, using more case-mix categories can
increase the accuracy of health care resource allocations whether at
the network or medical center level, but may also provide more
opportunities to classify patients inappropriately to receive the
highest capitation amounts.
Medical Centers Received About One-Quarter of Their Resources Based on
a Variety of Other Factors:
Medical centers in Network 9 (Nashville) received about 23 percent of
their total resources, or $232 million, in fiscal year 2002 based on a
variety of factors other than fixed-capitation amounts for patient
workload and case mix. (See fig. 2.) These resources came from three
sources: Network 9 (Nashville), VA headquarters, and collections in the
amounts of $84 million, $75 million, and $73 million, respectively.
Figure 2: Percentage and Amounts of Approximately $1 Billion in
Resources Medical Centers Received Based on a Variety of Factors Other
Than Fixed-Capitation Amounts for Patient Workload and Case Mix, Fiscal
Year 2002:
[See PDF for image]
[End of figure]
Network 9 (Nashville) Allocated a Portion of Resources Based on a
Variety of Other Factors in Fiscal Year 2002:
In fiscal year 2002, Network 9 (Nashville) used a variety of factors to
allocate $84 million to its medical centers. Using these factors, the
network allocated $36 million for education and research support, $33
million for the network reserves, $14 million for equipment and
nonrecurring maintenance, and $1 million for other purposes.
To allocate $36 million in resources for education and research
support, Network 9 (Nashville) used two methods. For education, the
network allocated $22 million in resources to medical centers based on
the number of residents at each medical center in the current academic
year, the same approach that VERA used that year. For research support,
the network allocated $14 million in resources to medical centers based
primarily on the amount of funded research in fiscal year 2000, like
VERA.
To allocate the network's reserve fund, network management allocated
about $33 million in fiscal year 2002 based on the financial needs of
medical centers. The network reserve fund was intended to provide
resources for unexpected contingencies and cover unmet expenses that
medical centers have during the course of a year. VA headquarters
requires that all networks have such a fund, which is similar in
concept to VERA's reserve fund.[Footnote 16] Network officials told us
while they encourage efficient operations, some medical centers have
higher costs in certain areas and if these medical centers are unable
to lower their costs, the network allocates funds from the reserve to
help medical centers cover unmet expenses during the year. In fiscal
year 2002, the network allocated reserve funds to medical centers for
these purposes and distributed about half of the reserve fund to the
Lexington medical center because of its higher than average costs in
pharmacy, radiology, and laboratory expenses. Table 3 shows how the
network distributed the network reserve to its six medical centers in
fiscal year 2002.
Table 3: Allocations to Medical Centers from the Network 9 (Nashville)
Reserve Fund, Fiscal Year 2002:
Medical center: Lexington, Ky;
Amount distributed: $15,595,390;
Percent of network reserve distributed: 46.9.
Medical center: Tennessee Valley Healthcare System (TVHS), Tenn;
Amount distributed: $7,097,166;
Percent of network reserve distributed: 21.4.
Medical center: Mountain Home, Tenn;
Amount distributed: $5,834,036;
Percent of network reserve distributed: 17.6.
Medical center: Louisville, Ky;
Amount distributed: $4,403,466;
Percent of network reserve distributed: 13.2.
Medical center: Memphis, Tenn;
Amount distributed: $222,870;
Percent of network reserve distributed: 0.7.
Medical center: Huntington, W. Va;
Amount distributed: $87,738;
Percent of network reserve distributed: 0.3.
Medical center: Total;
Amount distributed: $33,240,666;
Percent of network reserve distributed: 100.
Source: GAO analysis of VA data.
Note: According to Network 9 (Nashville) officials, the network does
not necessarily allocate its entire reserve fund to medical centers
each year, sometimes carrying over some resources into the next year.
The amount carried over each year varies. For example, the network
carried over about $5 million from its fiscal year 2002 reserve fund
into fiscal year 2003.
[End of table]
To allocate resources for equipment and nonrecurring maintenance, the
network allocated about $14 million[Footnote 17] for that purpose in
fiscal year 2002 based on priorities established by the chief engineers
from each medical center and the network's Executive Leadership Council
(ELC).[Footnote 18] These groups prioritized a list of projects
submitted by each medical center and the network allocated resources
for projects according to these priorities. VERA, by contrast,
allocated its equipment and nonrecurring maintenance resources to all
networks that year based primarily on fixed-capitation amounts for
patient workload.
Two other factors accounted for a small portion of resources medical
centers received or approximately $1 million. The network used other
factors to control the amount of change in a medical center's total
network allocation from the prior year and for differences in local
costs. In fiscal year 2002, the network capped net change in medical
centers' resources allocated by the network to a maximum of an 8
percent increase or decrease from fiscal year 2001 resource
allocations. The caps were designed to prevent year-to-year
fluctuations beyond management's ability to prudently manage services.
In addition, the network adjusted the amounts allocated to some medical
centers relative to others to account for local price differences.
These differences resulted primarily from variations in federal
employee pay rates at the various medical centers in the network.
VA Headquarters Allocated a Portion of the Resources Medical Centers
Received Based on a Variety of Other Factors in Fiscal Year 2002:
VA headquarters directly allocated $75 million to medical centers for
special programs such as prosthetics, stipends for medical residents
and other trainees, and other programs based on a variety of other
factors. In fiscal year 2002, VA allocated $34 million for prosthetics
directly to medical centers based largely on medical centers'
historical expenditures for prosthetics, including items such as
hearing aids, wheelchairs, and artificial limbs. VA headquarters also
allocated $25 million that year to medical centers in the network to
fund stipends for medical residents and other trainees based on the
type and number of medical residents at each medical center. VA
headquarters allocated about $16 million for other programs, including
readjustment counseling, substance abuse, and post-traumatic stress
disorder (PTSD) based on a variety of other factors.
Medical Centers Also Received a Portion of Their Resources from
Collections in Fiscal Year 2002:
Medical centers in Network 9 (Nashville) collected $73 million in
resources from third-party insurance payments, copayments, and
reimbursements for services provided to non-VA health care providers in
fiscal year 2002. Medical centers in the network collected about $67
million of this amount from third-party insurance and copayments paid
by veterans. Medical centers in the network also collected about $6
million in resources through reimbursements from the provision of
health care services to non-VA entities such as private hospitals, the
Department of Defense (DOD), and DOD's civilian health care contractors
in fiscal year 2002. Each medical center retained the resources it
collected and had the flexibility to use these resources for any health
care purpose. The amounts collected varied depending upon the priority
status of veterans treated, whether their treatment was required for a
service-connected condition, whether the veteran had health insurance,
and other factors.
Expenditures Made by the Network 9 (Nashville) Office Increased by
Approximately $22 Million Since Fiscal Year 1997:
Expenditures made by the network office increased from $1 million in
fiscal year 1997 to $23 million in fiscal year 2002. The two primary
reasons for the $22 million increase were the consolidation of
information technology and staffing expenditures. Information
technology expenditures accounted for the largest increase in
expenditures made by the network office. This increase occurred, in
part, because the network assumed the cost of contracts for software
licenses and information technology services for which medical centers
had once been responsible, according to network officials. Instead of
having each medical center contract for information technology services
individually, the network took responsibility for these contracts to
consolidate and negotiate lower costs. In fiscal year 2002, computer
contracts, software licensing, and other information technology
expenditures represented $9.6 million or approximately 41 percent of
total network office expenditures. (See table 4.):
Table 4: Expenditures Made by the Network 9 (Nashville) Office, Fiscal
Year 2002:
Network 9 (Nashville) office expenditures: Information technology
related expenditures;
Amount: $9,583,965;
Percent of total: 41.
Network 9 (Nashville) office expenditures: Staff expenditures;
Amount: 8,051,324;
Percent of total: 35.
Network 9 (Nashville) office expenditures: Contracts/consultant
services[A];
Amount: 3,198,000;
Percent of total: 14.
Network 9 (Nashville) office expenditures: Other[B];
Amount: 1,295,579;
Percent of total: 6.
Network 9 (Nashville) office expenditures: Office of Resolution
Management[C];
Amount: 1,119,098;
Percent of total: 5.
Network 9 (Nashville) office expenditures: Total;
Amount: $23,247,966;
Percent of total: 100.
Source: GAO analysis of VA data.
Note: Percents do not add due to rounding.
[A] Contracts and consultant services include a contract regarding
quality assurance and consultant services for enhancing clinical and
operational improvements for TVHS.
[B] Other includes after-hours telephone care, awards, and accounting
support.
[C] Office of Resolution Management provides Equal Employment
Opportunity complaint processing services to VA employees, applicants
for employment, and former employees.
[End of table]
Staff expenditures accounted for the second largest increase in
expenditures made by the network office and accounted for $8 million by
fiscal year 2002. Most of the increase in network office staff resulted
because of growth in Mid South Customer Accounts Center (MCAC)
staffing. (See table 5.) This growth occurred because the network
consolidated staff positions formerly located at medical centers for
medical insurance collections and claims processing at a central
location and also added additional staff for this purpose. To establish
this operation in fiscal year 1998, the network transferred 57
positions from the medical centers to MCAC. By fiscal year 2002, the
network had added another 30 MCAC staff positions. MCAC staff
expenditures in fiscal year 2002 were about $5 million. The MCAC
operation is based at TVHS's Murfreesboro location. Network officials
told us they consolidated this operation to increase efficiency and
improve oversight of collections and claims processing. From fiscal
years 1997 through 2002, collections for third-party insurance payments
and copayments increased from $28 million to about $67 million.
Table 5: Number of Network 9 (Nashville) Office Staff Positions, Fiscal
Years 1997 through 2002:
Network office staff positions: Staff positions at Mid South Customer
Accounts Center (MCAC);
Fiscal year: 1997: 0;
Fiscal year: 1998: 57;
Fiscal year: 1999: 62;
Fiscal year: 2000: 66;
Fiscal year: 2001: 68;
Fiscal year: 2002: 87.
Network office staff positions: Mandated by VA headquarters;
Fiscal year: 1997: 4;
Fiscal year: 1998: 5;
Fiscal year: 1999: 8;
Fiscal year: 2000: 7;
Fiscal year: 2001: 8;
Fiscal year: 2002: 9.
Network office staff positions: Other network staff positions;
Fiscal year: 1997: 4;
Fiscal year: 1998: 4;
Fiscal year: 1999: 6;
Fiscal year: 2000: 8;
Fiscal year: 2001: 14;
Fiscal year: 2002: 16.
Network office staff positions: Total;
Fiscal year: 1997: 8;
Fiscal year: 1998: 66;
Fiscal year: 1999: 76;
Fiscal year: 2000: 81;
Fiscal year: 2001: 90;
Fiscal year: 2002: 112.
Source: GAO analysis of VA data.
Note: The MCAC opened in fiscal year 1998.
[End of table]
Staff expenditures by the network office also increased because of
growth in positions mandated by VA headquarters and additional staff
positions that network management said would improve operations. These
staff positions accounted for about $3 million in staff expenditures in
fiscal year 2002. The network office added 5 positions from fiscal
years 1997 through 2002 that were mandated by VA headquarters for all
network offices to improve operations VA wide. These staff positions
included a patient safety officer and a compliance officer. In
addition, the network created 12 other network staff positions from
fiscal years 1997 to 2002 that management expected to improve
operations. For example, the network created a pharmacy benefits
manager position to manage the network's pharmaceutical budget, which,
according to network officials, has brought down the increase in
pharmaceutical costs for the entire network, and a Decision Support
System (DSS) manager to oversee DSS activities.[Footnote 19] For a
detailed description of all network office staff positions and their
responsibilities for the network from fiscal years 1997 to 2002, see
appendix III.
Agency Comments:
In commenting on a draft of this report, VA agreed with our findings.
VA provided technical comments which we incorporated, as appropriate.
VA's written comments are in appendix IV.
As agreed with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 30 days
after its issue date. We will then send copies of this report to the
Secretary of Veterans Affairs, interested congressional committees, and
other parties. We also 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. If you or your staff have any
questions about this report, please call me at (202) 512-7101. Another
contact and key contributors are listed in appendix V.
Signed by:
Cynthia A. Bascetta,
Director, Health Care--Veterans' Health and Benefits Issues:
[End of section]
Appendix I: Objectives, Scope, and Methodology:
We reviewed Network 9 (Nashville) allocations to its medical centers
for fiscal year 2002 to determine: (1) the amount of resources medical
centers in the network received and the source of those resources, (2)
the basis on which medical centers in the network received these
resources, and (3) the extent to which network office expenditures were
greater than in fiscal year 1997 and the primary reasons accounting for
any increase. To place this information in context, we supplemented our
findings for fiscal year 2002, the most recent year for which complete
data were available at the time of our analysis, with information for
fiscal years 1997 through 2003. We limited our review to how resources
were allocated to medical centers in Network 9 (Nashville) and did not
analyze how they spent their allocations to deliver health care.
The Amount of Resources Medical Centers in Network 9 (Nashville)
Received and the Source of Those Resources:
To determine the amount of resources medical centers in Network 9
(Nashville) received in fiscal year 2002 and the source of those
resources we obtained financial data from the Office of the Chief
Financial Officer within the Veterans Health Administration and from
the Network 9 (Nashville) office. We categorized transactions in
financial reports, referred to as medical center allotment reports,
into the source of the resources: (1) Network 9 (Nashville), (2) VA
headquarters, and (3) resources from collections. We identified
transactions and summed the amount provided from each of the sources
based on analysis of the medical centers' allotment reports and
interviews with VA headquarters and network officials. As part of
resources allocated by the network, we also included the amount each
medical center received in fiscal year 2002 from the network's share of
a supplemental appropriation that VA received, and the resources
allocated for each medical center's costs for Consolidated Mail
Outpatient Pharmacy (CMOP) mail prescription services to veterans. In
fiscal year 2002, medical centers in Network 9 (Nashville) had
additional resources that they carried over from the prior fiscal year,
because they were authorized to use certain resources for longer than
12 months. We did not include $25 million the medical centers carried
over into fiscal year 2002, because the network had allocated these
resources in the prior year.
Information was available for resources allocated to all medical
centers in medical center allotment reports except for the Tennessee
Valley Healthcare System (TVHS) because TVHS's allotment report also
included resources allocated to the network office. To determine the
amount of resources allocated to TVHS in fiscal year 2002, therefore,
required additional analysis. Each network medical center was
identified in the VA allocation system with a unique three-digit
station number; however, TVHS and the network office shared the same
station number, and as such, the VA allocation system combined their
allotment data. To separate the TVHS and network office transactions,
we obtained the fiscal year 2002 network office financial transfer
report from TVHS. We separated each transaction on the combined
network/TVHS allotment report, which allowed us to construct an
allotment report for TVHS. We also obtained an internal allotment
ledger from TVHS and network officials that documented fund transfers
between the two, which were transacted outside the VA allotment system.
Using our TVHS allotment report and the TVHS/network internal allotment
ledger, we determined the amounts TVHS received through each funding
source by applying similar calculations as with the other medical
centers. This information was not available for TVHS's Nashville and
Murfreesboro locations after fiscal year 2000. However, information on
staffing resources at these two locations was available after that
year. See appendix II for our analysis of staffing information at the
two locations.
We estimated the percent of total medical center resources received
from Network 9 (Nashville) for fiscal years 1997 through 2001 and 2003
to supplement our findings for fiscal year 2002. To develop these
estimates, we used VA headquarters and network office data. To
determine the amount of resources the medical centers received from the
network we used VA information on the VERA allocations to Network 9
(Nashville) and network data on network office expenditures for these
fiscal years. To estimate the total amount of resources the medical
centers received through VA direct allocations in fiscal years 1997
through 2001 and in fiscal year 2003, we assumed it was the same
percentage as in fiscal year 2002 when medical centers in the network
received 3 percent of all funds VA headquarters allocated directly to
all VA medical centers nationwide. To determine the amount that medical
centers received through revenue collections in these years we relied
on VA data.
The Basis on Which Medical Centers in Network 9 (Nashville) Received
These Resources:
To obtain information on the basis on which the medical centers
received resources, we interviewed network officials including the
director, the chief financial officer, and TVHS officials. In addition,
we obtained and analyzed documents that described the network's
allocation methodology and relied on our prior work on VERA.[Footnote
20] To determine the basis on which VA headquarters allocated resources
directly to medical centers in the network, we interviewed officials in
the Office of the Chief Financial Officer within the Veterans Health
Administration. To determine how insurance collections and copayments
as well as other resources were incorporated in allocations, we
interviewed network officials, including the director of the Mid South
Customer Accounts Center (MCAC). Based on our analysis of information
we obtained from the network and VA headquarters, first we calculated
the percentage of resources allocated on the basis of fixed-capitation
amounts for patient workload and case mix in fiscal year 2002. We then
subtracted this amount from the total resources medical centers
received in fiscal year 2002 to determine the amount they received
based on other factors.
We estimated the percent of total resources received by all medical
centers combined based on fixed-capitation amounts for patient workload
and case mix for fiscal years 1997 through 2001 and 2003. To determine
the total amount of resources allocated to the medical centers by the
network based on fixed-capitation amounts, we used VA headquarters data
on the amount of VERA allocations to Network 9 (Nashville) each year
during this period. We then subtracted out expenditures made by the
network office from data provided by the network. From this total, we
subtracted out resources for allocations made to medical centers that
were not based on patient workload and case mix. We obtained data on
these allocations from VA headquarters, except allocations from the
network reserve fund. We estimated network reserve funds for fiscal
years 1997 through 2001 and 2003 by making the assumption that these
funds represented 4 percent of all resources allocated to the network
by VERA as in fiscal year 2002. To estimate the total resources medical
centers in the network received directly from VA headquarters during
this period we assumed it was the same percentage as in fiscal year
2002, when medical centers in the network received 3 percent of all
funds VA headquarters allocated directly to all VA medical centers
nationwide. We estimated the portion of these direct VA allocations to
medical centers in the network that was based on fixed-capitation
amounts for patient workload and case mix by assuming that during this
period the portion was the same as in fiscal year 2002, when such
resources amounted to 20 percent of VA headquarters' direct allocations
to the network. To determine the amount of resources collected for each
medical center in the network during this period, we used information
provided by the network and VA headquarters.
The Extent to Which Network 9 (Nashville) Office Expenditures Were
Greater Than in Fiscal Year 1997 and the Primary Reasons Accounting for
Any Increase:
To determine the extent to which network office expenditures were
greater in fiscal year 2002 than in fiscal year 1997 and the primary
reasons accounting for any increase, we analyzed reports on network
office expenditures. Specifically, we analyzed expenditures made by the
network office for fiscal year 2002 that were set aside from resources
that the medical centers received. We also reviewed network office
expenditures for information and technology, staffing, and other
functions for fiscal years 1997 through 2002. We interviewed network
officials to obtain the number of staff and their job titles and
responsibilities from fiscal years 1997 through 2002. We interviewed
the MCAC manager regarding the number of collections staff since fiscal
year 1998, when the MCAC was created. We also contacted officials at VA
headquarters to verify which staff positions were mandated by
headquarters. As part of this analysis, we categorized staff into staff
positions at MCAC and other network office staff positions, which
included positions mandated by VA headquarters for all VA networks and
those positions that Network 9 (Nashville) management established to
improve operations. We included positions at the MCAC as network office
positions because their salaries were paid from the same account as
other network office staff and they were supervised by an official who
reported to the network director.
Overall Data Verification and Methodology:
Throughout our review we examined the reliability of VA data and our
use of those data. We discussed these data with VA headquarters and
network officials to validate their accuracy. In addition, we discussed
our methodology with VA headquarters and Network 9 (Nashville) staff
who agreed that our approach and our assumptions were reasonable.
Furthermore, we tested the consistency of VA allocation data by
systematically comparing various types of data we obtained from several
VA sources. For example, we verified the amount and source of
transactions on the medical center allotment reports through interviews
with network and VA headquarters officials and by matching these
transactions with other financial reports obtained from VA. To better
understand all of these issues, we conducted a site visit to interview
officials at the network office located in Nashville and at the TVHS
locations in Nashville and Murfreesboro, Tennessee. We performed our
review from March 2003 through April 2004 in accordance with generally
accepted government auditing standards.
[End of section]
Appendix II: Staffing Resources Available at the Tennessee Valley
Healthcare System's Nashville and Murfreesboro Locations:
VA combined the Nashville and Murfreesboro medical centers to create a
single integrated medical center--the Tennessee Valley Healthcare
System (TVHS)--to improve veterans' health care and gain efficiencies.
In fiscal year 2000, the TVHS integration was announced and the first
TVHS director was hired. Separate financial resource information was
available for the Nashville and Murfreesboro locations before fiscal
year 2001. The accounting systems of the two locations were merged in
fiscal year 2001 and since then, information has not been available on
the financial resources allocated separately to the Nashville and
Murfreesboro locations. However, information on staffing at each
location was available for fiscal year 2002 and staff salaries and
benefits comprised over half of TVHS's budget in that year. Overall
staffing at each location declined since the integration, but trends
varied by type of staff, such as administrative and medical center
support staff and patient care staff. From fiscal year 2000 to fiscal
year 2002, the TVHS patient workload increased while patient care staff
remained about constant. Also, 125 other VA staff worked at the
Murfreesboro location in fiscal year 2002, in addition to the staff at
TVHS.[Footnote 21]
Information Not Available on Financial Resources Allocated Separately
to Nashville and Murfreesboro After Fiscal Year 2000:
Information was not available on financial resources allocated
separately to Nashville and Murfreesboro after fiscal year 2000.
Beginning in fiscal year 2001, Network 9 (Nashville) did not allocate
resources to Murfreesboro and Nashville separately because they were
combined as a single medical center, TVHS. Moreover, TVHS did not
allocate resources to each location. Instead, TVHS allocated resources
to the programs it operated across the two locations. As a result, the
accounting systems did not reflect allocations by location.
Staffing Declined at the Nashville and Murfreesboro Locations from
Fiscal Year 2000 to Fiscal Year 2002:
Overall, the number of staff declined at Nashville and Murfreesboro
from fiscal year 2000 to fiscal year 2002. However, the amount of
change varied by the type of staff. The number of staff at Nashville
declined by 49, or about 4 percent, from fiscal year 2000 to fiscal
year 2002. At Murfreesboro, the number of staff declined by 77, or
about 7 percent, from fiscal year 2000 to fiscal year 2002. (See fig.
3.):
Figure 3: Number of Staff at Nashville and Murfreesboro Locations,
Fiscal Year 2000 and Fiscal Year 2002:
[See PDF for image]
Note: Staff refers to full time equivalent employees (FTEE). Numbers
are rounded to the nearest FTEE.
[End of figure]
Staffing trends varied by type of staff at both locations.
Administrative and medical center support staff combined declined at
both locations while patient care staff remained about constant.
Administrative and medical center support staff include administrative,
clerical, and wage rate staff who do not provide patient care-related
work, such as secretaries and maintenance staff. At Nashville, the
number of administrative and medical center support staff combined
declined by 52, or 11 percent, from fiscal year 2000 to fiscal year
2002. At Murfreesboro, the number of administrative and support staff
combined declined by 65, or 14 percent, from fiscal year 2000 to fiscal
year 2002. (See fig. 4.):
Figure 4: Number of Administrative and Medical Center Support Staff at
Nashville and Murfreesboro Locations, Fiscal Year 2000 and Fiscal Year
2002:
[See PDF for image]
Note: Staff refers to full time equivalent employees (FTEE). Numbers
are rounded to the nearest FTEE.
[End of figure]
The largest decreases in administrative and medical center support
staff are shown in table 6. The largest declines were in administrative
and clerical staff. Smaller declines occurred among wage rate employees
who are medical center support staff.
Table 6: Largest Administrative and Medical Center Support Staff
Decreases at Nashville and Murfreesboro, Fiscal Year 2000 to Fiscal
Year 2002:
Location: Nashville;
Administrative and clerical: -45;
Wage rate[A]: -9.
Location: Murfreesboro;
Administrative and clerical: -56;
Wage rate[A]: -9.
Source: GAO analysis of VA data.
Note: Table excludes changes in the number of administrative and
medical center support staff of 1 or 2 positions. Staff refers to full
time equivalent employees (FTEE).
[A] Wage rate employees, such as maintenance staff, are paid at an
hourly rate.
[End of table]
There was very little change in patient care staff at both Nashville
and Murfreesboro between fiscal year 2000 and fiscal year 2002. Patient
care staff includes those who provide direct hands-on care to patients,
such as doctors and nurses, as well as those staff who provide indirect
care, such as pharmacists and laboratory technicians. The number of
patient care staff at Nashville increased less than 0.5 percent from
fiscal year 2000 to fiscal year 2002. The number of patient care staff
at Murfreesboro decreased by almost 2 percent during the same time
period. (See fig. 5.):
Figure 5: Number of Patient Care Staff at Nashville and Murfreesboro
Locations, Fiscal Year 2000 and Fiscal Year 2002:
[See PDF for image]
Note: Staff refers to full time equivalent employees (FTEE). Numbers
are rounded to the nearest FTEE.
[End of figure]
The largest changes in patient care staff from fiscal year 2000 to
fiscal year 2002 can be seen in table 7. The biggest increases were in
nursing staff and the biggest declines were in nursing aides and
assistants.
Table 7: Largest Changes in Patient Care Staff at Nashville and
Murfreesboro Locations, Fiscal Year 2000 to Fiscal Year 2002:
Location: Nashville;
Increases:
9 nurses (practical and licensed vocational); 6 part-time physicians; 5
nurse practitioners;
Decreases:
3 nursing aides/assistants; 10 other health technicians/aides/
therapists.
Location: Murfreesboro;
Increases:
13 nurses (registered);
Decreases:
18 nursing aides/assistants; 3 other health technicians/aides/
therapists; 3 social workers.
Source: GAO analysis of VA data.
Note: Table excludes changes in the number of administrative and
medical center support staff of 1 or 2 positions. Staff refers to full
time equivalent employees (FTEE).
[End of table]
Number of TVHS Patients Increased While Patient Care Staff Remained
About Constant:
The number of TVHS patients increased while the number of patient care
staff remained about constant from fiscal year 2000 to fiscal year
2002. The number of patients increased at TVHS from fiscal year 2000 to
fiscal year 2002 by 7 percent. The number of patient care staff
decreased less than 1 percent during the same time period. (See table
8.):
Table 8: Tennessee Valley Healthcare System's Patients and Patient Care
Staff, Fiscal Year 2000 and Fiscal Year 2002:
Fiscal year: 2000;
Patients[A]: 57,080;
Patient care staff: 1,477.
Fiscal year: 2002;
Patients[A]: 61,120;
Patient care staff: 1,468.
Source: GAO analysis of VA data.
Note: Staff refers to full time equivalent employees (FTEE).
[A] The number of patients using health care services as counted by
unique or unduplicated social security numbers. Each patient is counted
one time, regardless of how many visits each patient makes.
[End of table]
125 Other TVHS Staff Worked at Murfreesboro Location in Fiscal Year
2002:
In addition to TVHS staff, 125 other VA staff worked at Murfreesboro in
fiscal year 2002. These staff consisted of Network 9 (Nashville) staff,
staff working at the Consolidated Mail Outpatient Pharmacy (CMOP), the
Office of Resolution Management, and the Veterans Benefits
Administration. Table 9 shows the numbers and types of VA staff other
than those who work for TVHS who work at the Murfreesboro location.
Table 9: Other Staff Located at Murfreesboro, Fiscal Year 2002:
Description: Network 9 (Nashville) - includes 87 staff at the MCAC and
8 other network office staff whose offices are located at
Murfreesboro; Staff: 95.
Description: Consolidated Mail Outpatient Pharmacy (CMOP);
Staff: 28.
Description: Office of Resolution Management;
Staff: 2.
Description: Veterans Benefits Administration;
Staff:
