VA Health Care
Need for More Transparency in New Resource Allocation Process and for Written Policies on Monitoring Resources Gao ID: GAO-11-426 April 29, 2011Through fiscal year 2010, the Department of Veterans Affairs (VA) permitted its 21 health care networks to develop their own methodologies for allocating resources to medical centers. These methodologies varied considerably. Concerned that network methodologies were not fully transparent to VA headquarters, in fiscal year 2011, VA implemented a new single process for all networks to use to determine allocations to medical centers. VA headquarters retains overall responsibility for oversight of VA's resources, including ensuring networks do not spend more than the resources available. GAO was asked to review how VA networks allocate resources and how VA oversees these resources once they are allocated. In this report, GAO describes (1) VA's new process for networks to use in determining allocations to medical centers, and (2) how VA centrally monitors these resources. To do this work, GAO reviewed VA documents describing the new process and VA's monitoring efforts, in light of federal internal control standards, and interviewed VA officials..
VA's new resource allocation process uses a standardized model, but the transparency of networks' decisions for allocating resources to medical centers is limited. The new process involves three steps. First, VA headquarters proposes medical center allocation amounts to networks using a standardized resource allocation model. The model includes a standardized measure of workload that recognizes the varying costs and levels of resource intensity associated with providing care for each patient at each medical center. Second, network officials review the proposed amounts and have the flexibility to adjust them if they believe that certain medical centers' resource needs are not appropriately accounted for in the model. Third, networks report final medical center allocation amounts to VA headquarters and any adjustments made to the allocation amounts proposed by the model. VA headquarters did not ask networks to report reasons for each adjustment made to allocation amounts; networks reported reasons for some adjustments, but not for others. VA officials said that the new network resource allocation process was not intended to be used to question networks' decision making, but to increase the transparency of networks' allocation decisions to VA headquarters while maintaining network flexibility. However, absent rationales from networks on all adjustments made to medical center allocation amounts, transparency for decisions made through the allocation process is limited. Furthermore, understanding why networks make adjustments is key in determining if any modifications to the model are needed for subsequent years. VA officials told GAO that they intend to conduct annual assessments of the new resource allocation process, including a review of adjustments to the model, to identify areas for improvement. VA centrally monitors the resources networks have allocated to medical centers to ensure spending does not exceed allocations, but does not have written policies documenting these practices for monitoring resources. VA monitors resources through two primary practices--automated controls in its financial management system and regular reviews of network spending. Specifically, VA's financial management system electronically tracks the amount of resources that networks and medical centers have available--the resources allocated, less the resources already spent--and prevents medical centers from spending more than what they have available by rejecting spending requests in excess of available resources. In addition, each month VA headquarters officials compare each network's spending with what the network planned to spend and determine whether spending is on target, and whether any differences from the plan are significant. However, VA headquarters does not have written policies documenting the agency's practices for monitoring resources, which is not consistent with federal internal control standards. These standards state that internal controls should be documented, and all documentation should be properly managed, maintained, and readily available for examination. Without written policies, there is an increased risk of inconsistent monitoring of VA network and medical center resources. GAO recommends that VA (1) require networks to provide rationales for all adjustments made to allocations proposed by VA's resource allocation model, and (2) develop written policies to document practices for monitoring resources. VA concurred with these recommendations.
RecommendationsOur recommendations from this work are listed below with a Contact for more information. Status will change from "In process" to "Open," "Closed - implemented," or "Closed - not implemented" based on our follow up work.
Director: Randall B. Williamson Team: Government Accountability Office: Health Care Phone: (206) 287-4860GAO-11-426, VA Health Care: Need for More Transparency in New Resource Allocation Process and for Written Policies on Monitoring Resources
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United States Government Accountability Office:
GAO:
Report to Congressional Requesters:
April 2011:
VA Health Care:
Need for More Transparency in New Resource Allocation Process and for
Written Policies on Monitoring Resources:
GAO-11-426:
GAO Highlights:
Highlights of GAO-11-426, a report to congressional requesters.
Why GAO Did This Study:
Through fiscal year 2010, the Department of Veterans Affairs (VA)
permitted its 21 health care networks to develop their own
methodologies for allocating resources to medical centers. These
methodologies varied considerably. Concerned that network
methodologies were not fully transparent to VA headquarters, in fiscal
year 2011, VA implemented a new single process for all networks to use
to determine allocations to medical centers. VA headquarters retains
overall responsibility for oversight of VA‘s resources, including
ensuring networks do not spend more than the resources available.
GAO was asked to review how VA networks allocate resources and how VA
oversees these resources once they are allocated. In this report, GAO
describes (1) VA‘s new process for networks to use in determining
allocations to medical centers, and (2) how VA centrally monitors
these resources. To do this work, GAO reviewed VA documents describing
the new process and VA‘s monitoring efforts, in light of federal
internal control standards, and interviewed VA officials.
What GAO Found:
VA‘s new resource allocation process uses a standardized model, but
the transparency of networks‘ decisions for allocating resources to
medical centers is limited. The new process involves three steps.
First, VA headquarters proposes medical center allocation amounts to
networks using a standardized resource allocation model. The model
includes a standardized measure of workload that recognizes the
varying costs and levels of resource intensity associated with
providing care for each patient at each medical center. Second,
network officials review the proposed amounts and have the flexibility
to adjust them if they believe that certain medical centers‘ resource
needs are not appropriately accounted for in the model. Third,
networks report final medical center allocation amounts to VA
headquarters and any adjustments made to the allocation amounts
proposed by the model. VA headquarters did not ask networks to report
reasons for each adjustment made to allocation amounts; networks
reported reasons for some adjustments, but not for others. VA
officials said that the new network resource allocation process was
not intended to be used to question networks‘ decision making, but to
increase the transparency of networks‘ allocation decisions to VA
headquarters while maintaining network flexibility. However, absent
rationales from networks on all adjustments made to medical center
allocation amounts, transparency for decisions made through the
allocation process is limited. Furthermore, understanding why networks
make adjustments is key in determining if any modifications to the
model are needed for subsequent years. VA officials told GAO that they
intend to conduct annual assessments of the new resource allocation
process, including a review of adjustments to the model, to identify
areas for improvement.
VA centrally monitors the resources networks have allocated to medical
centers to ensure spending does not exceed allocations, but does not
have written policies documenting these practices for monitoring
resources. VA monitors resources through two primary practices-”
automated controls in its financial management system and regular
reviews of network spending. Specifically, VA‘s financial management
system electronically tracks the amount of resources that networks and
medical centers have available”-the resources allocated, less the
resources already spent-”and prevents medical centers from spending
more than what they have available by rejecting spending requests in
excess of available resources. In addition, each month VA headquarters
officials compare each network‘s spending with what the network
planned to spend and determine whether spending is on target, and
whether any differences from the plan are significant. However, VA
headquarters does not have written policies documenting the agency‘s
practices for monitoring resources, which is not consistent with
federal internal control standards. These standards state that
internal controls should be documented, and all documentation should
be properly managed, maintained, and readily available for
examination. Without written policies, there is an increased risk of
inconsistent monitoring of VA network and medical center resources.
What GAO Recommends:
GAO recommends that VA (1) require networks to provide rationales for
all adjustments made to allocations proposed by VA‘s resource
allocation model, and (2) develop written policies to document
practices for monitoring resources. VA concurred with these
recommendations.
View [hyperlink, http://www.gao.gov/products/GAO-11-426] or key
components. For more information, contact Randall B. Williamson at
(202) 512-7114 or williamsonr@gao.gov.
[End of section]
Contents:
Letter:
Background:
VA's New Allocation Process Uses a Standardized Model, but
Transparency of Networks' Allocation Decisions Is Limited:
VA Monitors Resources to Ensure Spending Does Not Exceed Allocations,
but Lacks Written Policies Documenting Practices for Monitoring
Resources:
Conclusions:
Recommendations for Executive Action:
Agency Comments:
Appendix I: Comments from the Department of Veterans Affairs:
Appendix II: GAO Contact and Staff Acknowledgments:
Figures:
Figure 1: Allocation of VA's Health Care Resources, Fiscal Year 2011:
Figure 2: VA's New Process for Networks to Use in Determining
Allocations to Medical Centers:
Figure 3: Percentage of Network Adjustments to VA's Proposed Medical
Center Allocation Amounts, Fiscal Year 2011:
Abbreviations:
VA: Department of Veterans Affairs:
VERA: Veterans Equitable Resource Allocation:
[End of section]
United States Government Accountability Office:
Washington, DC 20548:
April 29, 2011:
Congressional Requesters:
The Department of Veterans Affairs (VA) received appropriations of
about $48.2 billion for health care services for fiscal year 2011.
[Footnote 1] Each year, VA allocates most of the appropriations for
health care services to its 21 health care networks through a
national, formula-driven system, called the Veterans Equitable
Resource Allocation (VERA).[Footnote 2] The networks in turn allocate
resources received through VERA to their respective medical centers,
as part of their role in overseeing all medical centers within their
networks.
In fiscal year 2010, nearly 6 million patients received care through
153 VA medical centers across the 21 networks.[Footnote 3] Networks
vary in terms of veteran enrollment, geographic location, types of
services offered by their medical centers, and the number of their
medical centers designated as urban and rural. The decentralized
structure of the VA health care system was set up to allow networks to
respond to local health care needs, such as changing demographics of
the veteran population in their regions, and increasing demand for
ambulatory care.
Through fiscal year 2010, VA headquarters permitted networks to
develop their own methodologies for allocating resources to medical
centers, and these methodologies varied considerably among the 21
networks. For example, some networks' methodologies were based solely
on the previous year's allocations for its medical centers with an
adjustment for inflation, while some networks' methodologies
determined allocations based on the patient workload of their medical
centers. Concerned that network methodologies for allocating resources
to medical centers were not fully transparent to VA headquarters, VA
developed and implemented a new process in fiscal year 2011 for all
networks to use in determining their allocations to medical centers.
Although VA networks retain responsibility for resource allocation
decision making, VA headquarters retains overall responsibility for
oversight and management of VA's resources. For example, VA
headquarters is ultimately responsible for ensuring that networks and
medical centers do not spend more than the resources available to
them. You expressed interest in how VA networks allocate resources to
medical centers and how VA oversees these resources once they are
allocated. In this report, we describe (1) VA's new process for
networks to use in determining allocations to medical centers, and (2)
how VA centrally monitors resources networks have allocated to medical
centers.
To describe VA's new process for allocating resources from networks to
medical centers in fiscal year 2011, we reviewed VA documents
describing the process and interviewed VA officials from the Veterans
Health Administration's Office of Finance and Office of Operations and
Management about the process. In addition, we reviewed VA data
detailing the fiscal year 2011 allocations for each of VA's 21
networks to determine the effect of the new process on medical center
allocations. We assessed the reliability of the fiscal year 2011
allocation data by interviewing agency officials knowledgeable about
the data and the new process used to determine the allocations. We
also interviewed VA officials about the tests of reliability that they
conducted on the data. We determined that the data we used were
sufficiently reliable for the purposes of this report. In addition, we
reviewed information on the methodologies that networks used for
fiscal years 2004 through 2010. We also reviewed VA guidance regarding
the allocation of resources from networks to medical centers.
To describe how VA centrally monitors resources networks have
allocated to medical centers, we reviewed documents from VA about its
monitoring efforts. Specifically, we reviewed VA's procedures related
to financial management and information tracked through VA's financial
systems, in light of federal internal control standards, as documented
in GAO's Standards for Internal Control in the Federal Government.
[Footnote 4] In addition, we interviewed officials from the Office of
Finance and Office of Operations and Management about VA's monitoring
efforts and financial management systems.
For both objectives, we also interviewed officials from VA networks
and medical centers. We conducted in-person interviews with officials
from four VA networks--Network 5 (Baltimore), Network 8 (Bay Pines),
Network 10 (Cincinnati), and Network 20 (Portland)--and interviews
with officials from at least one medical center from each of these
networks to understand VA networks' implementation of the new
allocation process, the variety of methodologies used in prior years,
and the effect of VA headquarters' monitoring on networks. We
conducted telephone interviews with officials from two additional
networks--Network 16 (Jackson) and Network 23 (Minneapolis)--to
understand their implementation of the new allocation process and the
effect of VA headquarters' monitoring. We selected this judgmental
sample of networks and medical centers to obtain a diverse mix of
perspectives, based on variation in several factors, including
geographic location and number of veterans enrolled, and to obtain
perspectives from officials representing medical centers in both urban
and rural areas.
We conducted this performance audit from April 2010 through April 2011
in accordance with generally accepted government auditing standards.
Those standards require that we plan and perform the audit to obtain
sufficient, appropriate evidence to provide a reasonable basis for our
findings and conclusions based on our audit objectives. We believe
that the evidence obtained provides a reasonable basis for our
findings and conclusions based on our audit objectives.
Background:
Appropriations for VA's health care services are made through three
separate appropriations accounts: Medical Services, Medical Support
and Compliance, and Medical Facilities.[Footnote 5] VA allocates
resources from these appropriations to its networks and medical
centers for general purposes and specific purposes at the beginning of
each fiscal year.[Footnote 6] Seventy-eight percent, or approximately
$37.8 billion, of the nearly $48.2 billion in VA's advance
appropriations for health care services for fiscal year 2011 were
allocated to VA's 21 networks for general purpose patient care. VA
also allocates resources to networks and medical centers for specific
purposes, such as prosthetics, transplant care, and preventive and
primary care initiatives. For fiscal year 2011, 22 percent, or
approximately $10.4 billion, of VA's advance appropriations for health
care services were provided to networks and medical centers for
specific purposes. Of its total health care resources, VA sets aside
approximately $500 million at the beginning of each fiscal year to
allocate to networks and medical centers as needed throughout the year
to respond to contingencies and emergencies.
Allocation of General Purpose Resources from VA Headquarters to
Networks:
VA uses the VERA system to allocate general purpose resources to its
networks each fiscal year. Introduced in fiscal year 1997, VERA uses a
national formula-driven approach that considers the number and type of
veterans served (patient workload), the complexity of care provided
(case-mix), and certain geographic factors, such as local labor costs,
in determining how much each VA network should receive. VERA
determines how much each network will receive according to each
network's activities and needs in the following areas: patient care,
equipment, nonrecurring maintenance, education support, and research
support. We have previously reported that VERA is a reasonably sound
methodology for VA to allocate resources to networks, although we have
made recommendations to improve the methodology, some of which VA has
incorporated.[Footnote 7] VA assesses its VERA model annually to
determine any needed changes to the model, which may include
incorporating new components.
Allocation of General Purpose Resources from Networks to Medical
Centers:
Once VA applies VERA to determine how much networks will receive,
networks determine how these resources will be allocated to their
individual medical centers. (See figure 1.) Networks do not provide
resources directly to medical centers; rather VA headquarters retains
responsibility for providing these resources based on network
allocation decisions.
Figure 1: Allocation of VA's Health Care Resources, Fiscal Year 2011:
[Refer to PDF for image: illustration]
Congress:
Health care appropriations: $48.2 billion[A].
to:
VA:
General purpose resources ($37.8 billion): 78% of appropriations:
VERA[B]; to:
Networks: Network allocation; to:
Medical Centers.
Specific purpose resources ($10.4 billion): 22% of appropriations:
to:
Networks:
Medical Centers.
Source: GAO, Art Explosion (medical centers image).
[A] Appropriations for VA health care services are made through three
separate appropriations accounts: Medical Services, Medical Support
and Compliance, and Medical Facilities.
[B] The Veterans Equitable Resource Allocation (VERA) system uses a
national formula-driven approach that considers the number and type of
veterans served (patient workload), the complexity of care provided
(case-mix), and certain geographic factors, such as local labor costs,
in determining how much each VA network should receive.
[End of figure]
Prior to fiscal year 2011, VA permitted networks to develop and use
their own methodologies for determining how to allocate general
purpose resources to medical centers. VA headquarters provided general
guidance to networks on the principles they should use when
determining their allocation methodologies. For fiscal year 2010, for
example, VA's guidance stated that networks were expected to allocate
resources to medical centers in a manner that must, among other
things, be readily understandable and result in predictable
allocations, and support the goal of improving equitable access to
care and ensure appropriate allocation of resources to facilities to
meet that goal.[Footnote 8]
Given the relative autonomy that the 21 networks have under VA's
decentralized health care system, they developed varying allocation
methodologies. For example, networks varied in the factors they
considered in determining medical center allocations. These factors
included prior year funding, patient workload, performance, and
facility square footage. Nonetheless, VA headquarters required
networks to report descriptions of their allocation methodologies,
including a description of how the methodology met VA's guiding
principles for network allocation. Each network was also required to
report the total amount of resources it retained at the network level--
the portion of network general purpose resources set aside before
allocations were made to medical centers at the beginning of the
fiscal year--such as resources for network operations, network
initiatives, and emergencies.
VA's New Allocation Process Uses a Standardized Model, but
Transparency of Networks' Allocation Decisions Is Limited:
In fiscal year 2011, VA implemented a new resource allocation process
that includes a standardized model for networks to use in allocating
general purpose resources to their medical centers. The model was
designed to provide consistency in the allocation process across
networks and still allow networks the flexibility to make adjustments
to medical center allocations. However, VA headquarters did not
require networks to report reasons for all of the adjustments networks
made to their medical centers' allocations, which limits the
transparency of networks' allocation decisions.
The new process involves three steps--first, VA headquarters proposes
medical center allocation amounts to networks using a standardized
resource allocation model;[Footnote 9] second, network officials
review these amounts and can adjust them based on the needs of their
medical centers that are not reflected in the initial allocation
amounts proposed by headquarters; and third, after making any
adjustments, networks report final medical center allocation amounts
to VA headquarters in a consistent format. (See figure 2.)
Figure 2: VA's New Process for Networks to Use in Determining
Allocations to Medical Centers:
[Refer to PDF for image: illustration]
Step 1: VA proposes medical center allocation amounts.
Step 2: Networks review and can adjust proposed allocation amounts.
Step 3: Networks report final medical center allocation amounts to VA
headquarters.
Source: GAO.
[End of figure]
Step One: VA Proposes Allocation Amounts. VA headquarters provides
networks with a spreadsheet that includes a standardized model that
proposes allocation amounts for each medical center. The model
includes four main components covering different aspects of the
resources needed for network and medical center operations, which
combined determine the amount of resources allocated to each medical
center.[Footnote 10]
* Resources Retained for Network Initiatives. The new model requires
networks to report the amounts and purposes of all resources they do
not allocate to medical centers at the beginning of the fiscal year.
Networks retain and manage resources for network-level initiatives
that are allocated to medical centers throughout the fiscal year, such
as to offset start-up costs for new medical centers or clinics or for
the network's consolidation of services shared across medical centers
including contracting services, accounting, and laundry. Additionally,
networks retain resources for the administrative costs associated with
operating the network, such as salaries for network employees.
Historically, VA had asked networks to identify the amount of
resources retained at the network level, but they did not ask networks
to report the purposes of these resources.
* Resources Retained for the Network's Emergency Reserve. Networks may
retain resources in an emergency reserve to respond to medical center
emergencies throughout the year. The new model limits the amount of
resources retained by each network to respond to medical center
emergencies to 1.5 percent of the total allocation amount. Networks
may reduce the amount retained for emergencies, but they cannot exceed
the 1.5 percent limit. Networks have used these resources to help
cover unanticipated medical center costs, such as those associated
with natural disasters, which required resources beyond what a medical
center had been initially allocated. In our review of the fiscal year
2011 allocation models, the 21 networks' reserve amounts ranged from
about 0.1 percent to the 1.5 percent limit, with an average reserve
amount of 1.2 percent. While networks were asked in prior years to
report their emergency reserve amounts, VA had not required that this
amount be reported separately from other resources retained at the
network level, making it challenging in the past for VA headquarters
to know how much the network retained in reserve specifically for
emergencies. In fiscal year 2010, 1 network did not put any resources
in reserve, and the remaining networks' reserves ranged from 0.2
percent to 3.7 percent of their total allocation. Furthermore, VA had
not established a cap on emergency reserve amounts prior to fiscal
year 2011.
* Resources for Research Support, Education, and High Cost Patients.
Under the new model, medical centers' resources for research support,
education, and high cost patients--patients whose treatment costs
exceed a VA established threshold[Footnote 11]--are determined solely
by VERA. VERA calculates these amounts based on specific medical
center characteristics. For example, the amount of resources allocated
to medical centers for education is based on the number of residents
at each medical center in the current academic year. Although these
amounts were also calculated using VERA in prior years, networks had
the ability to adjust them. Under the new model, networks are no
longer involved in determining how to allocate these resources, which
allows VA headquarters to ensure that these resources are allocated
consistently across all networks.
* Resources for Patient Care Determined by a Standardized Measure of
Workload. The new model uses a standardized measure of patient
workload--which VA refers to as patient weighted work.[Footnote 12]
Prior to fiscal year 2011, each network was allowed to use its own
preferred workload measure, and the measures used ranged from a simple
count of individual patients to a more complex statistical regression
model. In fiscal year 2010, 9 of the 21 networks used a workload
measure similar to patient weighted work. VA officials told us they
chose patient weighted work because it establishes an equitable
measure of workload among medical centers that vary significantly in
their geographic location, and types and costs of services provided.
According to VA officials, the patient weighted work measure lessens
the impact of cost differences between medical centers, by recognizing
the varying costs and levels of resource intensity associated with
providing care for each patient at each VA medical center. For
example, patient weighted work would result in more resources being
allocated to a medical center that provides more complex care, such as
open heart surgery, than a workload measure based solely on a count of
each individual patient, which would not account for the additional
costs associated with more complex care. Furthermore, officials told
us that the patient weighted work measure is easily understandable by
networks, medical centers, and stakeholders, such as veterans or VA
employees.
Step Two: Networks Review and Can Adjust Proposed Medical Center
Allocation Amounts. After receiving the spreadsheet from headquarters,
network officials determine the allocation amounts for network
initiatives and reserves, which affect the total amount of resources
available for allocation to medical centers. Network officials then
review and can make adjustments to the model's proposed allocation
amounts for medical centers, as needed.[Footnote 13] According to VA
headquarters officials, these adjustments allow each network the
flexibility to change the allocation amounts if they believe that
certain medical centers' resource needs are not appropriately
accounted for in the model.
We reviewed the 21 networks' allocation spreadsheets, including the
adjustments networks made to the medical center allocation amounts
proposed by the new model. In our review, we found that, for fiscal
year 2011, of the 140 medical center allocations,[Footnote 14] 122
were adjusted from amounts proposed by the model--77 medical center
allocations received an upward adjustment and 45 received a downward
adjustment.[Footnote 15] The remaining 18 medical center allocations
were not adjusted. (See figure 3 for networks' percentage adjustments
to proposed allocations for medical centers.)
Figure 3: Percentage of Network Adjustments to VA's Proposed Medical
Center Allocation Amounts, Fiscal Year 2011:
[Refer to PDF for image: vertical bar graph]
Percentage adjustment: -13.99 to -10.0;
Number of medical center allocations: 2.
Percentage adjustment: -9.99 to -6.0;
Number of medical center allocations: 4.
Percentage adjustment: -5.99 to -2.0;
Number of medical center allocations: 19.
Percentage adjustment: -1.99 to 1.99;
Number of medical center allocations: 60;
Within this range, 18 of the 60 medical center allocations were not
adjusted (0.0), 20 received downward adjustments, and 22 received
upward adjustments from amounts proposed in the model. The adjustments
ranged from -13.9 to 34.2 percent. The average adjustment was 1.8
percent.
Percentage adjustment: 2.0 to 5.99;
Number of medical center allocations: 33.
Percentage adjustment: 6.0 to 9.99;
Number of medical center allocations: 14.
Percentage adjustment: 10.0 to 13.99;
Number of medical center allocations: 3.
Percentage adjustment: 14.0 to 17.99;
Number of medical center allocations: 1.
Percentage adjustment: 18.0 to 21.99;
Number of medical center allocations: 1.
Percentage adjustment: 22.0 to 25.99;
Number of medical center allocations: 1.
Percentage adjustment: 26.0 to 29.99;
Number of medical center allocations: 1.
Percentage adjustment: 30.0 to 33.99;
Number of medical center allocations: 0.
Percentage adjustment: 34.0 to 37.99;
Number of medical center allocations: 1.
Source: GAO analysis of VA data.
Note: Because some medical centers in VA are combined, they receive a
single allocation. Therefore, the 140 medical center allocations
represented in this figure is less than the total number of medical
centers--153--that VA operated in fiscal year 2011.
[End of figure]
Officials from the six networks we interviewed told us that they
adjusted the allocation amounts when they anticipated that one or more
of their medical centers' resource needs would not be met by the
amounts proposed in the model. Without these adjustments, network
officials believed that some medical centers may not have been able to
maintain the level of medical services for veterans in their service
areas as they did previously. For example,
* Officials from one network told us they made adjustments that
resulted in redistributing resources from other medical centers in the
network to a rural medical center because the new model's measure of
workload would not have appropriately determined the resources that
the rural medical center needed to operate. According to network
officials, this medical center has several community-based outpatient
clinics that have not been cost effective to operate but nonetheless
provide critical access to care for rural veterans. Therefore, the
network made adjustments to the amounts proposed in the model to
ensure the medical center had sufficient resources to continue to
provide access to veterans in these areas.
* Officials from another network told us that the fiscal year 2011
amount proposed in the model for one of its medical centers was 11
percent lower than the medical center's fiscal year 2010 allocation,
and for another medical center, the fiscal year 2011 allocation amount
was 18 percent higher than the amount in fiscal year 2010. Network
officials told us that the former medical center would not be able to
absorb such a cut in resources without negatively impacting services
offered, and the latter medical center would not be able to spend the
additional resources it would have received under the model within the
fiscal year. Network officials told us that the model's proposed
decreases to allocation amounts for some of its medical centers may
have been due to inefficiencies in medical center operations, but
adjustments were necessary to ensure these medical centers got the
resources they needed to continue to operate. Network officials stated
that they will likely continue to make adjustments in the future, but
they plan to work with their medical centers to increase their
efficiency and ensure that their resource needs are more in line with
what the model provides.
* More generally, VA headquarters officials stated that some medical
centers have resource needs that set them up to be recurring outliers
to the model. For example, officials said that the outpatient clinic
in Anchorage, Alaska, has significantly higher costs of care and
therefore its resource needs likely will continue to exceed the
amounts generated by the model.[Footnote 16] VA headquarters officials
explained that the Anchorage clinic and other outlier medical centers
exist to ensure equitable access to care for veterans in all areas and
that VA therefore expects that some will incur unavoidable high costs.
[Footnote 17] Network officials described certain factors contributing
to particularly high costs at this clinic, including a heavy reliance
on expensive community-based care and relatively high transportation
costs associated with transporting patients from their homes to the
medical center or between medical centers for more complex care or
available services.
VA headquarters officials told us they expected networks to make
adjustments to the amounts proposed in the model for fiscal year 2011,
but they also expected networks' allocations to medical centers to
come closer to the amounts provided by the model over time. If certain
medical centers continue to require significant adjustments to the
amounts proposed in the model, this could be an indicator that the
medical centers warrant further review or attention. VA officials said
adjustment information could be used together with information from
VA's managerial accounting systems (designed to help identify areas
for management improvement or redesign) to identify areas for
improving the medical centers' efficiency.
Step Three: Networks Report Final Allocation Amounts to VA
Headquarters. Lastly, networks report to VA headquarters their final
medical center allocation amounts, including the amounts and purposes
of resources retained for network initiatives and the amount retained
for network emergency reserves, using the original allocation
spreadsheet that VA provided. Additionally, networks report any
adjustments to the medical center allocation amounts proposed by the
model. VA headquarters officials told us that the spreadsheets
submitted by the networks provide headquarters with consistent
information on all 21 networks' medical center allocations to more
easily track network allocation decisions. However, VA did not collect
information on the reasons for each adjustment networks made to
proposed allocation amounts through the spreadsheet. Although VA
provided networks a list of acceptable rationales for adjustments for
fiscal year 2011, VA did not require networks to report these
rationales for their adjustments in the spreadsheet.[Footnote 18] As
such, networks may have reported rationales for some adjustments, but
networks also made adjustments for which they may not have reported a
rationale. For example, one network reported detailed rationales for
all adjustments to its medical center allocations (ranging from -13
percent to 34 percent), while another network did not report
rationales for any of the adjustments it made to its medical center
allocations (ranging from -14 percent to 17 percent). Officials said
that the new network resource allocation process was not intended to
be used to question networks' decision making, but rather to increase
the transparency of networks' allocation decisions to VA headquarters
while maintaining network flexibility for allocation decisions.
However, absent rationales from networks for each adjustment made to
medical center allocation amounts, transparency for decisions made
through the new allocation process is limited.
VA officials told us they have begun to review the fiscal year 2011
allocation process and intend to conduct annual assessments of the
network allocation process. VA officials said that this review will
help them identify potential ways to improve the model for fiscal year
2012. VA officials told us they plan to complete their assessment by
the end of fiscal year 2011. Additionally, VA officials told us that
they plan to conduct an assessment of the network allocation process
each subsequent year, including a review of adjustments to the model,
to identify areas for improvement. VA officials stated that
understanding these adjustments is key to identifying potential areas
where the model could be modified and to respond to changing health
care needs.
VA Monitors Resources to Ensure Spending Does Not Exceed Allocations,
but Lacks Written Policies Documenting Practices for Monitoring
Resources:
VA monitors the general purpose resources networks have allocated to
medical centers to ensure spending does not exceed allocations, but
does not have written policies documenting these practices for
monitoring resources. VA's lack of written policies documenting its
monitoring is inconsistent with internal control standards applicable
to all federal agencies and could put the agency's stewardship of
federal dollars at risk.
VA centrally monitors the resources networks have allocated to medical
centers through two primary practices--(1) automated controls in its
financial management system, and (2) regular reviews of network
spending. These practices help VA headquarters officials to manage VA
resources to prevent network and medical center spending from
exceeding their allocations and help to ensure that the agency does
not violate the Antideficiency Act.[Footnote 19] By monitoring network
and medical center resources throughout the fiscal year, VA is able to
recognize additional or changing needs that might not have been
apparent when resources were initially allocated, and to work with
networks to realign resources as appropriate, within the limits of the
respective appropriations--Medical Services, Medical Support and
Compliance, and Medical Facilities.
Specifically, VA headquarters officials told us that the agency
maintains a financial management system that has automated controls in
place that prevent networks and medical centers from spending more
than their available resources. VA's financial management system
electronically tracks the amount of resources that networks and
medical centers have available--that is, the resources they were
allocated, less the resources already spent.[Footnote 20] When medical
centers want to spend some of their resources, they enter requests for
the obligation of funds into the system.[Footnote 21] If the amount
entered exceeds what is available to them, the request is rejected by
the system, and cannot be processed.
VA headquarters officials also told us they monitor resources by
regularly reviewing network spending--which includes the total
spending of all medical centers within a network. On a monthly basis,
they monitor resources by comparing each network's spending with its
operating plan, which shows the network's plan for its medical
centers' spending of resources for each month of the fiscal year,
summarized at the network level and broken down by spending category--
such as travel, personnel, and equipment costs--and appropriations
account. Each network submits an operating plan to VA headquarters at
the beginning of the fiscal year and revises the plan throughout the
year as needed. VA headquarters officials told us they determine
whether spending is on target with the operating plan or not, and
whether any differences from the plan are significant.[Footnote 22] VA
headquarters officials told us that if they find differences that are
significant, they contact network officials to discuss the
differences, such as if the network appears to be behind on its
spending in a particular category, based on what the network planned
to spend in its operating plan. For example, a network may mention
that one of its medical centers has a large contract pending that will
be awarded later in the year. VA headquarters officials told us that
they do not have specific criteria for which differences between what
has been spent and what the network had planned to have spent would
warrant further investigation; rather, they rely on their experience
and judgment to know when a network may be in danger financially,
based on their review of the network's spending and their regular
communication with network officials. Officials also told us that they
have biweekly teleconferences with network financial officers and meet
with them in person on a quarterly basis to discuss any financial
concerns.
However, VA does not have written policies documenting the agency's
practices for monitoring the resources networks allocate to medical
centers. For example, VA does not have a written policy documenting
that one of its primary practices for monitoring is the automated
controls in its financial management system. In addition, VA does not
have a written policy that states the overall purpose and specific
objectives of their monthly reviews of network spending compared with
each network's operating plan.
VA's lack of written policies related to its monitoring of network and
medical center resources is inconsistent with federal internal control
standards and could put the agency's stewardship of federal dollars at
risk. Internal control standards state that internal controls should
be documented and all documentation should be properly managed and
maintained, and readily available for examination.[Footnote 23] Such
policies are an integral part of a federal agency's stewardship of
government resources. Without written policies that clearly define
VA's objectives for monitoring resources and document existing
practices, there is an increased risk that these internal control
activities may not be performed, may be performed inconsistently, or
may not be continued when knowledgeable employees leave, which can
lead to unreliable monitoring of VA network and medical center
resources.
Conclusions:
Although networks make decisions about how resources are allocated to
medical centers, VA headquarters retains overall responsibility for
oversight and management of VA's resources, including the process
networks use to allocate resources. To its credit, VA has taken steps
to increase the transparency for how networks allocate resources to
medical centers, while maintaining network flexibility for allocation
decisions. However, to make network decisions more transparent to VA
headquarters, and to achieve its goal of having networks' allocations
to medical centers come closer to the amounts proposed by VA's
resource allocation model over time, VA headquarters must understand
the specific reasons for any adjustments that networks make to the
model. Understanding why networks made adjustments is key in
determining if any modifications to the model are needed for
subsequent years. Further, evaluations of the model are important to
determine the viability of the allocation model each year and serve as
a platform for making annual modifications to it, where warranted.
VA's plan to conduct annual assessments of the allocation process will
provide it the opportunity to identify and implement any modifications
to the model--as medical centers' resource needs change over time--to
ensure the process and its various components continue to be viable
each year.
In addition, VA's current practices for monitoring help to ensure that
network and medical center spending does not exceed allocations.
However, without written policies to document its objectives for
monitoring resources--including its existing practices--VA cannot
ensure that monitoring will be performed consistently and reliably.
For example, if current employees left the agency and new employees
were asked to take on these monitoring activities, VA would not have
policies to guide them. These new employees might be unable to perform
these activities, or might perform them in a manner inconsistent with
how the agency has performed them in the past, resulting in unreliable
monitoring. Such possibilities could place VA's stewardship of federal
dollars at risk. By documenting this information in a manner
consistent with federal internal control standards, VA would have
greater assurance that the practices developed by the current
leadership will be maintained during management changes over time.
Recommendations for Executive Action:
To increase the transparency of the new network allocation process,
and to ensure that internal control activities are performed and that
the resources networks allocate to medical centers are monitored
consistently and reliably, we recommend that the Secretary of Veterans
Affairs direct the Under Secretary for Health to take the following
two actions:
* require networks to provide rationales for all adjustments made to
the allocation amounts proposed by the model in VA's resource
allocation process; and:
* develop written policies, consistent with federal internal control
standards, to formalize existing practices for monitoring resources
networks have allocated to medical centers.
Agency Comments:
We provided a draft of this report to VA for comment. In its written
comments, reproduced in appendix I, VA generally agreed with our
conclusions, and concurred with our recommendations. VA stated that
beginning in fiscal year 2012 the agency will require networks to
provide rationales for all adjustments made to medical centers'
allocation amounts proposed by the new resource allocation model. VA
also stated that beginning in fiscal year 2012 it will provide written
guidance consistent with federal internal control standards to
formalize its existing practices for monitoring resources networks
allocate to medical centers.
We are sending copies of this report to the Secretary of Veterans
Affairs and interested congressional committees. The report also will
be available at no charge on GAO's Web site at [hyperlink,
http://www.gao.gov].
If you or your staffs have any questions about this report, please
contact me at (202) 512-7114 or williamsonr@gao.gov. Contact points
for our Offices of Congressional Relations and Public Affairs may be
found on the last page of this report. GAO staff members who made
major contributions to this report are listed in appendix II.
Signed by:
Randall B. Williamson:
Director, Health Care:
List of Requesters:
The Honorable Jeff Miller:
Chairman:
The Honorable Bob Filner:
Ranking Member:
Committee on Veterans' Affairs:
House of Representatives:
The Honorable Jerry McNerney:
Ranking Member:
Subcommittee on Disability Assistance and Memorial Affairs:
Committee on Veterans' Affairs:
House of Representatives:
The Honorable Michael Michaud:
Ranking Member:
Subcommittee on Health:
Committee on Veterans' Affairs:
House of Representatives:
The Honorable Joe Donnelly:
Ranking Member:
Subcommittee on Oversight and Investigations:
Committee on Veterans' Affairs:
House of Representatives:
The Honorable John Boozman:
United States Senate:
The Honorable Jerry Moran:
United States Senate:
The Honorable Brian P. Bilbray:
House of Representatives:
The Honorable Gus M. Bilirakis:
House of Representatives:
The Honorable Corrine Brown:
House of Representatives:
The Honorable Vern Buchanan:
House of Representatives:
The Honorable Doug Lamborn:
House of Representatives:
The Honorable David P. Roe:
House of Representatives:
The Honorable Cliff Stearns:
House of Representatives:
The Honorable Timothy J. Walz:
House of Representatives:
[End of section]
Appendix I: Comments from the Department of Veterans Affairs:
Department Of Veterans Affairs:
Washington DC 20420:
April 15, 2011:
Mr. Randall B. Williamson:
Director, Health Care:
U.S. Government Accountability Office:
441 G Street, NW:
Washington, DC 20548:
Dear Mr. Williamson:
The Department of Veterans Affairs (VA) has reviewed the Government
Accountability Office's (GAO) draft report, VA Health Care: Need for
More Transparency in New Resource Allocation Process and for Written
Policies on Monitoring Resources (GA0-11-426) and generally agrees
with GAO's conclusions and concurs with GAO's recommendations to the
Department.
The enclosure specifically addresses each of GAO's recommendations and
provides comments on the draft report. VA appreciates the opportunity
to comment on your draft report.
Sincerely,
Signed by:
John R. Gingrich:
Chief of Staff:
Enclosure:
[End of letter]
Enclosure:
Department of Veterans Affairs (VA) Comments to Government
Accountability Office (GAO) Draft Report: VA Health Care: Need for
More Transparency in New Resource Allocation Process and for Written
Policies on Monitoring Resources (GA0-11-426).
GAO recommendation: To increase the transparency of the new network
allocation process, and to ensure that internal control activities are
performed and that the resources networks allocate to medical centers
are monitored consistently and reliably, we recommend that the
Secretary of Veterans Affairs direct the Under Secretary for Health to
take the following two actions:
Recommendation 1: Require networks to provide rationales for all
adjustments made to the allocation amounts proposed by the model in
VA's resource allocation process.
VA response: Concur. Beginning with the fiscal year (FY) 2012
allocation process, the Veterans Health Administration (VHA) Chief
Finance Officer (CFO) will require Veterans Integrated Service Network
(VISN) Directors to provide rationales for all adjustments to amounts
provided to medical facilities from those amounts initially proposed
by VHA's resource allocation model.
Recommendation 2: Develop written policies, consistent with Federal
internal control standards, to formalize existing practices for
monitoring resources networks have allocated to medical centers.
VA response: Concur. Beginning with the FY 2012 VHA budget execution
cycle, VHA's CFO will provide written guidance consistent with Federal
internal control standards to formalize existing practices for
monitoring FY 2012 and future resources that VISNs allocate to medical
centers.
[End of section]
Appendix II: GAO Contact and Staff Acknowledgments:
GAO Contact:
Randall B. Williamson, (202) 512-7114 or williamsonr@gao.gov:
Staff Acknowledgments:
In addition to the contact named above, Janina Austin, Assistant
Director; Jennie F. Apter; Jessica Morris; Lisa Motley; and Julie T.
Stewart made key contributions to this report.
[End of section]
Footnotes:
[1] The Consolidated Appropriations Act, 2010, provided advance
appropriations for fiscal year 2011 for VA health care services. See
Pub. L. No. 111-117, div. E, tit. II, 123 Stat. 3034, 3298-3300
(2009). Among other things, the Department of Defense and Full-Year
Continuing Appropriations Act, 2011, rescinded 0.2 percent of the
amount provided as advance appropriations. See Pub. L. No. 112-10,
div. B, tit. I, § 1119, 125 Stat. 38 (2011).
[2] VA allocates the remaining resources to networks and medical
centers outside of the VERA system for such things as prosthetics and
sets aside resources so that they are available for contingencies that
may arise during the year.
[3] Medical centers typically include one or more hospitals as well as
other types of health care facilities such as outpatient clinics and
nursing homes.
[4] GAO, Internal Control: Standards for Internal Control in the
Federal Government, [hyperlink,
http://www.gao.gov/products/GAO/AIMD-00-21.3.1] (Washington, D.C.:
November 1999).
[5] In addition, VA receives appropriations for information
technology, medical and prosthetic research, and construction, which
support the delivery of health care services.
[6] In addition, medical centers may receive resources from third-
party collections, such as insurance companies, and from veterans'
copayments for services and prescription drugs. VA credits these sums
to a collections fund and may transfer them to its Medical Services
account, from which they are provided to medical centers. See 38
U.S.C. § 1729A; Pub. L. No. 112-10, div. B, tit. I, § 1101(a) (6), 125
Stat. 38 (2011); Pub. L. No. 111-117, § 215, 123 Stat. 3034, 3305
(2009).
[7] GAO, VA Health Care: Resource Allocation Has Improved, but Better
Oversight Needed, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-97-178] (Washington, D.C.:
September 1997). GAO, VA Health Care: More Veterans Are Being Served,
but Better Oversight Is Needed, [hyperlink,
http://www.gao.gov/products/GAO/HEHS-98-226] (Washington, D.C.: August
1998). GAO, VA Health Care: Allocation Changes Would Better Align
Resources with Workload, [hyperlink,
http://www.gao.gov/products/GAO-02-338] (Washington, D.C.: February
2002).
[8] The guidance also stated that network allocation systems must
support high quality health-care delivery in the most appropriate
setting; support integrated patient-centered operations; provide
incentives to ensure continued delivery of appropriate complex care;
provide adequate support for VA's research and education missions; be
consistent with eligibility requirements and priorities; be consistent
with the network's strategic plans and initiatives; promote managerial
flexibility and innovation; and encourage increases in alternative
revenue collections. Department of Veterans Affairs, Veterans
Equitable Resource Allocation 2010, VERA 10 Includes all Veteran
Users: Equitable Funding Across 21 Health Care Networks, pg. 109.
(Washington, D.C.: May 2010).
[9] In the spring of 2010, VA formed an internal workgroup to
recommend options for a new standardized network allocation process.
The workgroup recommended a standardized allocation model, which VA
adopted for use in fiscal year 2011. The workgroup was comprised of
officials from VA headquarters, networks, and medical centers.
[10] Another component of the new model relates to capital resources,
such as those for medical center equipment and maintenance costs. As
in prior years, these resources are allocated at the network's
discretion.
[11] VA provides networks with an additional allocation for patients
whose annual costs exceed a certain threshold. In fiscal year 2011, VA
set this threshold at $107,000.
[12] Patient weighted work is determined using facility workload
(FacWork) as a base measure. FacWork measures workload by taking into
account the range of resources required to care for different classes
of patients, as determined by age and case-mix. Patient weighted work
accounts for additional factors including high cost procedures;
geographic cost differences between medical centers; and the
complexity of medical centers as measured by the size of their patient
population, the complexity of medical services provided, and the
extent to which they have research and education programs, among other
factors.
[13] Network adjustments to proposed allocation amounts for medical
centers cannot increase or decrease the network's total allocation for
the fiscal year.
[14] Because some medical centers in VA are combined, they receive a
single allocation. Therefore, the number of medical center allocations
is less than the total number of medical centers--153--that VA
operated in fiscal year 2011.
[15] Regardless of adjustments from the amounts proposed in the model,
in fiscal year 2011, 132 out of 140 medical center allocations
represented an increase from the prior year's allocation.
[16] This clinic is an independent outpatient clinic that receives
resources in the same manner as medical centers.
[17] In addition to the general purpose resources allocated through
the model, VA allocated specific purpose resources to this medical
center to meet its resource needs.
[18] For fiscal year 2011, VA's list of acceptable rationales included
adjustments to account for staffing realignments, significant revenue
changes, providing care in rural areas, and the impact of the new
model. VA officials told us that if networks wanted to make an
adjustment for a rationale not included in the list, they would need
to obtain approval from VA headquarters.
[19] The Antideficiency Act prohibits federal agencies from making
obligations or expenditures in excess of the appropriations available,
among other things. See 31 U.S.C. § 1341(a)(l).
[20] VA headquarters makes resources available to its networks on a
quarterly basis, for use by medical centers; as such, the network's
total allocation for the fiscal year is not available at the beginning
of the fiscal year.
[21] An obligation is a definite commitment that creates a legal
liability for the payment of goods and services ordered or received.
An agency incurs an obligation, for example, when it awards a contract.
[22] VA headquarters officials told us they use a red/yellow/green
color-coding system in their reviews of network spending. In this
system, networks are coded as red if their spending is different from
their operating plans, with a major impact on operations. Networks are
coded as yellow if their spending is different from their operating
plans, but with a minor impact on operations. Networks are coded as
green if their spending is on target with their operating plans.
[23] [hyperlink, http://www.gao.gov/products/GAO/AIMD-00-21.3.1].
[End of section]
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