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entitled 'VA Health Care: Experiences in Denver and Charleston Offer 
Lessons for Future Partnerships with Medical Affiliates' which was 
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Report to the Chairman, Committee on Veterans' Affairs, House of 
Representatives: 

April 2006: 

VA HEALTH CARE: 

Experiences in Denver and Charleston Offer Lessons for Future 
Partnerships with Medical Affiliates: 

GAO-06-472: 

GAO Highlights: 

Highlights of GAO-GAO-06-472, a report to the Chairman, Committee on 
Veterans' Affairs, House of Representatives. 

Why GAO Did This Study: 

The Department of Veterans Affairs (VA) maintains affiliations with 
medical schools, including the Medical University of South Carolina 
(MUSC) and the University of Colorado at Denver and Health Services 
Center and University of Colorado Hospital (UCH), to obtain enhanced 
medical care for veterans. As part of their plans for new medical 
campuses, both UCH and MUSC proposed jointly constructing and operating 
new medical facilities with VA in Denver and Charleston, respectively. 

This report discusses (1) how VA evaluated the joint venture proposals 
for Denver and Charleston and the status of these proposals, (2) the 
challenges these proposals pose for VA, and (3) the lessons VA can 
learn from its experiences in Charleston and Denver for future 
partnerships. 

What GAO Found: 

VA evaluated the joint venture proposals for its medical facilities in 
Denver and Charleston using criteria developed specifically for each 
location, and while VA opted to build a stand alone facility in Denver, 
it is still considering a joint venture in Charleston. Because the 
proposals involved joint construction and service sharing on a scale 
beyond anything VA had experienced with its medical affiliates in the 
past, VA did not have criteria at the departmental level to evaluate 
the proposals on a consistent basis in both locations. In both 
locations, negotiations between VA and its medical affiliates stretched 
over a number of years, in part because they were hampered by limited 
collaboration and communication, among other things. While VA decided 
against a joint venture in Denver, it has made no decision on 
Charleston. A VA-MUSC steering group, formed last summer to study the 
joint venture proposal in Charleston, issued a report in December 2005 
that outlined the advantages and disadvantages of different options. 

The joint ventures proposed in Denver and Charleston present a number 
of challenges to VA, including addressing institutional differences 
between VA and its medical affiliates, identifying legal issues and 
seeking legislative remedies, and balancing funding priorities. For 
example, capital expenditures for a joint venture would have to be 
considered in the context of other VA capital priorities. Although 
addressing these issues will be difficult, the VA-MUSC steering groups 
efforts could provide insight into how to tackle them. 

VAs experiences with joint venture proposals in Denver and Charleston 
offer several lessons for VA as it considers similar opportunities in 
the future. One of the most important lessons is that having criteria 
at the departmental level to evaluate joint venture proposals helps to 
improve the transparency of decisions concerning joint ventures and 
VAs ability to ensure that the decisions are made in a consistent 
manner across the country. Another key lesson is that the lack of a 
strategy for communicating with stakeholders, such as employees and 
veterans, helps VA build understanding and trust among stakeholders. 
The following table identifies these and other lessons from VAs 
experiences in Denver and Charleston. 

Lessons Learned from VAs Experiences in Denver and Charleston 

* Criteria at the departmental level helps provide clarity and 
consistency in evaluation approach.
* A communications strategy helps avoid misinformation and confusion.
* Leadership support facilities negotiations.
* Extensive collaboration assists negotiations. 

What GAO Recommends: 

GAO recommends that VA establish criteria for evaluating joint venture 
proposals and a strategy for communicating with stakeholders when 
negotiating such proposals. VA agreed with GAOs conclusions and 
recommendations. 

[Hyperlink, http://www.gao.gov/cgi-bin/getrpt?GAO-GAO-06-472]. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact Mark L. Goldstein at 
(202) 512-2834 or goldsteinm@gao.gov. 

[End of Section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

VA Lacks Departmental Criteria to Evaluate Joint Venture Proposals: 

Joint Venture Proposals in Charleston and Denver Pose Multiple 
Challenges: 

VA Could Learn Several Lessons from Its Experiences with Denver and 
Charleston Joint Venture Proposals: 

Conclusions: 

Recommendations for Executive Action: 

Agency Comments: 

Scope and Methodology: 

Appendix: 

Appendix I: Description of Planning Models Identified by Steering 
Group: 

Related GAO Products: 

Tables: 

Table 1: Information on VA's Facilities in Charleston and Denver and 
MUSC's and UCH's Facilities: 

Table 2: Criteria Identified by the VA-MUSC Steering Group: 

Table 3: Description of Planning Models Identified by Steering Group: 

Figures: 

Figure 1: Time Line of Key Events in the Negotiations between VA and 
UCH: 

Figure 2: Federal Tower Proposal at Fitzsimons: 

Figure 3: Location of Land That VA Is Currently Pursuing at Fitzsimons 
in Relation to UCH facilities: 

Figure 4: Time Line of Key Events in the Negotiations between VA and 
MUSC: 

Figure 5: MUSC's Construction Plan, 2002: 

Figure 6: MUSC's Proposal (2002) and VA's Counter Proposal (2003): 

Figure 7: Construction of Phase I of MUSC's Project, July 2005: 

Abbreviations:

CARES: Capital Asset Realignment for Enhanced Services: 

DOD: Department of Defense: 

EUL: Enhanced-Use Lease: 

FRA: Fitzsimons Redevelopment Authority: 

MUHA: Medical University Hospital Authority: 

MUSC: Medical University of South Carolina: 

PET: Positron Emission Tomography: 

UCH: University of Colorado Hospital: 

VA: Department of Veterans Affairs: 

Letter: 
April 28, 2006: 

The Honorable Steve Buyer: 
Chairman: 
Committee on Veterans' Affairs: 
House of Representatives: 

Dear Mr. Chairman: 

For decades, the Department of Veterans Affairs (VA) has maintained 
partnerships, or affiliations, with university medical schools to 
obtain medical services for veterans and provide training and education 
to medical residents. These affiliations help VA fulfill its mission of 
providing health care to the nation's veterans. Today, VA has 
affiliations with 107 medical schools, including the Medical University 
of South Carolina (MUSC) in Charleston, South Carolina, and the 
University of Colorado's School of Medicine--through the University of 
Colorado at Denver and Health Sciences Center and the University of 
Colorado Hospital (UCH)--in the Denver, Colorado, area.[Footnote 1] For 
example, many MUSC physicians serve as residents at VA's medical 
facility in Charleston, the Ralph H. Johnson VA Medical Center, and UCH 
physicians do the same at VA's Eastern Colorado Health System in 
Denver. As part of their plans for new medical campuses, UCH and MUSC 
proposed jointly constructing and operating new medical facilities with 
VA in Denver and Charleston, respectively. Although VA has a long 
history of partnering with its medical affiliates for training and 
education as well as purchasing medical services from its medical 
affiliates, this type of joint venture would represent a departure from 
VA's typical relationship with its medical affiliates. 

In addition to partnering with university medical schools, VA manages a 
diverse inventory of real property to provide health care to veterans. 
However, many of VA's facilities were built more than 50 years ago and 
are no longer well suited to providing accessible, high-quality, cost- 
effective health care in the 21ST century. To address its aging 
infrastructure, VA initiated the Capital Asset Realignment for Enhanced 
Services (CARES) process--the most comprehensive, long-range assessment 
of its health care system's capital asset requirements ever undertaken 
by VA. In February 2004, the CARES Commission--an independent body 
charged with assessing VA's capital assets--issued its recommendations 
regarding the realignment and modernization of VA's capital assets 
necessary to meet the demand for veterans' health care services through 
2022. In Denver, the commission recommended VA build a replacement 
medical center with the Department of Defense (DOD) on the former 
Fitzsimons Army Base in Aurora, Colorado, which is just outside of 
Denver. The commission also noted widespread agreement among 
stakeholders that the new VA facility should be located near a new UCH 
facility, which was being constructed at the Fitzsimons site. In 
Charleston, the commission did not recommend replacing the current 
medical facility. However, the commission recommended that, among other 
things, VA promptly evaluate MUSC's proposal to jointly construct and 
operate a new medical center with VA in Charleston, noting that such a 
joint venture arrangement could serve as a possible framework for 
partnerships in the future. In responding to the commission's 
recommendations in May 2004, the Secretary stated that VA would build a 
replacement VA medical center on the Fitzsimons site with "some shared 
facilities with the UCH" and continue to "consider options for sharing 
opportunities with MUSC."[Footnote 2] 

This report discusses (1) how VA evaluated the joint venture proposals 
involving its facilities in Charleston and Denver and the status of 
these proposals; (2) the challenges that VA faces in sharing facilities 
and services with its medical university affiliates in Charleston and 
Denver; and (3) the lessons VA can learn, if any, from its experiences 
in Charleston and Denver if it moves forward with other partnerships. 
To address these objectives, we analyzed agency documents and 
interviewed officials at VA, MUSC, UCH, and the University of Colorado 
at Denver and Health Sciences Center. We also met with local 
stakeholders, such as officials from the Fitzsimons Redevelopment 
Authority (FRA) in Aurora, the mayors of Charleston and Aurora, and 
representatives from the VA employee union in each location to obtain 
their perspectives on the joint venture proposals and to obtain 
information on local capital asset planning and its impact. We also 
discussed the CARES review process and CARES Commission recommendations 
with VA officials. We assessed the reliability of the information 
obtained from VA, MUSC, and UCH. We concluded that the information was 
sufficiently reliable for our purposes. We also reviewed GAO's body of 
work on VA's management of its capital assets and on leading practices 
for realigning federal agency infrastructure, collaboration among 
organizations, and organizational transformations.[Footnote 3] In 
September 2005, we also testified before the Subcommittee on Health, 
Committee on Veterans' Affairs, House of Representatives, on the joint 
venture proposal involving VA's facility in Charleston and 
MUSC.[Footnote 4] Although we examined the joint venture proposals for 
VA's Denver and Charleston facilities and the associated studies and 
planning documents, we did not evaluate the merits of the proposals. We 
conducted our work from June 2005 through February 2006 in accordance 
with generally accepted government auditing standards. 

Results in Brief: 

Because it lacks criteria at the departmental level, VA evaluated 
proposals for joint ventures with local medical affiliates in Denver 
and Charleston using criteria developed specifically for each location, 
and while VA opted to build a stand-alone facility in Denver, it is 
still in the process of considering a joint venture in Charleston. In 
both locations, multiple iterations of the joint venture proposals have 
been considered, and negotiations between VA and its medical affiliates 
have stretched over a number of years, delaying decisions regarding the 
facilities in Denver and Charleston. For example, in Denver, VA 
officials at the facility and network level[Footnote 5] and UCH 
officials in 1999 began informally discussing the possibility of 
constructing and operating a joint facility on the former Fitzsimons 
army base in Aurora, Colorado, which was closed as part of DOD's base 
realignment and closure process. Negotiations over different aspects 
and revisions of the joint venture proposal continued until late 2004, 
at which time VA decided against a joint facility with UCH. Similarly, 
negotiations over the joint venture proposed between VA and MUSC in 
Charleston began in 2002, and, to date, no decisions have been made. 
However, a steering group composed of VA and MUSC officials issued a 
report in December 2005 that outlined options for a joint venture 
ranging from sharing of medical services, which could occur with VA 
maintaining its existing building, to a large, new building with space 
for both VA and MUSC. Complex arrangements such as the joint venture 
proposals in Denver and Charleston require extensive negotiations 
between the potential partners. However, negotiations in both locations 
were hampered by limited communication and collaboration and lack of VA 
leadership support, among other things. For example, in Charleston, for 
a 2-year period after the joint venture was proposed, there was little 
communication between VA and MUSC, which caused negotiations to stall 
during this period. In Denver, top VA leadership was not fully 
supportive of exploring a joint venture with UCH, resulting in delays 
in negotiations and misunderstandings between VA and UCH. 

Joint ventures proposed by VA's medical university affiliates in Denver 
and Charleston present several challenges to VA. These challenges 
include addressing institutional changes for VA and institutional 
differences between VA and its medical affiliates, identifying legal 
issues and seeking legislative remedies, and balancing funding 
priorities. For example, capital expenditures for a joint venture would 
have to be considered in the context of other VA capital priorities, 
and VA would have to ensure that a joint venture would allow VA to 
fulfill its other departmental missions, such as supporting national, 
state, and local emergency management. In addition, a joint venture 
would also require VA to depart from its traditional health care model 
of providing medical services in house and adopt one that includes 
sharing capital assets with an affiliate. Although addressing these 
issues will be difficult, the VA-MUSC steering group has begun to work 
through some of these challenges. 

Its experiences in Denver and Charleston offer several lessons for VA 
as it considers other similar opportunities. One of the most important 
lessons to emerge from VA's experience with the joint venture proposals 
in Denver and Charleston is the need to develop criteria at the 
departmental level to evaluate the merits of joint venture proposals on 
a consistent basis. A set of criteria for evaluating decisions 
regarding infrastructure, including joint ventures, would enhance the 
transparency of these decisions and help ensure that the decisions were 
made in a manner that was fair to joint venture partners and other 
stakeholders, such as veterans and employees. The lack of departmental- 
level criteria forced VA to evaluate the proposals without a consistent 
framework that would allow VA to determine and assess the effects of 
each proposal on medical care cost and quality within the context of 
its overall mission. Another important lesson of VA's experience in 
Denver and Charleston is the need for a communications strategy for 
communicating with its medical affiliate and stakeholders. Such a 
strategy could help facilitate negotiations with the medical affiliate 
as well as help address concerns voiced by veterans and employees, such 
as the impact of the joint venture on patient care. A communication 
strategy would help ensure that these groups receive a message that is 
consistent in tone and content. The lack of such a strategy contributed 
to breakdowns in communications in both Denver and Charleston during 
key points of the negotiations and hindered progress. For example, in 
Charleston, there was limited communication between VA and MUSC for 
about 2 years; as a result, negotiations stalled. Other lessons that VA 
could take away from its experiences in Denver and Charleston include 
that negotiations are facilitated by VA leadership support for 
exploring the possibility of joint ventures and extensive collaboration 
between the potential joint venture partners. 

To better position VA to consider future joint venture proposals with 
medical affiliates, we are recommending that the Secretary develop 
criteria at the departmental level for evaluating joint venture 
proposals on a consistent basis and a strategy for communicating with 
the department's affiliates and stakeholders about joint venture 
proposals. VA reviewed a draft of this report and agreed with the 
report's conclusions and recommendations. 

Background: 

VA manages a large health system for veterans, providing health care 
services to over 5 million beneficiaries. The cost of these services in 
fiscal year 2005 was over $30 billion. According to VA, its health care 
system now includes 157 medical centers, 862 ambulatory care and 
community-based outpatient clinics, and 134 nursing homes. VA health 
care facilities provide a broad spectrum of medical, surgical, and 
rehabilitative care. The management of VA's facilities is decentralized 
to 21 regional networks referred to as Veterans Integrated Service 
Networks (networks). The Charleston facility is part of Network 7, or 
the Southeast Network, and the Denver facility is located in Network 
19, or the Rocky Mountain Network.[Footnote 6] 

To meet its mission of serving the needs of the nation's veterans, VA 
partners with medical universities and DOD. In 1946, VA established a 
program to enter into partnerships with medical universities, now 
referred to as academic affiliations, to provide high quality health 
care to America's veterans and to train new health professionals. 
Today, VA maintains affiliations with 107 of the nation's 126 medical 
schools. In addition to academic affiliation agreements, VA purchases 
clinical services from medical schools for the treatment of 
veterans.[Footnote 7] Similarly, in 1982, the VA and DOD Health 
Resources Sharing and Emergency Operations Act (Sharing Act)[Footnote 
8] was enacted to provide for more efficient use of medical resources 
through greater interagency sharing and coordination. For example, the 
VA Medical Center in Louisville and the Ireland Army Community Hospital 
in Fort Knox, Kentucky, have engaged in sharing activities to provide 
services to beneficiaries that include primary care, acute care 
pharmacy, ambulatory, blood bank, intensive care, pathology and 
laboratory, audiology, podiatry, urology, internal medicine, and 
ophthalmology. Given the importance of these partnerships to VA's 
ability to meet its mission, VA's 2003-2008 strategic plan includes 
goals for sustaining partnerships with medical universities and sharing 
resources with DOD. 

VA's Denver and Charleston medical facilities have long-standing 
affiliations with local medical universities. VA's facility in Denver 
is affiliated with the University of Colorado's School of Medicine-- 
through the University of Colorado at Denver and Health Sciences Center 
and UCH--and VA's facility in Charleston is affiliated with MUSC. These 
affiliations provide both VA facilities with the majority of VA's 
medical residents who rotate through all VA clinical service areas. 
Both VA facilities also purchase a significant amount of medical 
services from their affiliates. Specifically, the Denver facility 
annually obtains $9 million worth of services from UCH, and the 
Charleston VA facility buys $13 million in services annually from MUSC. 
The medical services purchased are in such areas as gastroenterology, 
infectious disease, internal medicine, neurosurgery, anesthesia, 
pulmonary, and cardiovascular perfusion. In addition to these services, 
VA also has a medical research partnership with MUSC for a mutually 
supported biomedical research facility, the Thurmond Biomedical 
Research Center. Table 1 provides more detailed information about the 
VA facilities in Charleston and Denver and their medical affiliates. 

Table 1: Information on VA's Facilities in Charleston and Denver and 
MUSC's and UCH's Facilities: 

Year built: Main hospital; 
Charleston, South Carolina: VA's Ralph H. Johnson Medical Center: 1966; 
Charleston, South Carolina: MUSC: 1955; 
Denver, Colorado: VA's Eastern Colorado Health System: 1951; 
Denver, Colorado: UCH: 1921. 

Square footage; 
Charleston, South Carolina: VA's Ralph H. Johnson Medical Center: 
352,000; 
Charleston, South Carolina: MUSC: 1,530,125[A]; 
Denver, Colorado: VA's Eastern Colorado Health System: 670,000; 
Denver, Colorado: UCH: 1,200,000[B]. 

Beds; 
Charleston, South Carolina: VA's Ralph H. Johnson Medical Center: 126; 
Charleston, South Carolina: MUSC: 709;  
Denver, Colorado: VA's Eastern Colorado Health System: 128; 
Denver, Colorado: UCH: 420. 

Inpatient admissions; 
Charleston, South Carolina: VA's Ralph H. Johnson Medical Center: 
4,510; 
Charleston, South Carolina: MUSC: 28,591;  
Denver, Colorado: VA's Eastern Colorado Health System: 4,750; 
Denver, Colorado: UCH: 19,622. 

Outpatient visits; 
Charleston, South Carolina: VA's Ralph H. Johnson Medical Center: 
370,917; 
Charleston, South Carolina: MUSC: 551,914[C];  
Denver, Colorado: VA's Eastern Colorado Health System: 481,769; 
Denver, Colorado: UCH: 546,248. 

Annual operating budget (in millions); 
Charleston, South Carolina: VA's Ralph H. Johnson Medical Center: $160; 
Charleston, South Carolina: MUSC: $559; 
Denver, Colorado: VA's Eastern Colorado Health System: $267; 
Denver, Colorado: UCH: $490. 

Source: GAO presentation of VA, MUSC, and UCH data. 

[A] The MUSC medical center includes the Institute of Psychiatry 
(62,299 square feet), Children's Hospital (347,697), North Tower and 
Main Hospital (545,201), Rutledge Tower (383,752), and Charleston 
Memorial Hospital (191,176). 

[B] By 2008, UCH will have approximately 1.8 million gross square 
footage of fully operational facilities, with about 1.5 million gross 
square footage dedicated to clinical and patient care services. This 
number does not reflect gross square footage at UCH's current facility 
in Denver. 

[C] This number does not include same-day surgeries (6,802) or 
emergency visits (35,375).

[End of table] 

VA Lacks Departmental Criteria to Evaluate Joint Venture Proposals: 

VA evaluated the joint venture proposals for its facilities in Denver 
and Charleston on an ad hoc basis because it lacks criteria at the 
departmental level to evaluate such proposals consistently. VA has 
decided against a joint facility in Denver, but it is still in the 
process of considering such a facility in Charleston. In both 
locations, multiple iterations of the joint venture proposals have been 
considered, and negotiations between VA and its medical affiliates have 
stretched over a number of years. Negotiations in both locations were 
hampered by limited communication and collaboration, a lack of top VA 
leadership support for the proposals, and no single VA point of contact 
for the medical affiliates. 

VA Does Not Have Criteria at the Departmental Level to Evaluate Joint 
Venture Proposals Consistently: 

VA does not have criteria at the departmental level that could be used 
to evaluate joint venture proposals on a consistent basis. 
Consequently, VA officials identified factors for considering the 
specific joint venture proposals in Charleston and Denver. Some of the 
identified factors were consistent between the two locations, and 
others were site-specific, but it is not clear how any of the factors 
weighed in VA's consideration of the proposals. 

In studies and correspondence regarding the joint venture proposal in 
Denver, VA officials identified several factors that they believed to 
be important in considering the joint venture proposal. In particular, 
in correspondence between VA and UCH in 2002, and again in 2004, the 
Secretary of VA identified four major considerations--(1) maintaining 
VA's identity; (2) maintaining VA's governance; (3) balancing and 
evaluating priorities within VA's capital asset program, including the 
CARES process; and (4) securing funding. In 2002, a VA taskforce 
composed of headquarters, network, and facility officials examined the 
potential for a VA-UCH joint facility and identified additional factors 
critical to the decision-making process. These factors included 
maintaining VA's commitment to providing health care to meet veterans' 
unique needs and research programs, VA's aging infrastructure, and the 
gap between health care demand and capacity and funding. Another 
consideration that arose through the course of negotiations was VA's 
space requirements for a new facility and the associated acreage of 
land needed and available on the Fitzsimons campus. VA did not indicate 
how the factors identified in the studies or correspondence weighed in 
its decision making regarding the joint venture proposal. 

Similarly, the VA-MUSC steering group identified a set of criteria to 
help identify and analyze the joint venture proposal for Charleston. As 
shown in table 2, these criteria include enhanced quality and service 
and financial viability. The steering group's report did not indicate 
how or why these criteria were chosen, provide an explanation of the 
individual criterion, or indicate the relative importance of the 
criteria. While the steering group used the criteria in identifying and 
evaluating options for further consideration, it is not clear how, if 
at all, these criteria will be used by VA leadership in making a final 
decision on the joint venture proposal. In meetings with VA officials 
about the joint venture proposal in Charleston, officials identified 
other considerations that could influence the decision-making process, 
including the condition of the existing VA facility and the need to 
balance investment priorities across the region and nation. 

Table 2: Criteria Identified by the VA-MUSC Steering Group: 

Criterion. 

* Enhance quality and service. 

* Improve access. 

* Financial viability. 

* Optimal legal authorities. 

* Enhance efficient infrastructure sharing. 

* Maximize land utilization and development. 

* Collaborative governance structure. 

* Maintain unique VA identity. 

* Become a regional center of excellence. 

* Enhance Department of Defense services. 

* Produce serendipitous win-wins. 

* Serve as a national model for collaborations. 

Source: Collaborative Opportunities Steering Group, Final Report, 
December 2005.

[End of table] 

VA Decided to Construct Stand-alone Facility in Denver, but 
Negotiations about Location Continue: 

VA has decided against a fully-integrated facility with UCH in Denver. 
Negotiations between VA and the University of Colorado at Denver and 
Health Services Center and UCH stretched over a number of years, and a 
number of different options were considered. The lack of leadership buy-
in and miscommunication about VA's intentions regarding the future 
Denver facility prolonged negotiations and created an atmosphere of 
mistrust between the parties. Figure 1 provides a time line of key 
events in the negotiations between VA and UCH. 

Figure 1: Time Line of Key Events in the Negotiations between VA and 
UCH: 

[See PDF for image] 

[End of figure]  

In 1995, the University of Colorado decided to relocate its Health 
Sciences Center campus, including its affiliated UCH, from downtown 
Denver to the former Fitzsimons Army Medical Base located in nearby 
Aurora, Colorado, which was closed as part of DOD's base realignment 
and closure process. UCH determined that its facility in downtown 
Denver lacked the space to accommodate its patient population and that 
there was little room for expansion. The availability of land at the 
Fitzsimons site offered an opportunity for UCH to move and expand the 
size of its campus. When Fitzsimons closed, DOD turned a portion of the 
577 acres the base occupied over to the U.S. Department of Education so 
that it could convey land to public educational institutions.[Footnote 
9] The University of Colorado applied for and received 227 acres from 
the U.S. Department of Education, and the University leased about 55 
acres to UCH for its new inpatient and outpatient pavilions. The 
majority of the land at Fitzsimons--about 332 acres--was purchased by 
FRA for $1.85 million.[Footnote 10] FRA plans to develop a biomedical 
research park on this land. The remaining land at Fitzsimons is owned 
by the City of Aurora, a private entity, and a nonprofit organization. 

In late 1999, VA officials at the facility and network level and UCH 
officials began to informally discuss the possibility of relocating 
VA's Denver medical center to the Fitzsimons campus. UCH and VA 
officials were concerned that UCH's move to Fitzsimons, about 6 miles 
from its downtown Denver location, would strain their affiliation 
because of the amount of time it would take doctors to travel between 
the facilities. The UCH president also suggested that colocating the 
UCH and VA medical center at Fitzsimons could achieve cost efficiencies 
through integrating inpatient activities, such as medical and surgical 
specialty labs, and sharing some patient treatment. In considering a 
possible joint venture, facility and network VA officials worked with 
UCH officials to examine options for moving VA's medical center to the 
Fitzsimons campus as well as sharing services and facilities with UCH. 
In particular, these officials jointly funded a study to determine the 
feasibility and cost of different options, including constructing free- 
standing facilities with limited sharing to jointly constructing and 
operating a new fully-integrated facility at Fitzsimons. The study, 
completed in 2001, concluded that a fully integrated, or joint, 
facility was the most cost-effective option. A second study 
commissioned by VA's Network 19 in 2002 also analyzed a range of 
options, including a joint VA-UCH facility; but this study did not 
recommend which option to pursue. These studies were shared with VA's 
central office, veteran service organizations, and the Congress, and 
became the basis of the joint venture proposal and negotiations. 

The Secretary of VA established a task force to examine the joint 
venture proposal to integrate the Denver medical center and UCH on the 
Fitzsimons campus in July 2002. The task force was composed of VA 
officials at the departmental, network, and facility levels. In 
September 2002, the task force issued a draft report, which examined 
seven alternatives--ranging from maintaining the status quo to 
constructing a fully integrated facility with UCH. The task force's 
report presented advantages and disadvantages of each alternative. It 
did not recommend which alternative to pursue. 

In September 2002, the president of UCH sent a letter to the Secretary 
of VA asking that VA make a decision within 1 year regarding moving the 
VA facility to the Fitzsimons campus. In October 2002, the Secretary 
responded that VA could not commit to a joint UCH-VA hospital within 
that time frame. The Secretary indicated that a number of important 
questions remained unanswered, including how the joint hospital would 
be governed. Furthermore, he noted that the proposal to relocate the 
Denver medical center to Fitzsimons had to be evaluated in the context 
of the CARES Commission report, which was not scheduled to be completed 
until the following year. The Secretary's response effectively ended 
discussions about constructing and operating a fully-integrated 
facility with UCH. 

In January 2003, VA began developing a proposal for a joint VA-DOD 
facility on the Fitzsimons campus. Specifically, the proposed joint 
federal facility would house VA and DOD, and the two entities would 
share some medical services and equipment. The joint VA-DOD facility, 
which was referred to as the federal tower, would be built on UCH- 
leased land at Fitzsimons and would be connected to UCH's inpatient 
pavilion by a 2-story clinical facility. (See fig. 2.) The clinical 
facility would house operating rooms, imaging, and pathology 
laboratories, among other things, that would be shared by VA, UCH, and 
DOD. With this concept in hand, VA, UCH, and DOD began discussions 
about the availability of land adjacent to the UCH inpatient pavilion 
for the federal tower. In August 2004, the UCH president estimated that 
18 acres of land was available adjacent to the UCH facility for the 
federal tower. However, soon thereafter, a survey of the land indicated 
that approximately 12 acres were available for the federal tower once 
easements and setbacks were taken into account. 

Figure 2: Federal Tower Proposal at Fitzsimons: 

[See PDF for image]  

[End of figure]  

In December 2004, in a letter to UCH, the Secretary stated that the 
approximate 12 acres would be insufficient to meet VA's space 
requirements for a new medical center. Specifically, the Secretary 
stated that predesign planning for the new facility revealed that VA 
needed approximately 1.46 million square feet to meet the specialized 
needs of veterans and DOD patients. To accommodate these space 
requirements, VA's architectural firm outlined three design options-- 
ranging from a 6-story VA hospital on 38 acres to a 8-to 10-story VA 
hospital on 20 acres. Based on this analysis and other considerations, 
the Secretary concluded that VA needed about 38 acres on the Fitzsimons 
campus for the joint VA-DOD facility. This decision ended negotiations 
over building the federal tower on UCH-leased land and connecting it to 
UCH's inpatient pavilion with a clinical facility. UCH subsequently 
decided to use the land adjacent to the inpatient pavilion for other 
purposes. 

After land negotiations with UCH ended, VA officials began looking for 
a new location on the Fitzsimons site for a stand-alone VA medical 
center. The conference report accompanying VA's appropriation act for 
fiscal year 2004 directed VA to continue efforts to "co-locate the 
Denver VA medical center with  [UCH] at the Fitzsimons 
campus."[Footnote 11]While there is no statutory requirement to locate 
the VA medical center at Fitzsimons, VA considers this language in the 
conference report to express the will of Congress and, as a result, has 
gone forward with efforts to purchase property from FRA for such a 
purpose. In July 2005, VA signed a memorandum of understanding with FRA 
to set forth the conditions under which VA and FRA will proceed with 
discussions that may lead to the purchase and conveyance of about 40 
acres located on the southeast corner of the Fitzsimons campus. (See 
fig. 3.) According to FRA officials, this piece of land is currently 
owned by FRA and three other entities. According to a VA official, in 
February 2006, VA offered FRA $16.50 per square foot for the FRA-owned 
portion of the land. (VA is in the process of surveying the land to 
determine the total square footage.) The VA official responsible for 
the land negotiations at Fitzsimons told us that VA's offer is valid 
for 6 months, and that VA expects to finalize the purchase of the FRA- 
owned portion of the land by the end of this fiscal year. VA is 
currently negotiating with the other three land-holding entities about 
the purchase of their land. According to the VA official, he does not 
foresee any "show stoppers" in the negotiations with these three 
entities, and therefore VA expects to reach agreement with these 
entities in the coming months. 

Figure 3: Location of Land That VA Is Currently Pursuing at Fitzsimons 
in Relation to UCH facilities: 

[See PDF for image]  

[End of figure]  

Lack of Leadership Buy-in and Miscommunication Prolonged Negotiations 
and Created Atmosphere of Mistrust: 

Negotiations between VA and UCH on the different joint venture 
proposals were hampered by a lack of VA leadership buy-in and 
miscommunication. For instance, although VA officials at the facility 
and network levels worked with UCH officials in developing the joint 
facility proposal, the current network director told us that the 
Secretary was never fully supportive of this concept. Rather, according 
to the network director, the Secretary envisioned a stand-alone 
facility adjacent to the UCH complex. When VA decided to pursue a stand-
alone facility, UCH officials said they felt as though they had been 
misled by VA officials, including the Secretary, about VA's interest in 
a joint facility. Further, in a correspondence from the UCH president 
to VA in 2004, the UCH president noted that a freestanding VA medical 
center on the Fitzsimons campus was never discussed. UCH officials also 
told us that at no time did UCH ever consider a freestanding facility 
for VA on its new campus because there would be limited opportunities 
for sharing capital and operating costs. In addition, there was 
miscommunication about the amount of land available for a federal tower 
and VA's space requirements. Specifically, UCH officials told VA 
officials that there were about 18 acres available for the federal 
tower; however, the survey revealed that only a little more than 12 
acres were available. In addition, in December 2004, the Secretary of 
VA informed UCH that VA needed 1.46 million square feet for its new 
facility. According to UCH officials, these space requirements ran 
counter to estimates that were discussed with VA facility and network 
level officials and, according to the UCH president in 2004, would 
result in a facility that was about 50 percent larger than the existing 
VA medical center in Denver.[Footnote 12] These events contributed to 
an atmosphere of mistrust between VA and UCH. 

VA and MUSC Have Identified Multiple Options for Sharing Resources and 
Space, but No Decision Has Been Made: 

VA has not made a decision regarding a joint venture with MUSC. 
Negotiations between VA and MUSC have stretched over a number of years 
and have been hampered by limited collaboration and communication among 
the parties. VA's Under Secretary for Health and the president of MUSC 
are currently considering the results of a recent report that 
identifies and analyzes options for sharing facilities and space in 
Charleston. Figure 4 provides a time line of key events in the 
negotiations between VA and UCH. 

Figure 4: Time Line of Key Events in the Negotiations between VA and 
MUSC: 

[See PDF for image] 

[End of figure]  

In November 2002, the president of MUSC sent a proposal to the 
Secretary of VA about partnering with MUSC in the construction and 
operation of a new medical center in phase II of MUSC's construction 
project. Under MUSC's proposal, VA would vacate its current facility 
and move to a new facility located on MUSC property. MUSC also 
indicated that sharing medical services would be a component of the 
joint venture. Although VA and MUSC currently share some services, the 
joint venture proposal, according to MUSC officials, would have 
increased the level of sharing of medical services and equipment, 
thereby creating cost savings for both VA and MUSC. 

To meet the needs of a growing and aging patient population, MUSC has 
undertaken a multiphase construction project to replace its aging 
medical campus. Construction on the first phase began in October 2004. 
Phase I includes the development of a 4-story diagnostic and treatment 
building and a 7-story patient hospitality tower, providing an 
additional 641,000 square feet in clinical and support space. Phase I 
also includes the construction of an atrium connecting the two 
buildings, a parking structure, and a central energy plant. Initial 
plans for phases II through V include diagnostic and treatment space 
and patient bed towers. According to MUSC officials, as of September 
2005, there are approximately 24 months remaining for the planning of 
phase II. As shown in figure 5, phases IV and V would be built on VA 
property. In particular, phase V would be built on the site of VA's 
existing medical center. 

Figure 5: MUSC's Construction Plan, 2002: 

[See PDF for image]  

Note: The circle highlights some of VA's existing property.

[End of figure]  

In response to MUSC's proposal, VA formed an internal workgroup 
composed of officials primarily from VA's Network 7 to evaluate MUSC's 
proposal. The workgroup analyzed the feasibility and cost-effectiveness 
of the proposal and issued a report in March 2003, which outlined three 
other options available to VA: replacing the Charleston facility at its 
present location, replacing the Charleston facility on land presently 
occupied by the Naval Hospital in Charleston, or renovating the 
Charleston facility. The workgroup concluded that it would be more cost-
effective to renovate the current Charleston facility than to replace 
it with a new facility. This conclusion was based, in part, on the cost 
estimates for constructing a new medical center. In April 2003, the 
Secretary of VA sent a response to the president of MUSC, which stated 
that if VA agreed to the joint venture, it would prefer to place the 
new facility in phase III--which is north of phase I--to provide better 
street access for veterans. (See fig. 6 for MUSC's proposal and VA's 
counterproposal.) In addition, the Secretary indicated that MUSC would 
need to provide a financial incentive for VA to participate in the 
joint venture. Specifically, MUSC would need to make up the difference 
between the estimated life-cycle costs of renovating the Charleston 
facility and building a new medical center-- which VA estimated to be 
about $85 million--through negotiations or other means. The Secretary 
stated that if these conditions could not be met, VA would prefer to 
remain in its current facility. 

Figure 6: MUSC's Proposal (2002) and VA's Counter Proposal (2003): 

[See PDF for image]  

Note: The circle highlights some of VA's existing property.

[End of figure]  

The MUSC president responded to VA's counterproposal in an April 2003 
letter to the Secretary of VA. In the letter, the MUSC president stated 
that MUSC was proceeding with phase I of the project and that the joint 
venture concept could be pursued during later phases of construction. 
The letter did not specifically address VA's proposal to locate the new 
facility in phase III, or the suggestion that MUSC would need to 
provide some type of financial incentive for VA to participate in the 
joint venture. To move forward with phase I, the MUSC president stated 
that MUSC would like to focus on executing an enhanced-use lease (EUL) 
for Doughty Street. Although MUSC owns most of the property that will 
be used for phases I through III, Doughty Street is owned by VA and 
serves as an access road to the Charleston facility and parking lots. 
The planned facility for phase I would encompass Doughty 
Street.[Footnote 13] (See fig. 7.) Therefore, MUSC could not proceed 
with phase I--as originally planned--until MUSC secured the rights to 
Doughty Street. To help its medical affiliate move forward with 
construction, VA executed an EUL agreement with MUSC in May 2004 for 
use of the street.[Footnote 14] According to the terms of the EUL, MUSC 
will pay VA $342,000 for initial use of the street and $171,000 for 
each of the following 8 years. 

Figure 7: Construction of Phase I of MUSC's Project, July 2005: 

[See PDF for image] 

Note: The photograph shows the initial construction for phase I of 
MUSC's project. Doughty Street will be encompassed by MUSC's new 
facility.

[End of figure]  

To facilitate negotiations on the joint venture proposal, a 
congressional delegation visited Charleston to meet with VA and MUSC 
officials to discuss the joint venture proposal on August 1, 2005. 
After this visit, VA and MUSC agreed to jointly examine key issues 
associated with the joint venture proposal. Specifically, VA and MUSC 
established the Collaborative Opportunities Steering Group (steering 
group). The steering group is composed of five members from VA, five 
members from MUSC, and a representative from DOD, which is also a 
stakeholder in the facility health care market.[Footnote 15] The 
steering group chartered four workgroups: 

* The governance workgroup examined ways of establishing organizational 
authority within a joint venture between VA and MUSC, including shared 
medical services. 

* The clinical service integration workgroup identified medical 
services provided by VA and MUSC and opportunities to integrate or 
share these services. 

* The legal workgroup reviewed federal and state authorities (or 
identified the lack thereof) and legal issues relating to a joint 
venture with shared medical services. 

* The finance workgroup provided cost estimates and analyses relating 
to a joint venture with shared medical services. 

The steering group and workgroups were intended to help VA and MUSC 
determine if the joint venture proposal would be mutually beneficial. 
On December 7, 2005, the steering group issued its final report to the 
Under Secretary for Health and to the president of MUSC. According to 
the report, the steering group concluded that the most advantageous 
options were those that provide a revenue stream for VA and provide 
MUSC access to new space without capital financing. Therefore, the 
group explored construction models that incorporated benefits to both 
organizations that included taking advantage of VA's access to capital 
financing and access to MUSC revenue streams. As shown in table 3, the 
report identifies six planning models, ranging from constructing a new 
medical facility with space for VA and MUSC, to sharing that could 
occur with VA maintaining its existing facility. Four of the models--A, 
A-1, A-2, and B--include varying levels of shared space between VA and 
MUSC. These four models also call for VA to overbuild the facility-- 
that is, build it bigger than VA needs--and lease the excess space to 
MUSC, thus providing VA with a revenue stream to offset some of the 
cost of construction. The amount of excess space built and leased by VA 
varies among the four models. Any option pursued that involves VA 
building a new medical facility over-capacity for the purpose of 
leasing the underutilized space requires close scrutiny, since real 
estate leasing agreements are currently not part of its mission. In 
addition, such options would also require specific congressional 
authorization and appropriation since the costs of any of the planning 
models identified would exceed $7 million, the threshold for such 
action. 

Table 3: Description of Planning Models Identified by Steering Group: 

Model: Model A; 
Description: Construct a new, oversized VA medical center to replace 
all VA services. Excess capacity is leased to MUSC. 

Model: Model A-1; 
Description: Construct a new, oversized VA medical center to replace 
all VA services. Excess capacity is leased to MUSC. MUSC would 
construct an adjacent tower. 

Model: Model A-2; 
Description: Construct a new, oversized VA medical center to replace 
all VA services, with administrative and clinical services located in 
separate buildings. Excess capacity is leased to MUSC. 

Model: Model B; 
Description: Construct a new, slightly oversized VA medical center to 
replace all VA services. Excess capacity is leased to MUSC. 

Model: Model C; 
Description: Construct a new VA medical center, with no excess space 
available for leasing. Additional sharing between VA and MUSC consists 
of shared high tech equipment and contracts for services. 

Model: Model D; 
Description: VA remains in its current facility, with renovations as 
appropriate. Additional sharing between VA and MUSC consists of shared 
high tech equipment and contracts for services. 

Source: GAO summary of information in the Collaborative Opportunities 
Steering Group, Final Report, December 2005.

[End of table] 

The steering group's December 2005 report does not recommend an option 
that VA should pursue. Rather, the report outlines the perceived 
advantages and disadvantages, as well as the costs, of each 
option.[Footnote 16] (See app. I for the advantages, disadvantages, and 
costs of the different models.) However, the report does note that two 
options were rejected by steering group members. In particular, the 
finance workgroup rejected Model A-2--which included an oversized new 
VA medical center and separate buildings for administrative and 
clinical services--because, among other things, the construction of a 
separate building to house administrative services was not cost- 
effective. Additionally, MUSC deemed Model B--which included a 
replacement VA medical center with moderate excess space to lease to 
MUSC--not to be a viable option because it did not meet its total bed 
replacement needs. Although the report identifies options that provide 
a revenue stream for VA, the report notes that there is not sufficient 
revenue or cost avoidance in any of the models for VA to achieve a 30- 
year payback on the construction investment. According to VA officials, 
the next step is for the Capital Asset Board of the Veterans Health 
Administration to make a recommendation regarding the options contained 
in the report. VA expects the Capital Asset Board's recommendations by 
the end of April 2006. 

Limited Collaboration and Communication Stalled Negotiations in 
Charleston for About 3 Years: 

Prior to the summer of 2005, limited collaboration and communication 
generally characterized the negotiations between MUSC and VA over the 
joint venture proposal. In particular, before August 2005, VA and MUSC 
had not exchanged critical information that would help facilitate 
negotiations. For instance, MUSC did not clearly articulate to VA how 
replacing the Charleston facility, rather than renovating it, would 
improve the quality of health care services for veterans or benefit VA. 
MUSC officials had generally stated that sharing services and equipment 
would create efficiencies and avoid duplication, which would lead to 
cost savings. However, MUSC had not provided any analyses to support 
such claims. Similarly, as required by law,[Footnote 17] VA studied the 
feasibility of coordinating its health care services with MUSC, pending 
construction of MUSC's new medical center. This study was completed in 
June 2004. However, VA officials did not include MUSC officials in the 
development of the study, nor did they share a copy of the completed 
study with MUSC. VA also updated its cost analysis of the potential 
joint venture in the spring of 2005, but again, VA did not share the 
results with MUSC. Because MUSC was not included in the development of 
these analyses, there was no agreement between VA and MUSC on key input 
for the analyses, such as the specific price MUSC would charge VA for, 
or the nature of, the medical services that would be provided. As a 
result of the limited collaboration and communication, negotiations 
stalled--prior to August 2005, the last formal correspondence between 
VA and MUSC leadership on the joint venture occurred in April 2003. 

Joint Venture Proposals in Charleston and Denver Pose Multiple 
Challenges: 

The joint venture proposals under consideration in Charleston and 
previously proposed in Denver raise a number of challenges for VA and 
its medical affiliates. These challenges--which were identified by VA, 
MUSC, or UCH officials as well as previous studies prepared for or by 
VA, MUSC, or UCH--include addressing institutional changes for VA and 
institutional differences between VA and its medical affiliates, 
identifying legal issues and seeking legislative remedies, and 
balancing funding priorities. Although addressing these issues will be 
difficult, it is not insurmountable, as evidenced by the VA-MUSC 
steering group's efforts to address some of these challenges, as well 
as by VA's past partnerships with some medical affiliates and DOD. 

* Addressing institutional changes and differences: The joint ventures 
proposed in Charleston and Denver pose a series of institutional 
changes for VA and reveal a number of institutional differences between 
VA and its medical affiliate that would need to be reconciled. 
Specifically, as an in-house health care service provider with other 
departmental priorities, by jointly constructing and operating a 
hospital with a nonfederal health system, VA would deviate from its 
current health care model. Although VA purchases significant amounts of 
medical services from its medical affiliates, the relationship between 
VA and its affiliates has centered on providing enhanced care for 
veterans as well as training medical school residents and conducting 
medical research. According to VA, altering this historical 
relationship to include jointly constructing and operating facilities 
would introduce legal, administrative, and management complexities that 
might require additional authorities. In addition, according to VA and 
some stakeholders, a joint facility could diminish VA's identity by 
deviating from a VA medical facility that treats only veterans to one 
with a mixed-patient population served by providers from different 
health systems. Hence, if maintaining VA's identity is important to VA 
leadership, steps would need to be taken to protect VA's identity in a 
joint facility. 

Adding to the challenge of expanding affiliation relationships to 
include joint ventures involving major capital are inherent differences 
between VA and its medical affiliates--from their missions to their 
funding processes. For example, in addition to its mission of providing 
care for our nation's veterans, VA is also responsible for supporting 
national, state, and local emergency management and serving as backup 
to DOD during war and other national emergencies. In addition, funding 
decisions for both VA and MUSC must go through several layers of 
review. VA's major capital investments (over $7 million) must be 
evaluated at multiple levels within VA and approved by the Office of 
Management and Budget and by Congress,[Footnote 18] while such 
investments by MUSC must be approved by its board, and if requiring 
state funds, by the state legislature. These differences would need to 
be considered in any joint venture between VA and a medical affiliate. 

* Identifying legal issues and seeking legislative remedies: Joint 
venture proposals raise many complex legal issues. The specific legal 
issues raised depend on the type of joint venture proposed, but many 
involve real estate, construction, contracting, and employment. In 
Charleston, the legal workgroup identified VA's and MUSC's legal 
authorities, or lack thereof, on numerous issues relating to each 
option considered. The legal workgroup concluded that VA has the legal 
authority to pursue any of the six planning models identified but that 
specific considerations would arise for each model. For example, 
legislative authorization and appropriation are required for any major 
VA construction project over $7 million. In addition, while VA is 
authorized, under its EUL authority, to lease underutilized real 
property for up to 75 years, the authorization does not provide for 
building a new medical facility over-capacity for the purpose of 
leasing the underutilized space.[Footnote 19] 

* Developing appropriate governance plans: A venture involving a 
jointly operated facility would require the parties to agree to a plan 
for governing it. Any governance plan would have to maintain VA's 
direct authority over and accountability for the care of VA patients. 
In addition, if shared medical services were a component of a joint 
venture between the VA and an affiliate, the entities would need a 
mechanism to ensure that the interests of the patients served by both 
are protected today and in the future. For instance, VA might decide to 
purchase operating room services from its affiliate. If the sharing 
agreement were dissolved afterwards, it would be difficult for VA to 
resume the independent provision of these services. Therefore, a clear 
plan for governance would ensure that VA and its affiliate could 
continue to serve their patients' health care needs as well as or 
better than before. To address possible governance issues in 
Charleston, the steering group recommended instituting a joint 
governance council that would include a nonaffiliated third party to 
oversee the sharing relationship in areas other than research and 
educational activities. The joint governance council's decisions would 
be advisory in nature--and not legally binding--in order not to 
undermine the current authority of VA or MUSC. 

* Balancing funding priorities: VA leadership must weigh joint venture 
opportunities against VA's capital assets and health care service needs 
throughout the nation when making funding decisions and 
recommendations. VA operates a nationwide health care system for 
veterans, including 157 medical centers and over 800 clinics. According 
to VA, its capital requirements are significant given the amount of 
real property it owns and uses and the age and condition of most of its 
facilities. Further, in 2004, the Secretary of VA estimated that 
implementing CARES will require additional investments of approximately 
$1 billion per year for at least the next 5 years, with substantial 
infrastructure investments then continuing indefinitely. Balancing 
these competing capital requirements is made more difficult by the 
fiscal challenges facing the federal government. Given the size of the 
government's projected deficit, VA, like other federal agencies, could 
face constrained budgets in the future, making funding of even high 
priority capital requirements challenging. 

Additional challenges are likely to be identified as VA continues to 
explore the proposed joint venture with MUSC or other possible joint 
ventures in the future. In particular, should VA decide to pursue a 
joint venture with MUSC or other medical affiliates in the future, it 
would likely face additional challenges during the implementation 
phase. For example, due to the inherent differences in the purposes for 
which VA's and MUSC's information management systems were designed, the 
systems would not be compatible. According to MUSC officials, VA's and 
MUSC's computerized patient record systems are different, and their 
billing systems are incompatible. Therefore, at least initially, the 
systems would not be integrated, and parallel systems would need to be 
implemented--which could result in added costs in terms of staff time 
and raise the potential for errors. 

VA's Current Sharing Arrangements with Medical Affiliates and DOD Could 
Be Instructive As VA Considers Current and Future Joint Ventures: 

Partnerships with other health providers are not new to VA. For 
instance, the Mike O'Callaghan Federal Hospital, an integrated federal 
hospital jointly constructed by the VA and Air Force in Las Vegas, 
Nevada, currently serves as a model of joint operation and shared 
medical services.[Footnote 20] However, joint ventures of this 
magnitude with DOD are limited. Further, VA has not entered into a 
joint venture with a medical affiliate of the magnitude proposed in 
Charleston or Denver. However, there are instances of significant 
capital ventures between VA and its affiliates involving high-priced 
medical equipment. For example, VA's Western New York Healthcare System 
in Buffalo, New York, houses a Positron Emission Tomography (PET) 
scanner that was purchased by its affiliate. In exchange, VA purchases 
scans from its affiliate for veterans and provides operational and 
administrative staff to support the equipment. 

These past capital ventures are on a smaller scale than the joint 
ventures proposed in Charleston and Denver, but they could be somewhat 
instructive as VA considers current and future joint venture proposals 
and attempts to address the associated challenges. For example, in 
these past capital ventures, VA had to ensure that veterans received 
the appropriate access to equipment and services, and VA accomplished 
this through the terms and conditions outlined in the contract. In 
addition, VA had to address governance, legal, and information 
management challenges in establishing these capital-sharing 
arrangements. The difficulty of addressing such challenges, however, 
likely increases as the complexity and magnitude of the proposed joint 
venture grows. 

VA Could Learn Several Lessons from Its Experiences with Denver and 
Charleston Joint Venture Proposals: 

Because VA may explore the possibility of entering into partnerships 
with other medical affiliates in the future, the lessons learned from 
VA's experiences in Charleston and Denver could be instructive. It is 
possible that more opportunities for similar joint ventures or sharing 
arrangements will present themselves in the coming years. In 
particular, our analysis of VA data on its major medical facilities 
indicates that 43 percent of these facilities, like the medical center 
in Denver, consist of buildings with an average age of over 50 years, 
although some have undergone extensive renovations over the years. 
Given the age of these facilities, many of them may need to be replaced 
or extensively renovated in the future. Additionally, disasters, such 
as Hurricane Katrina, could force unplanned renovations or 
replacements. As VA moves forward in making necessary renovations or 
replacements throughout the country, there could be opportunities for 
joint ventures with its medical affiliates. VA will have to determine 
if these opportunities are in the best interest of the federal 
government and our nation's veterans. 

The lessons that emerged from our work in Charleston and Denver reflect 
how the absence of practices that we have emphasized in previous 
reports can hamper effective consideration of potential joint ventures. 
These reports examine leading practices for realigning federal agency 
infrastructure, collaboration among organizations, and organizational 
transformations.[Footnote 21] The lessons include establishing criteria 
to evaluate the joint venture proposal, obtaining leadership buy-in and 
support for the joint venture, ensuring extensive collaboration among 
stakeholders, and developing a strategy for effective and ongoing 
communications. 

Lack of Criteria at Departmental Level Results in Inconsistent 
Evaluations: 

One of the most important lessons from VA's experiences in Denver and 
Charleston is that the absence of criteria at the departmental level to 
evaluate joint venture proposals can result in inconsistent 
evaluations, misunderstandings, and delays. The joint venture proposals 
for VA's medical centers in Denver and Charleston presented VA with a 
new opportunity--that is, the proposals involved joint construction and 
service sharing on a scale beyond anything VA had experienced in 
partnering with its medical affiliates in the past. VA did not have 
criteria at the departmental level for evaluating and negotiating joint 
venture proposals, which led to inconsistent evaluations of the Denver 
and Charleston proposals. For instance, in Denver, VA facility and 
network officials worked collaboratively with UCH officials on the 
joint venture proposals, including jointly funding a study to assess 
the feasibility and cost of various options. In contrast, VA facility 
and network officials did not include MUSC officials in the development 
of the study that examined the feasibility of coordinating VA's health 
care services with MUSC, nor did they share a copy of the completed 
study with MUSC. This contributed to the negotiations between VA and 
MUSC stalling for over 2 years. VA officials in Denver also told us 
that the lack of departmental criteria hampered negotiations, and noted 
that on the basis of their experience a common tool or process is 
needed to assess joint venture proposals so that they can be evaluated 
consistently. 

As we have emphasized in previous work on realigning federal 
infrastructure, a set of criteria for evaluating decisions regarding 
infrastructure enhances the transparency of these decisions and helps 
ensure that the decisions are made in a manner that is fair to all 
stakeholders and that is efficient and effective.[Footnote 22] Although 
we recognize that every joint venture is likely to be different, 
criteria would establish a framework for evaluating future joint 
venture proposals. In addition to identifying the factors VA would 
consider in evaluating proposals and indicating how these factors would 
be measured, the criteria would help ensure that proposals are 
evaluated consistently--regardless of location or officials involved. 
The criteria would also serve to communicate VA's expectations for 
joint ventures. That is, they would identify what VA is looking for in 
potential joint ventures, such as improved medical care for veterans 
and reduced operating costs. By documenting and sharing these criteria 
with potential partners, VA would help ensure that its positions are 
understood from the outset and thus eliminate possible 
misunderstandings. The VA-MUSC steering group's efforts to identify 
criteria to evaluate the Charleston proposal and the studies conducted 
in Denver could serve as starting points for the development of 
criteria. 

Lack of Communications Strategy Leads to Misinformation and Confusion: 

VA's experiences in Denver and Charleston highlighted the fact that the 
absence of sustained communication with potential joint venture 
partners and stakeholders as well as within VA can be detrimental to 
negotiations. Breakdowns in communication occurred in both locations 
during key points of the negotiations and hindered progress. For 
example, in Charleston, there was limited communication between VA and 
MUSC for about 2 years; as a result, negotiations stalled. In addition, 
in both locations, a primary point of contact--either a single 
individual or a group--was not identified to represent VA's position in 
negotiations with the medical universities. Rather, various VA 
officials at the facility, network, and departmental levels often 
maintained separate contacts with UCH and MUSC officials. As a result, 
according to MUSC and UCH officials, they received mixed signals as to 
VA's intentions regarding the proposals. Similarly, MUSC and UCH also 
contacted and communicated with different VA officials at the facility, 
network, and departmental levels, which also led to confusion. 

In our previous work on organizational transformations, we have noted 
that creating an effective, ongoing communication strategy is essential 
to implementing significant organizational changes like the joint 
ventures proposed in Charleston and Denver.[Footnote 23] Such a 
strategy should entail communicating information early and often to 
help build an understanding of the purpose of the planned change and 
build trust among VA and its medical affiliates as well as 
stakeholders, such as employees and veterans, who could have concerns 
over such issues as the impact of a joint venture on patient care. The 
strategy should also encourage communication by facilitating a two-way 
honest exchange with, and allow for feedback from, stakeholders. A 
communications strategy can also help ensure that these groups receive 
a message that is consistent in tone and content. Sharing a consistent 
message with stakeholders helps reduce the perception that others are 
getting the "real" story when, in fact, all are receiving the same 
information. The strategy should also make it clear that it is 
essential to have a primary point of contact with the necessary 
authority to negotiate effectively with partners, make timely 
decisions, and move quickly to implement top leadership's decisions 
regarding the joint venture. Good communication is central to forming 
the effective internal and external partnerships that are vital to the 
success of transforming endeavors such as joint ventures. In 
Charleston, the steering group has taken steps to improve communication 
by establishing a plan for VA and MUSC to share information about the 
potential joint venture with stakeholders such as employees and 
veterans groups. 

Lack of Leadership Support Can Hinder Negotiations: 

Another lesson that emerged from VA's experience with the joint venture 
proposals for Denver and Charleston is that leadership buy-in and 
support are critical. The proposed joint venture in Denver did not come 
to fruition largely because VA leadership never fully supported the 
concept. In particular, when the joint venture was first proposed, UCH 
and VA officials at the network and facility levels worked extensively 
together on the proposal. Top level VA management, however, was not 
involved in these efforts. Moreover, in response to UCH's request for a 
1-year time frame for a decision regarding a joint facility, in October 
2002, the VA Secretary wrote that VA "cannot now commit to a joint 
University-VA hospital within the one-year timetable you propose. 
However, I feel strongly that we should not preclude a freestanding VA 
medical center at Fitzsimons in the future." According to UCH 
officials, this decision was unexpected given the fact they had worked 
closely with VA facility officials on a possible joint venture. 
Certainly it is the VA Secretary's prerogative to extend or withhold 
support for different proposals, and the Secretary must determine 
whether the proposals are in the best interest of veterans. However, 
VA's experiences in Denver and Charleston indicate that without such 
support negotiations for joint ventures will be hampered. 

Our previous work on organizational transformation indicates that 
support from top leadership is indispensable for fundamental change, 
such as a joint venture.[Footnote 24] Top leadership's clear and 
personal involvement in the transformation represents stability for 
both the organization's employees and its external partners. Top 
leadership must set the direction, pace, and tone for the 
transformation. Likewise, when a transformation requires extensive 
collaboration with another organization, as would be the case with a 
joint venture, committed leadership at all levels is needed to overcome 
the many barriers to working across organizational boundaries. If VA 
decides to pursue a joint venture with MUSC in Charleston, or other 
similar projects with medical affiliates or other partners, success 
will hinge on the level of support the project receives from top VA 
management. 

Lack of Extensive Collaboration Hampers Negotiations: 

Another lesson that emerged from the experiences in Denver and 
Charleston is that a lack of, or limited, collaboration hampers 
negotiations. For example, in Charleston, VA and MUSC did not initially 
exchange or share critical information, such as the feasibility study, 
which contributed to the negotiations stalling from about 2003 to 2005. 
In addition, until the VA-MUSC steering group was formed in Charleston, 
there was limited collaboration between VA and its stakeholders. This 
heightened the stakeholders' anxiety about the proposed joint venture 
and led to the spread of misinformation about the proposed joint 
venture. In Denver, although VA officials from the facility and network 
level and UCH officials met frequently after UCH proposed the joint 
venture, VA officials with the necessary decision-making authority were 
not involved in these initial discussions. Consequently, when the 
Secretary of VA decided against a joint venture in Denver, UCH 
officials felt misled, which resulted in an atmosphere of mistrust 
between the entities. 

Our previous work on collaboration between organizations suggests 
several practices that VA might benefit from as it continues to 
consider a joint venture in Charleston as well as other such 
opportunities that may occur in the future.[Footnote 25] These 
practices include ensuring the involvement of key stakeholders, 
defining and articulating a common outcome, establishing mutually 
reinforcing or joint strategies, identifying and addressing needs by 
leveraging resources, and agreeing on roles and responsibilities. The 
VA-MUSC steering group illustrates how some of these practices can be 
implemented. For example, the steering group was led by senior VA and 
MUSC officials and consisted of VA and MUSC staff who have knowledge in 
key areas (e.g., finance). In addition, the communications plan the VA- 
MUSC steering group established includes a presentation to use when 
communicating with stakeholders about the joint venture proposal. 

Conclusions: 

To address future health care needs of veterans, VA's challenge is to 
explore new ways to fulfill its mission of providing veterans with 
quality health care. The prospect of jointly constructing and operating 
medical facilities with medical affiliates presents an opportunity for 
VA to consider the feasibility of expanding its relationships with 
university medical school affiliates to include the sharing of medical 
services in an integrated hospital. This is just one of several ways VA 
could provide care to veterans. It is up to VA, working with its 
stakeholders, and Congress to determine if expanding VA's relationship 
with medical affiliates to include joint ventures--of the scale 
proposed in Denver and Charleston--is in the best interest of the 
federal government and the nation's veterans, as well as how such joint 
ventures fit within the context of the CARES framework. 

VA will be in a better position to consider future joint ventures if it 
learns from its experiences with the joint venture proposals in Denver 
and Charleston. Among these lessons is the importance of leadership 
support and extensive collaboration. In addition, VA's experiences in 
Denver and Charleston indicate that having a set of criteria at the 
departmental level would provide a clear basis for making decisions on 
joint venture proposals. Although each proposal will likely be somewhat 
unique, and should be evaluated on its own merits and circumstances, 
criteria provide a framework for future evaluations and negotiations. A 
set of criteria at the departmental level helps ensure that proposals 
are evaluated in a consistent fashion across the country as well as 
communicates VA's expectations for joint ventures. Another important 
lesson is that a strategy for communicating with its medical affiliates 
and stakeholders, including veterans and employees, can help VA avoid 
the problems that hampered progress in negotiations over the Denver and 
Charleston joint venture proposals. A communications strategy helps 
build understanding and trust between VA and its medical affiliates and 
stakeholders as well as helps ensure that these groups receive a 
message that is consistent in tone and content. Establishing a set of 
evaluation criteria and a communications strategy are tangible steps VA 
could take to better position itself in considering future joint 
venture proposals. 

Recommendations for Executive Action: 

To ensure that there is a clear basis for evaluating future joint 
venture proposals as well as to help ensure early and frequent 
communication between VA and its medical affiliates and stakeholders 
during negotiations, we recommend that the Secretary of VA take the 
following two actions: 

* Identify criteria at the departmental level for evaluating joint 
venture proposals. In order to foster an atmosphere of collaboration, 
VA should share these criteria with potential joint venture partners. 

* Develop a communications strategy for use in negotiating joint 
venture proposals. 

Agency Comments: 

We provided a draft of this report to VA for its review and comment. On 
April 10, 2006, VA's audit liaison provided VA's comments on the draft 
report via e-mail. VA agreed with the report's conclusions and 
recommendations. We also provided UCH and MUSC officials portions of 
the draft report that related to their joint venture proposals. UCH and 
MUSC officials provided technical clarifications to these portions of 
the draft report, which we incorporated where appropriate. 

Scope and Methodology: 

To address our objectives, we analyzed VA, UCH, and MUSC planning 
documents, presentations, and studies related to the joint venture 
proposals as well as correspondence between VA and these medical 
affiliates regarding the proposals. We also examined the 
recommendations of the CARES Commission and the Secretary's CARES 
Decision report, VA's 5-year capital plan (2005-2010), and federal 
statutes and accompanying reports. In addition, we interviewed 
officials from VA, DOD, MUSC, and UCH to obtain information on the 
history and status of the joint venture proposals as well as the 
challenges associated with implementing such proposals. We also 
interviewed local stakeholders, including officials from the Fitzsimons 
Redevelopment Authority in Aurora, Colorado, the mayors of Charleston 
and Aurora, and representatives from the VA employees' unions in each 
location to obtain their perspectives and to obtain information on 
local capital asset planning and its impact. We also toured VA and MUSC 
facilities in Charleston and VA and UCH facilities in the Denver area. 
Finally, we synthesized information obtained from VA, MUSC, and UCH 
officials and reviewed our past work on organizational transformation 
and collaboration among organizations to identify lessons learned from 
VA's experiences with joint venture proposals in Charleston and 
Denver.[Footnote 26] Although we examined the joint venture proposals 
for VA's Denver and Charleston facilities and the associated studies 
and planning documents, we did not evaluate the merits of the 
proposals. We assessed the reliability of the information obtained from 
VA, MUSC, and UCH. We concluded that the information was sufficiently 
reliable for our purposes. 

We are sending copies of this report to congressional committees with 
responsibilities for veteran issues; the Secretary of Veterans Affairs; 
and the Director, Office of Management and Budget. We also will make 
copies available to others upon request. In addition, this report will 
be available at no charge on GAO's Web site at [Hyperlink,  
http://www.gao.gov]. 

If you or your staff have any questions on matters discussed in this 
report, please contact me on (202) 512-2834 or at goldsteinm@gao.gov. 
Contact points for our Offices of Congressional Relations and Public 
Affairs may be found on the last page of this report. Key contributors 
to this report include Chris Bonham, Nikki Clowers, Daniel Hoy, 
Jennifer Kim, Edward Laughlin, Susan Michal-Smith, James Musselwhite, 
Jr., and Michael Tropauer. 

Sincerely, 

Signed by:

Mark L. Goldstein: 
Director, Physical Infrastructure Issues: 

[End of section] 

Appendixes: 

Appendix I: Description of Planning Models Identified by Steering 
Group: 

Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC. 
Provides VA with $6.7 million annually to enhance care; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Requires 
the largest construction investment by VA; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Construction cost: $545.6 
million + activation; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion. 

Provides VA with extra bed capacity to meet disaster needs; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: MUSC 
construction must meet VA security requirements, raising construction 
costs. 

Model A-1: Construct a new, oversized VA medical center to replace all 
VA services. Excess capacity is leased to MUSC. MUSC would construct an 
adjacent tower; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Advantage; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: 
Disadvantage; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Construction cost: 
Construction cost; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: Life 
cycle cost. 

Reduces VA's construction investment; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Requires 
large investment by VA for construction; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Construction cost: $368 
million + activation; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.2 
billion. 

Provides MUSC with a lower construction cost; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: VA security 
and safety specifications may need to be met if buildings are connected 
. 

Provides VA with $4.2 million annually to enhance care; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Separate 
construction reduces the coordination and compatibility of space. 

Provides VA with extra bed capacity to meet disaster needs; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Eliminates 
some VA lease revenue and negatively affects payback. 

Model A-2: Construct a new, oversized VA medical center to replace all 
VA services, with administrative and clinical services located in 
separate buildings. Excess capacity is leased to MUSC; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Advantage; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: 
Disadvantage; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Construction cost: 
Construction cost; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: Life 
cycle cost. 

Reduces VA's construction investment; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Volume of 
administrative space is small and construction costs are similar to 
Model A; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Construction cost: Not 
calculated; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: Not 
calculated. 

Builds adjacency of VA and MUSC; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Some 
operational inefficiencies arise through lack of adjacency. 

Provides VA with additional annual revenue to enhance care; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: MUSC 
construction must meet VA security requirements, raising construction 
costs. 

Model B: Construct a new, slightly oversized VA medical center to 
replace all VA services. Excess capacity is leased to MUSC; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Advantage; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: 
Disadvantage; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Construction cost: 
Construction cost; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: Life 
cycle cost. 

Somewhat less initial VA investment required; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: MUSC does 
not consider this model viable since it must still construct beds 
elsewhere; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Construction cost: $444.4 
million + activation; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.2 
billion. 

Provides VA with $4.9 million annually to enhance care; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Requires 
second largest investment by VA for construction. 

Provides VA with extra bed capacity to meet disaster needs; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: MUSC 
construction must meet VA security requirements, raising construction 
costs. 

Model C: Construct a new VA medical center, with no excess space 
available for leasing. Additional sharing between VA and MUSC consists 
of shared high tech equipment and contracts for services; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Advantage; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: 
Disadvantage; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Construction cost: 
Construction cost; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: Model A-1: Construct a new, oversized VA medical center to 
replace all VA services. Excess capacity is leased to MUSC. MUSC would 
construct an adjacent tower.: Life cycle cost: $4.2 billion: Model A-2: 
Construct a new, oversized VA medical center to replace all VA 
services, with administrative and clinical services located in separate 
buildings. Excess capacity is leased to MUSC.: Life cycle cost: Not 
calculated: Model B: Construct a new, slightly oversized VA medical 
center to replace all VA services. Excess capacity is leased to MUSC.: 
Life cycle cost: $4.2 billion: Model C: Construct a new VA medical 
center, with no excess space available for leasing. Additional sharing 
between VA and MUSC consists of shared high tech equipment and 
contracts for services.: Life cycle cost. 

Provides VA with state-of-the-art patient care and administrative 
space, including private and semiprivate patient rooms and efficient 
energy systems; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Results in 
demolition of a facility currently considered to be sound; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Construction cost: $317.2 
million+ activation; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: Model A-1: Construct a new, oversized VA medical center to 
replace all VA services. Excess capacity is leased to MUSC. MUSC would 
construct an adjacent tower.: Life cycle cost: $4.2 billion: Model A-2: 
Construct a new, oversized VA medical center to replace all VA 
services, with administrative and clinical services located in separate 
buildings. Excess capacity is leased to MUSC.: Life cycle cost: Not 
calculated: Model B: Construct a new, slightly oversized VA medical 
center to replace all VA services. Excess capacity is leased to MUSC.: 
Life cycle cost: $4.2 billion: Model C: Construct a new VA medical 
center, with no excess space available for leasing. Additional sharing 
between VA and MUSC consists of shared high tech equipment and 
contracts for services.: $4.1 billion. 

Potentially improves adjacency of VA and MUSC; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Requires a 
sizable construction investment by VA. 

Provides VA with opportunities to address specialty care at a network 
level; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Eliminates 
revenue sources that would offset construction costs through space and 
service sharing. 

Potential for VA and MUSC to reduce the size of new facilities by 
planning to share some capacity through contracts; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Duplicates 
construction of some services that could potentially be shared. 

Maintains greater VA and MUSC autonomy. 

Avoids further investment into VA's aging infrastructure. 

Provides VA with $4.3 million annually to enhance care. 

Model D: VA remains in its current facility, with renovations as 
appropriate. Additional sharing between VA and MUSC consists of shared 
high tech equipment and contracts for services; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Advantage; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: 
Disadvantage; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Construction cost: 
Construction cost; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: Model A-1: Construct a new, oversized VA medical center to 
replace all VA services. Excess capacity is leased to MUSC. MUSC would 
construct an adjacent tower.: Life cycle cost: $4.2 billion: Model A-2: 
Construct a new, oversized VA medical center to replace all VA 
services, with administrative and clinical services located in separate 
buildings. Excess capacity is leased to MUSC.: Life cycle cost: Not 
calculated: Model B: Construct a new, slightly oversized VA medical 
center to replace all VA services. Excess capacity is leased to MUSC.: 
Life cycle cost: $4.2 billion: Model C: Construct a new VA medical 
center, with no excess space available for leasing. Additional sharing 
between VA and MUSC consists of shared high tech equipment and 
contracts for services.: Life cycle cost; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

No up-front construction costs for VA; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Existing 
facility is dated and will require continued investment; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Construction cost: $27.1 
million; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: Model A-1: Construct a new, oversized VA medical center to 
replace all VA services. Excess capacity is leased to MUSC. MUSC would 
construct an adjacent tower.: Life cycle cost: $4.2 billion: Model A-2: 
Construct a new, oversized VA medical center to replace all VA 
services, with administrative and clinical services located in separate 
buildings. Excess capacity is leased to MUSC.: Life cycle cost: Not 
calculated: Model B: Construct a new, slightly oversized VA medical 
center to replace all VA services. Excess capacity is leased to MUSC.: 
Life cycle cost: $4.2 billion: Model C: Construct a new VA medical 
center, with no excess space available for leasing. Additional sharing 
between VA and MUSC consists of shared high tech equipment and 
contracts for services.: $3.9 billion; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Continues use of a sound facility; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Replacement 
may be necessary at some future date; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Opportunities for increased sharing have been identified that do not 
necessarily require construction ; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Duplicates 
construction of services that could potentially be shared; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Provides VA with opportunities to address specialty care at a network 
level; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Charleston 
area veterans may have to travel to other VA medical centers for some 
care; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Maintains current access; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Requires 
that the facility be renovated to withstand disasters; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Maintains more VA and MUSC autonomy; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Less bed 
capacity for potential disaster and DOD needs ; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Disadvantage: Existing 
facility may not withstand strong hurricane or flood; 
Model A: Construct a new, oversized VA medical center to replace all VA 
services. Excess capacity is leased to MUSC.: Life cycle cost: $4.3 
billion: [Empty]. 

Source: Collaborative Opportunities Steering Group, Final Report, 
December 2005. 

[End of table] 

[End of section] 

Related GAO Products: 

[End of section] 

Results-Oriented Government: Practices That Can Help Enhance and 
Sustain Collaboration among Federal Agencies. GAO-06-15. Washington, 
D.C.: October 21, 2005. 

VA Health Care: Preliminary Information on the Joint Venture Proposal 
for VA's Charleston Facility. GAO-05-1041T. Washington, D.C.: September 
26, 2005. 

VA Health Care: Key Challenges to Aligning Capital Assets and Enhancing 
Veterans' Care. GAO-05-429. Washington, D.C.: August 5, 2005. 

Federal Real Property: Further Actions Needed to Address Long-standing 
and Complex Problems. GAO-05-848T. Washington, D.C.: June 22, 2005. 

U.S. Postal Service: The Service's Strategy for Realigning Its Mail 
Processing Infrastructure Lacks Clarity, Criteria, and Accountability. 
GAO-05-261. Washington, D.C.: April 8, 2005. 

VA Health Care: Important Steps Taken to Enhance Veterans' Care by 
Aligning Inpatient Services with Projected Needs. GAO-05-160. 
Washington, D.C.: March 2, 2005. 

High-Risk Series: An Update. GAO-05-207. Washington, D.C.: January 
2005. 

Budget Issues: Agency Implementation of Capital Planning Principles Is 
Mixed. GAO-04-138. Washington, D.C.: January 16, 2004. 

Federal Real Property: Vacant and Underutilized Properties at GSA, VA, 
and USPS. GAO-03-747. Washington, D.C.: August 19, 2003. 

VA Health Care: Framework for Analyzing Capital Asset Realignment for 
Enhanced Services Decisions. GAO-03-1103R. Washington, D.C.: August 18, 
2003. 

Results-Oriented Cultures: Implementation Steps to Assist Mergers and 
Organizational Transformations. GAO-03-669. Washington, D.C.: July 2, 
2003. 

VA Health Care: Improved Planning Needed for Management of Excess Real 
Property. GAO-03-326. Washington, D.C.: January 29, 2003. 

Major Management Challenges and Program Risks: Department of Veterans 
Affairs. GAO-03-110. Washington, D.C.: January 2003. 

High-Risk Series: Federal Real Property. GAO-03-122. Washington, D.C.: 
January 2003. 

VA Health Care: VA Is Struggling to Address Asset Realignment 
Challenges. GAO/T-HEHS-00-88. Washington, D.C.: April 5, 2000. 

VA Health Care: Improvements Needed in Capital Asset Planning and 
Budgeting. GAO/HEHS-99-145. Washington, D.C.: August 13, 1999. 

VA Health Care: Challenges Facing VA in Developing an Asset Realignment 
Process. GAO/T-HEHS-99-173. Washington, D.C.: July 22, 1999. 

VA Health Care: Capital Asset Planning and Budgeting Need Improvement. 
GAO/ T-HEHS-99-83. Washington, D.C.: March 10, 1999. 

(543137): 

FOOTNOTES 

[1] VA is affiliated with the University of Colorado's School of 
Medicine in Denver. The University of Colorado's School of Medicine is 
located at the University of Colorado at Denver and Health Sciences 
Center. UCH is the principal teaching hospital for the University of 
Colorado at Denver and the Health Sciences Center. VA negotiated with 
both the University of Colorado at Denver and Health Sciences Center 
and UCH over the joint venture proposal, although most of the 
correspondence was exchanged between VA and UCH. 

[2] VA, Secretary of Veterans Affairs CARES Decision, May 2004. 

[3] See "Related GAO Products" at the end of this report. 

[4] See GAO, VA Health Care: Preliminary Information on the Joint 
Venture Proposal for VA's Charleston Facility, GAO-05-1041T 
(Washington, D.C.: Sept. 26, 2005). 

[5] The management of VA's facilities is decentralized to 21 regional 
networks. 

[6] The Southeast Network includes South Carolina, Georgia, and 
Alabama, and the Rocky Mountain Network includes Colorado, Montana, 
Utah, Wyoming, and parts of Idaho, Kansas, Nebraska, Nevada, and North 
Dakota. 

[7] VA is authorized to enter into sharing arrangements with any health 
care provider or entity, such as medical universities, to secure health-
care resources that otherwise might not be feasibly available, or to 
effectively utilize certain other health-care resources. See 38 U.S.C. 
 8151-8153. 

[8] Pub. L. 97-174, 96 Stat. 70 (1982). 

[9] VA was also offered land on the Fitzsimons campus, but declined the 
offer. 

[10] FRA is a special-purpose governmental entity created in 1996 under 
an intergovernmental agreement between the City of Aurora and the 
University of Colorado Regents. FRA leads the planning, implementation, 
and redevelopment effort of a square mile section of the former 
Fitzsimons Army Medical Center dedicated to learning, patient care, 
basic science, and bioscience research and development in a manner that 
maximizes the long-term economic benefits to the Aurora community and 
the state of Colorado. The University of Colorado at Denver and Health 
Sciences Center and UCH are responsible for the redevelopment of the 
Fitzsimons property they received from the Department of Education. 

[11] See H.R. 2673 Conf. Rep. No. 108-401, at 1040 (2003). 

[12] According to VA, the additional space is required to accommodate 
its needs--including making the majority of patient rooms private--and 
DOD's needs. 

[13] To provide access to the current VA facility, a new street--the 
Ralph H. Johnson Drive--will be constructed around MUSC's new facility. 

[14] The Secretary of VA and the Medical University Hospital Authority 
(MUHA), an affiliate of MUSC, entered into a 75-year EUL agreement in 
May 2004 for MUHA use of VA property--a 1-block segment of Doughty 
Street. VA's EUL authority allows VA to lease real property under the 
Secretary's jurisdiction or control to a private or public entity for a 
term of up to 75 years. EULs must result in a beneficial redevelopment/ 
reuse of the affected VA property by the lessee that will include space 
for a VA mission-related activity and/or will provide consideration 
that can be applied to improve health care and services for veterans 
and their families in the community where the site is located. See 38 
U.S.C.  8161-8169. 

[15] DOD currently provides medical services to a number of its 
beneficiaries through the Naval Hospital in Charleston. 

[16] The finance workgroup did not estimate the cost of Model A-2 
because it determined this option was not viable. 

[17] Pub. L. 108-170,  232, 117 Stat. 2042, 2052-2053 (2003). 

[18] 38 U.S.C.  8103-8104. 

[19] 38 U.S.C.  8162. 

[20] The Mike O' Callaghan Federal Hospital is situated on a 49-acre 
site adjacent to Nellis Air Force Base, approximately 11 miles 
northeast of downtown Las Vegas. The facility encompasses 114 beds, 
with 52 designated for VA use. Activated in August 1994, the 370,000 
square footage facility cost $75 million to construct. VA contributed 
$9 million for the construction of the facility. 

[21] GAO, U.S. Postal Service: The Service's Strategy for Realigning 
Its Mail Processing Infrastructure Lacks Clarity, Criteria, and 
Accountability, GAO-05-261 (Washington, D.C.: Apr. 8, 2005); Results- 
Oriented Government: Practices That Can Help Enhance and Sustain 
Collaboration among Federal Agencies, GAO-06-15 (Washington, D.C.: Oct. 
21, 2005); Results-Oriented Cultures: Implementation Steps to Assist 
Mergers and Organizational Transformations, GAO-03-669 (Washington, 
D.C.: July 2, 2003); and Results-Oriented Cultures: Implementation 
Steps to Assist Mergers and Organizational Transformations, GAO-03-669 
(Washington, D.C.: July 2, 2003). 

[22] GAO-05-261. 

[23] GAO-03-669. 

[24] GAO-03-669. 

[25] GAO-06-15. 

[26] See "Related GAO Products" at the end of this report. 

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