Veterans Affairs:

Limited Support for Reported Health Care Management Efficiency Savings

GAO-06-359R: Published: Feb 1, 2006. Publicly Released: Feb 1, 2006.

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The Department of Veterans Affairs (VA) provides a uniform set of health care services to eligible veterans who enroll to receive such care and seek it from VA. These services include preventive and primary health care, a full range of outpatient and inpatient services, and prescription drugs. VA provides additional services, such as nursing home and dental care and other services, as required by law for some veterans and makes these services available to other veterans on a discretionary basis as resources permit. Most of the nation's 24 million veterans are eligible for some aspect of VA's health care services if they choose to enroll. In fiscal year 2005, about 7 million veterans were enrolled to receive VA health care services. In that year, VA planned to provide health care services to about 5 million veterans based on its initial budget request of $ 30.2 billion. Funding for VA's health care program has increased substantially in recent years. Congress appropriates funds annually for VA to provide health care services to eligible veterans. Congressional budget deliberations start when the President submits his annual budget request to Congress as the Budget of the United States Government. This is soon followed by VA providing the Congress with a more detailed budget justification of the President's policy and funding proposals for its programs. In each of the President's budget requests for fiscal years 2003 through 2006, the proposals assumed implementation of management efficiency initiatives that would save money without reducing the quality of service. Indeed, over these 4 fiscal years, the President's budget proposals assumed that these initiatives reduced funding requests by billions of dollars. Since savings from management efficiencies were expected to help reduce the level of annual appropriations, Congress asked us to examine (1) VA's methodology for projecting the health care management efficiency savings that were assumed in the President's budget requests for fiscal years 2003 through 2006 and (2) VA's support for reported actual savings achieved through management efficiency initiatives during fiscal years 2003 and 2004--including the methodology and documentation used to track and report achieved savings. We also summarized prior GAO and VA Office of the Inspector General (OIG) reports that have identified management inefficiencies at VA.

VA lacked a methodology for making the health care management efficiency savings assumptions reflected in the President's budget requests for fiscal years 2003 through 2006 and, therefore, was unable to provide us with any support for those estimates. VA officials told us that the management efficiency savings assumed in these requests were savings goals used to reduce requests for a higher level of annual appropriations in order to fill the gap between the cost associated with VA's projected demand for health care services and the amount the President was willing to request. Further, VA lacks adequate support for the $1.3 billion it reported as actual management efficiency savings achieved for fiscal years 2003 and 2004 because it lacked a sound methodology and adequate documentation for calculating and reporting management efficiency savings. Specifically, there was little consistency with respect to what VA's regional networks reported as management efficiency savings, how savings were calculated, and what type of documentation was available to support the savings figures reported. In addition, VA's regional networks sometimes reported savings resulting from cost-cutting measures as management efficiency savings. Although both can achieve savings, cost-cutting measures, unlike management efficiency initiatives, are not consistent with VA's objective of providing the same or higher quality and quantity of service at a lower cost. Finally, VA does not have a reliable basis for determining whether it has realized the management efficiency savings that were reflected in the President's budget requests for fiscal years 2003 and 2004. Specifically, VA's use of its savings calculation for its national procurement initiatives is misleading because VA calculates actual savings for these initiatives on a cumulative basis and compares these savings figures with savings goals that are reflected on an incremental basis. In recent years, the VA OIG and we identified management inefficiencies that, if unaddressed, could contribute to requests for higher amounts of appropriations that could otherwise have been avoided. For example, although VA has instituted a number of procurement reform initiatives aimed at leveraging its purchasing power and improving the overall effectiveness of its procurement actions, the VA OIG and we continue to identify problems with VA's procurement processes. Moreover, the VA OIG identified deficiencies in VA's procurement practices as one of the agency's most serious management challenges. For instance, recent GAO and VA OIG reports disclosed significant problems with VA's acquisitions involving Federal Supply Schedule (FSS) contracts; procurement of health care services; VA construction; acquisition support weaknesses; and inadequate management and oversight of major system initiatives. In addition, recent GAO and VA OIG reports have identified both serious control weaknesses in the agency's inventory management and shortfalls in the agency's efforts to provide reliable cost data to accurately assess the efficiency and effectiveness of VA's programs and initiatives.

Status Legend:

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  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: To better determine whether management efficiency savings are being achieved as planned, the Secretary of Veterans Affairs should direct the Assistant Secretary for Management to establish methodologies for tracking and reporting actual savings achieved through implementation of proposed management efficiencies, including controls to ensure that actual savings are reported on the same basis as projected savings in the budget request.

    Agency Affected: Department of Veterans Affairs

    Status: Closed - Implemented

    Comments: As part of our 2006 review of VA's health care management efficiency savings, we determined that VA lacked a methodology for making health care management efficiency savings assumptions reflected in the President's budget requests for fiscal years 2003 through 2006, including the lack of a consistent basis for reporting actual savings and savings projections in budget estimates. We recommended that the Secretary of Veterans Affairs should direct the Assistant Secretary for Management to develop a methodology for tracking and reporting actual savings achieved through implementation of management efficiency initiatives, including controls to ensure that actual savings are reported on the same basis as projected savings in budget requests. In November 2009, VA developed an online reporting tool and scorecard through the VA Acquisition Resource Center for reporting savings from management efficiency initiatives. New controls were put in place to provide a more consistent basis for reporting savings. For example, each month responsible officials are required to obtain concurrences on the information entered. In addition, the Office of Acquisition, Logistics, and Construction will report the savings realized for each initiative at monthly performance reviews conducted by the VA Deputy Secretary. By implementing new controls over the reliability of reported management efficiency savings, VA has helped ensure the reliability of reported data on the implementation of management efficiency initiatives.

    Recommendation: To better determine whether management efficiency savings are being achieved as planned, the Secretary of Veterans Affairs should direct the Assistant Secretary for Management to establish methodologies for tracking and reporting actual savings achieved through implementation of proposed management efficiencies, including clear criteria for what constitutes savings resulting from management efficiencies.

    Agency Affected: Department of Veterans Affairs

    Status: Closed - Implemented

    Comments: As part of our 2006 review of VA's health care management efficiency savings, we determined that VA lacked a methodology for making health care management efficiency savings assumptions reflected in the President's budget requests for fiscal years 2003 through 2006, including the lack of clear criteria as to what would constitute savings resulting from management efficiencies. To better determine whether management efficiency savings are being achieved as planned, we recommended that the Secretary of Veterans Affairs should direct the Assistant Secretary for Management to develop a methodology for tracking and reporting actual savings achieved through implementation of management efficiency initiatives, including clear criteria for what constitutes savings resulting from those management efficiencies. In November 2009, VA established a department-wide program to identify, track and document acquisition savings through the Office of Acquisition, Logistics and Construction, including criteria to be followed in calculating the planned savings. VA developed a schedule detailing the management efficiency initiatives to be undertaken, the planned savings, and the criteria and methodology as to how the savings were to be calculated. By implementing GAO's recommendation to develop a methodology for tracking and reporting actual savings achieved through management efficiency initiatives, including clear criteria as to what constitutes savings to be realized from those initiatives, VA has helped ensure the reliability of data on savings resulting from management efficiencies, as well as successful implementation of those initiatives.

    Recommendation: If VA continues to plan and budget for management efficiency savings, the Secretary of Veterans Affairs should direct the Assistant Secretary for Management to develop a methodology to project savings for management efficiency initiatives that provides key data and assumptions used to estimate the savings.

    Agency Affected: Department of Veterans Affairs

    Status: Closed - Implemented

    Comments: As part of our 2006 review of VA's health care management efficiency savings, we determined that VA lacked a methodology for determining the health care management efficiency savings assumptions reflected in the President's budget requests for fiscal years 2003 through 2006. Specifically, savings calculations did not identify the key data and assumptions used. We recommended that, if VA continues to plan and budget for management efficiency savings, the Secretary of Veterans Affairs should direct the Assistant Secretary for Management to develop a methodology to project savings for management efficiency initiatives that provides key data and assumptions used to estimate the savings. In November 2009, VA developed an Acquisition Savings Plan setting out projected savings to be achieved through various procurement initiatives. The plan also set out VA's methodology on how the savings estimates were calculated, and the key assumptions used in deriving the savings estimates. By implementing GAO's recommendation to put in place a methodology providing key data and assumptions used to estimate management efficiency savings, VA should have more reliable data which should help ensure the reliability of savings estimates to be realized through various management efficiency initiatives.

    Recommendation: To better determine whether management efficiency savings are being achieved as planned, the Secretary of Veterans Affairs should direct the Assistant Secretary for Management to establish methodologies for tracking and reporting actual savings achieved through implementation of proposed management efficiencies, including documentation of such savings.

    Agency Affected: Department of Veterans Affairs

    Status: Closed - Implemented

    Comments: As part of our 2006 review of VA's health care management efficiency savings, we determined that VA lacked an adequate methodology and supporting documentation for health care management efficiency savings assumptions reflected in the President's budget requests for fiscal years 2003 through 2006, including the lack of documentation supporting claimed savings. We recommended that the Secretary of Veterans Affairs should direct the Assistant Secretary for Management to develop a methodology for tracking and reporting actual savings achieved through implementation of proposed management efficiency initiatives, including supporting documentation of such savings. In November 2009, VA developed a department-wide program that provided for documenting acquisition savings (the Acquisition Savings Plan) that provided for accumulating and retaining documents used to calculate savings amounts. By implementing GAO's recommendation to document savings, VA should have more reliable data on its savings which should help ensure successful implementation of management efficiency initiatives.

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