VA and Defense Health Care:

Evolving Health Care Systems Require Rethinking of Resource Sharing Strategies

HEHS-00-52: Published: May 17, 2000. Publicly Released: May 17, 2000.

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Pursuant to a congressional request, GAO provided information on the Department of Veterans Affairs' (VA) and Department of Defense's (DOD) shared health care resources, focusing on: (1) the benefits gained from sharing; (2) the extent to which VA and DOD are sharing health care resources; and (3) barriers and challenges VA and DOD face in their efforts to share health resources.

GAO noted that: (1) as a provider of services, VA most frequently cited increased revenue as a benefit and DOD most often cited the opportunity to enhance staff proficiency; (2) VA and DOD providers also cited fuller utilization of staff and equipment as benefits; (3) as a receiver of services, VA cited improved beneficiary access and DOD cited reduced cost of services as benefits; (4) for fiscal year (FY) 1998, sharing activity occurred under 412, or about three-quarters, of the existing local sharing agreements; (5) direct medical care accounted for about two-thirds of services exchanged--the remaining one-third included ancillary services, such as laboratory testing, and support services, such as laundry; (6) most of this activity occurred under a few agreements and at a few facilities, usually in locations where multiple DOD facilities were near VA hospitals or where DOD facilities provided specialized services; (7) overall, 75 percent of direct medical care episodes occurred under just 12 agreements for inpatient care, 19 agreements for outpatient care, and 12 agreements for ancillary care; (8) reimbursements for care provided under sharing agreements were similarly concentrated; (9) in FY 1998, three-quarters of the $29 million in reimbursements for provided care was collected by only 26 of the 145 facilities participating in active agreements; (10) at the joint venture sites, where another $21 million in services was exchanged, GAO found activity was concentrated at the two locations where VA and DOD integrated many hospital services and administrative processes; (11) specifically, almost 300,000 episodes of care were provided, and $3.2 million in cost avoidance was measured at these two locations; (12) two barriers identified most often by both VA and DOD are: (a) inconsistent reimbursement and budgeting policies; and (b) burdensome agreement approval processes; (13) a more recent barrier centers on DOD policies and guidance in implementing its managed care program; (14) a DOD legal opinion and subsequent policy in effect prohibits military treatment facilities from using existing sharing agreements with VA for direct medical care; (15) consequently, DOD's contracts with private health care companies may supersede the sharing of direct medical care between VA and DOD facilities; and (16) while the policy supports VA facilities' participation in the contractors' health care networks, the military Surgeons General and local VA and DOD officials told GAO that the policy is causing confusion over what services can be shared.

Status Legend:

More Info
  • 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

    Matter for Congressional Consideration

    Matter: As the health care environment in which VA and DOD share resources continues to evolve, VA and DOD will likely continue to be challenged in their collaborations on how best to make effective use of excess federal health care resources. If the two agencies are unable to resolve their differences in a reasonable amount of time, Congress should consider providing direction and guidance that clarifies the criteria, conditions, roles, and expectations for VA and DOD collaboration.

    Status: Closed - Not Implemented

    Comments: In October 2000 Congress passed the 2001 Defense Authorization Act (H.R. 4305) Sect. 739, which gave full force and effect to any agreements under Section 8111 of Title 38, USC or under section 1535 of Title 31, USC that were in effect on September 30, 1999, but allowed for any modifications or terminations to be made by the sharing partners in accordance with the terms of such agreements. The Act also required that payments for any services or resources provided under sharing agreements be directly paid by the military departments. In July 2001 legislation was introduced in the House to further enhance sharing. H.R. 2667, Department of Defense and Department of Veterans Affairs Health Resources Access Improvement Act of 2001, proposes demonstration sites at five locations where impediments to sharing that GAO has identified will be addressed in order to take full advantage of opportunities to integrate selected VA and DOD facilities.

    Recommendations for Executive Action

    Recommendation: To increase the attractiveness of VA medical centers (VAMC) as cost-effective providers of services to DOD, the Secretary of Veterans Affairs should direct the Under Secretary for Health to ensure that VAMCs follow VA's guidelines and charge incremental costs rather than total costs under sharing agreements.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: VA Medical Centers are directed to use a range of incremental charges--from a low based on marginal cost to a high based on market price--rather than total costs. VA officials said that most VA medical centers are already pricing within this range, but the VA Handbook (Section 1660.1) will be revised in October 2000 to incorporate this change.

    Recommendation: To provide stability to the sharing program while DOD and VA reassess how best to achieve the goals of resource sharing legislation, the Secretary of Defense should direct the Assistant Secretary of Health Affairs to review and clarify, for each category of beneficiary, DOD's policy on the extent to which direct medical sharing is permitted with VA, including whether the current sharing agreements are still in effect and under what circumstances DOD requires VA to be part of the TRICARE network in order to share resources, provide clear guidance to contractors on how to process claims to ensure timely reimbursements, and take a more proactive role in managing the joint VA/DOD sharing database.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: Based on the recommendation to reassess how to best achieve the goals of the sharing program and to provide clear guidance on processing claims for sharing agreements, on May 16, 2000, DOD issued a revised policy on the use of Department of Veterans Affairs (VA) health care facilities. The memo clarified May 14, 1999, guidance that, in effect, nullified the sharing agreements. The revised policy stated that the earlier memorandum did not prohibit agreements between VA facilities and MTFs and that such agreements could continue to be authorized. It also clarified its policy to include VA medical centers (VAMCs) in its TRICARE program. To eliminate the confusion surrounding payment responsibility for sharing agreements, DOD changed its policy to require that claims for sharing agreements be submitted directly to the MTF involved or other DOD entities specified in the agreement, rather than submitting the claim to the managed care support contractors.

    Recommendation: To increase the usefulness of the joint VA/DOD database as a means for assessing and reporting sharing progress to Congress, the Secretaries of Veterans Affairs and Defense should direct the Under Secretary for Health and the Assistant Secretary of Defense for Health Affairs to include in the joint database: (1) the volume and types of services provided, reimbursements collected, and costs avoided under local and joint venture sharing agreements between VA and DOD facilities by having facilities report this activity to the medical sharing office; and (2) similar information on the progress and activity occurring under national initiatives and other sharing activities authorized outside of the VA and DOD Health Resources Sharing and Emergency Operations Act.

    Agency Affected: Department of Defense

    Status: Closed - Not Implemented

    Comments: On August 26, 2005, VHA forwarded the following response to GAO for this recommendation: In August 2004, DOD recommended this item be closed out. The Resource Sharing Office agrees with DOD that the recommendation concerning improvements to the VA-DOD Database be closed out.

    Recommendation: To increase the usefulness of the joint VA/DOD database as a means for assessing and reporting sharing progress to Congress, the Secretaries of Veterans Affairs and Defense should direct the Under Secretary for Health and the Assistant Secretary of Defense for Health Affairs to include in the joint database: (1) the volume and types of services provided, reimbursements collected, and costs avoided under local and joint venture sharing agreements between VA and DOD facilities by having facilities report this activity to the medical sharing office; and (2) similar information on the progress and activity occurring under national initiatives and other sharing activities authorized outside of the VA and DOD Health Resources Sharing and Emergency Operations Act.

    Agency Affected: Department of Veterans Affairs

    Status: Closed - Not Implemented

    Comments: On August 5, 2004, the Deputy Assistant Secretary of Defense provided a response to the open GAO recommendation on the Department's efforts to create a joint VA/DOD database. The Secretary stated that, "Upon further review, we believe the investment of dollars and efforts spent to develop the database would not result in improved management of DoD/VA sharing agreements." Accordingly, VA and DOD have not planned and do not at this time plan to create a joint database that captures the volume and types of services exchanged by both agencies under health resource sharing agreements.

    Recommendation: To the extent sharing opportunities and potential are identified, the Secretaries of Veterans Affairs and Defense should jointly address the barriers that have impeded sharing and collaboration, by establishing procedures to accommodate each other's budgeting and resources management functions as well as facilitate timely billing, reimbursement, and agreement approval.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: Based on the recommendation to jointly assess how best to achieve the goals of health resource sharing and to eliminate barriers that have impeded sharing, the VA/DOD Executive Council established a VA/DOD Partnership Work Group to follow up on policy and operational issues and consider barriers that impede sharing. Together VA and DOD have eliminated reimbursement and billing barriers by reversing a May 1999 DOD policy that now allows VA to again directly bill MTFs, rather than submitting sharing agreement claims to the managed care support contractors.

    Recommendation: The Secretaries of Veterans Affairs and Defense should jointly assess how best to achieve the goals of health resource sharing, considering the changes that have occurred over the last decade in the VA and DOD health care systems and the populations they serve. This assessment should include a determination of the most cost-effective means of providing care to beneficiaries from the federal government's perspective--not just from the perspective of either VA or DOD. As part of this assessment, DOD and VA should determine the appropriate mix of purchasing care directly from contractors or providing care directly through their own systems, including medical sharing opportunities, by identifying current and expected excess capacities.

    Agency Affected: Department of Defense

    Status: Closed - Implemented

    Comments: Based on the recommendation, the VA/DOD Executive Council has formed a VA/DOD Partnering Work Group. Under the new Council format, the various work groups will meet monthly and the full council will meet quarterly. Agenda issues for the VA/DOD Partnering Work Group include improving use of the VA/DOD national agreements, implementing the VA Millennium Act, sharing medical specialists, and addressing recognized budgeting and resource management barriers including billing and reimbursement issues. Per VA and DOD officials, the work group recognizes significant changes occurring in both health care systems and the need to improve communication and coordination, as well as business processes. Planned actions to review all existing sharing agreements will consider GAO's recommendation to identify excess capacities. VA will also include in its study of service delivery options and capital asset realignment options for each of its 22 networks, an assessment of existing and potential opportunities to enhance veteran health care through the appropriate sharing of resources among government and private health care providers.

    Recommendation: The Secretaries of Veterans Affairs and Defense should jointly assess how best to achieve the goals of health resource sharing, considering the changes that have occurred over the last decade in the VA and DOD health care systems and the populations they serve. This assessment should include a determination of the most cost-effective means of providing care to beneficiaries from the federal government's perspective--not just from the perspective of either VA or DOD. As part of this assessment, DOD and VA should determine the appropriate mix of purchasing care directly from contractors or providing care directly through their own systems, including medical sharing opportunities, by identifying current and expected excess capacities.

    Agency Affected: Department of Veterans Affairs

    Status: Closed - Implemented

    Comments: Based on the recommendation, the VA/DOD Executive Council has formed a VA/DOD Partnering Work Group. Under the new Council format, the various work groups will meet monthly and the full council will meet quarterly. Agenda issues for the VA/DOD Partnering Work Group include improving use of the VA/DOD national agreements, implementing the VA Millennium Act, sharing medical specialists, and budgeting and resource management barriers including billing and reimbursement issues. Per VA and DOD officials, the work group recognizes significant changes occurring in both health care systems and the need to improve communication and coordination, as well as business processes. Planned actions to review all existing sharing agreements will consider GAO's recommendation to identify excess capacities.

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