oversight

Department of Veterans Affairs: Key Management Challenges in Health and Disability Programs

Published by the Government Accountability Office on 2003-05-08.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                          United States General Accounting Office

GAO                       Testimony
                          Before the Committee on Veterans’
                          Affairs, House of Representatives


For Release on Delivery
Expected at 10:00 a.m.
Thursday, May 8, 2003     DEPARTMENT OF
                          VETERANS AFFAIRS
                          Key Management
                          Challenges in Health and
                          Disability Programs
                          Statement of Cynthia A. Bascetta
                          Director, Health Care—Veterans’
                           Health and Benefits Issues




GAO-03-756T
                                               May 8, 2003


                                               DEPARTMENT OF VETERANS AFFAIRS

                                               Key Management Challenges in Health
Highlights of GAO-03-756T, a testimony
before the Committee on Veterans’ Affairs,     and Disability Programs
House of Representatives




In previous GAO reports and                    VA has taken actions to address key challenges in its health care and
testimonies on the Department of               disability programs. However, growing demand for health care and a
Veterans Affairs (VA), and in its              potentially larger and more complex disability workload may make VA’s
ongoing reviews, GAO identified                challenges in these areas more complex.
major management challenges
related to enhancing access to
health care, improving the                     •   Enhancing access to health care. VA is challenged to deliver timely,
efficiency of health care delivery,                convenient health care to its enrolled veteran population. Too many
and improving the effectiveness of                 veterans continue to travel too far and wait too long for care. However,
disability programs. This                          shifting care closer to where veterans live is complicated by stakeholder
testimony underscores the                          interests. In addition, VA’s efforts to reduce waiting times may be
importance of continuing to make                   complicated by an anticipated short-term surge in demand for specialty
progress in addressing these                       outpatient care. VA also faces difficult challenges in providing equitable
challenges and ultimately                          access to nursing home care services to a growing elderly veteran
overcoming them.                                   population.
What Remains to Be Done                        •   Improving the efficiency of health care delivery. VA is challenged to
VA remains challenged to:                          find more efficient ways to meet veterans’ demand for health care. VA
•   ensure timely, convenient, and                 operates a large portfolio of aged buildings that is not well aligned to
    equitable access to health care,               efficiently meet veterans’ needs. As a result, VA faces difficult
    including hospital, specialty                  realignment decisions involving capital investments, consolidations,
    outpatient, and nursing home                   closures, and contracting with local providers. VA also faces challenges
    care;                                          in implementing management changes to improve the efficiency of
•   realign its health care delivery               patient support services, such as food and laundry services.
    infrastructure and implement
    other management initiatives               •   Improving the effectiveness of disability programs. VA is
    to increase the efficiency of                  challenged to find more effective ways to compensate veterans with
    the delivery of patient support
                                                   disabilities. VA’s outdated disability determination process does not
    services; and
•   seek solutions to modernize its                reflect a current view of the relationship between impairments and work
    disability programs as well as                 capacity. Advances in medicine and technology have allowed some
    improve the timeliness and                     individuals with disabilities to live more independently and work more
    quality of disability claims                   effectively. VA also faces continuing challenges to improve the
    decisions.                                     timeliness, quality and consistency of claims processing. Major
                                                   improvements may require fundamental program changes.

                                               GAO designated federal real property, including VA health care
                                               infrastructure, and federal disability programs, including VA disability
                                               benefits, as high-risk areas in January 2003. GAO did this to draw attention
                                               to the need for broad-based transformation in these areas, which is critical
                                               to improving the government’s performance and ensuring accountability
                                               within expected resource limits.


www.gao.gov/cgi-bin/getrpt?GAO-03-756T.

To view the full report, including the scope
and methodology, click on the link above.
For more information, contact Cynthia A.
Bascetta at (202) 512-7101.
Mr. Chairman and Members of the Committee:

Thank you for inviting me to discuss our past and current work on
veterans’ health care and disability benefits—two major program areas at
the Department of Veterans Affairs (VA). As you know, VA’s budget
submission for fiscal year 2004 includes about $64 billion and 214,000 staff.
In fiscal year 2002, VA spent about $23 billion to provide health care to
over 4 million veterans and about $26 billion to provide cash disability
benefits to over 3 million veterans, family members, and survivors.

It is especially fitting, with the recent deployment of our military forces to
armed conflict, that we reaffirm our commitment to provide high quality
services in a convenient and timely manner to those who serve our nation
in its times of need. Meeting this commitment as efficiently and effectively
as possible is also of paramount importance. In this regard, my statement
focuses on challenges that VA faces to ensure reasonable access to health
care, use its health care resources efficiently, and manage its disability
programs effectively.

My comments today are based on numerous reports and testimonies
issued over the last 7 years, including significant recommendations we
have made and VA’s progress in implementing them. (See Related GAO
Products.) We did our work in over 100 VA health care delivery locations
and conducted surveys of all 21 health care networks and reviews of
disability management issues covering all 57 disability claims processing
regional offices. We are also reporting preliminary results of ongoing
health care work that started in November 2002. This involves visits to
delivery locations, document reviews, and interviews with VA officials in
headquarters and the networks. We did our work in accordance with
generally accepted government auditing standards.

In summary, VA is challenged to meet the acute and nursing home care
needs of veterans in a timely, convenient, and equitable manner. Despite
VA’s significant access enhancements over the past several years, too
many veterans continue to travel too far and wait too long for
appointments, especially when they require hospital admissions or
consultations with specialists on an outpatient basis. When trying to
reduce travel times, VA faces difficult decisions because shifting care
closer to where veterans live can have significant ramifications for
stakeholders, such as medical schools, as well as for the use of VA’s
existing resources. In addition, VA’s efforts to reduce waiting times may be
complicated by an anticipated surge in demand for VA specialty outpatient
care over the next 10 years. Also, the population most in need of nursing


Page 1                                                            GAO-03-756T
home care—veterans who are 85 years old or older—is growing. As a
result, VA faces difficult decisions concerning the delivery and sizing of
nursing home care services to equitably meet these needs.

VA is also challenged to find ways to use available health care resources
more efficiently to meet veterans’ demand for health care. For example,
VA operates and maintains a large portfolio of aged health care assets,
primarily buildings. This infrastructure is no longer effectively aligned
with VA’s new delivery model that emphasizes outpatient care. As a result,
VA faces difficult realignment decisions involving capital investments,
consolidations, closures, and contracting with local providers. These may
have significant ramifications for stakeholders, such as medical schools
and unions, primarily because realignments involve a shifting of workload
among delivery locations or workforce reductions. VA also faces
challenges in implementing management changes to improve the
efficiency of patient support services, such as food and laundry services.

In addition, VA is challenged to find ways to compensate disabled veterans
in a more meaningful and timely manner. For example, VA uses a disability
determination process that is based on economic conditions in 1945 and,
as such, does not accurately reflect current relationships between
impairments and the skills and abilities needed to work in today’s business
environment. Moreover, the consequences of some medical conditions for
many individuals have been reduced through advances in medicine and
technology, which allow individuals to live with greater independence and
function more effectively in work settings. Besides modernizing the
economic and medical underpinnings of the program, VA remains in the
midst of significant challenges to improve the quality, timeliness, and
consistency of disability claims processing. Despite its recent efforts, too
many disabled veterans wait too long for disability decisions. Significant
and sustainable improvements may not be possible without fundamental
program design changes, including those that require legislative actions to
implement. VA and the Congress could face significant stakeholder
resistance to such changes.

I would also like to point out that we designated federal real property and
federal disability programs as high-risk areas in January 2003.1 We did this



1
 U.S. General Accounting Office, High-Risk Series: An Update, GAO-03-119 (Washington,
D.C.: Jan. 1, 2003); U.S. General Accounting Office, High-Risk Series: Federal Real
Property, GAO-03-122 (Washington, D.C.: Jan. 1 2003).




Page 2                                                                   GAO-03-756T
                 to draw attention to the need for broad-based transformation in these
                 areas, which is critical to improving the government’s performance and
                 ensuring accountability within expected resource limits. If this
                 transformation is well implemented, agencies will be better positioned to
                 achieve mission effectiveness, reduce operating costs, improve facility
                 conditions, and enhance security and safety.


                 During World War I, Public Health Service hospitals treated returning
Background       veterans and, at the end of the war, several military hospitals were
                 transferred to the Public Health Service to enable it to continue treating
                 injured soldiers. In 1921, those hospitals were transferred to the newly
                 established Veterans’ Bureau. By the early 1990s, the veterans’ health care
                 system had grown into one of our nation’s largest direct providers of
                 health care, comprising more than 172 hospitals.

                 In October 1995, VA began to transform its health care system from a
                 hospital-dominated model to one that provides a full range of health care
                 services. A key feature of this transformation involves the development of
                 community-based, integrated networks of VA and non-VA providers that
                 could deliver health care closer to where veterans live. At that time, about
                 half of all veterans lived more than 25 miles from a VA hospital; about 44
                 percent of those admitted to VA hospitals lived more than 25 miles away.2
                 In making care more proximate to veterans’ homes, VA also began shifting
                 the delivery of health care from high-cost hospital settings to lower-cost
                 outpatient settings.

                 To facilitate VA’s transformation, the Congress passed the Veterans’
                 Health Care Eligibility Reform Act of 1996, which furnishes tools that VA
                 said were key to a successful transformation, including:

             •   new eligibility rules that allow VA to treat veterans in the most appropriate
                 setting;
             •   a uniform benefits package to provide a continuum of services; and
             •   an expanded ability to purchase services from private providers.




                 2
                 U.S. General Accounting Office, VA Health Care: How Distance From VA Facilities
                 Affects Veterans’ Use of VA Services GAO/HEHS-96-31 (Washington, D.C.: Dec. 20, 1995).




                 Page 3                                                                    GAO-03-756T
Today, VA operates over 800 delivery locations nationwide, including over
600 community-based outpatient clinics and 162 hospitals. VA’s delivery
locations are organized into 21 geographic areas, commonly referred to as
networks. Each network includes a management office responsible for
making basic budgetary, planning, and operating decisions concerning the
delivery of health care to its veterans. Each office oversees between 5 and
11 hospitals, as well as many community-based outpatient clinics.

To promote more cost-effective use of resources, VA is authorized to share
resources with other federal agencies to avoid unnecessary duplication
and overlap of activities. VA and the Department of Defense (DOD) have
entered into agreements to exchange inpatient, outpatient, and specialty
care services as well as support services. Local facilities also have
arranged to jointly purchase pharmaceuticals, laboratory services, medical
supplies, and equipment.

Also, VA has been authorized to enter into agreements with medical
schools and their teaching hospitals. Under these agreements, VA
hospitals provide training for medical residents, and appoint medical
school faculty as VA staff physicians to supervise resident education and
patient care. Currently, about 120 medical schools and teaching hospitals
have affiliation agreements with VA. About 28,000 medical residents
receive some of their training in VA facilities every year.

Veterans’ eligibility for health care also has evolved over time. Before
1924, VA health care was available only to veterans who had wounds or
diseases incurred during military service. Eligibility for hospital care was
gradually extended to war-time veterans with lower incomes and, in 1973,
to peace time veterans with lower incomes. By 1986, all veterans were
eligible for hospital and outpatient care for service-connected conditions
as well as for conditions unrelated to military service.3

VA implemented an enrollment process in 1998 that was established
primarily as a means of prioritizing care if sufficient resources were not
available to serve all veterans seeking care. About 6.2 million veterans had
enrolled by the end of fiscal year 2002. In contrast, the overall veteran
population is estimated to be about 25 million. VA projects a decline in the




3
U.S. General Accounting Office, VA Health Care: Issues Affecting Eligibility Reform
Efforts, GAO/HEHS-96-160 (Washington, D.C.: Sept. 11, 1996).




Page 4                                                                    GAO-03-756T
total veteran population over the next 20 years while the enrolled
population is expected to decline more slowly as shown in table 1.

Table 1: Veteran Population and Enrollment Projections between Fiscal Years 2007
and 2022 (in millions)

                                              2007         2012         2017         2022
    Veteran population                         22.8        20.6         18.6         16.9
    Enrollment                                  6.3          6.3          6.1          5.7

Source: VA



In addition to health care, VA provides disability benefits to those veterans
with service-connected conditions. Also, VA provides pension benefits to
low-income wartime veterans with permanent and total disabilities
unrelated to military service. Further, VA provides compensation to
survivors of service members who died while on active duty.

Disabled veterans are entitled to cash benefits whether or not employed
and regardless of the amount of income earned. The cash benefit level is
based on the percentage evaluation, commonly called the “disability
rating,” that represents the average loss in earning capacity associated
with the severity of physical and mental conditions. VA uses its Schedule
for Rating Disabilities to determine which disability rating to assign to a
veteran’s particular condition. VA’s ratings are in 10 percent increments,
from 0 to 100 percent.

Although VA generally does not pay disability compensation for
disabilities rated at 0 percent, such a rating would make veterans eligible
for other benefits, including health care. About 65 percent of veterans
receiving disability compensation have disabilities rated at 30 percent or
lower; about 8 percent are 100 percent disabled. Basic monthly payments
range from $104 for a 10 percent disability to $2,193 for a 100 percent
disability.

To process claims for these benefits, VA operates 57 regional offices.
These offices made almost 800,000 rating-related decisions4 in fiscal year
2002. Regional office personnel develop claims, obtain the necessary


4
 Rating-related claims are primarily original claims for compensation and pension benefits
and “reopened” claims; for example, when a veteran claims that a service-connected claim
has worsened.




Page 5                                                                       GAO-03-756T
                           information to evaluate claims, and determine whether to grant benefits.
                           In doing so, they consider veterans’ military service records, medical
                           examination and treatment records from VA health care facilities, and
                           treatment records from private providers. Once claims are developed, the
                           claimed disabilities are evaluated, and ratings are assigned based on
                           degree of disability. Veterans with multiple disabilities receive a single,
                           composite rating. For veterans claiming pension eligibility, the regional
                           office also determines if the veteran served in a period of war, is
                           permanently and totally disabled for reasons unrelated to military service,
                           and meets the income thresholds for eligibility.


                           Over the past several years, VA has done much to ensure that veterans
Access to Health Care      have greater access to health care. Despite this, travel times and waiting
Could Be Enhanced          times are still problems. Another problem faced by aging veterans is
                           potentially inequitable access to nursing home care.


Many Veterans Travel Too   The substantial increase in VA health care delivery locations has enhanced
Far for Hospital           access for enrolled veterans in need of primary care, although many still
Admissions and Specialty   travel long distances for primary care.5 In addition, many who need to
                           consult with specialists or require hospitalization often travel long
Consultations              distances to receive care. Nationwide, for example, more than 25 percent
                           of veterans enrolled in VA health care—over 1.7 million—live over 60
                           minutes driving time from a VA hospital. These veterans would have to
                           travel a long distance if they require admissions or consultations with
                           specialists, such as urologists or cardiologists, located at the closest VA
                           hospitals.

                           In October 2000, VA established the Capital Asset Realignment for
                           Enhanced Services (CARES) program, which has a goal of improving
                           veterans’ access to acute inpatient care, primary care, and specialty care.
                           CARES is intended to identify how well the geographic distribution of VA
                           health care resources matches projected needs and the shifts necessary to
                           better align resources and needs. Toward that end, VA has divided, for
                           analytical purposes, its 21 networks into 76 geographic areas—groups of
                           counties—in order to determine the extent to which enrollees’ travel times
                           exceed VA’s access standards.



                           5
                            U.S. General Accounting Office, VA Health Care: Community-Based Clinics Improve
                           Primary Care Access, GAO-01-678T (Washington, D.C.: May 2, 2001).




                           Page 6                                                                 GAO-03-756T
For example, as part of CARES, VA has mandated that the 21 network
directors identify ways to ensure that at least 65 percent of the veterans in
their areas are within VA’s access standards for hospital care—60 minutes
for veterans residing in urban counties, 90 minutes for those in rural
counties, and 120 minutes for those in highly rural counties. VA has
identified 25 areas that do not meet this 65 percent target. In these areas,
over 900,000 enrolled veterans have travel times that exceed VA’s access
standards. In addition, as part of CARES, VA identified 51 other areas
where access enhancements may be addressed at the discretion of
network directors, given that at least 65 percent of all enrolled veterans in
those areas have travel times that meet VA’s standard. In these areas,
about 875,000 enrolled veterans have travel times that exceed VA’s
standards.

By contrast, VA has not mandated that network directors enhance access
for veterans who travel long distances to consult with specialists. Unlike
hospital care, VA has not established standards for acceptable travel times
for specialty care. Currently, nearly 2 million enrolled veterans live more
than 60 minutes driving time from specialists located at the closest VA
hospital.

When considering ways to enhance access for veterans, VA network
directors may consider three basic options: construct a new VA-owned
and operated delivery location; negotiate a sharing agreement with
another federal entity, such as a DOD facility; or contract with nonfederal
health care providers. Shifting the delivery of health care closer to where
veterans live may have significant ramifications for other stakeholders,
such as medical schools. For example, within the 76 areas, there are
smaller geographic areas that contain large concentrations of enrollees
outside VA’s access standards—10,000 or more—who live closer to non-
VA hospitals than they do to the nearest VA hospitals. Such enrolled
veterans could account for significant portions of the hospital workload at
the nearest VA delivery locations. Therefore, a shifting of this workload
closer to veterans’ residences could reduce the size of residency training
opportunities at existing VA delivery locations.

Enhancing veterans’ access can also have significant ramifications
regarding the use of VA’s existing resources. Currently, VA has most of its
resources dedicated to costs associated with its existing hospitals and
other infrastructure, including clinical and support staff, at its major
health care delivery locations. Reducing veterans’ travel times through
contracting with providers in local communities or other options could
reduce demand for services at VA’s existing, more distant delivery


Page 7                                                           GAO-03-756T
                         locations. Efficient operation of those locations could become more
                         difficult given the smaller workloads in relation to the operating costs of
                         existing hospitals.


Many Veterans Wait Too   We also have found that excessive waiting times for VA outpatient care
Long for Appointments    persist—a situation that we have reported on for the last decade. For
                         example, in August 2001, we reported that veterans frequently wait longer
                         than 30 days—VA’s access standard—for appointments with specialists at
                         VA delivery locations in Florida and other areas of the country.6 More
                         recently, a Presidential task force reported in its July 2002 interim report
                         that veterans are finding it increasingly difficult to gain access to VA care
                         in selected geographic regions.7 For example, the task force found that the
                         average waiting time for a first outpatient appointment in Florida, which
                         has a large and growing veteran population, is over a year.

                         Although there is general consensus that waiting times are excessive, we
                         reported, and VA agreed, that its data did not reliably measure the scope of
                         the problem.8 To improve its data, VA is in the process of developing an
                         automated system to more systematically measure waiting times. VA has
                         also taken several actions to mitigate the impact of long waiting times,
                         including limiting enrollment of lower priority veterans and granting
                         priority for appointments to certain veterans with service-connected
                         disabilities.9

                         VA faces an impending challenge, however, reducing the length of times
                         veterans wait for appointments. Specifically, VA’s current projections of
                         acute health care workload indicate a surge in demand for acute health



                         6
                         U.S. General Accounting Office, VA Health Care: More National Action Needed to Reduce
                         Waiting Times, but Some Clinics Have Made Progress, GAO-01-953 (Washington, D.C.:
                         Aug. 31, 2001).
                         7
                          President’s Task Force to Improve Health Care Delivery for Our Nation’s Veterans:
                         Interim Report, (Washington, D.C.: July 31, 2002).
                         8
                          U.S. General Accounting Office, Veterans’ Health Care: VA Needs Better Data on Extent
                         and Causes of Waiting Times, GAO/HEHS-00-90 (Washington, D.C.: May 31, 2000).
                         9
                          The Veterans’ Health Care Eligibility Reform Act of 1996 required VA to establish priority
                         categories for enrollment to manage access in relation to available resources. VA has 8
                         priority categories, with Priority 1 veterans—those with service-connected disabilities
                         rated 50 percent or more—having the highest priority for enrollment. By contrast, Priority 8
                         veterans are primarily veterans with no service-connected disabilities and higher incomes.




                         Page 8                                                                       GAO-03-756T
                        care services over the next 10 years. For example, specialty outpatient
                        demand nationwide is expected to almost double by fiscal year 2012.


Veterans’ Access to     VA’s long-term care infrastructure, including nursing homes it operates,
Nursing Home Care May   was developed when the concentration of veteran population was
Be Inequitable          distributed differently by region. Consequently, the location of VA’s
                        current infrastructure may not provide equitable access across the
                        country. In addition, when VA developed its long-term care infrastructure,
                        it relied more on nursing home care and less on home and community-
                        based services than current practice. To help update VA’s long-term care
                        policy, the Federal Advisory Committee on the Future of VA Long-Term
                        Care recommended in 1998 that VA maintain its nursing home capacity at
                        the level of that time but meet the growing veteran demand for long term
                        care by greatly expanding home and community-based service capacity.10
                        The House Committee on Veterans’ Affairs has expressed concern that VA
                        needs to maintain its nursing home capacity workload at 1998 levels.

                        VA currently operates its own nursing home care units in 131 locations,
                        according to VA headquarters officials. In addition, it pays for nursing
                        home care under contract in community nursing homes. VA also pays part
                        of the cost of care for veterans at state veterans’ nursing homes and in
                        addition pays a portion of the construction costs for some state veterans’
                        nursing homes. In all these settings combined, VA’s nursing home
                        workload—average daily census—has declined by more than 1,800 since
                        1998. See table 2. The biggest decline has been in community nursing
                        home care where the average daily census was 31 percent less in 2002 than
                        in 1998. Average daily census in VA-operated nursing homes also declined
                        by 11 percent during this period. A 9 percent increase in state veterans’
                        nursing homes’ average daily census offsets some of the decline in average
                        daily census in community and VA-operated nursing homes.




                        10
                          VA Long-Term Care At The Crossroads: Report of the Federal Advisory Committee on
                        the Future of VA Long-Term Care, (Washington, D.C.: June, 1998).




                        Page 9                                                                 GAO-03-756T
Table 2: Nursing Home Average Daily Census Provided or Paid for by VA in Fiscal
Years 1998-2002

 Type of nursing home                          1998       1999        2000       2001        2002
 VA nursing homes                             13,426     12,653      11,828     11,674     11,974
 Community nursing homes                       5,575      4,547       3,682      4,010      3,831
 State veterans’ nursing homes                14,602     15,051      15,286     15,593     15,941
 Total                                        33,603     32,251      30,796     31,277     31,746

Source: VA.

Note: The average daily census represents the total number of days of nursing home care divided by
the number of days in the year.


VA headquarters officials told us that the decline in nursing home average
daily census could be the result of a number of factors. These factors
include providing more emphasis on shorter-term care for post-acute care
rehabilitation, providing more home and community-based services to
obviate the need for nursing home care, assisting veterans to obtain
placement in community nursing homes where care is financed by other
payers, such as Medicaid, when appropriate, and difficulty recruiting
enough nursing staff to operate all beds in some VA-operated nursing
homes.

VA policy provides networks broad discretion in deciding what nursing
home care to offer those patients that VA is not required to provide
nursing home care to under the provisions of the Veterans Millennium
Health Care and Benefits Act of 1999.11 Networks’ use of this discretion
appears to result in inequitable access to nursing home care. For example,
some networks have policies to provide long-term nursing home care to
these veterans who need such care if resources allow, while other
networks do not have such policies. As a result, these veterans who need
long-term nursing home care may have access to that care in some
networks but not others. This is significant because about two-thirds of
VA’s current nursing home users are recipients of discretionary nursing
home care.




11
 This act requires that VA provide nursing home care to veterans with service-connected
disabilities of 70 percent or more and those who need such care because of a service-
connected disability. This provision of the act expires on December 31, 2003.




Page 10                                                                            GAO-03-756T
                      VA intended to address veterans’ access to nursing home care as part of its
                      larger CARES initiative to project future health care needs and determine
                      how to ensure equitable access. However, initial projections of nursing
                      home need exceeded VA’s current nursing home capacity. VA said that the
                      projections did not reflect its long-term care policy and decided not to
                      include nursing home care in its CARES initiative. Instead, VA officials
                      told us that they have developed a separate process to provide projections
                      for nursing home, and home and community-based services needs. These
                      officials expect that new projections will be developed for consideration
                      by the Under Secretary for Health by July 2003. VA officials also told us
                      that VA will use this information in its strategic planning initiatives to
                      address nursing home and other long-term care issues at the same time
                      that VA implements its CARES initiatives.

                      Because VA has not systematically examined its nursing home policies and
                      access to care, veterans have no assurance that VA’s $2 billion nursing
                      home program is providing equitable access to care to those who need it.
                      This is particularly important given the aging of the veteran population.
                      The veteran population most in need of nursing home care—veterans 85
                      years old or older—is expected to increase from almost 640,000 to over 1
                      million by 2012 and remain at about that level through 2023. Until VA
                      develops a long-term care projection model consistent with its policy, VA
                      will not be able to determine if its nursing home care units in 131 locations
                      and other nursing home care services it pays for provide equitable access
                      to veterans now or in the future.


                      In recent years, VA has made an effort to realign its capital assets,
Efficiency Could Be   primarily buildings, to better serve veterans’ needs as well as institute
Improved through      other needed efficiencies. Despite this, many of VA’s buildings remain
                      underutilized and patient support services are not always provided
Health Care Asset     efficiently. VA could make better use of its resources by taking steps to
Realignment and       partner with other public and private providers, purchase care from such
                      providers, replace obsolete assets with modern ones, consolidate
Other Management      duplicative care provided by multiple locations serving the same
Actions               geographic areas where it would be cost effective to do so, and assess
                      various management options to improve the efficiency of patient support
                      services.




                      Page 11                                                          GAO-03-756T
Capital Assets Not Well-    VA has a large and aged infrastructure, which is not well aligned to
Aligned to Meet Veterans’   efficiently meet veterans’ needs. In recent years, as a result of new
Needs                       technology and treatment methods, VA has shifted delivery from inpatient
                            to outpatient settings in many instances and shortened lengths of stay
                            when hospitalization was required. Consequently, VA has excess inpatient
                            capacity at many locations.

                            For example, in August 1999, we reported that VA owned about 4,700
                            buildings, over 40 percent of which had operated for more than 50 years,
                            and almost 200 of which were built before 1900. Many organizations in the
                            facilities management environment consider 40 to 50 years to be the useful
                            life of a building.12 Moreover, VA used fewer than 1,200 of these buildings
                            (about one-fourth of the total) to deliver health care services to veterans.
                            The rest were used primarily to support health care activities, although
                            many had tenants or were vacant.13 In addition, most delivery locations
                            had mission-critical buildings that VA considered functionally obsolete.
                            These included, for example, inpatient rooms not up to industry standards
                            concerning patient privacy; outpatient clinics with undersized examination
                            rooms; and buildings with safety concerns, such as vulnerability to
                            earthquakes.

                            As part of VA’s transformation, begun in 1995, its networks implemented
                            hundreds of management initiatives that significantly enhanced their
                            overall efficiency and effectiveness.14 The success of these strategies—
                            shifting inpatient care to more appropriate settings, establishing primary
                            care in community clinics, and consolidating services in order to achieve
                            economies of scale—significantly reduced utilization at most of VA’s
                            inpatient delivery locations. For example, VA operated about 73,000
                            hospital beds in fiscal year 1995. In 1998, veterans used on average fewer
                            than 40,000 hospital beds per day, and by 2001 usage had further declined
                            to about 16,000 hospital beds per day.




                            12
                             Price Waterhouse, Independent Review of the Department of Veterans Affairs’ Office of
                            Facilities Management (Washington, D.C.: June 17, 1998).
                            13
                              Health care support buildings include warehouses, engineering shops, laundries, fire
                            stations, day care centers and boiler plants.
                            14
                             U.S. General Accounting Office, Veterans’ Affairs: Progress and Challenges in
                            Transforming Health Care, GAO/T-HEHS-99-109 (Washington, D.C.: April 15, 1999).




                            Page 12                                                                      GAO-03-756T
In 1999, we concluded that VA’s existing infrastructure could be the
biggest obstacle confronting VA’s ongoing transformation efforts.15 During
a hearing in 1999 before this Committee’s Subcommittee on Health, we
pointed out that, although VA was addressing some realignment issues, it
did not have a plan in place to identify buildings that are no longer needed
to meet veterans’ health care needs. We recommended that VA develop a
market-based plan for restructuring its delivery of health care in order to
reduce funds spent on underutilized or inefficient buildings. In turn those
funds could be reinvested to better serve veterans’ needs by placing health
care resources closer to where they live.

To do so, we recommended that VA comply with guidance from the Office
of Management and Budget. The guidance suggested that market-based
assessments include (1) assessing a target population’s needs,
(2) evaluating the capacity of existing assets, (3) identifying any
performance gaps (excesses or deficiencies), (4) estimating assets’ life
cycle costs, and (5) comparing such costs to other alternatives for meeting
the target population’s needs. Alternatives include (1) partnering with
other public or private providers, (2) purchasing care from such providers,
(3) replacing obsolete assets with modern ones, or (4) consolidating
services duplicated at multiple locations serving the same market.

During the 1999 hearing, the subcommittee chairman urged VA to
implement our recommendations and VA agreed to do so. In August 2002,
VA announced the results of a pilot study in its Great Lakes network,
which includes Chicago and other locations. VA selected three
realignment strategies in this network – consolidation of services at
existing locations, opening of new outpatient clinics, and closure of one
inpatient location. Currently, VA is analyzing ways to realign health care
delivery in its 20 remaining networks. VA expects to issue its plans by the
end of 2003. To date, VA has projected veterans’ demand for acute health
care services through fiscal year 2022, evaluated available capacity at its
existing delivery locations, and targeted geographic areas where
alternative delivery strategies could allow VA to operate more efficiently
and effectively while ensuring access consistent with its standards for
travel time.




15
 U.S. General Accounting Office, VA Health Care: Capital Asset Planning and Budgeting
Need Improvement, GAO/T-HEHS-99-83 (Washington, D.C: Mar. 10, 1999).




Page 13                                                                 GAO-03-756T
For example, VA has the opportunity to achieve efficiencies through
economies of scale in 30 geographic areas where two or more major
health care delivery locations that are in close proximity provide
duplicative inpatient and outpatient health care services. VA may also
achieve similar efficiencies in 38 geographic areas where two or more
tertiary care delivery locations are in close proximity. VA considers
delivery locations to be in close proximity if they are within 60 miles of
one another for acute care and within 120 miles for tertiary care. In
addition, VA may achieve additional efficiencies in 28 geographic areas
where existing delivery locations have low acute medicine workloads,
which VA has defined as serving less than 40 hospital patients per day. VA
also identified more than 60 opportunities for partnering with the DOD to
better align the infrastructure of both agencies.16

VA faces difficult challenges when attempting to improve service delivery
efficiencies. For example, service consolidations can have significant
ramifications for stakeholders, such as medical schools and unions,
primarily due to shifting of workload among locations and workforce
reductions. Understandably, medical schools are reluctant to change long-
standing business relationships involving, among other things, training of
medical residents. For example, VA tried for 5 years to reach agreement on
how to consolidate clinical services at two of Chicago’s four major health
care delivery locations before succeeding in August 2002. This is because
such restructuring required two medical schools to use the same location
to train residents, a situation that neither supported.

Unions, too, have been reluctant to support planning decisions that result
in a restructuring of services. This is because operating efficiencies that
result from the consolidation of clinical services into a single location
could also result in staffing reductions for such support services as
grounds maintenance, food preparation, and housekeeping. For example,
as part of its ongoing transformation, VA proposed to consolidate food
preparation services of 9 delivery locations into a single location in New
York City in order to operate more efficiently. Two unions’ objections,


16
  In May 2000, we reported that most VA/DOD sharing activity involved a relatively small
number of sharing agreements and joint ventures. U.S. General Accounting Office, VA and
Defense Health Care: Evolving Health Care Systems Require Rethinking of Resource
Sharing Strategies, GAO/HEHS-00-52 (Washington, D.C.: May 17, 2000). The Congressional
Commission on Servicemembers and Veterans Transition Assistance also reported that
opportunities exist for greater sharing and partnering between VA and DOD. See Report of
the Congressional Commission on Servicemembers and Veterans Transition Assistance
(Washington, D.C.: Jan. 14, 1999).




Page 14                                                                   GAO-03-756T
however, slowed VA’s restructuring, although VA and the unions
subsequently agreed on a way to complete the restructuring.

VA also faces difficult decisions concerning the need for and sizing of
capital investments, especially in locations where future workload may
increase over the short term before steadily declining. In large part, such
declines are attributable to the expected nationwide decrease in the
overall veteran population by more than one-third by 2030; in some areas,
veteran population declines are expected to be steeper. It may be in VA’s
best interests to partner with other public or private providers for services
to meet veterans’ demands rather than risk making a major capital
investment that would be underutilized in the latter stages of its useful life.

In cases when VA’s realignment results in buildings that are no longer
needed to meet veterans’ health care needs, VA faces other difficult
decisions regarding whether to retain or dispose of these buildings. VA has
several options, including leasing, demolition, or transferring buildings to
the General Services Administration (GSA), which has the authority to
dispose of excess or surplus federal property. When there is no leasing
potential, VA faces potentially high demolition costs as well as uncertain
site preparation costs associated with the transfer of buildings to GSA.
Given that such costs involve the use of health care resources, ensuring
that disposal decisions are based on systematic analyses of costs and
benefits to veterans poses another realignment challenge.17

The challenge of dealing with a misaligned infrastructure is not unique to
VA. In fact, we identified federal real property management as a high-risk
area in January 2003. For the federal government overall and VA in
particular, technological advancements, changing public needs,
opportunities for resource sharing, and security concerns will call for a
new way of thinking about real property needs. In VA’s case, it has
recognized the critical need to better manage its buildings and land and is
in the process of implementing CARES to do so. VA has the opportunity to
lead other federal agencies with similar real property challenges. However,
VA and other agencies have in common persistent problems, including
competing stakeholder interests in real property decisions. Resolving
these problems will require high-level attention and effective leadership.




17
 U.S. General Accounting Office, VA Health Care: Improved Planning Needed for
Management of Excess Real Property, GAO-03-326 (Washington, D.C.: Jan. 29, 2003).




Page 15                                                                  GAO-03-756T
Patient Support Services   As VA continues to transform itself from an inpatient- to an outpatient-
Could Be Provided More     based health care system, it must find more efficient, systemwide ways of
Efficiently                providing patient care support services, such as consolidation of services
                           and the use of competitive sourcing. For example, VA’s shift in emphasis
                           from inpatient to outpatient health care delivery has significantly reduced
                           the need for inpatient care support services, such as food and laundry
                           services. To make better use of resources, some VA inpatient facilities
                           have consolidated food production locations, used lower-cost Veterans
                           Canteen Service (VCS) workers instead of higher-paid Nutrition and Food
                           Service workers18 to provide inpatient food services, or contracted out for
                           the provision of these services. Some VA facilities have also consolidated
                           two or more laundries into a single location, contracted for labor to
                           operate VA laundries, or contracted out laundry services to commercial
                           organizations.

                           VA needs to systematically explore the further use of such options across
                           its health care system. In November 2000, we recommended that VA
                           conduct studies at all of its food and laundry service locations to identify
                           and implement the most cost-effective way to provide these services at
                           each location.19 At that time, we identified 63 food production locations
                           that could be consolidated into 29, saving millions of dollars annually. We
                           estimated that VA could potentially save millions of dollars by
                           consolidating both food and laundry production locations.

                           VA may also be able to reduce its food and laundry service costs at some
                           facilities through competitive sourcing—through which VA would
                           determine whether it would be more cost-effective to contract out these
                           services or provide them in-house. VA must ensure, however, that, if a
                           decision to contract for services is made, contract terms on payments and
                           service quality standards will continue to be met. For example, we found
                           that weaknesses in the monitoring of VA’s Albany, New York laundry




                           18
                            The wage differences between the two result from differences in how wage rates for their
                           respective pay schedules are determined.
                           19
                            U.S. General Accounting Office, VA Health Care: Expanding Food Service Initiatives
                           Could Save Millions, GAO-01-64 (Washington, D.C.: Nov. 30, 2000); U.S. General
                           Accounting Office, VA Laundry Service: Consolidations and Competitive Sourcing Could
                           Save Millions, GAO-01-61 (Washington, D.C.: Nov. 30, 2000).




                           Page 16                                                                    GAO-03-756T
contract appear to have resulted in overpayments, reducing potential
savings.20

In August 2002, VA issued a directive establishing policy and
responsibilities for its networks to follow in implementing a competitive
sourcing analysis to compare the cost of contracting and the cost of in-
house performance to determine who can do the work most cost
effectively. VA has announced that, as part of the President’s Management
Agenda, it will complete studies of competitive sourcing of 55,000
positions by 2008. VA plans to complete studies of competitive sourcing
for all its laundry positions by the end of calendar year 2003. Similar
initiatives for food services and other support services are in the planning
stages at VA. Overall, VA’s plan for competitive sourcing shows promise.
However, VA has not yet established a timeline for implementing an
assessment of competitive sourcing and the other options we
recommended for all its inpatient food service locations. Until VA
completes these assessments and takes action to reduce costs, it may be
paying more for inpatient food services than required and as a result have
fewer resources available for the provision of health care to veterans.

We recognize that one of the options we recommended that VA assess, the
competitive sourcing process set forth in the Office of Management and
Budget (OMB) Circular A-76, historically has been difficult to implement.
Specifically, there are concerns in both the public and private sectors
regarding the fairness of the competitive sourcing process and the extent
to which there is a “level playing field” for conducting public-private
competitions. It was against this backdrop that the Congress in 2001,
mandated that the Comptroller General establish a panel of experts to
study the process used by the government to make sourcing decisions. The
Commercial Activities Panel that the Comptroller convened conducted a
yearlong study, and heard repeatedly about the importance of competition
and its central role in fostering economy, efficiency, and continuous
performance improvement. The panel made a number of
recommendations for improving sourcing policies and processes.

As part of the administration’s efforts to implement the recommendations
of the Commercial Activities Panel, OMB published proposed changes to



20
 U.S. General Accounting Office, Inadequate Oversight of Laundry Facility at the
Department of Veterans Affairs Albany, New York, Medical Center, GAO-01-207R
(Washington, D.C.: Nov. 30, 2000).




Page 17                                                                   GAO-03-756T
                               Circular A-76 for public comment in November 2002. In our comments on
                               the proposal to the Director of OMB this past January, we noted the
                               absence of a link between sourcing policy and agency missions,
                               unnecessarily complicated source selection procedures, certain unrealistic
                               time frames, and insufficient guidance on calculating savings. The
                               administration is now considering those and other comments as it finalizes
                               the revisions to the Circular.


                               Significant program design and management challenges hinder VA’s ability
Fundamental Changes            to provide meaningful and timely support to disabled veterans and their
Could Improve                  families. VA relies on outmoded medical and economic disability criteria.
                               VA also has difficulty providing veterans with accurate, consistent, and
Effectiveness of VA’s          timely benefit decisions, although recent actions have improved
Disability Programs            timeliness.


VA’s Disability Criteria Are   In assessing veterans’ disabilities, VA remains mired in concepts from the
Outmoded                       past. VA’s disability programs base eligibility assessments on the presence
                               of medically determinable physical and mental impairments. However,
                               these assessments do not always reflect recent medical and technological
                               advances, and their impact on medical conditions that affect the ability to
                               work. VA’s disability programs remain grounded in an approach that
                               equates certain medical impairments with the incapacity to work.
                               Moreover, advances in medicine and technology have reduced the severity
                               of some medical conditions and allowed individuals to live with greater
                               independence and function more effectively in work settings. Also, VA’s
                               rating schedule updates have not incorporated advances in assistive
                               technologies—such as advanced wheelchair design, a new generation of
                               prosthetic devices, and voice recognition systems—that afford some
                               disabled veterans greater capabilities to work.

                               VA has made some progress in updating its rating schedule to reflect
                               medical advances. Revisions generally consist of (1) adding, deleting, and
                               reorganizing medical conditions in the Schedule for Rating Disabilities,
                               (2) revising the criteria for certain qualifying conditions, and (3) wording
                               changes for clarification or reflection of current medical terminology.
                               However, VA’s effort to update its disability criteria within the context of
                               current program design has been slow and is insufficient to provide the
                               up-to-date criteria VA needs to ensure meaningful and equitable benefit




                               Page 18                                                          GAO-03-756T
decisions. Completing an update of the schedule for one body system has
generally taken 5 years or more; the schedule for the ear and other sense
organs took 8 years. In August 2002,21 we recommended that VA use its
annual performance plan to delineate strategies for and progress in
updating its disability rating schedule. VA did not concur with our
recommendation because it believes that developing timetables for future
updates to the rating schedule is inappropriate while the initial review is
ongoing.

In addition, VA’s disability criteria have not kept pace with changes in the
labor market. The nature of work has changed in recent decades as the
national economy has moved away from manufacturing-based jobs to
service- and knowledge-based employment. These changes have affected
the skills needed to perform work and the settings in which work occurs.
For example, advancements in computers and automated equipment have
reduced the need for physical labor. However, the percentage ratings used
in VA’s Schedule for Rating Disabilities are primarily based on physicians’
and lawyers’ estimates made in 1945 about the effects that service-
connected impairments have on the average individual’s ability to perform
jobs requiring manual or physical labor. VA’s use of a disability schedule
that has not been modernized to account for labor market changes raises
questions about the equity of VA’s benefit entitlement decisions; VA could
be overcompensating some veterans, while under-compensating or
denying compensation entirely to others.

In January 1997, we suggested that the Congress consider directing VA to
determine whether the ratings for conditions in the schedule correspond
to veterans’ average loss in earnings due to these conditions and adjust
disability ratings accordingly. Our work demonstrated that there were
generally accepted and widely used approaches to statistically estimate
the effect of specific service-connected conditions on potential earnings.
These estimates could be used to set disability ratings in the schedule that
are appropriate in today’s socio-economic environment.22




21
  U.S. General Accounting Office, SSA and VA Disability Programs: Re-Examination of
Disability Criteria Needed to Help Ensure Program Integrity, GAO-02-597 (Washington,
D.C.: Aug. 9, 2002).
22
 U.S. General Accounting Office, VA Disability Compensation: Disability Ratings May
Not Reflect Veterans’ Economic Losses, GAO/HEHS-97-9 (Washington, D.C.: Jan. 7, 1997).




Page 19                                                                   GAO-03-756T
In August 2002, we recommended that VA use its annual performance plan
to delineate strategies for and progress in periodically updating labor
market data used in its disability determination process. VA did not concur
with our recommendation because it does not plan to perform an
economic validation of its disability rating schedule, or to revise the
schedule based on economic factors. According to VA, the schedule is
medically based; represents a consensus among stakeholders in the
Congress, VA, and the veteran community; and has been a valid basis for
equitably compensating disabled veterans for many years.

Even if VA’s schedule updates were completed more quickly, they would
not be enough to overcome program design limitations in evaluating
disabilities. Because of the limited role of treatment in VA disability
programs’ statutory and regulatory design, its efforts to update the rating
schedule would not fully capture the benefits afforded by treatment
advances and assistive technologies. Current program design limits VA’s
ability to assess veterans’ disabilities under corrected conditions, such as
the impact of medications on a veteran’s ability to work despite a severe
mental illness. In August 2002, we recommended that VA study and report
to the Congress on the effects that a comprehensive consideration of
medical treatment and assistive technologies would have on its disability
programs’ eligibility criteria and benefit package. This study would include
estimates of the effects on the size, cost, and management of VA’s
disability programs and other relevant VA programs; and would identify
any legislative actions needed to initiate and fund such changes. VA did
not concur with our recommendation because it believes this would
represent a radical change from the current programs, and it questioned
whether stakeholders in the Congress and the veterans’ community would
accept such a change.

VA’s disability program challenges are not unique. For example, the Social
Security Administration’s (SSA) disability programs23 remain grounded in
outmoded concepts of disability. Like VA, SSA has not updated its
disability criteria to reflect the current state of science, medicine,
technology and labor market conditions. Thus, SSA also needs to
reexamine the medical and vocational criteria it uses to determine
whether individuals are eligible for benefits.


23
  Disability Insurance (DI) provides benefits to workers with severe long-term disabilities
who have enough work history to be insured for coverage under the program.
Supplemental Security Income (SSI) provides benefits to disabled, blind, or aged
individuals with low income and limited resources, regardless of their work histories.




Page 20                                                                       GAO-03-756T
VA Is Trying to Improve      Even if VA brought its disability criteria up to date, it would continue to
the Quality and Timeliness   face challenges in ensuring quality and timely decisions, including
of Claims Processing         ensuring that veterans get consistent decisions—that is, comparable
                             decisions on benefit entitlement and rating percentage—regardless of the
                             regional office making the decisions. VA has made some progress in
                             improving disability program administration, but much remains to be done
                             before VA has a system that can sustain production of accurate,
                             consistent, and timely decisions.

                             VA is making changes that will allow it to better identify accuracy
                             problems at the national, regional office, and individual employee levels.
                             In turn, this will allow VA to identify underlying causes of inaccuracies and
                             target corrective actions, such as additional training. In response to our
                             March 1999 recommendation,24 VA has centralized accuracy reviews under
                             its Systematic Technical Accuracy Review (STAR) program to meet
                             generally applicable government standards on segregation of duties and
                             organizational independence. Also, the STAR program began reviewing
                             more decisions in fiscal year 2002, with the intent of obtaining statistically
                             valid accuracy data at the regional office level; regional office-level
                             accuracy goals have been incorporated into regional directors’
                             performance standards. Further, VA is developing a system to measure the
                             accuracy of individual employees’ work; this measurement is tied to
                             employee performance evaluations.

                             While VA has made changes to improve accuracy, it continues to face
                             challenges in ensuring consistent claims decisions. In August 2002, we
                             recommended that VA establish a system to regularly assess and measure
                             the degree of consistency across all levels of VA claims adjudication.25
                             While VA agreed that consistency is an important goal, it did not fully
                             respond to our recommendation regarding consistency because it did not
                             describe how it would measure consistency and evaluate progress in
                             reducing any inconsistencies it may find. Instead, VA said that consistency
                             is best achieved through comprehensive training and communication
                             among VA components involved in the adjudication process. We continue



                             24
                              U.S. General Accounting Office, Veterans’ Benefits Claims: Further Improvements
                             Needed in Claims-Processing Accuracy, GAO/HEHS-99-35 (Washington, D.C.: Mar. 1,
                             1999).
                             25
                              U.S. General Accounting Office, Veterans’ Benefits: Quality Assurance for Disability
                             Claims and Appeals Processing Can Be Further Improved, GAO-02-806 (Washington,
                             D.C.: Aug. 16, 2002).




                             Page 21                                                                    GAO-03-756T
to believe that VA will be unable to determine the extent to which such
efforts actually improve consistency of decision-making across all levels of
VA adjudication now and over time.

VA’s major focus over the past 2 years has been on producing more timely
decisions for veterans, and it has made significant progress in improving
timeliness and reducing the backlog of claims. The Secretary established
the VA Claims Processing Task Force, which in October 2001 made
specific recommendations to relieve the veterans’ claims backlog and
make claims processing more timely. The task force observed that the
work management system in many regional offices contributed to
inefficiency and an increased number of errors. The task force attributed
these problems primarily to the broad scope of duties performed by
regional office staff—in particular, veterans service representatives (VSR).
For example, VSRs were responsible for both collecting evidence to
support claims and answering claimants’ inquiries. Based on the task
force’s recommendations, VA implemented its claims process
improvement (CPI) initiative in fiscal year 2002. Under this initiative,
regional office claims processing operations were reorganized around
specialized teams to handle specific stages of the claims process. For
example, regional offices have teams devoted specifically to claims
development, that is, obtaining evidence needed to evaluate claims.

Also, VA focused on increasing production of rating-related decisions to
help reduce inventory and, in turn, improve timeliness. In fiscal years 2001
and 2002, VA hired and trained hundreds of new claims processing staff.
VA also set monthly production goals for fiscal year 2002 for each of its
regional offices, incorporating these goals into regional office directors’
performance standards. VA completed almost as many decisions in the
first half of 2003 (404,000) than in all of fiscal year 2001 (481,000). This
increase in production has contributed to a significant inventory
reduction; on March 31, 2003, the rating-related inventory was about
301,000 claims, down from about 421,000 at the end of fiscal year 2001.
Meanwhile, rating-related decisions timeliness has been improving
recently; an average of 199 days for the first half of fiscal year 2003, down
from an average of 223 days in fiscal year 2002.

While VA has made progress in getting its workload under control and
improving timeliness, it will be challenged to sustain this performance.
Moreover, it will be difficult to cope with future workload increases due to
factors beyond its control, such as future military conflicts, court
decisions, legislative mandates, and changes in the filing behavior of
veterans. VA is not alone in facing these challenges; SSA is also challenged


Page 22                                                          GAO-03-756T
to improve its ability to provide accurate, consistent, and timely disability
decisions to program applicants. For example, after failing in its attempts
since 1994 to redesign a more comprehensive quality assurance system,
SSA has recently begun a new quality management initiative. Also, SSA has
taken steps to provide training and enhance communication to improve
the consistency of decisions, but variations in allowances rates continue
and a significant number of denied claims are still awarded on appeal. SSA
has recently implemented several short-term initiatives not requiring
statutory or regulatory changes to reduce processing times but is still
evaluating strategies for longer-term solutions.

More dramatic gains in timeliness and inventory reduction might require
program design changes. For example, in 1996, the Veterans’ Claims
Adjudication Commission noted that most disability compensation claims
are repeat claims—such as claims for increased disability percentage—
and most repeat claims were from veterans with less severe disabilities.
The Commission questioned whether concentrating processing resources
on these claims, rather than on claims by more severely disabled veterans,
was consistent with program intent. Another possible program design
change might involve assigning priorities to the processing of claims. For
example, claims from veterans with the most severe disabilities and
combat-disabled veterans could receive the highest priority attention.
Program design changes, including those to address the Commission’s
concerns, might require legislative actions.

In addition to program design changes, outside studies of VA’s disability
claims process identified potential advantages to restructuring VA’s
system of 57 regional offices. In its January 1999 report, the Congressional
Commission on Servicemembers and Veterans Transition Assistance
stated that some regional offices might be so small that their
disproportionately large supervisory overhead unnecessarily consumes
personnel resources. Similarly, in its 1997 report, the National Academy of
Public Administration stated VA should be able to close a large number of
regional offices and achieve significant savings in administrative overhead
costs.

Apart from the issue of closing regional offices, the Commission
highlighted a need to consolidate disability claims processing into fewer
locations. VA has consolidated its education assistance and housing loan
guaranty programs into fewer than 10 locations, and the Commission
encouraged VA to take similar action in the disability programs. VA
proposed such a consolidation in 1995 and in that proposal enumerated
several potential benefits, such as allowing VA to assign the most


Page 23                                                         GAO-03-756T
                  experienced and productive adjudication officers and directors to the
                  consolidated offices; facilitating increased specialization and as-needed
                  expert consultation in deciding complex cases; improving the
                  completeness of claims development, the accuracy and consistency of
                  rating decisions, and the clarity of decision explanations; improving
                  overall adjudication quality by increasing the pool of experience and
                  expertise in critical technical areas; and facilitating consistency in
                  decisionmaking through fewer consolidated claims-processing centers. VA
                  has already consolidated some of its pension workload (specifically,
                  income and eligibility verifications) at three regional offices.26 Also, VA has
                  consolidated at its Philadelphia regional office dependency and indemnity
                  compensation claims by survivors of servicemembers who died on active
                  duty, including those who died during Operation Enduring Freedom and
                  Operation Iraqi Freedom.


                  Mr. Chairman, this concludes my prepared statement. I will be happy to
                  answer any questions that you or Members of the Committee may have.


                  For further information, please contact me at (202) 512-7101. Individuals
Contact and       making key contributions to this testimony include Paul R. Reynolds,
Acknowledgments   James C. Musselwhite, Jr., Irene P. Chu, Pamela A. Dooley, Cherie’ M.
                  Starck, William R. Simerl, Richard J. Wade, Thomas A. Walke, Cheryl A.
                  Brand, Kristin M. Wilson, Greg Whitney, and Daniel Montinez.




                  26
                   These are the VA regional offices in St. Paul, Minnesota; Philadelphia, Pennsylvania; and
                  Milwaukee, Wisconsin.




                  Page 24                                                                      GAO-03-756T
Related GAO Products


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

             High-Risk Series: An Update. GAO-03-119. Washington, D.C.: January 1,
             2003.

             High-Risk Series: Federal Real Property. GAO-03-122. Washington, D.C.:
             January 1, 2003.

             Major Management Challenges and Program Risks: Department of
             Veterans Affairs. GAO-03-110. Washington, D.C.: January 1, 2003.

             Veterans’ Benefits: Quality Assurance for Disability Claims and Appeals
             Processing Can Be Further Improved. GAO-02-806. Washington, D.C.:
             August 16, 2002.

             SSA and VA Disability Programs: Re-Examination of Disability
             Criteria Needed to Help Ensure Program Integrity. GAO-02-597.
             Washington, D.C.: August 9, 2002.

             VA Long-Term Care: The Availability of Noninstitutional Services Is
             Uneven. GAO-02-652T. Washington, D.C.: April 25, 2002.

             VA Long-Term Care: Implementation of Certain Millennium Act
             Provisions Is Incomplete, and Availability of Noninstitutional Services
             Is Uneven. GAO-02-510R. Washington, D.C.: March 29, 2002.

             VA Health Care: More National Action Needed to Reduce Waiting Times,
             but Some Clinics Have Made Progress. GAO-01-953. Washington, D.C.:
             August 31, 2001.

             VA Health Care: Community-Based Clinics Improve Primary Care
             Access. GAO-01-678T. Washington, D.C.: May 2, 2001.

             Inadequate Oversight of Laundry Facility at the Department of Veterans
             Affairs Albany, New York, Medical Center. GAO-01-207R. Washington,
             D.C.: November 30, 2000.

             VA Health Care: Expanding Food Service Initiatives Could Save
             Millions. GAO-01-64. Washington, D.C.: November 30, 2000.

             VA Laundry Service: Consolidations and Competitive Sourcing Could
             Save Millions. GAO-01-61. Washington, D.C.: November 30, 2000.


             Page 25                                                      GAO-03-756T
Veterans’ Health Care: VA Needs Better Data on Extent and Causes of
Waiting Times. GAO/HEHS-00-90. Washington, D.C.: May 31, 2000.

VA and Defense Health Care: Evolving Health Care Systems Require
Rethinking of Resource Sharing Strategies. GAO/HEHS-00-52.
Washington, D.C.: May 17, 2000.

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.

Veterans’ Affairs: Observations on Selected Features of the Proposed
Veterans’ Millennium Health Care Act. GAO/T-HEHS-99-125. Washington,
D.C.: May 19, 1999.

Veterans’ Affairs: Progress and Challenges in Transforming Health
Care. GAO/T-HEHS-99-109. Washington, D.C.: April 15, 1999.

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

Veterans’ Benefits Claims: Further Improvements Needed in Claims-
Processing Accuracy. GAO/HEHS-99-35. Washington, D.C.: March 1, 1999.

VA Health Care: Closing a Chicago Hospital Would Save Millions and
Enhance Access to Services. GAO/HEHS-98-64. Washington, D.C.: April 16,
1998.

VA Hospitals: Issues and Challenges for the Future. GAO/HEHS-98-32.
Washington, D.C.: April 30, 1998.

VA Health Care: Status of Efforts to Improve Efficiency and Access.
GAO/HEHS-98-48. Washington, D.C.: February 6, 1998.




Page 26                                                      GAO-03-756T
           VA Disability Compensation: Disability Ratings May Not Reflect
           Veterans’ Economic Losses. GAO/HEHS-97-9. Washington, D.C.: January 7,
           1997.

           VA Health Care: Issues Affecting Eligibility Reform Efforts. GAO/HEHS-
           96-160. Washington, D.C.: September 11, 1996.




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