oversight

VA Dialysis Pilot: Increased Attention to Planning, Implementation, and Performance Measurement Needed to Help Achieve Goals

Published by the Government Accountability Office on 2012-05-23.

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

                             United States Government Accountability Office

GAO                          Report to Congressional Requesters




May 2012
                             VA DIALYSIS PILOT

                             Increased Attention to
                             Planning,
                             Implementation, and
                             Performance
                             Measurement Needed
                             to Help Achieve Goals



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GAO-12-584
                                              May 2012

                                              VA DIALYSIS PILOT
                                              Increased Attention to Planning, Implementation,
                                              and Performance Measurement Needed to Help
                                              Achieve Goals
Highlights of GAO-12-584, a report to
congressional requesters




Why GAO Did This Study                        What GAO Found
Veterans diagnosed with end-stage             GAO found a number of weaknesses in the Department of Veterans Affairs’ (VA)
renal disease—a condition of                  execution of the planning and early implementation phases of the Dialysis Pilot.
permanent kidney failure—represent            These weaknesses involved pilot location selection, cost estimation practices,
one of the most resource-intensive            and cost savings calculations that could collectively limit the achievement of the
patient populations at VA. These              pilot’s goals. Specifically, VA did not do the following:
veterans are often prescribed dialysis,
which is a life-saving and relatively         •   Appropriately document its pilot location selection process. VA did not
expensive medical procedure that                  maintain a clear and transparent pilot location selection process; it did not
removes excess fluids and toxins from             document how its criteria for pilot location selection were applied to all 153
the bloodstream. VA began developing              VA medical centers (VAMC) or why substitutions in pilot locations were
its Dialysis Pilot in 2009 with four              made. However, VA officials reported that several criteria, including dialysis
goals: (1) improved quality of care,              patient prevalence and average treatment costs, were used to select the pilot
(2) increased veteran access,                     locations in Durham and Fayetteville, North Carolina; Philadelphia,
(3) additional medical research                   Pennsylvania; and Cleveland, Ohio.
opportunities, and (4) cost savings.
Through this pilot, VA will establish
                                              •   Produce consistent and comparable cost estimates for pilot locations.
four VA-operated outpatient dialysis
                                                  VA did not complete consistent and comparable cost estimates for the four
clinics in communities surrounding
select VA medical centers by the end
                                                  pilot locations. Specifically, GAO found several cases where pilot locations
of fiscal year 2012 using start-up                did not complete reliable cost estimates because they made changes to
funding provided by VA Central Office.            formulas and assumptions of the Dialysis Pilot cost estimation model, which
Pilot locations are expected to achieve           was developed by VA systems redesign engineers.
cost savings and to repay their start-up
funding. GAO examined VA’s planning           •   Provide clear and timely guidance on start-up fund repayment and cost
and early implementation efforts for the          savings calculations. VA did not provide Veterans Integrated Service
Dialysis Pilot, and how VA plans to               Network and VAMC officials with clear and timely written guidance or
evaluate the pilot.                               instructions on how to pay back start-up funds, or how to calculate cost
                                                  savings generated by the pilot locations.
GAO reviewed relevant VA documents,
including those related to pilot location     VA Central Office has not yet determined how it will achieve its goals for the
selection and cost estimation, and
                                              Dialysis Pilot or created clear performance measures for the pilot locations.
spoke with VA officials responsible for
                                              Previously, GAO found that leading public sector organizations take three steps
overseeing the Dialysis Pilot and
representatives from all pilot locations.     to improve their performance and help their organizations become more
                                              effective: (1) define a clear mission and goals, (2) measure performance to
What GAO Recommends                           gauge progress toward achieving goals, and (3) use performance information as
                                              a basis for decision making. While VA has defined a clear mission and goals for
Among other actions, GAO                      the Dialysis Pilot, it has only made limited progress in the remaining two steps. In
recommends that VA improve its
                                              March 2012, VA reported that it was in the early stages of establishing an
Dialysis Pilot by providing guidance for
                                              agreement with a leading university research center to conduct an evaluation of
start-up fund repayment, as well as
developing an evaluation plan that            the Dialysis Pilot; however, no target dates were provided for when this
includes performance measures for the         evaluation would begin or what aspects of the Dialysis Pilot it would evaluate.
pilot locations. VA concurred with            Because VA has not yet developed an evaluation plan or defined performance
GAO’s recommendations and provided            measures for pilot locations, it is not collecting consistent and reliable information
an action plan to address them.               on the performance of the pilot locations and thus may not have this information
                                              available when it is time to either make midcourse corrections to the Dialysis Pilot
                                              or decide whether and how to open additional VA-operated outpatient dialysis
View GAO-12-584. For more information,        clinics. VA officials also told GAO they have developed a limited plan for
contact Randall B. Williamson at (202) 512-   expanding the Dialysis Pilot despite not having access to performance
7114 or williamsonr@gao.gov.
                                              information on the existing four pilot locations.
                                                                                        United States Government Accountability Office
Contents


Letter                                                                                       1
               Background                                                                    3
               Planning and Early Implementation Phases of the Dialysis Pilot
                 Had Significant Weaknesses                                                  7
               VA’s Dialysis Pilot Has a Stated Mission but Lacks Clearly Defined
                 Performance Criteria and an Evaluation Plan                               14
               Conclusions                                                                 17
               Recommendations for Executive Action                                        19
               Agency Comments and Our Evaluation                                          20

Appendix I     Status of VA Dialysis Pilot Locations                                       23



Appendix II    Comments from the Department of Veterans Affairs                            24



Appendix III   GAO Contact and Staff Acknowledgments                                       30



Table
               Table 1: Status of Dialysis Pilot Locations as of March 2012                23


Figure
               Figure 1: Selected Components of the Dialysis Pilot Cost
                        Estimation Model                                                   10




               Page i                                              GAO-12-584 VA Dialysis Pilot
Abbreviations

CMS               Centers for Medicare & Medicaid Services
ESRD              end-stage renal disease
VA                Department of Veterans Affairs
VAMC              Veterans Affairs medical center
VHA               Veterans Health Administration
VISN              Veterans Integrated Service Network



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Page ii                                                       GAO-12-584 VA Dialysis Pilot
United States Government Accountability Office
Washington, DC 20548




                                   May 23, 2012

                                   Congressional Requesters

                                   Veterans diagnosed with end-stage renal disease (ESRD)—a condition of
                                   permanent kidney failure—are one of the most resource-intensive patient
                                   populations the Department of Veterans Affairs’ (VA) health care system
                                   serves. To treat the effects of ESRD, veterans with the disease are often
                                   prescribed dialysis, which is a life-saving medical procedure that removes
                                   excess fluids and toxins from the bloodstream. 1 Veterans diagnosed with
                                   ESRD must receive dialysis treatments for the rest of their lives unless
                                   they receive a kidney transplant. These treatments are time intensive for
                                   veterans and relatively expensive for VA. Dialysis typically requires
                                   veterans to undergo three outpatient treatments per week that each last
                                   about 4 hours. Due to VA’s limited dialysis capacity in its own facilities,
                                   VA most commonly provides these dialysis treatments to veterans by
                                   referring them to non-VA outpatient dialysis clinics in their local
                                   communities through VA’s fee basis program. 2, 3 In fiscal year 2011, VA
                                   referred about 9,600 veterans to fee basis providers for dialysis
                                   treatments at a cost of about $314 million, up from about 6,900 veterans
                                   at a cost of about $133 million in fiscal year 2008.

                                   To help address these rising costs, VA began developing its Dialysis Pilot
                                   in 2009. Through this pilot, VA will establish four VA-operated outpatient
                                   dialysis clinics in communities surrounding select VA medical centers
                                   (VAMC) by the end of fiscal year 2012. VA officials expect these new
                                   clinics will reduce the number of veterans referred to fee basis providers
                                   for dialysis treatments. Ultimately, VA believes the Dialysis Pilot will lead



                                   1
                                    In this report, we use the term dialysis to describe hemodialysis—the most common form
                                   of dialysis treatment provided in the United States. VA provides dialysis as part of the
                                   medical benefits package it provides to all veterans enrolled in its health care system—a
                                   full range of hospital and outpatient services, prescription drugs, and noninstitutional long-
                                   term care services. See 38 C.F.R. § 17.38.
                                   2
                                    Outpatient dialysis clinics are freestanding clinics that are typically located in convenient
                                   areas, such as shopping centers, and vary in the number of patients served. These clinics
                                   make these chronic treatments accessible to those who need them.
                                   3
                                    Through its fee basis program, VA can pay for veterans to receive care from non-VA
                                   providers in the community for certain health care services that it is not capable of
                                   providing in its own medical facilities—such as dialysis treatment.




                                   Page 1                                                          GAO-12-584 VA Dialysis Pilot
to the development of a business model with a mission of providing more
veterans’ dialysis treatments in VA facilities rather than through the fee
basis program. To meet this mission, VA set four goals for the Dialysis
Pilot: (1) to improve the quality of dialysis care veterans receive, (2) to
increase veterans’ access to dialysis care, (3) to provide additional
dialysis research opportunities, and (4) to achieve cost savings for VA-
funded dialysis treatments.

Congressional requesters expressed interest in the analysis VA
performed to determine the cost-effectiveness of providing more veterans’
dialysis treatments in VA-operated facilities. This report examines
(1) VA’s early planning and implementation efforts for the Dialysis Pilot
and (2) how VA plans to evaluate the Dialysis Pilot.

To examine VA’s early planning and implementation efforts for the
Dialysis Pilot, we reviewed relevant VA Central Office, Veterans
Integrated Service Network (VISN), and VAMC documents related to
(1) pilot location selection, (2) cost estimation, and (3) pilot location start-
up funding. 4 We also interviewed VA Central Office, VISN, and VAMC
officials involved with the Dialysis Pilot—including officials from each
VISN and VAMC operating a pilot location, the Veterans Health
Administration’s (VHA) Chief Business Office, the VHA Dialysis Steering
Committee, the Dialysis Workgroup, and VA systems redesign
engineers. 5 In addition, we analyzed VA’s key decision-making tools—
including the cost estimation models used to assess pilot costs—for each
Dialysis Pilot location and the pilot as a whole. We also analyzed VA’s
data on dialysis fee basis expenditures. We verified these data with VA
officials and found information derived from analysis of these expenditure
data to be sufficiently reliable for our purposes.




4
Each VISN is responsible for the day-to-day management of facilities within its network.
5
 The VHA Chief Business Office oversees the development of administrative processes,
policy, regulations, and directives associated with the delivery of VA health benefit
programs. The VHA Dialysis Steering Committee includes VA clinicians and officials who
assess and assist in the management of the delivery of dialysis services for veterans
enrolled at VA. The Dialysis Workgroup was created to research, design, and implement
VA’s Dialysis Pilot. VA’s systems redesign engineers work at one of VA’s Veterans
Engineering Resource Centers. These centers support collaboration between
researchers, systems redesign engineers, and clinicians to improve VA health care
delivery.




Page 2                                                       GAO-12-584 VA Dialysis Pilot
                         To examine VA’s plans to evaluate the Dialysis Pilot, we reviewed
                         relevant VA and VISN documentation of key pilot plans and meetings—
                         including business plans, implementation plans, approval documents, and
                         meeting minutes. We also spoke with officials from VA Central Office and
                         all three VISNs and four VAMCs operating pilot locations regarding
                         (1) reporting responsibilities and expectations for the Dialysis Pilot and
                         (2) any ongoing or planned evaluations of the Dialysis Pilot.

                         We conducted this performance audit from September 2011 to May 2012
                         in accordance with generally accepted government auditing standards.
                         Those standards require that we plan and perform the audit to obtain
                         sufficient, appropriate evidence to provide a reasonable basis for our
                         findings and conclusions based on our audit objectives. We believe that
                         the evidence obtained provides a reasonable basis for our findings and
                         conclusions based on our audit objectives.


                         VHA oversees VA’s health care system, which includes 153 VAMCs
Background               organized into 21 VISNs. Each VISN is charged with the day-to-day
                         management of the VAMCs within its network. VA Central Office
                         decentralized its budgetary, planning, and decision-making functions to
                         the VISN offices in an effort to improve accountability and oversight of
                         daily facility operations. However, VA Central Office maintains
                         responsibility for monitoring and overseeing both VISN and VAMC
                         operations.


Providing Dialysis       Veterans may elect to have their dialysis treatments through VA or
Treatments to Veterans   Medicare but cannot receive dialysis benefits from both simultaneously. In
                         2008, there were over 18,000 veterans enrolled in VA’s health care
                         system diagnosed with ESRD who required dialysis treatments. 6 Of these
                         enrolled veterans, about two-thirds elected to receive their dialysis
                         treatments through VA. However, VA treated less than half of these
                         veterans in VAMC-based dialysis clinics because of capacity limitations
                         and other factors, such as long distances veterans may have to travel to



                         6
                          See Corrigo Health Care Solutions, LLC, Purchase of Non-VA Hemodialysis Treatments,
                         a report prepared at the request of the Department of Veterans Affairs, Veterans Health
                         Administration, January 30, 2009. The VHA Chief Business Office awarded a contract to
                         Corrigo Health Care Solutions, a professional services firm, to complete this study on VA’s
                         ability to purchase dialysis services both now and in the future.




                         Page 3                                                        GAO-12-584 VA Dialysis Pilot
the VAMC. 7 This limited internal capacity and other factors resulted in
most of these veterans receiving their dialysis treatments through VA’s
fee basis program. Through VA’s fee basis program, veterans can select
any dialysis provider, as long as their chosen provider accepts VA’s
established payment rate for dialysis treatment. Currently, fee basis rates
differ by VISN; however, several VISNs are currently paying for dialysis
treatments through several multi-VISN-negotiated agreements with
dialysis providers. Under these agreements, per-treatment costs for these
VISNs currently range from $248 to $310. Veterans who elect to have
their dialysis treatments provided through VA—either in VAMCs or
through the fee basis program—may not incur any out-of-pocket
expenses.

The remaining one-third of all veterans enrolled in VA’s health care
system who were diagnosed with ESRD, in fiscal year 2008, elected to
have their dialysis treatments paid for by Medicare. 8 The veteran can
select any Medicare-certified dialysis provider that accepts Medicare
payment and there are few, if any, restrictions on this choice since all
major dialysis providers accept individuals covered by Medicare.
Medicare reimburses dialysis providers 80 percent of a specified per-
treatment base bundled rate—about $230 in 2011—and beneficiaries
or private insurance companies are responsible for the remaining
20 percent. 9 For veterans who elect to have their dialysis treatments paid
for by Medicare, the remaining 20 percent may be an out-of-pocket
expense that was about $7,600 per year in 2008, because VA is not
authorized to pay these out-of-pocket expenses incurred by veterans
covered by Medicare.


7
 See Corrigo Health Care Solutions, LLC, Non-VA Hemodialysis Treatments. At the end
of fiscal year 2008, VA operated 64 VAMC-based dialysis clinics that treated both
veterans in need of acute inpatient dialysis treatments and veterans receiving outpatient
chronic dialysis treatments for ESRD.
8
 See Corrigo Health Care Solutions, LLC, Non-VA Hemodialysis Treatments. Medicare
covers dialysis treatment for most individuals with ESRD regardless of age. Medicare
coverage generally begins in the fourth month after they start dialysis. If an individual
entitled to Medicare because of ESRD is covered by a commercial health insurance plan,
the commercial plan is the primary payer and Medicare is secondary for the first
30 months of Medicare entitlement, after which Medicare becomes the primary payer.
See 42 U.S.C. § 1395y(b)(1)(C).
9
 Medicare pays dialysis providers a single rate for providing dialysis treatment and certain
related items and services, which is a common form of Medicare payment known as
bundling.




Page 4                                                         GAO-12-584 VA Dialysis Pilot
Development of the   In 2009, VA began developing the Dialysis Pilot to build its in-house
Dialysis Pilot       capacity to provide dialysis treatments to veterans in response to several
                     issues, including the following:

                     •     Rising numbers of veterans needing dialysis. A VA-funded study
                           found that the number of veterans requiring dialysis treatments was
                           projected to increase 6 percent from fiscal year 2008 to fiscal year
                           2015 and the number of veterans receiving these dialysis treatments
                           from community providers through the fee basis program was
                           projected to increase 16 percent. 10

                     •     Rising costs of providing dialysis through the fee basis program.
                           The same VA-funded study also found that VA’s fee basis per-
                           treatment costs were projected to increase about 59 percent from
                           $337 per treatment in fiscal year 2008 to $535 per treatment in fiscal
                           year 2015. 11

                     •     Unsuccessful efforts to achieve lower reimbursement rates with
                           fee basis dialysis providers. Another VA-funded study found that if
                           VA adopted Medicare rates, set by the Centers for Medicare &
                           Medicaid Services (CMS), for outpatient dialysis treatments, it would
                           reduce its dialysis fee basis expenditures by 39 percent resulting in
                           projected cost reductions from fiscal year 2011 through fiscal year
                           2020 of about $2 billion. 12 As a result of this study, VA Central Office
                           instructed VISN directors to begin using Medicare rates as the
                           prevailing reimbursement rate for fee basis dialysis treatments in
                           2009. However, the major fee basis dialysis providers did not agree to
                           provide dialysis treatments to veterans through VA’s fee basis
                           program at these reduced rates. 13 This resulted in VA continuing to




                     10
                         See Corrigo Health Care Solutions, LLC, Non-VA Hemodialysis Treatments.
                     11
                         See Corrigo Health Care Solutions, LLC, Non-VA Hemodialysis Treatments.
                     12
                       See Kennell and Associates, Inc., Report on Medicare Pricing of Outpatient Services, a
                     report prepared at the request of the Department of Veterans Affairs, Veterans Health
                     Administration, November 18, 2009.
                     13
                       The dialysis industry is very concentrated, with many facilities owned and operated by a
                     few organizations. For example, about 61 percent of the approximately 5,600 dialysis
                     facilities nationwide are owned by three large organizations.




                     Page 5                                                        GAO-12-584 VA Dialysis Pilot
     pay for these treatments according to previously established rates,
     which are typically higher than Medicare rates. 14

In response to these issues, VA Central Office charged VISN 6, a VISN
with a significant volume of veterans who require dialysis treatments, with
establishing a dialysis workgroup to evaluate VA’s options for dialysis
treatment delivery. 15 The Dialysis Workgroup—led by officials from
VISN 6, with representatives from VA Central Office and the VHA Chief
Business Office and others with financial and clinical expertise—met in
2009 to discuss various options for providing dialysis care for veterans.
This workgroup identified several options VA could take to build its
internal capacity to provide dialysis treatments to veterans and identified
several ways VA could address the rising costs of dialysis care provided
through the fee basis program, including (1) building dialysis units in
leased space in communities surrounding select VAMCs, (2) purchasing
modular dialysis units, (3) modifying existing space in selected VAMCs to
expand or build dialysis units, and (4) negotiating pricing agreements with
select dialysis providers to allow VAMCs to pay a lower rate for fee basis
dialysis treatments. 16

In March 2010, after discussing these options and exploring potential
solutions, the Dialysis Workgroup began designing the Dialysis Pilot as
an effort to build VA’s capacity to provide dialysis treatments to veterans
in VA-operated facilities and reduce fee basis costs. The Dialysis
Workgroup projected that the Dialysis Pilot would result in a 5-year cost
savings of about $33 million by operating four outpatient dialysis clinics
that could each treat 48 veterans a week. The Dialysis Pilot was
approved by the Under Secretary for Health in August 2010 and by the
Secretary of Veterans Affairs in September 2010. The final four pilot
locations selected by the Dialysis Workgroup were Durham and
Fayetteville, North Carolina; Philadelphia, Pennsylvania; and Cleveland,


14
  In December 2010, VA amended its regulations to apply CMS rates to all non-VA
inpatient and outpatient medical services, including dialysis. See 75 Fed. Reg. 78,901
(Dec. 17, 2010) (amending 38 C.F.R. §§ 17.52, 17.56).
15
  VISN 6 oversees eight VAMCs in North Carolina, Virginia, and West Virginia and serves
a veteran population with a high prevalence of ESRD.
16
  Modular dialysis units are buildings or trailers that are predesigned and can be installed
on VAMC property. These units are designed to meet the standards of several health care
accrediting and surveying entities, including CMS, state agencies, and The Joint
Commission.




Page 6                                                         GAO-12-584 VA Dialysis Pilot
                            Ohio. Each of these locations was provided approximately $2.5 million in
                            start-up funding by VA Central Office to establish an outpatient dialysis
                            clinic with 12 dialysis stations that could treat 48 veterans per week. VA
                            Central Office expected this start-up funding would be repaid by the pilot
                            locations. (See app. I for more information on the current status of each
                            pilot location.)

                            The pilot locations in Durham and Fayetteville, North Carolina, began
                            treating veterans in June 2011. The Philadelphia, Pennsylvania, pilot
                            location is scheduled to open in May 2012, and the Cleveland, Ohio, pilot
                            location is scheduled to open in September 2012.


                            There were a number of weaknesses in VA’s execution of the planning
Planning and Early          and early implementation phases of the Dialysis Pilot that collectively
Implementation              could limit the achievement of its goals. Specifically, weaknesses in pilot
                            location selection, cost estimation practices, and cost savings calculations
Phases of the Dialysis      could hamper the Dialysis Pilot’s effectiveness.
Pilot Had Significant
Weaknesses
VA’s Pilot Location         While the Dialysis Workgroup reported using several criteria to select the
Selection Process Was Not   Dialysis Pilot locations and documented some of these criteria in the
Transparent or              approval documents for the Dialysis Pilot, it did not document how these
                            criteria were applied or whether it assessed all 153 VAMCs for potential
Appropriately Documented    inclusion in the Dialysis Pilot. According to GAO internal control
                            standards, clearly documenting key information is necessary to ensure
                            that appropriate internal controls for communicating and recording
                            decision-making activities are in place. 17 According to Dialysis Workgroup
                            officials, the Dialysis Workgroup began its pilot location selection process
                            by identifying 13 potential pilot locations using several criteria, including
                            (1) the number of veterans receiving outpatient dialysis treatments living
                            within a 30-mile radius or a 30-minute drive of a VAMC, (2) a VAMC’s
                            potential to achieve cost savings by operating a pilot location, and (3) the



                            17
                              See GAO, Standards for Internal Control in the Federal Government,
                            GAO/AIMD-00-21.3.1 (Washington, D.C.: November 1999). Standards for internal control
                            in the federal government state that information should be recorded and communicated to
                            management and others within the agency that need it in a format and time frame that
                            enables them to carry out their responsibilities.




                            Page 7                                                      GAO-12-584 VA Dialysis Pilot
perceived level of dialysis-related clinical expertise available at each
VAMC. 18 Dialysis Workgroup officials told us that the final four pilot
locations in Durham, Fayetteville, Philadelphia, and Cleveland were all
ultimately selected because they had a high number of veterans receiving
dialysis treatments and, in some cases, had access to high-quality clinical
expertise. However, no documentation was provided by VA discussing
how these criteria were applied to all 153 medical centers and why
Durham, one of the final four pilot locations, was omitted from the list of
13 potential pilot locations when it clearly met these selection criteria. 19 In
addition, VA officials from the Dialysis Workgroup whom we spoke with
could not recall complete details regarding the pilot location selection
process that occurred in 2009, including whether additional VAMCs were
assessed against the various criteria. As a result, it is not possible for VA
or an external party to definitively determine if there were any other
VAMCs that could have been viable pilot locations beyond the
13 considered by the Dialysis Workgroup.

The transparency of the pilot site selection process was further
compromised by the manner in which the Durham VAMC was selected as
a pilot location. Dialysis Workgroup officials did not document their
rationale for selecting this VAMC—a site not included in the original
13 potential pilot locations—as one of the four final pilot locations.
According to Dialysis Workgroup officials, the VAMC in Salisbury was
originally selected as one of the four final pilot locations; however, this
VAMC was undergoing managerial changes at that time and the VAMC in
Durham, located in the same VISN, was selected as a replacement pilot
location. In April 2012, Dialysis Workgroup officials reported that the
Durham VAMC’s high number of veterans receiving dialysis and
nephrology expertise also contributed to its selection as one of the four
final pilot locations. However, VA did not document either the initial


18
 The 13 potential pilot locations were VAMCs located in Ann Arbor, Michigan; Augusta,
Georgia; Cleveland, Ohio; Dublin, Georgia; Erie, Pennsylvania; Fayetteville, North
Carolina; Los Angeles, California; Kansas City, Missouri; Loma Linda, California;
Philadelphia, Pennsylvania; Phoenix, Arizona; Sacramento, California; and Salisbury,
North Carolina.
19
  In April 2012, Dialysis Workgroup officials told us that how the pilot location selection
criteria were applied was documented in a series of e-mails between VA systems redesign
engineers. However, these e-mail messages did not contain a transparent and clear
description of the application of these criteria and included some information that
contradicts other documentation of the selection process provided by the Dialysis
Workgroup.




Page 8                                                        GAO-12-584 VA Dialysis Pilot
                      selection of the VAMC in Salisbury as a pilot location or the rationale for
                      why the VAMC in Durham was a better final selection for the Dialysis Pilot
                      than one of the other 13 potential pilot locations that was not selected.
                      The lack of documentation on this particular selection further reduced the
                      transparency of the decision-making process.

                      VA Central Office officials do not have complete information about how or
                      why pilot locations were selected because key decisions and the rationale
                      behind them were not documented. Such documentation of decision-
                      making processes is necessary to ensure that VA decision makers have
                      access to relevant, reliable, and timely information and could follow a
                      rigorous and fair decision-making process for this critical aspect of the
                      Dialysis Pilot. The lack of documentation related to a key planning
                      decision—such as the complete process used to select pilot locations—
                      limits VA’s ability to access this information in the future, evaluate the
                      success of the Dialysis Pilot, and make decisions about how best to
                      expand the pilot to additional locations.


VA Did Not Produce    It is not possible to determine whether pilot locations completed reliable
Consistent and        cost estimations because these estimates are not consistent and
Comparable Cost       comparable. This will limit VA’s ability to determine if the Dialysis Pilot has
                      met its mission to reduce the cost of dialysis treatments paid for by VA.
Estimates for Pilot   Reliable cost estimates are necessary to ensure that pilot location costs
Locations             are comparable across the four pilot locations. 20 Generating reliable and
                      comparable cost estimates prior to opening the pilot locations was critical
                      to the early implementation of the Dialysis Pilot in order to ensure that
                      appropriate site-specific baseline cost estimates were generated that
                      would allow VA to evaluate the cost of the Dialysis Pilot and ensure that
                      any cost savings generated by the pilot locations could be accurately
                      calculated. The importance of thorough and reliable cost estimation
                      processes was included in VA’s own business analysis of the Dialysis
                      Pilot, which stated that pilot locations were intended to use the same cost
                      estimation methodology to facilitate uniformity and ensure that all pilot
                      locations produced reliable information.



                      20
                        See GAO/AIMD-00-21.3.1. Standards for internal control in the federal government state
                      that information should be recorded and communicated to management and others within
                      the agency that need it in a format and time frame that enables them to carry out their
                      responsibilities.




                      Page 9                                                      GAO-12-584 VA Dialysis Pilot
To its credit, the Dialysis Workgroup worked with VA systems redesign
engineers to develop a sophisticated cost estimation model to help VISN
and VAMC officials estimate costs for their pilot locations. VA systems
redesign engineers built the cost estimation model using validated
research as the foundation for its general baseline cost estimates. The
cost estimation model included information on several aspects of
establishing and operating an outpatient dialysis clinic—including
equipment costs, leased-space costs, staff costs, and veteran travel
costs. 21 (See fig. 1.)

Figure 1: Selected Components of the Dialysis Pilot Cost Estimation Model




21
  VA reimburses some veterans for travel expenses associated with their care and
treatment. Eligibility for these travel reimbursements is determined by several factors,
including a veteran’s service-connected disability rating, pension status, and annual
income.




Page 10                                                        GAO-12-584 VA Dialysis Pilot
Despite this effort to build a robust model for estimating Dialysis Pilot
costs, VA did not maintain proper control over the cost estimation model
following its release for use by VISNs and VAMCs. While there were
designated areas in the cost estimation model for each pilot location to
enter its specific cost inputs, a VA systems redesign engineer we spoke
with explained that the formulas in the cost estimation model should not
be customized by pilot locations. These formulas were validated by VA
systems redesign engineers and were meant to remain constant across
all pilot locations to ensure that comparable and consistent cost estimates
were produced. However, VA Central Office requested that the cost
estimation model be fully customizable—including all cost inputs and
formulas—in order to encourage pilot locations to use the model.
Because the model was fully customizable, some pilot locations both
appropriately altered their pilot location-specific inputs and inappropriately
altered the formulas that were intended to remain constant. As a result of
the inappropriately altered formulas, final cost estimates for the four pilot
locations are inconsistent and do not include comparable information.

We found several inconsistencies in pilot locations’ use of the cost
estimation model, including the following:

•   Not all pilot locations used validated formulas for developing
    cost estimates. We found that not all pilot locations used the
    validated formulas developed by VA systems redesign engineers to
    calculate their cost estimates. For example, Philadelphia’s cost
    estimation model did not use the validated formula for calculating the
    pilot location’s equipment costs. While the validated equipment cost
    formula included a patient transport cardiac monitor for each dialysis
    pilot location, the Philadelphia pilot location’s model omitted this
    equipment from its calculation. Also, instead of using the validated
    formulas, the Cleveland pilot location deleted some formulas related
    to annual patient demand and leased-space costs and replaced them
    with specific numeric values. As a result of these changes, some of
    Cleveland’s cost estimations cannot be confidently compared with
    those from the other three pilot locations because it is unclear what
    the location used to calculate these numeric values. Consistent use of
    the cost estimation model and its validated formulas is necessary to
    ensure that the cost estimations of each pilot location can be
    compared and evaluated.




Page 11                                              GAO-12-584 VA Dialysis Pilot
•    Pilot location capacity changes. Two pilot locations increased the
     capacity of their outpatient dialysis clinics, despite the fact that the
     Dialysis Workgroup specifically established clear capacity limits and
     the cost estimation model was developed for these specific capacity
     limits. According to the Dialysis Workgroup and the Dialysis Pilot
     approval document signed by the Secretary of Veterans Affairs, each
     pilot location’s capacity was limited to 12 dialysis stations that could
     provide up to 48 veterans with dialysis treatments each week. 22
     However, the Fayetteville pilot location increased its capacity from 12
     to 16 dialysis stations and the Cleveland pilot location increased its
     capacity from 12 to 20 dialysis stations. These capacity increases
     were not validated by VA systems redesign engineers, and as a
     result, it is unclear how these changes may affect the efficiency of
     these pilot locations. In addition, it is unclear whether these capacity
     increases were approved by VA Central Office since the size of these
     two pilot locations is larger than what was originally approved by the
     Secretary of Veterans Affairs.

According to Dialysis Workgroup officials, pilot location-specific baseline
cost estimates were included in VA’s own business analysis of the
Dialysis Pilot. However, the baseline cost estimates included in this
document are unreliable for the following reasons:

•    The baseline cost estimates included in VA’s business analysis of the
     Dialysis Pilot are based on the assumption that all pilot locations will
     be limited to 12 dialysis stations. However, the Cleveland and
     Fayetteville pilot locations currently have considerably more dialysis
     stations, with 20 and 16 dialysis stations, respectively.

•    The baseline cost estimates included in VA’s business analysis of the
     Dialysis Pilot were generated prior to the cost estimation model’s
     distribution to pilot locations for customization. Therefore, these
     estimates do not account for the pilot location-specific customization
     of several model inputs, such as actual leased-space costs. During



22
  The Dialysis Workgroup’s review of private sector dialysis models and dialysis
operations of academically affiliated medical centers found that 12 dialysis stations is the
minimum required size for a dialysis unit to achieve operating efficiencies. According to
VA’s business analysis of the Dialysis Pilot, this finding is consistent with the private
sector staffing standard of one dialysis technician for every 4 patients and one registered
nurse for every 12 patients. As a result of these findings, the Dialysis Workgroup
recommended that the four pilot locations be limited to 12 dialysis stations.




Page 12                                                         GAO-12-584 VA Dialysis Pilot
                                   the site-specific customization process, several of the costs
                                   associated with these customizable inputs increased significantly due
                                   to either changes in pilot location size or other factors. For example,
                                   the Cleveland pilot location’s customized model includes about
                                   $400,000 in annual lease expenses, while the baseline cost estimate
                                   for Cleveland’s lease expenses from VA’s business analysis is only
                                   about $220,000.

VA Did Not Provide Clear      VA Central Office officials did not provide VISN and VAMC officials with
and Timely Guidance to        clear and timely written guidance or instructions on how to pay back
Pilot Locations on Start-up   start-up funds or how to calculate cost savings from the Dialysis Pilot. VA
                              Central Office provided a total of approximately $10 million in start-up
Fund Repayment and Cost       funding for the Dialysis Pilot to the three VISNs associated with the pilot
Savings Calculations          locations. Each pilot location received about $2.5 million in start-up
                              funding to establish its outpatient dialysis clinic. Pilot locations are
                              expected to achieve cost savings through the outpatient dialysis clinics
                              and to repay their start-up funding. Specifically, the memorandum
                              approving the Dialysis Pilot signed by the Secretary of Veterans Affairs
                              and the Under Secretary for Health states that pilot location start-up funds
                              are to be repaid in two equal payments in fiscal year 2012 and fiscal year
                              2014.

                              A lack of communication—including ongoing discussions, reporting, and
                              guidance—regarding the repayment of pilot location start-up funds could
                              make it difficult for VA and external parties to determine if the pilot
                              locations are making reasonable progress toward repaying these funds
                              and realizing cost savings from the Dialysis Pilot. 23 VISN and VAMC
                              officials reported a lack of clarity about how Dialysis Pilot start-up funds
                              must be repaid. Specifically, officials from two of the three VISNs
                              associated with pilot locations—VISNs 4 and 10—told us that they have
                              not discussed the repayment of their pilot locations’ start-up funding with
                              VA Central Office. Similarly, officials from the VAMCs associated with the
                              two operational pilot locations acknowledged their understanding that
                              start-up fund repayment would likely be included as part of their cost




                              23
                                See GAO/AIMD-00-21.3.1. Standards for internal control in the federal government state
                              that information should be recorded and communicated to management and others within
                              the agency that need it in a format and time frame that enables them to carry out their
                              responsibilities.




                              Page 13                                                     GAO-12-584 VA Dialysis Pilot
                          savings calculations, but told us that they were not aware of any specific
                          agreements or plans for repayment. 24

                          In addition, while the Dialysis Workgroup provided pilot locations with
                          5-year cost savings projections and articulated plans for calculating actual
                          cost savings in a document that was published prior to the approval of the
                          Dialysis Pilot, VISN officials we spoke with were uncertain about how cost
                          savings would be calculated. According to VA’s own business analysis of
                          the Dialysis Pilot, actual cost savings will be calculated by comparing the
                          cost per treatment at each pilot location to actual fee basis per-treatment
                          rates for each pilot location’s corresponding VAMC. 25 This document also
                          states that cost saving calculations will be a collaborative effort between
                          pilot location leadership, VA researchers, and the VHA Chief Business
                          Office. However, VISN officials stated that while they expect that the cost
                          savings from their pilot locations will be examined, they did not receive
                          written guidance about how cost savings will be calculated. Given the lack
                          of specific and timely guidance to VISN and VAMC officials on the
                          calculation of cost savings, officials at the pilot locations may not use the
                          same methodology to track these savings.


                          VA Central Office has not yet determined how it will define success for
VA’s Dialysis Pilot Has   the Dialysis Pilot or created clear performance measures linked to the
a Stated Mission but      four Dialysis Pilot goals. When other leading public sector organizations
                          are engaged in efforts to improve their performance and help their
Lacks Clearly Defined     organizations become more effective—similar to VA’s goals for the
Performance Criteria      Dialysis Pilot—we found that these organizations commonly take three
and an Evaluation         steps: (1) define a clear mission and goals, (2) measure performance to
                          gauge progress toward achieving goals, and (3) use performance
Plan                      information as a basis for decision making. 26




                          24
                            Only the pilot locations in Durham and Fayetteville, North Carolina are currently
                          operational. The pilot locations in Philadelphia, Pennsylvania; and Cleveland, Ohio; are
                          scheduled to open in May and September 2012, respectively.
                          25
                            Each pilot location’s cost per treatment will be calculated using VA’s standard cost
                          assignment methodology contained in its Decision Support System.
                          26
                           GAO, Executive Guide: Effectively Implementing the Government Performance and
                          Results Act, GAO/GGD-96-118 (Washington, D.C.: June 1996).




                          Page 14                                                        GAO-12-584 VA Dialysis Pilot
Step 1—Defining a clear mission and goals. VA has completed the first
of these steps by defining a clear mission and goals for the Dialysis Pilot.
Specifically, the Dialysis Workgroup noted that the Dialysis Pilot would
allow VA to develop a cost-effective business model that could be used to
optimize VA’s resources and increase its capacity to provide dialysis
treatment to veterans. This workgroup also outlined four goals of the
Dialysis Pilot: (1) improved quality of care, (2) increased access for
veterans, (3) additional dialysis research opportunities, and (4) cost
savings for VA-funded dialysis treatments. Through the participation of its
membership in developing this mission and these goals, the Dialysis
Workgroup was able to incorporate the input of several VA internal
stakeholders—including VA Central Office representatives, VISN
leadership, clinical experts with experience treating veterans with ESRD,
and VA systems redesign engineers. This process included a thorough
assessment of VA’s options for providing dialysis treatments to
veterans—including the resources, equipment, and staffing needed to
operate a cost-effective outpatient dialysis clinic.

Step 2—Measuring performance to gauge progress. Despite its
success in defining a clear mission and goals for the Dialysis Pilot, VA
has not developed a clear plan for evaluating the pilot. Specifically, while
two pilot locations (Durham and Fayetteville) began treating veterans in
June 2011, VA has not yet begun an evaluation of the establishment and
management of the pilot locations—including causes for opening delays,
operating challenges, or the sufficiency of start-up funding. Previously, we
found that developing sound evaluation plans before a pilot program is
implemented can increase confidence in results and facilitate decision
making about broader applications of the pilot. 27 In March 2012, the VHA
Chief Business Office reported that VA is in the early stages of
establishing an agreement with a leading university research center to
conduct an evaluation of the Dialysis Pilot; however, no target dates were
provided for when this evaluation would begin or what aspects of the
Dialysis Pilot beyond cost-effectiveness it would evaluate.




27
  See GAO, Limitations in DOD’s Evaluation Plan for EEO Complaint Pilot Program
Hinder Determination of Pilot Results, GAO-08-387R (Washington, D.C.: Feb. 22, 2008),
and Tax Administration: IRS Needs to Strengthen Its Approach for Evaluating the SRFMI
Data-Sharing Pilot Program, GAO-09-45 (Washington, D.C.: Nov. 7, 2008).




Page 15                                                    GAO-12-584 VA Dialysis Pilot
In addition, VA Central Office has not developed a cohesive strategy for
evaluating the Dialysis Pilot and has not yet formally defined its criteria for
measuring the performance of the pilot locations or the success of the
Dialysis Pilot in general. Several potential performance measures could
be used to measure the pilot locations’ progress toward the achievement
of each Dialysis Pilot goal:

•    Improved quality of care. Officials from the Dialysis Workgroup told
     us that quality assurance outcomes, specifically those used by CMS
     to certify outpatient dialysis clinics, could be used to assess pilot
     locations. 28 These metrics would likely help VA assess the quality of
     dialysis care provided by the pilot locations.

•    Increased access for veterans. Dialysis Workgroup officials told us
     that patient satisfaction information could be used to assess pilot
     locations. This potential metric could help determine if the pilot
     locations increased veterans’ access to dialysis care.

•    Additional dialysis research opportunities. In its business analysis
     of the Dialysis Pilot, the Dialysis Workgroup recommended that VA
     fund a 4-year research study to evaluate the quality of care at all pilot
     locations and identify best practices in veteran dialysis care.
     According to this business analysis, the findings of this study would
     enable VA to develop an evidence-based strategy for veteran dialysis
     care that ensures veterans receive the highest quality of care.

•    Cost savings for VA-funded dialysis treatments. In its business
     analysis of the Dialysis Pilot, the Dialysis Workgroup suggested that
     pilot locations could use the cost estimation model to calculate cost
     savings generated by the pilot locations by comparing the cost of
     providing dialysis at each pilot location to the cost of providing this
     treatment through fee basis providers. However, this potential
     performance metric may be limited by VA’s failure to maintain control




28
  State survey agencies monitor the quality of dialysis care by periodically evaluating
dialysis organizations’ adherence to Medicare’s Conditions for Coverage for ESRD
Facilities. These conditions for coverage are the minimum health and safety rules that
dialysis facilities participating in Medicare must meet. 42 C.F.R. Part 494. In particular, the
conditions for coverage direct dialysis facilities to develop, implement, and maintain an
ongoing internal quality oversight program that focuses on indicators related to improved
health outcomes. 42 C.F.R. § 494.110.




Page 16                                                          GAO-12-584 VA Dialysis Pilot
                   over the cost estimation model or provide sufficient guidance to pilot
                   locations about how to properly use it.

              Because VA has not yet developed an evaluation plan or formally defined
              performance measures for pilot locations, it does not have access to
              consistent and reliable information on the performance of the pilot
              locations and may not have this information accessible when it is time to
              either make midcourse corrections for the Dialysis Pilot or decide whether
              and how to open additional VA-operated outpatient dialysis clinics.

              Step 3—Using performance as a basis for decision making. Despite
              not having fully developed performance measures for assessing the pilot
              locations, VA has already begun planning for the expansion of the
              Dialysis Pilot, which should not occur until after VA has defined clear
              performance measures for the existing pilot locations and evaluated their
              success. Specifically, a member of the VHA Dialysis Steering Committee
              told us that the committee has already developed a limited plan for
              expansion of the Dialysis Pilot. However, this plan does not incorporate
              the results of a performance assessment for the existing four pilot
              locations. In addition, VA systems redesign engineers have begun
              developing three additional cost estimation models despite not having
              fully evaluated the effectiveness of the cost estimation model used in the
              Dialysis Pilot. 29 Taken together, these two actions indicate that VA is
              beginning to make decisions about the future of the Dialysis Pilot and the
              cost estimation model, even though VA decision makers currently lack
              critical performance information on the existing four pilot locations.


              To its credit, VA developed the Dialysis Pilot as a potential way of
Conclusions   addressing the rising cost and utilization of fee basis dialysis treatments
              among veterans. Through the Dialysis Pilot, VA intends to test the viability
              of increasing its capacity to provide dialysis treatments in VA-operated
              outpatient dialysis clinics. VA set four goals for its Dialysis Pilot:
              (1) improve quality of care, (2) increase access for veterans, (3) provide
              additional dialysis research opportunities, and (4) achieve cost savings for
              VA-funded dialysis treatments. While these are commendable goals,
              there were weaknesses in VA’s planning and early implementation of the
              Dialysis Pilot that if not corrected, will make it difficult to determine


              29
                These new models analyze the feasibility of VAMCs expanding existing on-site dialysis,
              gastroenterology, and polysomnography (sleep study) units.




              Page 17                                                      GAO-12-584 VA Dialysis Pilot
whether the Dialysis Pilot has met its goals and will provide cost-effective
care if expanded. Specifically, VA did not conduct a transparent and well-
documented pilot location selection process, provide clear and timely
guidance to participating VISNs and VAMCs on key financial aspects of
the Dialysis Pilot, or articulate clear performance measures for pilot
locations. We believe that VA can rectify these weaknesses, but must act
prior to full implementation of the four pilot locations to ensure that the
Dialysis Pilot is not compromised and can serve as an effective
demonstration effort. Moreover, until VA has reliable data, we believe it
would be unwise for VA to expand the Dialysis Pilot beyond the current
four pilot locations, as doing so may risk investing resources
inappropriately.

Moving forward, we believe four critical areas should be addressed. First,
VA must clearly document the selection process it used to identify the
existing four pilot locations and may use to identify any future pilot
locations. VA relied on a decentralized and ad hoc selection process to
choose the existing four pilot locations and failed to properly document
the results of this key decision-making effort. Such inattention to
documenting critical decisions results in a lack of transparency and
weakens the credibility of the Dialysis Pilot.

Second, VA needs to ensure that changes to its cost estimation model
are reviewed by knowledgeable staff. This step is necessary to ensure
that this model produces comparable data for all pilot locations that can
serve as an accurate basis for evaluating the financial success of the
Dialysis Pilot. To date, pilot locations altered existing formulas and model
assumptions, which resulted in cost estimation data with questionable
reliability that may limit VA’s ability to compare results consistently across
the pilot locations.

Third, VISN and VAMC officials need specific guidance for the repayment
of Dialysis Pilot start-up funds and the calculation of cost savings realized
from the pilot locations. To date, VA Central Office has not articulated its
expectations regarding these two critical aspects of the Dialysis Pilot.
Without a clear understanding of the terms for start-up fund repayment, it
is difficult for VA or external entities to determine if the four pilot locations
are making significant progress toward repaying these funds and
generating cost savings that can be used to offset the cost of treating the
projected increased number of veterans who will need dialysis treatment
in the coming years.




Page 18                                                GAO-12-584 VA Dialysis Pilot
                      Finally, VA must develop clear and measurable performance criteria that
                      can be consistently applied to evaluate the Dialysis Pilot. Despite defining
                      the mission and goals for the Dialysis Pilot, VA has not developed a plan
                      for evaluating its success or developed performance measures to track
                      pilot locations’ progress toward meeting its stated mission and goals. An
                      effective evaluation plan and clear performance measures are needed to
                      help ensure that the Dialysis Pilot operates in an environment of
                      accountability.


                      In order to increase VA’s attention to planning, implementation and
Recommendations for   performance measurement of the Dialysis Pilot we are making five
Executive Action      recommendations.

                      To improve VA’s communication related to the Dialysis Pilot, we
                      recommend that the Secretary of Veterans Affairs direct the Under
                      Secretary for Health to ensure that key decisions made regarding pilot
                      location selection and efforts to continue or expand the Dialysis Pilot are
                      clearly documented.

                      To ensure that reasonable cost estimates are created for the Dialysis
                      Pilot and other similar programs, we recommend that the Secretary of
                      Veterans Affairs direct the Under Secretary for Health to restrict or
                      evaluate changes made to cost estimation models at the VISN and VAMC
                      levels that affect pilot development and analysis.

                      To ensure that start-up funds are repaid and cost savings are accurately
                      calculated for the Dialysis Pilot, we recommend that the Secretary of
                      Veterans Affairs direct the Under Secretary for Health to develop written
                      guidance about expectations for the repayment of start-up funds and how
                      the cost savings generated by the four pilot locations should be
                      calculated.

                      To ensure that VA Central Office effectively evaluates the Dialysis Pilot,
                      we recommend that the Secretary of Veterans Affairs direct the Under
                      Secretary for Health to take the following two actions:

                      •   Develop an evaluation plan that outlines how the Dialysis Pilot will be
                          assessed and provides target dates for the completion of this
                          assessment.




                      Page 19                                             GAO-12-584 VA Dialysis Pilot
                     •   Develop clear measures for assessing the performance of the four
                         Dialysis Pilot locations in key areas—including quality, access, and
                         cost.


                     VA provided written comments on a draft of this report, which we have
Agency Comments      reprinted in appendix II. In its comments, VA generally agreed with our
and Our Evaluation   conclusions, concurred with our recommendations, and described the
                     department’s plans to implement each of our five recommendations. VA
                     did not provide any technical comments.

                     In its general comments, VA noted that it has established a
                     comprehensive strategic plan for chronic kidney disease and dialysis
                     services; however, a copy of this strategic plan was not provided as part
                     of VA’s response to the draft report. According to VA, this plan
                     incorporates aspects of several of our recommendations. In addition, VA
                     stated that it is in the process of developing longer-range plans for the
                     expansion of dialysis services, including establishing additional
                     freestanding outpatient dialysis clinics similar to the current four pilot
                     locations. We support VA’s efforts to carefully analyze its delivery of
                     dialysis services to veterans, including the most cost-effective method of
                     providing these life-saving medical treatments, and make reasoned
                     decisions based on a thorough evaluation of its current pilot locations. In
                     this regard, we continue to believe that it is unwise to establish additional
                     freestanding outpatient dialysis clinics until the current four pilot locations
                     are fully evaluated and VA rectifies the weaknesses we identified in this
                     report.

                     In its plan for addressing our recommendations, VA stated that it is
                     developing a plan for the Dialysis Pilot that will address three of our
                     recommendations related to (1) the documentation of Dialysis Pilot key
                     decisions, including the selection of future pilot locations; (2) the creation
                     of reasonable cost estimates for pilot locations; and (3) guidance for the
                     repayment of start-up funding and cost savings calculations. According to
                     VA, this plan will ensure better communication and documentation of
                     decisions for future pilot site selections; more rigorous oversight of cost
                     estimation tools and analysis of financial and clinical outcomes; and a
                     thorough analysis of start-up fund repayment, including whether VA will
                     reverse its decision to require repayment of these funds. VA’s anticipated
                     completion date for these actions is July 1, 2012.




                     Page 20                                               GAO-12-584 VA Dialysis Pilot
Finally, to address our remaining two recommendations, VA intends to
develop a detailed evaluation plan for the Dialysis Pilot by July 1, 2012.
According to VA, this plan will include specific criteria, target dates, and
activities that must occur throughout the remainder of the pilot. VA
intends to use this plan to periodically review and evaluate the Dialysis
Pilot. In addition, VA described its efforts to significantly enhance the
decision-making tools used for the Dialysis Pilot, including the cost
estimation model. VA reported that these enhancements will include more
rigorous accounting for facility costs, such as those for staffing and
equipment. In addition, VA plans to task its systems redesign engineers
with assessing pilot locations’ performance using metrics for cost, access,
and quality.

We are sending copies of this report to the Secretary of Veterans Affairs,
appropriate congressional committees, and other interested parties. In
addition, the report is available at no charge on the GAO website at
http://www.gao.gov.

If you or your staff have any questions about this report, please contact
me at (202) 512-7114 or williamsonr@gao.gov. Contact points for our
Offices of Congressional Relations and Public Affairs may be found on
the last page of this report. GAO staff who made major contributions to
this report are listed in appendix III.




Randall B. Williamson
Director, Health Care




Page 21                                             GAO-12-584 VA Dialysis Pilot
List of Requesters

The Honorable Patty Murray
Chairman
The Honorable Richard Burr
Ranking Member
Committee on Veterans’ Affairs
United States Senate

The Honorable Jeff Miller
Chairman
Committee on Veterans’ Affairs
House of Representatives

The Honorable Bill Johnson
Chairman
Subcommittee on Oversight and Investigations
Committee on Veterans’ Affairs
House of Representatives

The Honorable Michael Michaud
Ranking Member
Subcommittee on Health
Committee on Veterans’ Affairs
House of Representatives




Page 22                                        GAO-12-584 VA Dialysis Pilot
Appendix I: Status of VA Dialysis Pilot
                                          Appendix I: Status of VA Dialysis Pilot
                                          Locations



Locations

                                          Table 1 provides additional information on the current operating status of
                                          the four Dialysis Pilot locations at the Department of Veterans Affairs (VA)
                                          medical centers (VAMC) in Durham, North Carolina; Fayetteville, North
                                          Carolina; Philadelphia, Pennsylvania; and Cleveland, Ohio.

Table 1: Status of Dialysis Pilot Locations as of March 2012

Pilot VAMC          Anticipated
location            capacity           Current operating status                Implementation challenges pilot locations reported
Fayetteville        Sixteen dialysis   Operational since June 2011             •    Planning and building issues. The pilot location’s
                    stations serving                                                leased space required that floor drains be installed,
                    64 veterans                                                     which delayed the progress of constructing the
                                                                                    outpatient dialysis clinic.
Durham              Twelve dialysis    Operational since June 2011             •    Difficulty finding an appropriate clinic location.
                    stations serving                                                Identifying an appropriate location and entering into
                    48 veterans                                                     a contract and lease for the outpatient dialysis clinic
                                                                                    took longer than anticipated.
                                                                               •    Equipment testing. The pilot location’s water
                                                                                    purification system, a necessary component of the
                                                                                    dialysis process, needed additional testing prior to
                                                                                    the opening of the outpatient dialysis clinic.
Philadelphia        Twelve dialysis    Not yet operational; scheduled to       •    Contracting challenges. The pilot location’s first
                    stations serving   become operational in May 2012               contract for leased space was canceled due to
                    48 veterans                                                     zoning issues that the contractor did not disclose. A
                                                                                    second location and a new contractor were
                                                                                    identified and construction of the pilot location is
                                                                                    under way.
Cleveland           Twenty dialysis    Not yet operational; scheduled          •    Difficulty finding an appropriate clinic location.
                    stations serving   to become operational in                     The VAMC initially planned to incorporate the pilot
                    80 veterans        September 2012                               location into an existing VAMC enhanced-use lease
                                                                                             a
                                                                                    project. However, VA Central Office determined
                                                                                    that the clinic could not be added to this enhanced-
                                                                                    use lease. A lease for space in a new location is
                                                                                    pending.
                                          Source: GAO.
                                          a
                                           Under VA’s enhanced-use lease program, VA property may be leased for non-VA uses, provided
                                          those uses are compatible with or benefit the department’s mission. VA requires lessees either pay
                                          rent or offer VA “in-kind” consideration.




                                          Page 23                                                              GAO-12-584 VA Dialysis Pilot
Appendix II: Comments from the Department
             Appendix II: Comments from the Department
             of Veterans Affairs



of Veterans Affairs




             Page 24                                     GAO-12-584 VA Dialysis Pilot
Appendix II: Comments from the Department
of Veterans Affairs




Page 25                                     GAO-12-584 VA Dialysis Pilot
Appendix II: Comments from the Department
of Veterans Affairs




Page 26                                     GAO-12-584 VA Dialysis Pilot
Appendix II: Comments from the Department
of Veterans Affairs




Page 27                                     GAO-12-584 VA Dialysis Pilot
Appendix II: Comments from the Department
of Veterans Affairs




Page 28                                     GAO-12-584 VA Dialysis Pilot
Appendix II: Comments from the Department
of Veterans Affairs




Page 29                                     GAO-12-584 VA Dialysis Pilot
Appendix III: GAO Contact and Staff
                  Appendix III: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  Randall B. Williamson, (202) 512-7114 or williamsonr@gao.gov
GAO Contact
                  In addition to the contact named above, Marcia A. Mann, Assistant
Staff             Director; Kathleen Diamond; Katherine Nicole Laubacher; Rebecca Rust;
Acknowledgments   and Malissa G. Winograd made key contributions to this report. Lisa
                  Motley provided legal support.




(290966)
                  Page 30                                        GAO-12-584 VA Dialysis Pilot
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