Defense Health Care: Tri-Service Strategy Needed to Justify Medical Resources for Readiness and Peacetime Care

Published by the Government Accountability Office on 1999-11-01.

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

                 United States General Accounting Office

GAO              Report to Congressional Requesters

November 1999
                 DEFENSE HEALTH
                 Tri-Service Strategy
                 Needed to Justify
                 Medical Resources for
                 Readiness and
                 Peacetime Care

      United States
GAO   General Accounting Office
      Washington, D.C. 20548

      Health, Education, and
      Human Services Division


      November 3, 1999

      The Honorable Stephen E. Buyer
      The Honorable Neil Abercrombie
      Ranking Minority Member
      Subcommittee on Military Personnel
      Committee on Armed Services
      House of Representatives

      The Honorable Wayne Allard
      The Honorable Max Cleland
      Ranking Minority Member
      Subcommittee on Personnel
      Committee on Armed Services
      United States Senate

      The Department of Defense’s (DOD) military health system (MHS), costing
      about $16 billion annually, offers care to 8.2 million military and civilian
      beneficiaries. The system has a dual role of medically supporting wartime
      deployments—its readiness mission1—while caring for active duty
      members, retirees, and their families in peacetime. The Army, Navy, and
      Air Force provide most of the system’s care through their own medical
      centers, hospitals, and clinics, totaling about 580 treatment facilities
      worldwide. Regional networks of civilian providers supply the remaining
      care. MHS has undergone major demographic changes and, today, serves
      more retirees than active duty beneficiaries and their respective families.
      Also, mirroring overall military end-strength decreases during this decade,
      military treatment facilities (MTF) have been closed or downsized, their
      budgets constrained, and medical practices shifted toward an emphasis on
      managed care. Such conditions have focused attention on the prospective
      need for MTFs, the coordination of peacetime care among them, and
      alternative care delivery approaches.

      Among the areas affected by the changes is the national capital area (NCA),
      in and around Washington, D.C. There, the three services offer care to
      about 400,000 beneficiaries in 26 MTFs, including 3 medical centers.
      Concerned about potential service overlaps and whether increased
      efficiencies are possible, the Congress, in the 1998 Defense Authorization

       MHS readiness needs are generally derived by projecting the active duty medical personnel and
      equipment required to support major wartime conflicts.

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                   Act mandated that we review the need for and coordination of care among
                   NCA MTFs. This review is the second of two GAO reviews mandated by the
                   act. In the first review, we examined the Navy’s and Army’s attempts in
                   1997 to downsize and close certain graduate medical education
                   programs—the primary source of military physicians. In the resulting
                   April 1998 report, we found that DOD and the two services lacked mutually
                   acceptable criteria and methods for targeting the graduate medical
                   education programs. DOD agreed with our recommendation to develop the
                   needed guidance and is now doing so.2

                   As agreed with your offices, this review’s objectives are to (1) evaluate the
                   need for NCA MTFs and DOD’s strategy for assessing such needs, (2) identify
                   any obstacles hindering DOD’s ability to make coherent needs assessments,
                   and (3) determine whether current care coordination among NCA MTFs
                   could be improved. We also agreed that, because NCA MTFs are integral
                   parts of the overall MHS, we would assess recent DOD initiatives to make
                   MHS management improvements. We conducted our work between
                   March 1998 and September 1999 in accordance with generally accepted
                   government auditing standards. For details on our methodology, see
                   appendix I.

                   Despite successful DOD and service efforts to improve MHS management,
Results in Brief   DOD still lacks a comprehensive tri-service strategy for determining and
                   allocating medical resources among MTFs. Consequently, neither we nor
                   DOD can fully address the need for, or appropriate size of, NCA MTFs or MTFs
                   elsewhere in MHS. In the current health care environment, each service has
                   its own needs determination and resource allocation approach. Generally,
                   each allocates resources based on prior year budgets, facility size,
                   location, historical workload, and readiness and political considerations. A
                   tri-service strategy applied systemwide would enable DOD to assess the
                   need for each MTF by taking into account the resources needed for both
                   readiness and peacetime care available at all NCA MTFs. Also, resources
                   available in the local civilian community need to be considered. Such a
                   strategy would also provide a systematic basis for justifying budget
                   requests. DOD has recently begun to address this fundamental deficiency.

                   A key obstacle to developing a tri-service strategy is the military services’
                   long-standing independence. Historically, the services have had enough
                   resources to maintain separate health care systems, with capabilities

                   Collaboration and Criteria Needed for Sizing Graduate Medical Education (GAO/HEHS-98-121,
                   Apr. 29, 1998).

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overlapping during peacetime. As a result, over the years, formal
interservice management efforts have been limited and, today, remain
difficult to achieve. A second obstacle is that DOD and the services have
not determined the cost of MHS’ evolving readiness mission or the cost of
its peacetime care. Without knowing such costs, DOD is hampered in
justifying MHS’ size and defending the need for individual MTFs.
Exacerbating this has been the emerging peacetime care emphasis during
this decade—projected to continue in the next—which competes for
resources with MHS’ basic readiness mission. Today, for example, retirees
outnumber active duty beneficiaries and their respective families. Studies
during the period have identified deficiencies in medical personnel
readiness. As a result, questions recur about whether MHS is too large; what
the potential extent of service overlap and inefficiencies are among MTFs
and if all are needed; whether more attractive alternatives to MTF care are
available; and whether military providers are being placed and trained
properly to manage readiness effectively.

Regarding current service coordination within NCA, we found that MTFs
have entered into numerous, varying agreements to share resources, such
as one MTF sending specialty providers to other MTFs on a monthly basis.
While the agreements appear beneficial, they are mostly ad hoc and results
are not well documented. Such agreements are vulnerable to changes in
MTF budgeting approaches and other factors that can affect the MTFs’
willingness to coordinate their efforts. A recent DOD effort to further
consolidate NCA MTF services by merging NCA medical centers met with
major disagreements about what care should be provided and where. As a
result, the effort was put on hold and the centers continue to operate

During this decade, DOD and the services’ Surgeons General have
undertaken improvement initiatives, including implementing DOD’s
managed care program, TRICARE; reducing the number of medical
personnel; consolidating graduate medical education programs;
establishing partnerships with the Department of Veterans Affairs;
reducing hospital stays; restructuring hospitals into more efficient clinics;
and revising budget processes to more closely link funding to
cost-effective health care. Recently, DOD began new initiatives. Among
these, the most critical in our and DOD’s view is to develop a tri-service
strategy that takes into account current and projected beneficiary
populations, focuses on MHS’ basic wartime and peacetime care missions,
and optimally seeks to realign MTF staffing and resource allocations. This
action is needed to justify MHS’ basic resource needs in a continually

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             changing health care environment. Also, the realignment should help to
             maximize enrollment and provide more effective care to enrolled
             beneficiaries as a result of savings and the avoidance of unnecessary costs.
             Progress on this initiative must be made before most of the others can

             The tri-service team assembled to develop the new MHS strategy faces a
             daunting challenge, given the task’s complexity and the services’ history of
             independence. For this reason, we believe DOD and the services need to
             continue dedicating high-level management attention to ensure the project
             succeeds. To enhance congressional oversight of this critical endeavor, we
             also believe DOD needs to periodically report to the cognizant
             congressional committees as the project progresses.

             MHS costs about $16 billion annually and offers care to a beneficiary
Background   population of about 8.2 million active duty personnel3 and their
             dependents, and military retirees and their dependents and survivors. By
             law, MHS has a dual role of supporting wartime and other deployments and
             providing peacetime care. For peacetime care, the services provide similar
             medical services worldwide to both military and civilian beneficiaries.
             However, the services differ in their medical support requirements for
             deployments. For example, the Army medically supports ground combat,
             the Navy supports the Naval Fleet and the Marine Corps on shipboard and
             land, and the Air Force is the primary means for air evacuation of wartime

             MHS’readiness mission determines the minimum numbers of active duty
             medical personnel required by each service. Each service’s readiness
             mission has two key components. The first component is the personnel4
             and equipment needed to support two major regional conflicts. If, for
             example, major conflicts developed in two parts of the world and the
             United States entered the conflicts, sufficient medical resources would be
             needed to care for an estimated number of U.S. casualties. Such resources
             would be needed where the conflict was occurring and where casualties
             were evacuated to, such as remote bases or stateside. Today’s readiness
             mission, which continues to evolve, calls for a smaller, more mobile
             medical force then during the Cold War. The second component is the

              Includes members of the Coast Guard and the Commissioned Corps of the National Oceanic and
             Atmospheric Administration and of the Public Health Service, who are eligible for care in the military
             health system.
              This includes reliance on medical forces activated from the reserves.

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                                   routine daily support for active duty personnel not in combat and their
                                   dependents assigned outside the United States and to certain remote U.S.
                                   locations. Both readiness mission components rely on a U.S. rotational
                                   base that allows medical personnel to rotate to and from assignments.
                                   Because assignments abroad are commonly only for 12 to 24 months, a
                                   continuous replacement flow is needed. Also, added medical personnel in
                                   training are needed to provide for attrition. Medical personnel are also
                                   available to help provide peacetime care. And, while MTFs are not required
                                   to provide peacetime care for non-active-duty beneficiaries, such care can
                                   provide readiness training for military providers.

                                   As shown in figure 1, active duty personnel comprise a small
                                   percentage—19 percent—of the 8.2 million beneficiaries, and they have
                                   first priority for MTF care. Active duty dependents represent almost
                                   30 percent of the eligible population. Retirees and their dependents and
                                   survivors are just over 50 percent of the beneficiary population.

Figure 1: Eligible Beneficiaries

                                   Note: Due to rounding, pie slices do not add to 100.

                                   Source: Defense Health Program, Fiscal Year 2000/2001 Biennial Budget Estimates (Feb. 1999).

                                   About three-fourths or $12 billion of MHS’ costs are incurred by about 580
                                   MTFs—15 medical centers, 76 hospitals, 374 medical clinics, and about 115
                                   dental clinics. Medical centers are large critical care facilities that provide
                                   a broad range of inpatient and outpatient health care, serve as referral
                                   centers with specialized and consultative support, and provide graduate
                                   medical education. Hospitals provide inpatient and outpatient treatment
                                   with diagnostic and therapeutic services, such as preventive medicine.
                                   Clinics are smaller medical facilities offering primary care, mostly on an

                                   Page 5                                  GAO/HEHS-00-10 Justifying Military Medical Resources

outpatient basis. Most MTFs are on military installations—in or near urban
areas or remotely located—to support active duty personnel.5 Some MTFs,
mostly clinics, are located off installations in urban areas to more
conveniently serve local retiree and other beneficiaries. And medical
centers may be located off installations, where beneficiary populations
can provide sufficient patient workload volume and mix. MTFs are similar
to civilian medical centers, hospitals, and clinics, although military
providers receive special training for readiness.

The remaining one-fourth, or about $3.5 billion, of the system’s cost is for
care delivered through civilian support contracts under DOD’s TRICARE
program. TRICARE, introduced in 1994, is DOD’s managed care approach to
controlling costs and improving access and quality of care. Since
March 1995, the civilian contracts have been implemented on a sequential
regional basis across the nation. The contract that included NCA was
implemented last—in June 1998.

TRICARE encompasses MTF care as well as civilian contracted care.
TRICARE offers beneficiaries three health care options: Prime, Standard,
and Extra. TRICARE Prime is the managed care approach that requires
beneficiaries to enroll, does not require copayments for care, and offers
them top priority for MTF care. Active duty personnel are automatically
enrolled in Prime. DOD and the services consider Prime their best option
for controlling costs and improving care access and quality. Beneficiaries
may also elect the Standard and Extra care options, which are
fee-for-service approaches not requiring beneficiary enrollment.

The Assistant Secretary of Defense for Health Affairs establishes MHS
policy and coordinates TRICARE, including administering the support
contracts. Further, Health Affairs plans and budgets for health care
operations and maintenance.6 Each service has its own medical
department, headed by a Surgeon General, which operates its MTFs and
recruits and funds its military medical personnel. Table 1 shows the
number of MTFs by service and facility type, excluding clinics that provide

For example, many of the medical personnel needed to support the 82nd Airborne Division at Fort
Bragg, North Carolina, provide services at Womack Army Medical Center, also located at Fort Bragg.
 DOD medical program funds are provided through a single Defense Health Program (DHP)
appropriations account. This account provides funds for operations and maintenance, procurement,
research, and development, but it excludes funds for active and reserve personnel (funded through the
services) or for military construction (funded through a separate account). The Assistant Secretary of
Defense for Health Affairs directs the distribution of the funds to the services, which allocate the funds
to their facilities.

Page 6                                    GAO/HEHS-00-10 Justifying Military Medical Resources

                                     only dental care. MTF physicians and medical support7 include active duty
                                     personnel (about 75 percent of all provider and support personnel) and
                                     civilians. Appendix II provides a profile of the NCA MTFs.

Table 1: Worldwide MTFs by Service
and Facility Type, as of May 1999                                                    Medical
                                                                                     centers      Hospitals        Clinics          Total
                                     Army                                                    7           21            178               206
                                     Navy                                                    3           22            148               173
                                     Air Force                                               5           33             48               86
                                     Total                                                 15            76            374               465
                                     Note: Facilities that provide only dental care are not included.

                                     Source: DOD and each service’s Office of the Surgeon General.

                                     Reflecting the one-third decrease in active duty forces during the past 10
                                     years, MHS has steadily declined, with military medical personnel declining
                                     15 percent and one-third of the MTFs closing. These conditions, along with
                                     constrained MTF budgets, have raised concerns about the continued need
                                     for all medical facilities and assets and how peacetime care can best be

                                     As an integral part of MHS, NCA has 26 MTFs in a radius of about 60 miles
                                     around Washington, D.C. (See fig. 2.) Three of these MTFs are medical
                                     centers—Walter Reed Army Medical Center in Washington, D.C.; National
                                     Naval Medical Center in Bethesda, Maryland; and the Air Force’s Malcolm
                                     Grow Medical Center at Andrews Air Force Base in Maryland. The Army
                                     and Navy each have 12 MTFs, while the Air Force has only its medical
                                     center and 1 clinic.

                                      DOD medical personnel include physicians, dentists, nurses, administrators, medical technicians,
                                     veterinarians, and corpsmen.

                                     Page 7                                    GAO/HEHS-00-10 Justifying Military Medical Resources

Figure 2: MTFs in the National Capital Area

                                              Source: Health Affairs, TRICARE Region 1 Lead Agent, and various MTF officials.

                                              Page 8                                 GAO/HEHS-00-10 Justifying Military Medical Resources

                      NCA includes about 5 percent of MHS’ beneficiaries and, in fiscal year 1998,
                      incurred about 5 percent or $778 million of MHS’ total costs. In 1998, the
                      three medical centers accounted for 75 percent of the NCA MTFs’
                      costs—including 95 percent of inpatient and 65 percent of outpatient
                      costs. From 1995 to 1998, NCA inpatient admissions declined 44 percent
                      and related costs declined 23 percent. Outpatient visits have also declined
                      by 14 percent, but related costs have risen 22 percent, reflecting
                      nationwide trends toward providing more costly care, including surgery,
                      on an outpatient basis.

                      Walter Reed, located in Washington, D.C., near the Maryland border,
                      began operating in 1909. It has branch clinics at the Pentagon and in the
                      District at Fort McNair. The Army also has a community hospital at Fort
                      Belvoir, Virginia, with four branch clinics in Virginia and a clinic at Fort
                      Meade, Maryland, which also has three branch clinics in Maryland. The
                      Naval Medical Center in Bethesda opened in 1942 about 5 miles north of
                      Walter Reed. Bethesda has eight branch clinics in Washington, D.C.;
                      Maryland; and Virginia. Separately, the Navy has two clinics in
                      Maryland—at Annapolis and at Patuxent River—and one clinic in
                      Quantico, Virginia. Malcolm Grow Medical Center opened in 1958 at
                      Andrews Air Force Base in Maryland. The Air Force also has a clinic at
                      Bolling Air Force Base in Washington, D.C. (See app. II for more details on
                      NCA MTFs.)

                      It is not possible to fully address the need for or appropriate size of NCA
The Need for and      MTFs or MTFs elsewhere in MHS because DOD and the services lack an overall
Appropriate Size of   strategy for determining and allocating medical resources among MTFs.
NCA and Other MTFs    While efforts to coordinate care among services have occurred, DOD and
                      the services have not systematically collaborated in seeking the most
Are Not Now           cost-effective placement and use of all medical resources. This is so even
Determinable          though MTFs in close proximity, such as the NCA MTFs, have overlapping
                      care capabilities and treat any beneficiary regardless of service affiliation.
                      The need for an overall strategy was reaffirmed recently when DOD
                      suspended an effort to merge NCA medical centers and medical centers in
                      San Antonio, Texas, for lack of clarity of the medical centers’ missions.

                      Service officials told us that each service has its own distinct approach for
                      determining and allocating MTF resources and generally does not take into
                      account the other services’ resources when making such decisions.
                      Moreover, the services use different organizational structures to plan for
                      and manage their NCA MTFs. While NCA MTFs are integral parts of the larger

                      Page 9                         GAO/HEHS-00-10 Justifying Military Medical Resources

MHS,  they are primarily concerned with the day-to-day delivery of
peacetime care. NCA MTF officials told us, for example, that they focus their
attention on such matters as budgets, rising pharmacy costs, beneficiary
satisfaction, facility maintenance, medical and support personnel staffing
levels, and the day-to-day running of a hospital or outpatient clinic. In
addressing the need for their facilities, they largely refer to present and
historical patient care workloads and the various care specialties their
facilities provide. And, while officials generally cite readiness as their
primary mission, beyond the numbers of military providers, none readily
identified which health care activities and costs were needed to support
readiness requirements. In this regard, the most recent major study of NCA
MTF needs and operations and others like it prepared during the early
1990s have largely focused on peacetime care.8

In delivering services, we found that the NCA MTFs are interdependent. MTF
service areas overlap, so the hospitals and clinics can serve the same
patients. Thus, patients in an Army MTF may be Air Force or Navy active
duty members, dependents, or retirees. Likewise, some MTF providers and
support staff may come from another service through a cooperative
agreement between the facilities. For example, providers from DeWitt
Army Community Hospital at Fort Belvoir provide outpatient prenatal care
at a Navy clinic at nearby Quantico and deliver babies at the Army

Further, many of the smaller NCA MTFs, which are branch clinics of the
larger MTFs, also serve as referral sources for specialty care provided in
any of the area’s medical centers, which also serve populations outside the
area. For example, both Bethesda and Walter Reed treat patients from
around the world in specialty care such as open heart surgery and
neurosurgery. Thus, NCA MTFs influence each others’ workloads, and
individual MTF need is not necessarily determined only by NCA care

Recently, the TRICARE managed care support contract that covers 13
northeastern states—including Maryland, Virginia, and Washington,
D.C.—was implemented, introducing added care options for NCA
beneficiaries. Many will be able to access both the MTF and the
contractor’s civilian care network. The TRICARE contractor becomes a
fifth major player—along with the Army, Navy, Air Force, and DOD’s Office
of the Assistant Secretary for Health Affairs—in the management and

  TRICARE Region 1 Integration of Specialty Services Study Final Report (Healthcare Studies, Vector
Research, Inc., Oct. 10, 1995).

Page 10                                 GAO/HEHS-00-10 Justifying Military Medical Resources

                      delivery of NCA military health care. Thus, the contractor plays a
                      supportive role with MTFs in helping to maintain military readiness and
                      providing peacetime care. But this further complicates the process of
                      determining the need for individual NCA MTFs and MTFs elsewhere and
                      further underscores the need for DOD and the services to collaboratively
                      determine each MTF’s role in and share of the area’s health care delivery.

                      During our review, DOD sought to merge NCA medical centers and medical
                      centers in San Antonio. The attempts were suspended, however, when DOD
                      concluded the medical centers’ missions needed to be clarified before
                      their peacetime care workloads could be analyzed for possible
                      consolidation. To illustrate, the Air Force objected to the proposed
                      elimination of certain services at Malcolm Grow that had limited patient
                      workloads. Officials at Malcolm Grow argued that personnel providing the
                      services were essential to its wartime tasks. Such arguments were coupled
                      with the services’ traditional objections to substantially altering their
                      medical centers’ structures and operations. As a result, the efforts were
                      put on hold and the centers continue to operate as before. Until DOD and
                      the services develop a comprehensive overall approach for justifying each
                      MTF’s size and resources, neither we nor DOD can assess NCA MTFs’ needs.

                      Currently, the Army, Navy, and Air Force have separate methods, rather
Obstacles Impede      than an overall tri-service strategy, for determining needs and allocating
Developing a          resources to MTFs. And the services define workload, such as patient visits,
Tri-Service Medical   differently, which limits DOD’s ability to measure performance across the
                      services. Several obstacles have allowed such conditions and deterred
Resource Strategy     development of a tri-service approach, including the services’
                      long-standing independence and DOD and the services’ not yet having
                      identified readiness costs so that their systems’ peacetime components
                      can be cost-effectively managed. Exacerbating these obstacles is the
                      emerging emphasis during this decade on peacetime care, which competes
                      with MHS’ evolving readiness mission. As a result, concerns continue about
                      the system’s size and potential MTF care overlaps and inefficiencies. Also at
                      issue are whether potentially more attractive MTF care alternatives are
                      available and whether military providers are being effectively placed and
                      trained so that readiness is managed effectively.

                      Page 11                        GAO/HEHS-00-10 Justifying Military Medical Resources

Each Service Has Its Own   Currently, each service uses its own model for estimating the number of
Approach to Determining    medical personnel needed to support its wartime missions, and each
Needs and Allocating       resisted DOD’s efforts to apply a common model for determining minimum
                           medical readiness requirement numbers. The services have agreed,
Resources                  however, to use a common approach when DOD’s reengineering initiative,
                           discussed in detail later, is implemented. The common model is referred to
                           as the DOD sizing model. (See app. III for descriptions of the services’

                           Each service also has its own method for allocating resources to its
                           MTFs—that   is, deciding where, how many, and what type of military
                           providers, support staff, and related funds should be distributed to each
                           MTF. To make such decisions, each service generally relies on historical
                           staffing and workload levels, facility size, and readiness and political
                           considerations. Also, each uses different models to support its decisions.
                           At the same time, the services’ separate methods for projecting and
                           validating MTF resource needs are and have been in a continual state of
                           change, and their reliability remains at issue. The Army, for example, in its
                           latest MTF needs modeling effort,9 reported that a year of mostly on-site
                           MTF work is required to validate performance data from at least eight or
                           nine sources, including MHS-wide cost and workload data systems. The
                           Army also reported that its other ongoing resource allocation modeling
                           exercises, while generally useful, were inadequate for specifically
                           addressing facility and staffing needs. The Air Force’s latest allocation
                           model version similarly raised reliability issues. At Malcolm Grow, for
                           example, officials argued that the model severely understated pediatric
                           workload and, if followed, would have resulted in fewer personnel than
                           needed to provide care.

                           Accurate, comparable MTF workload data are needed for performance
                           measurement, cost-effectiveness assessments, and alternative care
                           delivery evaluations. Such data include numbers and cost of outpatient
                           clinical visits, inpatient admissions, and average length of stay. But each
                           service defines workload differently, and as basic an element as a clinic
                           visit is not counted the same. Also, the cost and workload data captured in
                           DOD’s information systems is neither accurately reported nor recorded.10
                           Thus, cost and performance comparisons across MTFs are generally
                           unreliable. For example, we reported this year that the results of the
                           Medicare subvention demonstration—which is to demonstrate in six

                            Regional Uniform Benefit model (see app. III for a description of the model).
                            Medicare Subvention Demonstration: DOD Data Limitations May Require Adjustments and Raise
                           Broader Concerns (GAO/HEHS-99-39, May 28, 1999).

                           Page 12                                  GAO/HEHS-00-10 Justifying Military Medical Resources

                        selected locations the cost and other effects of serving Medicare-eligible
                        military retirees as MTF enrollees—would be affected by cost data
                        inaccuracies in DOD’s systems.

                        While differing in their modeling and resource allocation efforts, the
                        services also respond differently to reductions in active duty MTF medical
                        staffing and disagree on readiness needs. The Army, for example,
                        apportions reductions among MTFs based on related reductions in the
                        active duty forces each MTF supports. The Air Force generally shares the
                        losses among MTFs but favors facilities that appear most productive. In the
                        same vein, in 1993, a tri-service attempt to develop MTF provider workload
                        standards was abandoned for lack of support and agreement among the
                        services’ participants. And such service differences in MTF needs
                        assessment have also been apparent in DOD-wide attempts to agree on
                        medical readiness needs. DOD and service officials told us that the
                        minimum numbers of active duty MTF physicians needed to treat active
                        duty forces has been a major disagreement area.

                        Moreover, because of their independent approaches, DOD and the services
                        have not collaborated in seeking the most overall cost-effective
                        arrangement of medical resources. For example, the three large NCA
                        medical centers—Walter Reed, Bethesda, and Malcolm Grow—are in close
                        proximity and have overlapping service areas. But the centers are assigned
                        their resources by the Army, Navy, and Air Force, respectively,
                        independent of the other hospitals. As a result, these facilities provide
                        duplicative services and, in some cases, lack sufficient workload.

Long-Standing Service   We and many others have reported that DOD has had difficulty modernizing
Independence Makes      its health system because of traditional rivalries among the services and
Coordinated Strategy    their diverse organizational structures and duties. The lines of authority
                        and accountability among hospital commanders, the service Surgeons
Development Difficult   General, and the Assistant Secretary of Defense for Health Affairs are
                        complicated and sometimes at odds. MHS funding, for example, is
                        controlled by different entities: The Assistant Secretary controls funding
                        for operations, and each service controls funding for its military personnel
                        who operate the system. The services generally have had, until recent
                        years, enough resources to maintain independent health care systems with
                        overlapping peacetime care capabilities. Thus, over the years, while some
                        collaborative efforts were made, the services generally have not found it
                        necessary to engage in formal interservice management efforts, even in
                        today’s tight budget times.

                        Page 13                       GAO/HEHS-00-10 Justifying Military Medical Resources

                              Past studies have suggested changes to the organization of military
                              medicine, including merging the services’ medical departments into a
                              single health agency,11 but the services have resisted such efforts. Each
                              service believed it had unique medical needs and activities12 and thus
                              fought to maintain its own health system. Yet, some analysts have argued
                              that, in wartime, the U.S. military fights and provides medical care under
                              the authority of unified commands, not as individual services. The Navy,
                              for example, handles sea, land, and air functions so that one system could
                              perform all functions. These debates continue, while the services’ NCA MTFs
                              have sought to make informal care arrangements with one another for
                              increased efficiencies, care access, and care quality. These activities are a
                              sign that peacetime care delivery, for the most part, takes the same form
                              regardless of service. However, a strategy for formally coordinating
                              resource planning and distribution among the services while recognizing
                              the uniqueness of their wartime missions has yet to be achieved.

Changing Readiness Needs      During the 1990s, following the end of the Cold War, the level of medical
and Costs Impair Justifying   resources—and their costs—needed to ensure readiness has been widely
the Number and Size of        debated. With the Soviet Union’s dissolution and the emergence of
                              regional threats, DOD’s wartime medical needs changed markedly. In 1994,
MTFs                          a DOD study, known as the “733 study,” estimated that DOD had twice the
                              military physicians it needed for wartime. The services disagreed with the
                              733 study and individually estimated that higher numbers of physicians
                              were needed to meet their readiness missions. More recently, efforts
                              begun in 1995 to update the 733 study have also met with resistance and
                              disagreements, and the study’s long overdue final report was not signed
                              until May 1999–3 years after it was due. DOD pointed out, however, that
                              rather than its numerical results, the study’s analytical approach to
                              determining medical requirements is to be considered its most important

                              In 1995, the Congressional Budget Office reported that MHS could decrease
                              its physical capacity by 50 percent.13 While medical resource reductions
                              ensued, DOD and the services have yet to agree on what resources are
                              needed for readiness versus peacetime care. In fact, a base closure and

                               The Feasibility of Uniting the Medical Services of the Various Branches of the Armed Forces Into a
                              Single Corps, Congressional Research Service (Washington, D.C., Aug. 1993).
                               Defense Health Care: Implementing Coordinated Care—A Status Report (GAO/HRD-92-10, Oct. 3,
                                Restructuring Military Medical Care (Congressional Budget Office, July 1995).

                              Page 14                                  GAO/HEHS-00-10 Justifying Military Medical Resources

                          realignment study14 concluded that no military medical downsizing effort,
                          no matter how well designed, would accomplish meaningful, appropriate
                          reductions until DOD and the services agreed on MHS’ readiness needs and
                          how best to meet them.

                          Without clear distinctions between medical readiness and peacetime care
                          needs and costs, DOD and the Surgeons General are hampered in trying to
                          justify the number and size of their MTFs. For example, MHS budget
                          requests over the last 3 years have been insufficient to cover their costs,
                          requiring DOD to request supplemental appropriations to the cognizant
                          congressional subcommittee’s dissatisfaction. To develop the basis they
                          need, DOD and the services together have to define, assign cost to, and
                          agree on what specific elements comprise medical readiness—namely,
                          deployments; what activities, including training, prepare military providers
                          for deployment; and what activities enable the rotation and sustainment of
                          deployed active duty medical personnel. Not having done this, DOD and the
                          services continue operating their health systems not knowing what
                          percentage of their total costs are for readiness needs and what
                          percentage are for nonreadiness, peacetime care. Another consequence is
                          that DOD has little basis for deciding whether or not to make or buy its
                          peacetime care services or otherwise to make informed management
                          decisions about such care.

MHS’ Emerging Peacetime   MHS’ primary mission—and the justification for having active duty medical
Care Emphasis Competes    providers—is wartime medical readiness. But in the past 20 years, driven
With Readiness Mission    by budget pressures and a growing retiree population’s demands, DOD has
                          increasingly focused on providing peacetime care. Throughout the 1980s,
                          MHS costs significantly escalated, fueled by large cost overruns in the
                          Civilian Health and Medical Program of the Uniformed Services
                          (CHAMPUS).15 Between 1980 and 1990, DOD’s health care budget grew by
                          almost 225 percent, and the largest single program growth—about
                          350 percent—occurred in CHAMPUS. Meanwhile, DOD’s non-active-duty
                          population continued to increase. During the 1990s, MHS budgets generally
                          leveled off, while the numbers of retirees and their dependents grew to

                            In July 1995, the Defense Base Closure and Realignment Commission submitted a report to the
                          president recommending certain military bases for closure or realignment. The report also
                          recommended that DOD pursue MTF consolidation and restructuring, including the use of civilian
                          sector resources where it was cost-effective and maximizing the remaining military resources across
                          service lines.
                           Before TRICARE was fully implemented, DOD operated CHAMPUS, an insurance-like program that
                          paid for a portion of the care military families and retirees under age 65 received from private sector
                          health care providers.

                          Page 15                                   GAO/HEHS-00-10 Justifying Military Medical Resources

                                          more than half of the total beneficiary population. This trend, developing
                                          over the past 40 years, is projected to continue. (See fig. 3.)

Figure 3: Actual and Projected Active and Non-Active-Duty Beneficiaries and Their Respective Dependents for Selected

                                          Available data do not categorize retirees and their dependents as under or over age 65.

                                          Source: Office of the Assistant Secretary for Health Affairs.

                                          Page 16                                   GAO/HEHS-00-10 Justifying Military Medical Resources

In 1994, the Congressional Research Service reported that the growing
portion of DOD’s budget for civilian medical care had become a concern.
Also, we and others reported that, while DOD was aggressively pursuing its
peacetime care duties, training for medical readiness received less

Also at issue is whether military care providers have the training and skills
needed for war. After the Gulf War, we16 and DOD’s Inspector General17
questioned DOD’s ability to meet wartime medical needs. Among other
things, we found large numbers of medical personnel were not deployable
due to their unacceptable physical conditions, lack of required skills,
mismatched medical specialties, and a pervasive lack of wartime readiness
training. Since then, the services have worked to correct these problems,
but concerns persist. For example, the Air Force and Navy are now
shifting requirements and providers needed for wartime deployments from
their smaller MTFs to larger facilities to help ensure adequate training. But
each service generally makes these decisions independent of the others, so
that the physicians may be placed in the same proximities where patient
workloads may be insufficient to train all the physicians.

Recent legislation continues the peacetime care emphasis. For example,
the Balanced Budget Act of 1997 authorized a Medicare subvention
demonstration, which extends TRICARE benefits to those aged 65 and
over. Also, the fiscal year 1999 Defense Authorization Act mandated a
pharmacy demonstration that gives those 65 and over increased access to
the pharmacy benefit through mail order and retail pharmacies. The
Federal Employees Health Benefits Program (FEHBP) demonstration,
which was also authorized by the 1999 act, provides another MTF care
alternative for those 65 and over by offering health care coverage that
federal civilian employees have. Finally, the 1999 act also called for a
demonstration of the effects of providing another TRICARE benefit
supplement for senior retirees. Managing such alternative care
demonstrations while seeking to eliminate MTF service overlaps and

 Medical Readiness: Efforts Are Under Way for DOD Training in Civilian Trauma Centers
(GAO/NSIAD-98-75, Apr. 1, 1998), Chemical and Biological Defense: Emphasis Remains Insufficient to
Resolve Continuing Problems (GAO/NSIAD-96-103, Mar. 29, 1996), Operation Desert Storm: Problems
With Air Force Medical Readiness (GAO/NSIAD-94-58, Dec. 30, 1993), Operation Desert Storm:
Improvements Required in the Navy’s Wartime Medical Program (GAO/NSIAD-93-189, July 28, 1993),
Medical Readiness Training: Limited Participation by Army Medical Personnel (GAO/NSIAD-93-205,
June 30, 1993), and Operation Desert Storm: Full Army Medical Capability Not Achieved
(GAO/NSIAD-92-175, Aug. 18, 1992).
   Medical Mobilization Planning and Execution (Inspector General, DOD, Report No. 93-INS-13, Sept.
30, 1993).

Page 17                                 GAO/HEHS-00-10 Justifying Military Medical Resources

                           inefficiencies make DOD’s need for a comprehensive tri-service resource
                           management strategy all the more urgent.

                           Driven by tight budgets and rising costs, NCA MTFs have entered into
Numerous NCA               numerous agreements to share resources since 1995.18 These agreements
Coordination               cover a wide range of services, both within and across military
Agreements Seem            departments, and illustrate the need for and potential benefits of MTF
                           resource sharing in areas such as NCA. However, the agreements focus on
Beneficial, but an         improving the MTFs’ everyday peacetime care delivery rather than being
Overall Strategy Is        built into an overall strategic plan founded on MHS’ readiness needs and
                           optimal use of each MTF’s resources.
                           Thus, while NCA MTFs have many coordination agreements, it is unclear
                           how well each facility’s agreements support its particular health system
                           role. Also, the agreements’ largely informal nature make them vulnerable
                           to proposed MTF budgeting changes and to MTF commanders’ rotation, both
                           of which can affect MTFs’ willingness to share resources. Such conditions
                           for NCA care coordination provide little assurance that optimal results are
                           being achieved and argue, in our view, for an overall resource planning
                           and allocation strategy. Such a strategy would provide for the major
                           coordination activities needed to support each MTF’s dual mission.

NCA MTFs Have Entered      Since 1995, NCA MTFs have entered into numerous agreements to share
Into Numerous              personnel, facility space, and equipment to enhance care delivery. Such
Agreements Aimed at        agreements demonstrate that MTF commanders recognize the need and
                           have taken the initiative to look beyond their own facilities to best provide
Enhancing Peacetime Care   medical care. Most agreements are handled directly by and among the NCA
                           MTF commanders.19 MTF commanders told us that the service agreements
                           have largely been driven by rising care costs and recent level budgets. (See
                           fig. 4.)

                            About 150 agreements were in effect among NCA MTFs at the time of our review. Almost all involved
                           one or more of the three medical centers. Agreements ranged in scope and duration from continuing
                           divisions of specialty care among the medical centers to small exchanges of personnel to cover
                           short-term MTF shortages.
                            An NCA Federal Health Council informally oversees coordination among NCA MTFs. The Council
                           consists of the three medical center commanders and the Uniform Services University of the Health
                           Sciences and, recently, the Department of Veterans Affairs Medical Center in Washington, D.C. The
                           council, through its work groups, continues to identify and assess opportunities to coordinate military
                           medical care delivery.

                           Page 18                                  GAO/HEHS-00-10 Justifying Military Medical Resources

Figure 4: National Capital Area MTF

                                          Source: Operations and maintenance budget data from NCA MTFs.

                                          The NCA MTF budget total increased only 5 percent between 1995 and 1998
                                          (in dollars not adjusted for inflation). Conversely, the cost of providing
                                          care has risen significantly. The NCA cost per inpatient admission has
                                          increased from $6,224 in 1995 to $8,648 in 1998—a 39-percent increase.
                                          The NCA cost per outpatient visit has increased from $126 in 1995 to $177 in
                                          1998—a 41-percent increase.

                                          The following illustrate the variety of current NCA coordination agreements
                                          with respect to genesis, purpose, size, and complexity. Due to the varying
                                          availability of information about them, the examples are not presented for
                                          comparative purposes nor did we attempt to judge their individual or
                                          collective costs and benefits.

                                      •   Exemplifying care coordination within the same service, in 1998, Walter
                                          Reed and Kimbrough Army Ambulatory Care Clinic at Fort Meade
                                          arranged to have Walter Reed provide surgeons to Fort Meade for
                                          outpatient surgeries in areas such as orthopedics and ear, nose, and
                                          throat. Fort Meade provides the surgical space, support staff, and supplies.
                                          During fiscal year 1998, Walter Reed’s surgeons performed over 1,000
                                          outpatient surgeries at Fort Meade, with patients coming from Walter
                                          Reed, each service, and across the area. Benefits cited included reducing
                                          Walter Reed’s surgical backlogs and improving training for surgeons,
                                          anesthesia nurses, and support staffs.

                                          Page 19                             GAO/HEHS-00-10 Justifying Military Medical Resources

•   Illustrating care coordination between two different service MTFs, in 1995,
    Fort Belvoir’s DeWitt Army hospital agreed to provide obstetric services at
    Quantico, a Navy clinic about 23 miles away, and deliver the babies at Fort
    Belvoir. The Army hospital sends an obstetrician or nurse practitioner to
    Quantico about twice a week for routine outpatient obstetrical visits.
    Officials told us that, so far, about 120 deliveries have been done at Fort
    Belvoir. They estimated savings of $128,000, comparing the MTF costs with
    alternative civilian care the services would have otherwise had to
    reimburse. Also, Fort Belvoir officials cited the added convenience for
    beneficiaries of receiving routine obstetrical care at their local MTF.
•   Illustrating an agreement that crosses the three services, in 1998, the NCA
    MTFs leased a common type of communication pager from a single vendor
    for their medical staffs. MTF officials estimated savings at over $66,000 a
    year. Other benefits cited were equipment uniformity and reliability, a
    consolidated directory of pager users, and ease of contact among
    physicians, particularly those serving patients in more than one MTF.
•   Representing an extensive tri-service care arrangement, in 1995, the three
    NCA military medical centers agreed to divide the provision of inpatient
    mental health care. Walter Reed now provides all the adult psychiatric
    care, Bethesda provides all the adolescent psychiatric care, and Malcolm
    Grow provides all the substance abuse services in the area. An exception
    to normal coordination agreements, this arrangement was supported by a
    cost analysis because of the considerable MTF costs associated with mental
    health care. The arrangement involves no exchange of funds but does
    include exchange of personnel, with doctors and nurses of one service
    working in the other services’ hospitals. The major benefits expected are
    better cost control and mental health care quality.
•   One set of interservice agreements was not locally initiated. In response to
    DOD directives since 1994 that unnecessary, duplicative graduate medical
    education programs in the same area should be consolidated, Walter Reed
    and Bethesda agreed to integrate nearly a dozen such programs. And the
    centers continue reviewing the feasibility of combining more of their
    programs. One integrated program, inpatient neurology, for example, is
    now administered by Walter Reed, is jointly staffed, and has nine Army
    and six Navy trainees. The Army and Navy have made other attempts to
    significantly downsize their programs, including 1997 Navy efforts to
    eliminate some of its NCA graduate medical education programs and the
    Army’s attempt to do so at William Beaumont Army Medical Center in El
    Paso, Texas. But, the efforts were thwarted by lack of DOD and service
    agreement on criteria for deciding which programs to target.

    Page 20                       GAO/HEHS-00-10 Justifying Military Medical Resources

MTF Coordination Could   The current NCA service coordination agreements have certain general
Be Improved by Being     characteristics. While appearing to improve care access and quality at
Built Into Systemwide    particular facilities, the agreements are not part of any overall plan for
                         military care delivery in NCA. And, with few exceptions, they were entered
Planning                 into without formal cost analyses and generally are voluntary and
                         nonbinding. Also, the agreements commonly do not entail fund transfers
                         among the services or MTFs, although MTF officials told us that their goal
                         was that no MTF would be financially disadvantaged by the agreements.
                         Another characteristic is that readiness requirements were not driving
                         forces in entering into the agreements. Rather, MTF officials told us that,
                         while they informally considered the agreements’ effects on readiness,
                         perceived dollar savings and improving peacetime care delivery were the
                         main reasons for sharing their resources. Officials told us that achieving
                         the agreements depended heavily on the initiative of senior NCA medical
                         officers. And, except for the merger of NCA graduate medical education
                         programs, DOD and the services’ surgeons general have not had substantial
                         influence on the NCA coordination agreements.

                         The current NCA agreements may be made financially unattractive by
                         pending MTF budgeting changes and may or may not withstand a
                         requirement that they be more consistently and formally justified. NCA MTF
                         officials told us that under a proposed budgeting
                         approach—enrollment-based capitation20—MTFs would be funded based
                         largely on their enrolled populations. The officials told us that if the
                         approach was adopted without allowing for the current no-cost service
                         exchanges among facilities, MTFs would be deterred from entering care
                         coordination agreements unless they are reimbursed. For example, the
                         Naval Medical Center at Bethesda routinely sends physicians to other
                         Naval clinics at no cost to treat beneficiaries not enrolled at Bethesda.
                         Bethesda officials told us that, under enrollment-based capitation, they
                         would be hesitant to continue such agreements unless reimbursed for the
                         physicians’ costs. Also, officials told us that the administrative burden of
                         pricing and recording medical care given and received under the
                         agreements could seriously affect any agreement’s viability. As a result,
                         agreements would be abandoned or never started, and individual MTFs
                         would have the care gaps and overlaps that the current agreements
                         attempt to address. Thus, to facilitate voluntary MTF participation, most
                         agreements have been kept informal and nonbinding. But such conditions

                          Under enrollment-based capitation, an MTF’s per enrollee funding rates would be based on the MTF’s
                         estimated care costs. And, if an MTF’s enrollee is referred to and receives care at another MTF, the
                         home MTF would reimburse the provider MTF at the provider’s service rates. This may create
                         disincentives for commanders of smaller NCA clinics, such as Annapolis and Quantico, to refer their
                         enrollees for needed care at the larger, more costly NCA MTFs, like Bethesda.

                         Page 21                                 GAO/HEHS-00-10 Justifying Military Medical Resources

                       do not ensure that optimal results are being achieved, may not be
                       supportive of the system’s basic mission, and argue for an overall
                       tri-service strategy for determining needs and allocating resources.

                       Therefore, while the NCA MTF coordination agreements are numerous and
                       appear beneficial, we believe the key strategic question is, how well do
                       they individually and collectively support each MTF’s health system role?
                       And, further, which of the current and what additional MTF coordination is
                       needed to support MHS’ readiness and peacetime mission? But DOD and the
                       services do not have a systemwide strategic plan that positions them to
                       identify such NCA MTF coordination needs and provide for the most
                       effective arrangements. Such a strategy, for example, might specifically
                       recognize the need to coordinate costly mental health services, while
                       providing parameters within which MTF commanders could exercise
                       discretion in arranging smaller, more temporary resource exchanges.

                       During the past decade, DOD experienced many of the same challenges that
DOD and the Services   confronted U.S. health care generally—increasing costs, uneven care
Have Begun             access, and disparate benefit and cost-sharing packages for similar
Addressing Problems,   categories of beneficiaries. In response, DOD and the services’ Surgeons
                       General initiated, with congressional authority, a series of demonstration
but Success Requires   programs across the country to explore ways to more cost-effectively
Their Total            manage and deliver care to military beneficiaries. These demonstration
                       programs provided many valuable lessons, which DOD has applied to its
Commitment             health care system.

                       In 1994, such experiences led DOD to introduce a nationwide managed care
                       program called TRICARE to improve beneficiary access to high-quality
                       care while controlling MHS’ costs. Also, DOD and the Surgeons General
                       improved military care management by consolidating graduate medical
                       education programs; establishing partnerships with the Department of
                       Veterans Affairs; reducing hospital stays; restructuring hospitals into
                       smaller, more efficient clinics; revising MTF budget processes to more
                       closely link funding to cost-effective health care; and a host of other

                       DOD and the Surgeons General recognize that their medical system
                       continues to evolve and its appropriate size and relative costs and
                       effectiveness will continue to undergo intense scrutiny. As a result, in
                       1998, DOD began 29 separate initiatives to modernize MHS management.
                       (See app. IV.) The initiatives were prompted by increasing concerns about

                       Page 22                       GAO/HEHS-00-10 Justifying Military Medical Resources

                      whether DOD and the services had the right medical resources in the right
                      places to meet readiness needs and to optimize peacetime health care.
                      Other concerns included rising system costs, recent tight MTF budgets, and
                      growing competition from such potential care alternatives as FEHBP. DOD’s
                      initiatives range from improving medical technician training to resizing
                      and consolidating medical centers. As DOD pursued these efforts, one
                      initiative emerged as the central focus for the others. This initiative is
                      DOD’s and the services’ development of an overall medical resource
                      strategy to provide for readiness needs and optimize care delivery.

                      DOD  officials told us they view the initiative as critical to MHS’ future. They
                      also told us the effort has so far received DOD and service collaboration
                      and commitment. But the officials told us that many obstacles exist,
                      including maintaining tri-service—both medical and line—support, and
                      getting buy-in from key external stakeholders such as cognizant
                      congressional committees.

System Improvement    The 29 initiatives begun in 1998 address tri-service issues, such as
Initiatives Address   centralized purchasing, pharmacy management, outsourcing functions,
Tri-Service Issues    improved information systems, and graduate medical education
                      development. Regarding centralized purchasing, for example, DOD is
                      seeking to standardize medical and surgical supplies, while achieving
                      economies of scale through joint purchasing. DOD’s initiatives to address
                      pharmacy management problems—which we reported on in 199821
                      —include linking existing pharmacy databases to facilitate reviews of drug
                      use, cost, and safety and to standardize drug formularies across the
                      various military pharmacies.

                      Another initiative looks at the advantages and feasibility of buying medical
                      training services, such as for pharmacy and radiology technicians, from
                      the private sector. Such training is now provided within MHS. The initiative
                      to improve information systems seeks to enhance and integrate military
                      health data systems and to consolidate their administration. The graduate
                      medical education initiative is attempting to develop a departmentwide
                      policy for targeting such programs for consolidation, downsizing, and
                      closure, which responds to recommendations we made in a 1998 report.

                       Defense Health Care: A Fully Integrated Pharmacy System Would Improve Beneficiary Services and
                      Cost-Effectiveness (GAO/HEHS-98-176, June 12, 1998).

                      Page 23                               GAO/HEHS-00-10 Justifying Military Medical Resources

Focus on Tri-Service       Soon after DOD and the services began these efforts, they found that a
Strategy Is Emerging       more fundamental strategy was needed to more completely address basic
                           system problems and decide how large the military medical system should
                           be, including where resources should be placed and used to best support
                           readiness and provide peacetime care. Thus, in November 1998, DOD
                           established a tri-service team of senior officers22 to develop such a
                           strategy. Among the team’s goals are to devise an approach to determine
                           each MTF’s correct size, identify excesses and shortages of medical
                           personnel by specialty, and determine the right MTF provider mixes. DOD
                           officials agree with us that, until this is done, it is not possible to judge the
                           need for nor relative efficiency of MTFs in their health system. Because the
                           analytical tools needed to make these key decisions were not available,
                           the team identified the following eight areas as crucial to the strategy’s

                       •   Develop a tri-service approach for determining medical personnel
                           readiness requirements and for distributing them among MTFs.
                           Determining medical readiness requirements has been the subject of
                           heated controversy and study since the end of the Cold War. This year,
                           however, the three services agreed to tie their baseline staffing to an
                           existing DOD sizing model. When fully implemented, the model is expected
                           to determine minimum wartime service staffing levels. Based on such
                           staffing levels, and using common tri-service guidelines, each service will
                           design its own staffing distribution model to fit its mission, facility
                           capabilities, and the needs of beneficiaries served by those facilities.
                       •   Cost out MTF-readiness-related services so that both readiness and
                           nonreadiness costs can be defined and defended. Never done before, this
                           essential step would enable DOD and the services to identify which of their
                           care system costs can be subjected to “make versus buy” decisions. This
                           task is complicated by the services’ differing definitions of readiness and
                           how indirect MTF costs, such as facility maintenance, should be
                           apportioned between the dual missions. Of course, the resultant cost of
                           DOD medical readiness is highly sensitive to how expansive or narrow a
                           definition of readiness activities is finally used. That is, if the readiness
                           definition is broader, more MTF costs can be justified and fewer peacetime
                           costs would be subject to make versus buy decisions.
                       •   Use civilian best practices to develop provider (primary and specialty
                           care) to beneficiary workload ratios. This task’s purpose is to standardize
                           resource distribution among MTFs and to help ensure that sufficient
                           population and workload exist at each MTF to use and properly train
                           military providers for readiness and cost-effective care. A private care

                             The team also includes Health Affairs and TRICARE Management Activity representatives.

                           Page 24                                 GAO/HEHS-00-10 Justifying Military Medical Resources

    ratio, for example, is about 2,000 beneficiaries per primary care provider.
    According to DOD officials, adjusting for readiness training, a military
    provider would serve from 1,300 to 1,900 beneficiaries. Another goal for
    this exercise is to minimize MTF underuse. DOD officials told us that such
    workload standards will help identify unused MTF capacity and enable MTFs
    to recapture beneficiaries now using civilian support contractors and less
    expensively care for them.
•   Establish uniform workload reporting. Decisions on where providers
    should be placed and what MTF care alternatives should be considered
    require accurate, consistent, comparable data on MTF and the support
    contractors’ workload, costs, and performance. But MTF cost and workload
    data problems have been pervasive, and DOD continues to struggle with its
    data system inaccuracies. As we and others have reported, the root cause
    has been DOD’s and the services’ lack of oversight and incentives to ensure
    the data’s accuracy, timeliness, and completeness. In response to our
    recent report on its Medicare subvention demonstration, however, DOD has
    acted to improve its data and otherwise committed itself to overhauling its
    data systems.23
•   Implement an enrollment-based capitation budget approach for MTFs. This
    proposed approach represents a significant change from the MTFs’
    historical budget approaches, which largely based each year’s budget on
    the prior year’s budget and workload. Capitated budgeting for MTFs would
    pay them a fixed amount for enrolled beneficiaries, with certain other
    allowances. The aim is to focus MTFs on providing care primarily to its
    enrolled population and to urge MTF commanders to manage within these
•   After identifying an MTF’s readiness-based resource needs, determine what
    added resources would make it as efficient and cost-effective as possible.
    This task recognizes that an MTF’s readiness-based medical needs normally
    have to be supplemented with other care capabilities to enable the facility
    to optimally function as a full care facility. The question is whether such
    added care should be provided in the MTF by a military or civilian provider,
    or bought from the private sector.
•   Use utilization management and clinical practice guidelines to optimize
    health outcomes across the health system. A major shift in military care
    philosophy, this approach would change the system’s current emphasis on
    intervention following disease or injury to preventive services aimed at
    improving and maintaining the beneficiary population’s health. Another
    goal is to maximize clinical productivity, treatment consistency, and care
    quality. DOD officials told us that the critical step in making the
    philosophical shift is to maximize MTF beneficiary enrollment so the

      GAO/HEHS-99-39, May 28, 1999.

    Page 25                           GAO/HEHS-00-10 Justifying Military Medical Resources

    services can truly manage their health care. Currently, MTFs also provide
    space-available care, which tends to be episodic and leaves beneficiaries
    with alternatives to enrolling in managed care. Recently, we reported that
    the lack of a universal enrollment requirement had other adverse effects
    significantly limiting DOD’s ability to predict MHS costs and effectively plan
    and manage its health care system.24 Also, in 1998, we testified that
    maximum enrollment was needed to take full advantage of cost-effective
    managed care principles and practices.25
•   Identify measures needed to assess progress toward system health goals.
    Currently, numerous performance indicators are in use for gauging MTFs’
    and contractors’ performance, such as hospital stay lengths, appointment
    delays, and number of outpatient visits. The goal is to identify measures
    that will enable the services to comparatively assess progress toward
    system goals. Also, a key outcome is to identify and use measures that
    mirror civilian performance and quality indicators to facilitate cross-sector
    comparisons of quality of care.

    The completion of these tasks should help the services properly size each
    of their MTFs. The idea is that the process would begin with the
    determination of each service’s readiness requirements. Next, decisions
    would be made about how to distribute providers among the MTFs. Such
    decisions would consider each MTF’s readiness role, the beneficiary
    population to be served, and the availability of other MTF and civilian
    services. With this information in hand, each MTF’s readiness-based
    resources would be projected using adjusted civilian best practice norms.
    Because such resources alone are usually too limited in numbers, mix, and
    support to amount to an effective peacetime care system, other
    staff—both active duty and civilians—would be added. Once the best MTF
    profile has been developed, its empirical care levels would be assessed to
    identify whether unused capacity may exist. An overall goal is to fill this
    unused capacity by recapturing beneficiaries currently served by
    TRICARE contractors.

    The tri-service team’s goal is to complete its overall planning effort by
    April 2000 to be ready for resource planning and budgeting for the year
    2002. However, the team faces daunting tasks, not the least of which are
    defining readiness and its costs; sustaining DOD and the services’
    commitment to the effort; obtaining buy-in from line command and other
    key stakeholders, including cognizant congressional committees and

     Defense Health Program: Reporting of Funding Adjustments Would Assist Congressional Oversight
    (GAO/HEHS-99-79, Apr. 29, 1999).
      Defense Health Care: Operational Difficulties and System Uncertainties Pose Continuing Challenges
    for TRICARE (GAO/T-HEHS-98-100, Feb. 26, 1998).

    Page 26                                 GAO/HEHS-00-10 Justifying Military Medical Resources

              members; obtaining accurate cost and workload data; and achieving the
              shift from medical intervention to preventive health care.

              DOD is operating a $16-billion-a-year health care system, the bulk of which
Conclusions   is provided through MTFs. But DOD has not identified how much it spends
              for wartime medical readiness—its primary mission. Meanwhile, the
              beneficiary population has changed significantly, and retirees now
              outnumber active duty beneficiaries and their respective
              beneficiaries—and the trend is continuing. Moreover, MHS’ growing
              day-to-day medical focus is on its other mission, peacetime care delivery.
              A pivotal system deficiency is that DOD and the services lack a
              comprehensive strategy for ensuring that the right resources are budgeted
              for and located in the right places to meet readiness needs and
              cost-effectively provide peacetime care. The problems have persisted due
              to service independence and mission differences and because, historically,
              the services have had enough resources to maintain separate overlapping

              Absent a comprehensive strategy for determining and allocating resources
              across the services’ MTFs, neither we nor DOD can adequately judge the
              need for NCA MTFs or their appropriate size. Likewise, while NCA service
              coordination agreements among MTFs appear beneficial and show good
              faith efforts to improve care and reduce costs, the agreements are ad hoc
              and not governed by a systemwide strategy that would help guide such
              decisions and maximize outcomes. Meanwhile, MTFs are challenged to be
              cost-effective care providers by a growing peacetime workload coupled
              with rising costs, fewer military medical personnel, and competition from
              alternative care sources such as FEHBP.

              DOD  and the services have recently recognized that the time has come for
              such a strategy—one that clearly defines readiness costs and justifies
              peacetime care based on make versus buy analyses—and have taken
              actions aimed at developing it. Among a series of DOD system improvement
              initiatives begun this year is one now aimed at identifying medical
              resource needs and developing an approach for distributing resources
              among MTFs, identifying readiness costs, determining peacetime care
              needs that MTFs can most cost-effectively meet, and shifting care emphasis
              from medical intervention to prevention. As we have reported and testified
              in the past, DOD also needs to enroll as many beneficiaries as possible at
              MTFs to be better able to predict MHS costs and truly manage beneficiary

              Page 27                       GAO/HEHS-00-10 Justifying Military Medical Resources

                      health care. In short, maximizing enrollment is critical to the tri-service

                      We support the thrust of DOD’s initiative believing that such a resource
                      strategy would position it and the services to make informed, prudent
                      decisions about MTF resource needs. But major obstacles exist, such as the
                      difficulty in defining and obtaining consensus on readiness needs and
                      costs, and sustaining DOD and tri-service commitment over the long term.
                      Thus, we believe DOD and the services need to dedicate top-level
                      management attention to ensuring the project’s successful completion.
                      And, to enhance congressional oversight of this critical endeavor, DOD
                      needs to periodically report on the project’s progress.

                      To ensure, among other matters, that the defense medical system is
Recommendations       properly sized, that inefficiencies and overlaps among MTFs are eliminated,
                      and that readiness is effectively managed, we recommend that the
                      Secretary of Defense direct the Assistant Secretary of Defense for Health
                      Affairs and the services’ Surgeons General to

                  •   complete the development and implementation of a comprehensive
                      tri-service medical resource planning and allocation strategy that clearly
                      defines the cost of readiness and justifies nonreadiness peacetime care
                      based principally on cost-effectiveness analyses;
                  •   emphasize MTF beneficiary enrollment as a key element of the tri-service
                      strategy, and make every effort to enroll as many current MTF users as
                      possible so that the services and MTFs can truly manage health care;
                  •   ensure that the overall strategy identifies and provides for significant care
                      coordination opportunities such as in the NCA;
                  •   work with the line commanders and key stakeholders such as cognizant
                      congressional committees and key members, advocacy groups, and others
                      to obtain support for the implementation of the strategy; and
                  •   periodically report progress toward developing and implementing the
                      strategy to cognizant House and Senate committees.

                      Developing and implementing the tri-service medical resource strategy
                      may require actions by and coordination with other DOD Assistant
                      Secretaries; therefore, as appropriate, the Secretary should direct the
                      affected Assistant Secretaries’ support and participation.

                      Page 28                        GAO/HEHS-00-10 Justifying Military Medical Resources

                     In its written comments on a draft of this report, DOD agreed with the
Agency Comments      report and each of our recommendations. It also agreed that the tri-service
and Our Evaluation   team assembled to develop and coordinate implementation of the resource
                     planning and allocation strategy faces a formidable challenge. Hence, DOD
                     stated that the Department’s senior leadership is now and will continue
                     providing oversight and support for the project and that the project plan
                     was provided to the Senate and House Appropriations Committees on
                     September 23, 1999—during this draft report’s comment period. DOD plans
                     to brief the cognizant congressional oversight committees, seek their
                     buy-in and support, and keep them apprised of the project’s progress.
                     DOD’s comments are reprinted as appendix V.

                     We are sending copies of this report to the Honorable William S. Cohen,
                     Secretary of Defense, and will make copies available to others upon

                     Please contact me at (202) 512-7101 or Dan Brier, Assistant Director, at
                     (202) 512-6803 if you or your staff have any questions concerning this
                     report. Other GAO staff who made contributions to this report are Elkins
                     Cox, Allan Richardson, Cheryl Brand, and Cherie Starck.

                     Stephen P. Backhus
                     Director, Veterans’ Affairs and
                       Military Health Care Issues

                     Page 29                       GAO/HEHS-00-10 Justifying Military Medical Resources

Letter                                                                                                  1

Appendix I                                                                                             32

Scope and
Appendix II                                                                                            34
                         Organization of NCA MTFs                                                      34
Profile of MTFs in the   Selected NCA MTF Data                                                         37
National Capital Area
Appendix III                                                                                           38

Service Models
Appendix IV                                                                                            41

DOD’s 29
Consolidation, and
Appendix V                                                                                             46

Comments From the
Department of
Tables                   Table 1: Worldwide MTFs by Service and Facility Type, as of                    7
                           May 1999
                         Table II.1: NCA MTFs’ Number of Beds, Budget, Personnel, and                  37
                           Outpatient Workload, 1998

Figures                  Figure 1: Eligible Beneficiaries                                               5
                         Figure 2: MTFs in the National Capital Area                                    8

                         Page 30                      GAO/HEHS-00-10 Justifying Military Medical Resources

Figure 3: Actual and Projected Active and Non-Active-Duty                    16
  Beneficiaries and Their Respective Dependents for Selected
Figure 4: National Capital Area MTF Budgets                                  19


CHAMPUS     Civilian Health And Medical Program of the Uniformed
DHP         Defense Health Program
DOD         Department of Defense
FEHBP       Federal Employees Health Benefits Program
MHS         military health system
MTF         military treatment facility
NCA         national capital area

Page 31                     GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix I

Scope and Methodology

             To assess the need for NCA MTFs and the coordination of health care among
             MTFs, we examined the roles and activities of those MTFs and their related
             guidance and support from DOD and service command levels. We
             interviewed officials and analyzed records at each of those levels to assess
             the information and processes officials use for determining MTF resource
             needs and coordinating resource use. The scope of our work necessarily
             extended beyond the national capital area to include issues affecting MHS
             as a whole, with its dual mission of maintaining wartime readiness and
             providing peacetime care, because NCA MTFs are integral parts of that
             system and its dual mission. However, this review focuses on MHS within
             the United States and does not include those MTFs located overseas.

             Beginning our work among the 26 NCA MTFs, we conducted interviews and
             analyses at the 3 military medical centers—representing 75 percent of NCA
             MTF costs—and at 8 other MTFs, including all of the larger ones and a
             selection of smaller branch clinics. There, we discussed and analyzed
             information on how and to what extent MTF resource requirements are
             defined, measured, and justified, taking into account the MTFs’ dual
             missions. We also analyzed beneficiary population, workload, and cost
             data associated with NCA MTFs compared to national totals to generally
             assess the level of services provided to NCA beneficiaries. Through
             discussions with MTF officials, and focusing on a selection of NCA MTF
             coordination agreements, we examined the nature, purpose,
             achievements, and future expectations of care coordination activities
             among MTFs.

             We did not attempt to verify or compare costs and benefits among the NCA
             MTF coordination agreements because of the limited and widely varying
             data on those agreements. We contacted civilian NCA health care provider
             organizations along with health care consultants to obtain comparable
             information on how civilian health care facilities coordinate local health
             care services.

             Because each of the military services has its own methods for determining
             health care needs and allocating resources among its MTFs, we reviewed
             those processes at the services’ regional and Surgeon General levels.
             There we discussed and obtained data on the services’ modeling tools and
             other guidance and analytical processes affecting MTF resource allocation
             decisions and coordination of care among MTFs. That included considering
             how the services’ independent approaches differed in design and effects
             on their MTFs. We then followed up on the application of such independent
             tools to find how they affect selected NCA MTFs in terms of supporting

             Page 32                       GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix I
Scope and Methodology

readiness and providing peacetime care and to identify any problems in
their applications.

We assessed the current and potential effects of TRICARE implementation
on MTF needs and coordination in the national capital area and elsewhere,
based on the experiences and expectations of the MTFs we visited, the
expected role as viewed by the TRICARE lead agent and DOD, and our
current and prior TRICARE work. We also relied on current and prior
work and our reports and those by others in assessing the role, needs, and
performance of MHS.

Finally, we considered the purposes and potential effects of a broad
approach, begun by DOD and the services during our review, to improve
MHS management. Of the approach’s 29 initiatives, we focused on the one
that appears to be key—the development of a tri-service medical resource
planning and distribution plan intended to optimize use of MTF resources.
Through a series of discussions and review of the plan with the team
leading that effort and with others, we considered the initiative’s potential
to address the problems we found in the services’ approaches to MTF needs
assessment and care coordination in the national capital area and

Page 33                        GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix II

Profile of MTFs in the National Capital Area

                      The services use separate structures to plan and manage their NCA MTFs.
Organization of NCA   For example, the Army’s 12 NCA MTFs are centrally managed as part of the
MTFs                  Walter Reed Health Care System. This system is also part of a single
                      regional command that covers 21 states and the District of Columbia. In
                      contrast, only some of the Navy’s 12 NCA MTFs are directed by the Naval
                      Medical Center in Bethesda, Maryland; the other clinics report to a Navy
                      Health Support Office in Norfolk, Virginia. The Air Force’s one NCA
                      medical center and its one NCA clinic separately report to different major
                      commands. Along with operating independently, each service’s complex
                      command structure can limit the extent to which resource use is
                      coordinated among the service’s facilities. For example, the Air Force
                      medical center has sought control of the clinic to reduce duplicative
                      administrative costs and staffing. But the clinic reports to the Office of the
                      Air Force Surgeon General, who has retained the current structure.

Army NCA MTFs         All Army NCA MTFs come under the Walter Reed Health Care System and
                      consist of the medical center, a community hospital, a clinic with
                      same-day surgery capability, and their respective clinics. Walter Reed
                      Medical Center is a 350-bed tertiary care facility located in a residential
                      area of the District of Columbia, near the Maryland border. The center,
                      which began admitting patients in 1909, provides primary health care
                      services and about 50 specialty and subspecialty services. Walter Reed is
                      also a worldwide referral center and has research and medical training
                      programs. Walter Reed’s wartime mission is being a designated casualty
                      receiving center for injured military personnel. Further, over one-third of
                      its military personnel are designated to deploy during war. Walter Reed
                      has branch clinics at the Pentagon in Virginia and Fort McNair in
                      Washington, D.C. These outlying facilities offer the beneficiary convenient
                      access to routine and urgent primary health care services with referral to
                      Walter Reed for specialty care. These facilities treat beneficiaries in MHS
                      who might otherwise seek care in the civilian sector.

                      DeWitt Army Community Hospital, located in Fort Belvoir, Virginia, is the
                      only NCA inpatient military facility in northern Virginia. It is a 68-bed
                      hospital with an intensive care unit, medical/surgical wards, labor and
                      delivery and mother/baby wards, pharmacies, and a 24-hour emergency
                      room. DeWitt provides a number of specialty services and has a family
                      medicine residency training program. DeWitt hospital and its clinics
                      provide the primary medical support for several major Army commands
                      and crosses service lines by providing obstetric and orthopedic services to
                      Marines and their family members at the Quantico, Virginia, naval clinic.

                      Page 34                        GAO/HEHS-00-10 Justifying Military Medical Resources
                Appendix II
                Profile of MTFs in the National Capital Area

                DeWitt’s clinics are at Fort Meyer and A.P. Hill, Virginia. A.P. Hill, the
                southernmost NCA MTF, provides care to reservists on active duty and the
                cadre of active duty running the reserve training facility there. DeWitt also
                has clinics in Fairfax and Woodbridge, Virginia, where there are
                concentrations of dependent and retiree beneficiary populations.

                Kimbrough Ambulatory Care Center at Fort Meade, Maryland, provides
                primary care as well as a wide range of same-day surgery. Specialty
                services include general surgery; orthopedics; vascular surgery; urology;
                ophthalmology; gynecology; and ear, nose, and throat. The clinic performs
                approximately 2,000 ambulatory surgeries each year using assigned
                providers and staff from Walter Reed and the Naval Medical Center in
                Bethesda. Kimbrough’s clinics at Aberdeen Proving Ground, Edgewood,
                and Fort Detrick, Maryland, offer primary care services. Kimbrough cares
                for personnel assigned to the National Security Agency and the Defense
                Information School. Fort Detrick supports the U.S. Army Medical
                Research and Development Command. Aberdeen and Edgewood support a
                variety of Advanced Individual Training programs conducted by the U.S.
                Army Ordnance Corps.

Navy NCA MTFs   The National Naval Medical Center at Bethesda, Maryland; its branch
                clinics; and separate clinics at Annapolis and Patuxent River, Maryland,
                and Quantico, Virginia, comprise the Navy NCA MTFs. Bethesda has 239
                beds and provides primary health care services but is known for its
                specialty and subspecialty services, such as mother and infant care and
                breast care. Bethesda is a worldwide referral center, providing services for
                16 different specialties, as well as conducting medical training programs
                and research. Bethesda’s readiness mission includes staffing the USN
                Comfort, a hospital ship, as well as contributing staff to Navy and Marine
                ships, bases, and hospitals in the United States and overseas.

                Bethesda has eight branch clinics located throughout Washington, D.C.;
                Maryland; and Virginia that support Navy active duty commands. The
                outlying facilities offer beneficiaries convenient access to primary health
                care services with referral to Bethesda for specialty care. The clinics treat
                beneficiaries in MHS who might otherwise seek care from civilian

                The Indian Head, Maryland, and Arlington Annex and Dahlgren, Virginia,
                clinics provide outpatient primary care, occupational medicine, preventive
                medicine, and industrial hygiene services to all eligible DOD beneficiaries.

                Page 35                             GAO/HEHS-00-10 Justifying Military Medical Resources
                     Appendix II
                     Profile of MTFs in the National Capital Area

                     The Washington Navy Yard clinic and Naval Air Facility, Washington,
                     clinic at Andrews Air Force Base provide outpatient primary care,
                     occupational medicine, preventive medicine, and industrial hygiene
                     services to active duty personnel along with occupational medicine
                     services for civil service personnel. Naval Air Facility provides physical
                     exams for most Navy and Marine Corps personnel in Washington, D.C.,
                     and medical support and training to reserve personnel. The Carderock,
                     Virginia, clinic and the clinic at the Naval Research Laboratory in
                     Washington, D.C., provide occupational medicine and industrial hygiene
                     services to active duty and civil service personnel. The Naval Security
                     Station, Maryland, clinic provides sick call services to active duty
                     personnel located at the Naval Security Station.

                     The Naval Medical Clinic in Annapolis provides primary care for all
                     beneficiaries but mostly focuses care on the 4,000 midshipmen at the
                     Naval Academy. The Naval Medical Clinic in Quantico provides primary
                     care for all beneficiaries and care for trainees at the Marine Officer School.
                     The Naval Medical Clinic in Patuxent River provides primary care for a
                     mix of active duty, dependent, and retiree beneficiaries.

Air Force NCA MTFs   There are only two Air Force NCA MTFs: Malcolm Grow Medical Center and
                     Bolling clinic, each reporting to separate commands. Malcolm Grow, the
                     89th Medical Group, is a 70-bed tertiary center located at Andrews Air
                     Force Base, Maryland. The center reports to the Air Mobility Command in
                     Scott Air Force Base, Illinois, and provides primary health care services
                     but is known for more than 30 specialty and subspecialty clinics. It is also
                     has a family practice residency program. During wartime, Malcolm Grow
                     is the entry port for all patients air evacuated from overseas locations in
                     Europe. The 89th Medical Group also provides physiological training,
                     which consists of intense altitude chamber training to familiarize
                     personnel with the physiological effects of flying.

                     Bolling clinic, the 11th Medical Group, is located at Bolling Air Force Base
                     in Washington, D.C., and provides primary medical and dental care to
                     eligible DOD beneficiaries, which includes Defense Intelligence Agency,
                     Naval Research Laboratory, and Bellevue Navy Housing staff. It reports to
                     the Air Force Surgeon General’s office. Flight surgeons also provide
                     medical support to the offices of the Secretary of Defense and the
                     Chairman of the Joint Chiefs of Staff.

                     Page 36                             GAO/HEHS-00-10 Justifying Military Medical Resources
                                         Appendix II
                                         Profile of MTFs in the National Capital Area

                                         Table II.1 lists the NCA MTFs, the number of hospital beds, their 1998 DHP
Selected NCA MTF                         operations and maintenance (O&M) budget, their 1998 personnel numbers,
Data                                     and workload data.

Table II.1: NCA MTFs’ Number of Beds, Budget, Personnel, and Outpatient Workload, 1998
                                          DHP O&M                           Personnel                                        Outpatient
MTF               Number of beds             budget             Military        Civilian       Contract             Total        visits
Walter Reed       350                  $147,839,900                1,804           1,185             155           3,144         645,975
DeWitt            68                      59,945,000                 340             399             104             843         611,019
Kimbrough         Outpatient only         46,349,000                 273             423              32             728         321,691
Bethesda          239                    146,847,000               2,599             926             215           3,740         555,059
Annapolis         Outpatient only          6,455,000                 122              36              14             172          89,257
Patuxent River    Outpatient only          7,361,000                 152              67                5            224          73,109
Quantico          Outpatient only          8,451,000                 194              51              16             261          89,569
Air Force
Malcolm Grow      70                      33,213,000               1,314             264                •          1,578         394,477
Bolling           Outpatient only          5,390,000                 189              28                1            218          52,644
                                         Note: Walter Reed figures include Pentagon clinic and Fort McNair; DeWitt includes clinics at
                                         Fairfax, Fort Myer, A.P. Hill, and Woodbridge; Kimbrough includes clinics at Aberdeen,
                                         Edgewood, and Fort Detrick; Bethesda includes branch clinics at Dahlgren, Indian Head,
                                         Arlington Annex, Washington Navy Yard, Naval Air Facility, Carderock, Naval Research Lab, and
                                         Security Station.

                                         Page 37                                GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix III

Service Models

                 Historically, the Army, Navy, and Air Force—because of their
                 independence, diverse organizational structures, and general lack of
                 coordination—have developed their own approaches for identifying,
                 allocating, and validating MTF requirements. The approaches include an
                 array of technical, mathematical-based models. The brief descriptions
                 below indicate the variety and changing nature of models used; they are
                 not comprehensive, comparative assessments.

Army Models      For wartime requirements, the Army, unlike the Navy and Air Force,
                 begins with its Total Army Analysis model to determine the number and
                 type of support units, including medical, needed to support the Army’s
                 combat forces in wartime and other contingencies. In addition to the two
                 near-simultaneous major regional conflicts, the model also includes
                 requirements for post-hostility requirements—such as treating civilians
                 and refugees—operations other than war, homeland defense, and
                 domestic disaster relief. Building on the baseline obtained from the model,
                 the Army uses its Total Army Medical Department Personnel Structure
                 model to determine additional military medical personnel needed for
                 rotation and training.

                 Recently, the Army’s North Atlantic Regional Medical Command began
                 comparing medical personnel levels among MTFs within the command to
                 correct imbalances caused by changes in the medical environment.
                 Changes that affect the size of MTFs include TRICARE implementation,
                 shift from inpatient to outpatient care, base closure and realignments,
                 downsizing of the active duty force, increased deployments, decreased
                 budgets, and increased costs of providing health care. Thus, the North
                 Atlantic Regional Medical Command developed the Regional Uniform
                 Benefit model, which compares and validates medical personnel
                 allocation. The objectives of the model are to distribute resources to meet
                 population needs, benchmark productivity and performance, optimize
                 contract dollars, and develop “what if” analyses before implementing a
                 change in services or a facility. For example, at an MTF outside the national
                 capital area, the model identified excess resources, which resulted in a
                 decrease of about 120 staff, a decrease in its budget by $5.5 million, and
                 the elimination of a plan to build a new surgical suite. The model has been
                 completed at most NCA MTFs except at Walter Reed. The model has been
                 briefed to other Army offices and may be expanded beyond the North
                 Atlantic Regional Command. Army officials told us that the Automated
                 Staffing Assessment model and other models, while useful, had been
                 inadequate in addressing total facility and personnel needs.

                 Page 38                        GAO/HEHS-00-10 Justifying Military Medical Resources
                   Appendix III
                   Service Models

Navy Models        The Navy uses its Total Health Care Support Readiness Requirements to
                   project its active duty medical force readiness requirements. The Navy
                   readiness mission is to support all Navy and Marine Corps operational
                   missions, including wartime and day-to-day operations. This includes
                   mobilizing hospital ships—USN Mercy on the West Coast and the USN
                   Comfort on the East Coast—supporting Navy Fleet and Marine Corps
                   operations ashore and afloat and numerous Fleet hospitals, as well as
                   maintaining military treatment facilities outside the United States. Its
                   day-to-day operational support mission allows Navy medical personnel to
                   rotate between the United States, ships at sea, and overseas assignments.
                   Also included is training of medical personnel.

                   The Navy uses a number of models to determine wartime requirements,
                   allocate military medical personnel among MTFs, and validate MTF
                   manpower requirements. The Total Health Care Support Readiness
                   Requirements model defines readiness requirements as the minimum
                   number of military medical personnel required to support and sustain its
                   readiness mission. This model is the basis for DOD’s overall sizing model.
                   The Navy uses its allocation model called the CONUS Healthcare
                   Readiness Infrastructure Sizing model to allocate military medical
                   personnel among its MTFs in the United States. The model attempts to
                   validate the number of military personnel needed by the MTF to staff its
                   assigned wartime tasks. All military personnel in excess of wartime
                   requirements assigned to the MTF are considered to be part of the Navy
                   peacetime healthcare mission. Finally, the Navy uses its efficiency reviews
                   to further validate the number and type of personnel needed at an MTF to
                   provide the peacetime health care benefit using workload, number of
                   personnel, and workload standards. An efficiency review determines how
                   an MTF’s military and civilian staffing compares with applicable standards.

Air Force Models   The Air Force projects its requirements for military medical personnel
                   using DOD’s overall sizing model. This model identifies the number of
                   military medical personnel needed to support the Air Force’s mission of
                   supplying air-transportable hospitals, contingency hospitals, and critical
                   care air transport teams. In addition, the Air Force has decided that
                   military medical personnel should provide primary care services to active
                   duty personnel and active duty family members at all bases. According to
                   Air Force officials, this has resulted in an additional requirement of about
                   200 military medical personnel.

                   Page 39                        GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix III
Service Models

The Air Force Surgeon General and the major commands, such as the Air
Mobility Command, that fund and control the various MTFs, distribute the
wartime taskings and allocate associated military medical personnel
needed among MTFs based on major command wartime requirements and
on which MTFs can best support those requirements. The Air Force tries to
concentrate many of the wartime taskings at large MTFs that have the
beneficiary population—high volume of workload—to support military
provider readiness training. The Air Force also uses its Strategic
Resourcing Portfolio, an economic manpower sizing model, as a tool to
help determine where it may be economical and feasible to allocate
military medical personnel.

Currently, the Strategic Resourcing Portfolio projects the numbers and
mix of personnel needed at an MTF based on the demographics of the
beneficiary population, historical workload,26 and the cost of providing
health care services. The model also reflects the number of military
medical personnel assigned to meet the MTF’s wartime taskings. The health
care services provided by the military personnel in excess of this number
and by civilian personnel are part of the peacetime mission. However, the
latest edition of this model raised reliability issues, as we reported.

  In the future, when TRICARE is fully implemented, it will be based on the enrolled population.

Page 40                                  GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix IV

DOD’s 29 Reengineering, Consolidation, and
Optimization Initiatives

                  Prompted by concerns about whether it could meet readiness needs, as
                  well as optimize peacetime health care, DOD began 29 separate initiatives
                  to modernize MHS management in 1998. DOD’s 29 reengineering,
                  consolidation, and optimization initiatives and their objectives are listed

                  Pharmacy national mail order program: Redirect patients from using
                  Standard CHAMPUS pharmacies to retail network pharmacies.

                  Pharmacy automation and formulary management.

                  Pharmacy distribution and pricing agreements.

                  System/facility optimization:

              •   Improve care management consistent with recognized science-based best
                  clinical practice.
              •   Improve practice patterns.
              •   Implement evidence-based medicine and prevention.
              •   Reduce inappropriate variance from and speed adoption of
                  clinical/administration best practice.
              •   Implement utilization management system for all of TRICARE.
              •   Recapture most local area care to MTFs where cost beneficial.
              •   Optimize enrollee-to-provider ratio (for example, 1,500 enrollees per
              •   Right size hospitals and clinics.
              •   Right size each MTF’s primary and specialty care providers.
              •   Improve care management of high-intensity illnesses.
              •   Increase number and speed adoption of clinical guidelines for
                  high-intensity, high-cost illnesses.
              •   Develop patient safety initiative with the Department of Veterans Affairs
                  and other agencies.
              •   Implement MHS quality initiatives, and develop quality initiatives with
                  Department of Health and Human Services, Department of Veterans
                  Affairs, and Office of Personnel Management.
              •   Reengineer clinic infrastructure to support modern ambulatory care.
              •   Reengineer clinical and administrative processes to meet access and
                  satisfaction standards.
              •   Increase percentage of users who are enrolled.
              •   Increase nonphysician support in clinical settings.
              •   Shift nonemergent and nonurgent care in the emergency rooms to other
                  ambulatory care settings.

                  Page 41                         GAO/HEHS-00-10 Justifying Military Medical Resources
    Appendix IV
    DOD’s 29 Reengineering, Consolidation, and
    Optimization Initiatives

•   Retain flexibility in MHS to respond to future internal and external factors.
•   Determine MHS readiness requirements for nonphysicians as well as for
    physicians and move to that number, unless a make versus buy analysis
    indicates additional in-house MTF staffing is advantageous.

    Consolidate medical information management/information technology
    activities within DHP:

•   Consolidate administration into a single activity.
•   Move to more “paperless” processing.
•   Improve the integration and connectivity of multiple systems to support
    user needs.
•   Improve information systems, such as Composite Health Care System II,
    Government-Computerized Patient Record, and pharmacy management.

    Reduce/flatten/lean infrastructure: Eliminate duplicate management
    activities/functions at intermediate commands in the three military
    departments and TRICARE regional lead agents.

    Reduce cross-service duplications:

•   Consolidate preventive medicine.
•   Consolidate environmental health.
•   Consolidate blood donor labs.

    Consolidate the number of medical centers.

    Merge overlapping NCA medical centers and San Antonio medical centers.

    Reengineer aeromedical evacuation (program analysis and evaluation).

    Reengineer Air Force Institute of Pathology.

    Managed care support contract:

•   Reduce TRICARE managed care support contract administrative costs.
•   Reduce/consolidate number of change orders for managed care support
•   Extend contracts when advantageous to government and beneficiaries.

    Managed Care Support 3.0 contract: Implement new managed care support
    contract structure/process.

    Page 42                            GAO/HEHS-00-10 Justifying Military Medical Resources
    Appendix IV
    DOD’s 29 Reengineering, Consolidation, and
    Optimization Initiatives

    Contract policy/payment change.

    Military construction projects: Refer or reduce certain military
    construction projects (Air Force Institute of Pathology, classroom project
    at Army Medical Center and School, Center for Health Promotion and
    Preventative Medicine).

    Accelerate military personnel reductions (Air Force).

    Consolidate graduate medical education administration and development
    of Department graduate medical education policy.

    Purchasing/acquisition activities for all medical supplies used in MTFs
    (excluding fielded medical units and deployable medical systems):

•   Regionalize.
•   Implement universal product numbers, joint purchasing, standardization
    for medical and surgical supplies.

    Nationalize or regionalize maintenance and repair contracts for medical
    equipment used in medical and dental treatment facilities and in medical
    training activities.

    Outsourcing of advanced medical technical training for areas such as
    laboratory, radiology, electrocardiograph, and pharmacy technologists, as
    well as all other outsourcing initiatives related to quadrennial Defense

    Consolidate medical facility acquisition and life-cycle management
    activities into a single-facility life-cycle management organization.

    Beneficiary support:

•   Emphasize themes: “Taking care of our own,” “Protecting our forces’
    health,” “Customer first.”
•   Support and improve patient self-care and reduce overutilization of care.
•   Improve communication through increased use of Internet and other
    information tools.
•   Implement report cards and other performance assessment tools.
•   Implement consumer councils in all MTFs.
•   Strengthen grievance resolution procedures.
•   Expand customer satisfaction assessment to all of TRICARE.

    Page 43                            GAO/HEHS-00-10 Justifying Military Medical Resources
    Appendix IV
    DOD’s 29 Reengineering, Consolidation, and
    Optimization Initiatives

    TRICARE benefit policy:

•   Simplify, rationalize, and make more uniform the TRICARE benefit
    (include pharmacy).
•   Carry out successful TRICARE Senior demonstration.
•   Carry out successful DOD demonstration (MacDill).
•   Obtain authorization for TRICARE Senior (Medicare reimbursement)

    TRICARE staff training and education:

•   Increase training in “good” managed care for MTF staff.
•   Move trauma training into the private sector wherever it makes economic
    or readiness sense.
•   Use Internet and other advanced distributive learning tools.

    Improve assessment, purchase, and use of medical technology.

    Outsourcing quadrennial Defense reviews: Outsource functions better
    done by the private sector.

    Reengineer, improve prevention:

•   Focus on and shift resources to outcome-based, evidence-based
•   Implement “putting prevention into practice.”
•   Push reduction in high-priority areas—tobacco use, alcohol abuse,
•   Increased immunization rates.
•   Increase line support of troop fitness and wellness.
•   Improve infectious disease prevention, surveillance, and response.

    Improve resourcing:

•   Adjust payments to Uniform Services Treatment Facilities.
•   Move to capitation funding more quickly.
•   Reduce double payments by Medicare and DOD.
•   Increase third-party collection rates.

    Page 44                            GAO/HEHS-00-10 Justifying Military Medical Resources
    Appendix IV
    DOD’s 29 Reengineering, Consolidation, and
    Optimization Initiatives

    Improve MHS management:

•   Manage MHS by performance at all levels.
•   Design/refine/implement performance measures—outcomes, cost, access,
•   Further develop/reinforce partnership among Health Affairs and the
•   Strengthen leadership at all levels of MHS.
•   Make smart make versus buy decisions throughout MHS.
•   Develop/implement strategic communications with customers, public, DOD,
    and the Congress.
•   Develop stronger market analysis and marketing efforts.
•   Refine budget preparation to improve collaboration and earlier
    determination of MHS priorities.
•   Strengthen fraud and abuse reduction efforts with Inspector General.

    Page 45                            GAO/HEHS-00-10 Justifying Military Medical Resources
Appendix V

Comments From the Department of Defense

             Page 46    GAO/HEHS-00-10 Justifying Military Medical Resources
                Appendix V
                Comments From the Department of Defense

Now on p. 29.

Now on p. 29.

Now on p. 29.

                Page 47                          GAO/HEHS-00-10 Justifying Military Medical Resources
                Appendix V
                Comments From the Department of Defense

Now on p. 29.

Now on p. 29.

Now on p. 30.

(101615)        Page 48                          GAO/HEHS-00-10 Justifying Military Medical Resources
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