oversight

The Results Act: Observations on the Department of Health and Human Services' April 1997 Draft Strategic Plan

Published by the Government Accountability Office on 1997-07-11.

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

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

                     Health, Education, and
                     Human Services Division

                     B-277400

                     July 11, 1997

                     The Honorable Richard K. Armey
                     Majority Leader
                     House of Representatives

                     The Honorable John Kasich
                     Chairman, Committee on the Budget
                     House of Representatives

                     The Honorable Dan Burton
                     Chairman, Committee on Government
                       Reform and Oversight
                     House of Representatives

                     The Honorable Bob Livingston
                     Chairman, Committee on Appropriations
                     House of Representatives

                     Subject: The Results Act: Observations on the Department of Health and
                     Human Services’ April 1997 Draft Strategic Plan

                     On June 12, 1997, you asked us to review the draft strategic plans
                     submitted by the cabinet departments and selected major agencies for
                     consultation with the Congress as required by the Government
                     Performance and Results Act of 1993 (the Results Act). This letter reports
                     on our review of the Department of Health and Human Services’ (HHS)
                     draft strategic plan.


                     Our overall objective was to review and evaluate the latest available
Objectives, Scope,   version of HHS’ draft strategic plan, dated April 1997. As you requested, we
and Methodology      (1) assessed the plan’s response to the Results Act’s six requirements and
                     the strengths and weaknesses of the plan’s elements; (2) assessed whether
                     the plan covers the agency’s key statutory authorities; (3) examined
                     whether any agency programs, activities, or functions are crosscutting,
                     that is, similar to or related to goals, activities, or functions of other
                     agencies, and the extent to which the strategic plan reflects interagency
                     coordination; (4) determined if the draft plan addresses major
                     management problems; and (5) provided a preliminary assessment of the
                     agency’s capacity to provide reliable information about performance.




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             The focus of our review was HHS’ April 1997 strategic plan; we did not
             examine any plans prepared by HHS’ component agencies because HHS
             intends to submit only a Department-wide plan. As agreed, to review the
             plan, we relied on the Results Act, the Office of Management and Budget’s
             (OMB) guidance on developing the plans (Circular A-11, Part 2), our
             May 1997 guidance for congressional review of the plans (GAO/GGD-10.1.16),
             our general knowledge of HHS’ operations, and the many reports and
             testimonies on HHS and its programs that we have issued over the last
             several years. (See Related GAO Products at the end of this
             correspondence.) As you requested, we coordinated our work on HHS’ key
             statutory authorities and HHS’ capacity to provide reliable information with
             the Congressional Research Service and HHS’ Office of Inspector General
             (OIG), respectively.

             In passing the Results Act, the Congress anticipated that several planning
             cycles might be needed to perfect the process of developing a strategic
             plan and that the plan would be continually refined. Thus, our comments
             reflect a “snapshot” of the status of the plan at a particular point. We
             recognize that developing a strategic plan is a dynamic process and that
             HHS is continuing to work to revise the draft with input from OMB,
             congressional staff, and other stakeholders.

             We did our work between June 16 and July 8, 1997, in accordance with
             generally accepted government auditing standards. We met with HHS
             officials on July 8 to discuss a draft of this correspondence; they also
             provided written comments, which are presented in enclosure II.


             The Results Act seeks to shift the focus of federal management and
Background   decision-making from staffing, activity levels, and tasks completed toward
             results. Under the Results Act, federal agencies must develop (1) strategic
             plans by September 30, 1997; (2) annual performance plans for fiscal year
             1999 and beyond; and (3) annual performance reports beginning on
             March 31, 2000. The act states that agencies’ strategic plans should cover
             at least 5 years1 and that these plans should include, among other
             requirements, a set of strategic goals. Although it was expected to
             encourage agencies to focus their strategic goals on results, the act does
             not require that all of an agency’s strategic goals be explicitly results
             oriented. The act does not require agencies to have final plans until



             1
              OMB Circular A-11, Part 2, requires that strategic plans span a minimum 6-year period: the fiscal year
             it is submitted, and at least 5 years following that fiscal year.



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September 30, 1997, so many of these plans will most likely be imperfect,
reflecting their status as draft documents.

The sheer size and complexity of HHS’ responsibilities create great
challenges for complying with the requirements of the Results Act. HHS is
one of the largest federal departments, the nation’s largest health insurer,
and the largest grant-making agency in the federal government. Its fiscal
year 1996 outlays were $319.8 billion. The Department comprises several
large agencies, each of which manages a number of programs with many
parts. (See enc. I.) The size, range, and interrelatedness of HHS’ activities
and responsibilities make it especially important for HHS to use the
framework of the Results Act to integrate program goals and activities at a
departmental planning level; improve coordination and accountability
among its own agencies; and work successfully with other federal
agencies, state and local governments, and private-sector grantees.

HHS  is familiar with the kind of results-oriented management promoted by
the Results Act. HHS conducted two of the Results Act pilots designated by
OMB: one in the Administration for Children and Families’ (ACF) Office of
Child Support Enforcement (OCSE) and the other in the Food and Drug
Administration’s (FDA) Prescription Drug User Fee Program.2 The pilots
helped OCSE and FDA identify and progress toward performance goals. In
October 1996, we reported that OCSE’s Results Act pilot had made progress
in redirecting its management of the child support enforcement program
toward results.3 For example, OCSE approved national goals and objectives
focused on key program outcomes such as increasing the number of
paternities established, support orders obtained, and child support
collections received. At the time of our review, OCSE and the states had
begun to develop performance measures as statistical tools for measuring
state progress toward meeting program goals.

A second HHS Results Act pilot involved the Prescription Drug User Fee
Act of 1992 (PDUFA), which allows FDA to collect user fees from drug
companies seeking approval to market drugs. PDUFA dedicated the
revenues to expediting FDA’s review of human drug applications and


2
 When it passed the Results Act, the Congress understood that most agencies would need to make
fundamental management changes to implement this law properly and that these changes would not
come quickly or easily. To facilitate this process, the act included a pilot phase during which federal
agencies could gain experience in implementing key parts of the law to provide valuable lessons for
the rest of the government. OMB designated about 70 pilot tests in 26 federal entities for performance
planning and reporting.
3
 Child Support Enforcement: Reorienting Management Toward Achieving Better Program Results
(GAO/HEHS/GGD-97-14, Oct. 25, 1996).



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                   established time-specific performance goals to be achieved by the end of
                   fiscal year 1997. To meet these objectives, FDA consulted with its
                   stakeholders to determine appropriate performance indicators and target
                   levels and developed output-oriented performance goals. In its Fourth
                   Annual Performance Review, for fiscal year 1996, FDA reported that the
                   PDUFA program had exceeded its performance goals, improving the speed
                   and efficiency of the drug review process.

                   In addition, Healthy People 2000, the Public Health Service’s (PHS) national
                   public health initiative that seeks to improve the health of all Americans, is
                   an example of a results-based HHS management effort. In consultation with
                   HHS stakeholders, other government agencies, and the public health
                   community, PHS developed a series of outcome-based public health goals
                   and measures, with 300 disease prevention and health promotion
                   objectives. In 1995, PHS reviewed the nation’s progress in meeting these
                   objectives and reported that progress had been made toward achieving
                   half of the objectives; movement away from the target or no movement at
                   all had occurred for 21 percent; and insufficient data existed to assess
                   29 percent.


                   HHS’ draft strategic plan is more a summary of current programs than a
Results in Brief   document projecting actions the Department might take in the next
                   several years to achieve its six goals. Although a description of current
                   programs is helpful, a strategic plan should allow the Congress and the
                   American people to understand the direction in which HHS’ programs will
                   move. The plan in its draft form does not provide a useful basis for
                   consultation with the Congress and others interested in the Department’s
                   future. Greater attention in the plan to the six critical elements in the
                   Results Act would allow for more informed evaluation of the
                   appropriateness of HHS’ goals and objectives and the strategies for
                   achieving them. HHS officials recognize that the plan is incomplete but felt
                   that it was important to make available at least the framework for the plan
                   in time to get comments from their many stakeholders. Officials said they
                   have been working on the missing elements and expect to have them in
                   place by September 30.

                   Specifically, while the plan’s mission statement successfully captures the
                   broad array of the Department’s activities, many required elements of HHS’
                   draft strategic plan are incomplete or missing. The draft plan identifies six
                   overarching Department-wide goals, such as to improve the quality of
                   health care, public health, and human services and to promote



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                       self-sufficiency and parental responsibility. It also recognizes that many
                       different departmental agencies, such as the Health Care Financing
                       Administration (HCFA), the National Institutes of Health (NIH), and ACF, are
                       responsible for achieving the goals. HHS has not, however, consistently
                       identified strategies for achieving the goals or included measurable
                       objectives indicating, for example, how to measure an increase in
                       self-sufficiency. Nor did HHS adequately discuss how its component
                       agencies, such as HCFA and the Health Resources and Services
                       Administration, will coordinate their efforts to reach common goals.

                       Similarly, the draft plan does not sufficiently acknowledge the many other
                       federal partners, like the Department of Education, that share
                       responsibility with HHS for many of the same kinds of programs, such as
                       education and training. Also missing are discussions of the considerable
                       management challenges HHS faces in carrying out both its program
                       responsibilities and the type of strategic planning and performance
                       measurement the Results Act requires. In particular, the draft plan does
                       not give enough weight to the role that state and local governments play in
                       carrying out many of HHS’ programs and the fact that these partners may
                       lack the capacity to provide reliable and comparable information on
                       achieving HHS’ goals.


                       HHS’ draft strategic plan does not adequately address five of the Results
Draft Strategic Plan   Act’s six key elements. The six elements are (1) mission statement,
Omits Discussion of    (2) goals and objectives, (3) approaches to achieve goals and objectives,
Key Elements           (4) relationship between long-term goals/objectives and annual
                       performance goals, (5) key external factors beyond the agency’s control,
Required by the        and (6) how program evaluations were used to establish/revise strategic
Results Act            goals. All of these elements are important for establishing a meaningful
                       starting point and foundation for HHS’ consultations with the Congress and
                       stakeholders in defining the Department’s aims, identifying the strategies it
                       will use to achieve desired results, and then determining its success in
                       meeting its goals and objectives. More completely addressing the six key
                       elements of the Results Act is essential for HHS to move from a draft
                       strategic plan that too often merely describes the Department’s programs
                       and processes to a tool useful for projecting organizational priorities and
                       unifying the Department’s staff in the pursuit of shared goals. Although HHS
                       has developed a mission statement that successfully captures the broad
                       array of the Department’s activities related to the health and well-being of
                       the nation as well as the Department’s support for social- and




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                          health-related research, discussion of the remaining five elements in its
                          draft strategic plan is missing or incomplete.


Goals and Objectives      HHS has partially addressed the Results Act requirement to establish
Statement Is Incomplete   general goals and objectives in the agency’s draft strategic plan. Although
                          HHS has established six goals that are overarching for its operating
                          divisions and staff offices, the Department needs to take further action in
                          three areas to completely address the Results Act requirements for goals
                          and objectives.

                          First, HHS states that these six goals relate to those activities that have
                          priority over the next 6 years; they do not relate to every Department
                          activity that contributes to the overall mission. The Results Act and OMB
                          Circular A-11 require, however, that agency plans cover the Department’s
                          major functions and operations. The current HHS draft plan may be missing
                          major functions and operations that are reflected in statute or are
                          otherwise important to HHS’ mission. Excluding some significant programs
                          and activities obscures their relationship to the six departmental goals and
                          the methods for ensuring the accountability of these efforts. The draft
                          strategic plan, for example, makes no mention of HHS’ responsibilities for
                          certifying medical facilities, such as clinical laboratories and
                          mammography providers. Furthermore, to achieve the objectives of the
                          Government Management Reform Act of 1994 (GMRA), agencies must have
                          implemented financial management systems that provide adequate
                          safeguards and accountability. Despite numerous known financial
                          management weaknesses, however, the draft plan is silent about how HHS
                          plans to address these major operational issues. Including all major
                          programs and activities in the draft strategic plan would help to identify
                          their goals and hold managers accountable for achieving them.

                          Second, the plan does not always state the goals in a way that would allow
                          future assessment of whether the goals have been met. Under the Results
                          Act, goals are to be stated in a way that clarifies what results are expected
                          from the agency’s major functions and when results are expected. The
                          draft plan is explicit, for example, in presenting an objective of reducing
                          the number of uninsured children by half by the year 2002. More often,
                          however, the discussions supporting the goals explain the processes and
                          outputs of individual programs and activities without specifying their
                          intended results. For example, one HHS goal is to promote self-sufficiency,
                          but the draft plan only lists the programs and activities that support this
                          goal. It is therefore unclear whether success will be measured by reducing



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                            the number of people on federal assistance, improving the earning
                            potential of families beyond certain levels, or some other means.

                            Third, some HHS goals relate closely to those of other agencies, yet the
                            draft plan hardly discusses any coordination that may have taken place to
                            ensure that these goals are complementary rather than duplicative or even
                            contradictory. For example, the plan’s discussion of HHS’ responsibility for
                            maternal and child health programs makes no reference to the Department
                            of Agriculture’s closely related Special Supplemental Food Program for
                            Women, Infants, and Children. Similarly, the plan’s section on health
                            professions workforce programs does not discuss Department of
                            Education programs for training health professionals. HHS’ coordination of
                            program goals with other agencies should help to conserve scarce funds,
                            minimize confusion and frustration for program customers, and improve
                            the overall effectiveness of the federal effort.


Approaches and Strategies   HHS’ strategic plan has not yet fully addressed the Results Act requirement
Lacking in Draft Plan       to include the approaches and strategies for meeting goals and objectives.
                            Under the Results Act, strategies are to describe the operational
                            processes, staff skills, and technologies as well as the human, capital,
                            information, and other resources needed to achieve agency goals. In
                            addition, according to OMB Circular No. A-11, Part 2, these strategies
                            should outline how the agency will communicate strategic goals
                            organizationwide and hold managers and staff accountable for achieving
                            the goals.

                            HHS’s draft plan discusses its current programs and activities, but it does
                            not discuss how these programs and activities will operate and meet the
                            Department’s goals. For example, the draft plan cites research supported
                            by a number of HHS agencies on sexually transmitted diseases (STD). It does
                            not, however, specify the types of research initiatives that are planned or
                            under way or how they relate to a strategy for guiding clinical and public
                            health practice in preventing and treating STDs.

                            Nor does the plan specify how HHS’ various program strategies will work
                            together to reach common goals. Many of HHS’ programs developed over
                            time as the federal government responded to new needs and problems,
                            resulting in many cases in fragmented programs that may conflict with one
                            another. Especially important, therefore, is HHS’ need to identify and align
                            individual program strategies to support achievement of its overall
                            strategic goals and mission.



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An example of the need to discuss strategies for linking program goals is
the relationship between the child care and Head Start sections of the
draft plan. The Temporary Assistance for Needy Families (TANF) program
requires clients to increase their hours of work or work-related activity.
The draft plan recognizes that as these parents increase their work hours,
they will need additional child care services, and it mentions some HHS
activities related to child care. The plan fails to note, however, that Head
Start, which currently serves children of some TANF clients and therefore
could meet child care needs to some extent, is limited by being generally a
half-day, part-year program. Nor does the plan discuss strategies for
coordinating these programs, such as increasing HHS’ current efforts to
encourage partnerships between Head Start grantees and child care
providers, so that parents will have access to full-day child care services.4

In addition, HHS’ draft plan fails to discuss additional resources the
Department needs to reach its goals. For example, although the Health
Insurance Portability and Accountability Act of 1996 adds new funds to
fight fraud and abuse in the Medicare program, we have reported that this
additional funding will still leave per claim safeguard funding in 2003 at
about one-half the 1989 level after adjusting for inflation.

Similarly, the new welfare reform law gives HHS new administrative and
oversight responsibilities, the performance of which will rely on data
provided by the states. For example, using data provided by the states, HHS
is to establish a national directory of newly hired employees and a registry
of child support orders to strengthen child support enforcement. Yet the
plan makes no mention of the financial and data resources HHS needs for
this.

Moreover, HHS officials often cite changes needed in legislation or
regulation to provide them with the flexibility they need to manage
programs more effectively. For example, HHS has been working with the
Congress to try to group large numbers of individual programs into
consolidated program “clusters” to provide not only administrative savings
but also greater flexibility to respond to changing national needs.5 The
draft plan does not discuss these and similar matters, however.




4
Welfare Reform: Implications of Increased Work Participation for Child Care (GAO/HEHS-97-75,
May 29, 1997).
5
Health Professions Education: Clarifying the Role of Title VII and VIII Programs Could Improve
Accountability (GAO/T-HEHS-97-117, Apr. 25, 1997).



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                           Holding managers responsible for progress in meeting goals is a major
                           focus of the Results Act as a whole. HHS’ draft plan, however, does not
                           discuss what means or incentives the Department will use to achieve this.
                           By making managers responsible for the cost-effectiveness of programs
                           and activities, the Results Act can help move managers from a traditional
                           role as “caretaker” of federal programs to one of actively improving
                           efficiency and reducing the costs of federal interventions.


Relationship Between       HHS’draft plan does not define the relationship between the plan’s goals
Long-Term Goals and        and those it will include in its annual performance plans. The Results Act
Annual Performance Goals   requires a description of these goals’ relationship to help the Congress
                           judge whether agencies are progressing toward meeting their long-term
Missing                    goals. Because HHS’ draft plan has overlooked this discussion, it is difficult
                           to know what many of the goals mean and how the Congress will evaluate
                           whether they have been met.

                           HHS’ draft strategic plan states that the Department’s operating divisions
                           and staff offices are developing the performance plans that will specify
                           how resources will be used to meet goals and describe the objectives and
                           targets relevant to specific programs. The Results Act, however, requires
                           HHS’ strategic plan to describe how the annual performance goals will
                           relate to the strategic goals. One way to clarify the link is for the plan to
                           define the performance measures that will be used. For example, HHS
                           mentions using objectives in Healthy People 2000—which sets targets for
                           national health promotion and disease prevention—for two of its strategic
                           goals. The draft plan does not, however, clarify the relationship between
                           these objectives and the programs and activities.


Little Mention of Key      HHS’ draft plan pays only scant attention to some of the major external
External Factors           factors that could significantly affect the plan’s goals. The Results Act
                           requires HHS to discuss such factors and encourages the Department to
                           identify actions that could reduce or ameliorate their potential impact. The
                           act requires such a discussion to help HHS and the Congress assess the
                           likelihood of HHS’ meeting the strategic goals and determine the actions
                           needed to meet those goals. A factor the draft plan does discuss is the
                           impact of the growing size of the aged population on Medicare’s solvency.
                           The draft plan is silent, however, about other key factors. One major
                           external factor missing from the draft plan’s discussion is changes in the
                           economy, which could significantly affect how and whether HHS meets its
                           strategic goals. For example, although the nation is now in a period of



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                              economic growth, diminished national or even regional growth could
                              increase the demand on state health and income assistance programs
                              when state revenues may be unable to meet the need. Implementation of
                              welfare-to-work initiatives could also be compromised. As families’
                              economic stress would grow, so too would the risks to their children,
                              suggesting a need for increased attention to children’s well-being.


Use of Program                HHS’ draft strategic plan does not reflect the role program evaluation plays
Evaluations to Establish or   in structuring and refocusing Department goals and strategies. Such a
Revise Strategic Goals Not    discussion would help show the Congress that HHS has an evaluation
                              system in place to ensure the reasonableness and validity of its goals and
Discussed                     strategies as well as identify factors likely to affect performance.

                              Many evaluations of HHS programs by the Department, its OIG, and us have
                              raised issues that will affect the Department’s ability to implement the
                              Results Act, yet the draft strategic plan does not address these issues. For
                              example, many of these evaluations have pointed out that programs do not
                              gather data necessary to evaluate their overall effectiveness. Other
                              evaluations have pointed out the absence of systems to produce reliable
                              performance and cost data needed to set goals, evaluate results, and
                              improve performance. Several HHS and our own evaluations, for example,
                              have pointed out the inability of the Department’s health care shortage
                              area systems to target over $1 billion spent by over 30 programs each year
                              to alleviate medical underservice.6 In addition, the midpoint evaluation of
                              Healthy People 2000 reported that insufficient data existed to measure
                              progress for over one-fourth of the initiative’s 300 objectives.

                              Moreover, the draft plan does not reflect HHS’ experience with its Results
                              Act pilot programs, which could help the Department develop strategies
                              for meeting its goals. For example, OCSE gained experience in developing
                              strategic plans and working with diverse stakeholders. It also worked
                              closely with state and local governments to develop national goals and
                              performance measures.

                              The Results Act offers an opportunity for HHS to discuss in its plan the role
                              of future program evaluations in improving performance and informing
                              congressional decision-making. Many HHS programs established before

                              6
                               Two of the most recent studies include Health Care Shortage Areas: Designations Not a Useful Tool
                              for Directing Resources to the Underserved (GAO/HEHS-95-200, Sept. 8, 1995) and The Measurement
                              of Underservice and Provider Shortage in the United States: A Policy Analysis, North Carolina Rural
                              Health Research Program, Cecil G. Sheps Center for Health Services Research, University of North
                              Carolina (Chapel Hill, N.C.: 1994).



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                         1990 have never been evaluated. HHS has authority to set aside up to 1
                         percent of PHS program funding for evaluations, which in 1992 amounted
                         to $119 million. HHS has often used these funds for other purposes,
                         however.7 Refocusing these resources to evaluate program performance
                         may provide HHS and the Congress with the information they need to
                         explain reasons performance goals are not met and identify appropriate
                         strategies to meet unmet goals.


                         A broad range of statutes governs HHS’ activities.8 Among these statutes, as
HHS’ Strategic Plan      reflected in the plan, are the Social Security Act (including, among others,
Reflects Key Statutory   programs pertaining to Medicare, Medicaid, child welfare services, child
Authorities but Omits    support, foster care, and adoption assistance); the Public Health Service
                         Act; and the Federal Food, Drug, and Cosmetic Act. Major recent
Others                   legislation includes the Personal Responsibility and Work Opportunity
                         Reconciliation Act of 1996 (which, largely through amendments to the
                         Social Security Act, authorizes TANF block grants, revises the child support
                         enforcement program, and increases flexibility and funding available for
                         child care programs) and the Health Insurance Portability and
                         Accountability Act of 1996 (HIPAA).

                         Although HHS’ draft plan generally reflects the key statutory authorities
                         governing the agency’s activities, it does not address all significant statutes
                         and the programs for which HHS is responsible. For example, the plan says
                         nothing about agency responsibilities such as regulation of the nation’s
                         blood supply, operation of a network for organ procurement and
                         transplant, and certification of clinical laboratories and mammography
                         facilities. The Results Act requires that the comprehensive mission
                         statement and the general goals and objectives cover all major agency
                         functions and operations. HHS specifically acknowledges, however, that its
                         plan does not include all activities that contribute to the agency’s overall
                         mission—only those that HHS believes should have priority over the next 6
                         years.




                         7
                          Public Health Service: Evaluation Set-Aside Has Not Realized Its Potential to Inform the Congress
                         (GAO/PEMD-93-13, Apr. 8, 1993).
                         8
                          When we performed our review, no comprehensive list of HHS’ statutory responsibilities was
                         available, and the draft plan did not provide any linkage between the mission, goals, and key statutory
                         authorities. In view of the limited time available for our review, we could not comprehensively
                         compare the plan with the statutory authorities governing HHS. We did not identify any major agency
                         activity not grounded in explicit statutory authority.



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                         HHS’ array of interrelated activities and responsibilities makes it especially
Plan Pays Insufficient   important for HHS managers to work together to address the Department’s
Attention to             overarching program goals. Moreover, many programs that are HHS’
Crosscutting             responsibility share goals with or relate closely to programs administered
                         by other federal agencies. In addition to coordinating the activities of its
Programs                 own agencies, HHS must also coordinate its efforts with these other
                         agencies. Although HHS’ draft strategic plan recognizes that many different
                         HHS agencies and programs are responsible for meeting each of the
                         Department’s goals, it does not discuss strategies for coordinating such
                         efforts. Nor does the draft discuss HHS’ need to coordinate its work with
                         other federal agencies.

                         The following examples are a few of the many opportunities HHS has for its
                         plan to discuss both intra- and interdepartmental crosscutting issues. One
                         program area that requires HHS to focus on both internal and external
                         coordination is alcohol and drug abuse treatment and prevention.9
                         Programs addressing alcohol and drug abuse issues are located not only in
                         several HHS agencies—including the Substance Abuse and Mental Health
                         Services Administration (SAMHSA), NIH, ACF, and the Centers for Disease
                         Control and Prevention—but also in 15 other federal agencies. These
                         include the Departments of Veterans Affairs, Education, Housing and
                         Urban Development, and Justice.

                         Substance abuse programs also have a bearing on other aspects of the
                         Department’s mission. HHS has previously reported that the number of
                         child protective service (CPS) cases involving substance abuse can range
                         from 20 to 90 percent, depending on the area of the country. Although the
                         draft strategic plan mentions the use of illicit drugs as a major threat to the
                         health of Americans and notes its impact on the complexity of family
                         problems, it does not discuss how ACF and SAMHSA programs can work
                         together to alleviate the problems that have produced a crisis for the CPS
                         system.

                         Nor does the draft plan discuss HHS’ work that overlaps with that of other
                         agencies in addressing the dramatic increase in the number and severity of
                         cases of child abuse and neglect over the last 20 years. HHS has recognized
                         the need for interagency cooperation on child abuse issues and has
                         participated in forums with the Department of Justice’s National Institute
                         of Justice, Office for Victims of Crime, and Office of Juvenile Justice and
                         Delinquency Programs.

                         9
                         Substance Abuse and Mental Health: Reauthorization Issues Facing the Substance Abuse and Mental
                         Health Services Administration (GAO/T-HEHS-97-135, May 22, 1997).



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                             Another example involves the new welfare reform law, which requires
                             recipients to work after 2 years as a condition of receiving further benefits
                             and requires states to achieve specified and increasing levels of recipient
                             participation in work activities until the required rate reaches 50 percent
                             in fiscal year 2002. State officials have expressed concern that as the most
                             employable recipients find jobs, the remaining caseload will consist of
                             individuals with substantial barriers to employment, making the higher
                             target rates difficult to achieve. Although HHS’ draft plan does not mention
                             them, the employment, training, and education programs administered by
                             the Departments of Labor and Education will probably be essential to
                             TANF’s success and to HHS’ goal of promoting self-sufficiency and parental
                             responsibility.

                             Finally, the draft plan does recognize the enormous impact the aging of the
                             baby boomers will have on HHS programs. It does not, however, discuss the
                             effects of this demographic change on related programs that affect
                             economic well-being, such as Social Security and the Department of
                             Labor’s protections of private pensions, and the need for HHS to work
                             closely with these other agencies to manage the consequences of such
                             profound social change.


                             HHS  faces many major management challenges in carrying out both its
Strategic Plan Does          program responsibilities and the type of strategic planning and
Not Fully Address            performance measurement the Results Act requires.10 Although HHS is
Major Management             aware of many of these challenges, its plan does not address them. By
                             acknowledging these challenges in its plan, however, HHS could foster a
Challenges                   more useful dialogue with the Congress about its goals and the strategies
                             for achieving them. We would like to point out two areas in particular: HHS’
                             reliance on state, local, and private agencies to carry out many programs
                             for which it is responsible and the maintenance of financial management
                             and program integrity.


Partnership With State and   Many HHS programs are operated by states, localities, or nongovernmental
Local Agencies Makes         organizations, which requires HHS agencies to develop ways to make their
Accountability for Results   many partners accountable for program results. In administering programs
                             jointly with state governments or that involve many local grantees, HHS
Difficult                    must continually balance program flexibility with oversight and
                             maintaining program controls. To further complicate HHS’ task, state data

                             10
                              Department of Health and Human Services: Management Challenges and Opportunities
                             (GAO/T-HEHS-97-98, Mar. 18, 1997).



                             Page 13                                        GAO/HEHS-97-173R HHS’ Draft Strategic Plan
                            B-277400




                            necessary for meaningful performance measurement may not be currently
                            available or may not be comparable from state to state.

                            The changes associated with recently enacted welfare reform exemplify
                            many of these difficulties and will challenge HHS to assess the effects of
                            reform on children and families. Under the TANF program, states have
                            flexibility to design and implement their own assistance programs within
                            federal guidelines, and HHS has a broad range of responsibilities for
                            ensuring accountability from the states. The law also gives HHS authority to
                            assess penalties if states fail to comply with certain requirements and
                            provides for states to receive bonuses if they meet certain performance
                            standards. HHS will need comparable and reliable state data to ensure that
                            states are enforcing the federal 5-year lifetime limit on receiving welfare
                            benefits, meeting minimum work participation rates, and maintaining a
                            certain level of welfare spending, as well as to assess penalties and
                            provide performance bonuses. Enforcing the time limit exemplifies the
                            difficulty of HHS’ task because information on the total amount of time a
                            person has received welfare is often unavailable in an individual state, let
                            alone across states.

                            Administering the Medicaid program presents the same difficulty in
                            balancing flexibility and accountability. Federal statutes and regulations
                            allow states substantial flexibility in designing and administering their
                            Medicaid programs. Because HCFA is authorized to waive certain statutory
                            requirements, such as those for managed care or home- and
                            community-based service alternatives to long-term care, it may provide
                            states with even greater latitude. Although HCFA performs structural
                            reviews of waiver programs during the planning stage, problems have
                            developed in some states as programs are implemented and continue to
                            operate. Flexibility can be positive for beneficiaries as well as the states;
                            however, HCFA’s ongoing monitoring and oversight are important to ensure
                            the appropriate use of federal funds. The need for accountability will be
                            even more pronounced if the need for waivers to enroll beneficiaries in
                            managed care is eliminated as the President and the Congress have
                            proposed.11


Financial Management and    With HHS’ broad range of programs, large number of grantees and
Program Integrity Require   contractors, huge volume of vendor payments, and millions of
Constant Vigilance          beneficiaries, the Department must constantly protect its programs from

                            11
                             Medicaid Managed Care: Challenge of Holding Plans Accountable Requires Greater State Effort
                            (GAO/HEHS-97-86, May 16, 1997).



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B-277400




fraud, abuse, mismanagement, and waste. Safeguarding Medicare, the
government’s second largest social program, which in fiscal year 1996 had
expenses of about $200 billion and processed 822 million claims, has been
a long-standing management challenge for HHS.12 The draft strategic plan
recognizes the role of program integrity in meeting departmental goals in
its discussion of Operation Restore Trust but does not discuss many
important aspects of this issue.

The draft plan, for example, does not address HHS’ problems in complying
with GMRA. To provide decisionmakers with reliable, consistent financial
data on the operations of federal agencies, GMRA requires each department
and major independent agency to submit to OMB an audited agencywide
financial statement beginning with fiscal year 1996. The magnitude of this
task for HHS is extraordinary. HHS’ expenses exceed $300 billion a year.
Over 80 percent of this amount is spent by HCFA, primarily for the Medicare
and Medicaid programs. Although the OIG tried to audit HCFA’s financial
statements in prior years, it could not express an opinion on the reliability
of these statements mainly because of inadequate supporting
documentation for some of the significant reported amounts. Financial
management problems identified by the fiscal year 1996 financial
statement audit effort include an estimated $23 billion in improper
Medicare benefit payments made during that year.

Another critical challenge that HHS’ plan does not address and that we have
reported on is long-standing concerns about Medicare’s claims processing
systems. These systems do not allow for cross-checking of claims
processed by carriers and intermediaries or for prepayment alerts of
unusual increases in billing for particular items. HHS has been developing a
single, integrated database system, the Medicare Transaction System
(MTS), but ineffective planning and management of MTS modernization
contributed to a substantial increase—from about $151 million to
$1 billion—in the total costs estimated for developing and implementing
this system. This occurred because HCFA did not carefully plan its MTS
transition, effectively manage MTS as an investment, and fully follow
commonly accepted system development practices. The MTS project is at
risk of not meeting its revised schedule, which calls for completion of the
design by October 1998. To address these issues, we made numerous




12
 Medicare: Inherent Program Risks and Management Challenges Require Continued Federal Attention
(GAO/T-HEHS-97-89, Mar. 4, 1997).



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                     B-277400




                     recommendations to the Secretary of HHS that, if implemented effectively,
                     would help ensure that a successful system will be delivered.13

                     HHS’ draft strategic plan also fails to address the issue of information
                     security that was identified during the fiscal year 1996 financial statement
                     audit effort. HCFA’s electronic data processing security program, which
                     should provide a framework for managing risk, developing security
                     policies, assigning responsibility, and monitoring the adequacy of
                     computer-related controls, is ineffective. These weaknesses could allow
                     unauthorized individuals to access sensitive medical history and personal
                     beneficiary and claims data, and then inappropriately disclose or alter
                     such data. HCFA’s officials informed us that they plan to implement a plan
                     to address this issue.


                     Nothing is more crucial to effectively managing an enterprise of HHS’ size
Agency Capacity to   and scope than accurate information about programs and their effects. Yet
Provide Reliable     HHS’ draft strategic plan does not discuss either key aspect of the

Information on       Department’s capacity to provide needed information—the use of
                     information technology and the availability of reliable data on program
Meeting Strategic    performance.
Goals Is Not
                     Recent information technology reform legislation, including the
Discussed            Paperwork Reduction Act of 1995 and the Clinger-Cohen Act of 1996, set
                     forth requirements that promote more efficient and effective use of
                     information technology to support agency missions and improve program
                     performance. Under the information technology reform laws, agencies are
                     to better relate their technology plans and information technology use to
                     their programs’ missions and goals. However, HHS’ plan does not discuss
                     how it plans to use information technology to achieve its missions, goals,
                     and objectives, nor does the plan describe how HHS intends to use
                     information technology to improve performance and reduce costs.

                     The plan is also silent on how HHS will meet the “year 2000” problem in
                     connection with existing and planned automated systems. This problem
                     stems from the common practice of abbreviating years by using their last
                     two digits only. Thus, miscalculations in all kinds of activities—such as
                     benefit payments—could occur because the computer system would
                     interpret 00 as 1900 instead of the year 2000. HHS, along with other



                     13
                      Medicare Transaction System: Success Depends Upon Correcting Critical Managerial and Technical
                     Weaknesses (GAO/AIMD-97-78, May 16, 1997).



                     Page 16                                         GAO/HEHS-97-173R HHS’ Draft Strategic Plan
                  B-277400




                  agencies that maintain time-based systems, must develop strategies to
                  resolve this potential problem in the near future.

                  To implement its programs and meet its responsibilities successfully, HHS
                  must have access to data that are both reliable and appropriate to the
                  task.14 Without such data, HHS cannot inform the Congress or the American
                  people of its progress toward meeting its performance goals. For example,
                  because several important HHS programs, including Medicaid and TANF, are
                  joint federal-state efforts, the current lack of comparable data among
                  states increases the difficulty of obtaining timely and reliable data.

                  The federal government has only limited data on the Medicaid program,
                  some of which are of questionable accuracy. Some of these problems stem
                  from collecting data from 50 states and the District of Columbia, which do
                  not all use identical definitions for data categories. HHS’ adoption of
                  standardized data sets, as required by HIPAA, will provide a structure for
                  reporting but will not solve other problems such as some duplicate
                  reporting on the number of managed care enrollees.

                  Some of Medicaid’s long-standing data problems could worsen because of
                  the program’s growing reliance on managed care to provide health
                  services to beneficiaries. The proportion of Medicaid beneficiaries
                  enrolled in managed care, as reported by HCFA, quadrupled from about
                  10 percent in 1991 to about 40 percent in 1996. Although HIPAA requires the
                  adoption of a standardized encounter transaction format for managed
                  care, unless proper and sufficient data are required for that format, HHS
                  will still lack the detailed utilization data it needs to meaningfully compare
                  the data available under fee-for-service billing. This, in turn, makes
                  evaluating the program’s success even more difficult.


                  HHS  officials agreed that the Department’s draft plan omitted many of the
Agency Comments   elements required by the Results Act. They explained that the remaining
                  elements of the plan are now being prepared and they expect that the plan
                  will be complete by the time it is due in September. Even though they
                  recognized in April when they released the draft that it did not contain all
                  required elements, they believed that it was more important to allow
                  enough time to consult with their many stakeholders, including state and
                  local governments, than to devote the time to developing a more complete
                  plan. They also believed that the plan as distributed in April provided a

                  14
                   Department of Health and Human Services: Management Challenges and Opportunities
                  (GAO/T-HEHS-97-98, Mar. 18, 1997).



                  Page 17                                        GAO/HEHS-97-173R HHS’ Draft Strategic Plan
B-277400




sufficient framework for consultation. Furthermore, officials were
concerned that providing a level of detail to the extent we have suggested
would make the strategic plan a poor vehicle for communicating with the
Department’s stakeholders. Finally, they believed that it was important to
recognize that the strategic plan was a work in progress and not a final
product to be evaluated against the requirements of the Results Act. HHS’
comments are included in enclosure II. HHS officials also provided
technical comments, which we incorporated in the correspondence as
appropriate.


As arranged with your offices, unless you publicly announce its contents
earlier, we plan no further distribution of this correspondence until 30
days after its issue date. At that time, we will send copies to the Ranking
Minority Members of your Committees; the Chairmen and Ranking
Minority Members of the House Committees on Commerce and Ways and
Means; the Secretary of HHS; the Director, Office of Management and
Budget; and other interested parties. We will also send copies to others on
request.

This work was done under the direction of Bernice Steinhardt, Director,
Health Services Quality and Public Health Issues, who may be reached on
(202) 512-7119 if you or your staffs have any questions. Other major
contributors to this letter are in enclosure III.




Richard L. Hembra
Assistant Comptroller General

Enclosures - 3




Page 18                               GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Page 19   GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Enclosure I

HHS’ Major Operating Divisions




              Note: Operating divisions marked with an asterisk are part of PHS.




              Page 20                                           GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Enclosure II

Comments From the Department of Health
and Human Services




               Page 21     GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Enclosure II
Comments From the Department of Health
and Human Services




Page 22                                  GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Enclosure II
Comments From the Department of Health
and Human Services




Page 23                                  GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Enclosure II
Comments From the Department of Health
and Human Services




Page 24                                  GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Enclosure II
Comments From the Department of Health
and Human Services




Page 25                                  GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Enclosure II
Comments From the Department of Health
and Human Services




Page 26                                  GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Enclosure II
Comments From the Department of Health
and Human Services




Page 27                                  GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Enclosure III

Major Contributors to This Correspondence


                Marsha Lillie-Blanton, Associate Director
                Helene Toiv, Project Manager
                Lacinda Baumgartner, Senior Evaluator
                Lisanne Bradley, Senior Evaluator
                Kay Brown, Assistant Director
                Kay Daly, Senior Auditor
                Mark E. Heatwole, Assistant Director
                Christie M. Motley, Assistant Director
                Dayna Shah, Assistant General Counsel
                Stefanie Weldon, Senior Attorney




                Page 28                              GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Page 29   GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Page 30   GAO/HEHS-97-173R HHS’ Draft Strategic Plan
Page 31   GAO/HEHS-97-173R HHS’ Draft Strategic Plan
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              Medicare: Control Over Fraud and Abuse Remains Elusive
              (GAO/T-HEHS-97-165, June 26, 1997).

              Medicare: Need to Hold Home Health Agencies More Accountable for
              Inappropriate Billings (GAO/HEHS-97-108, June 13, 1997).

              Managing for Results: Analytic Challenges in Measuring Performance
              (GAO/HEHS/GGD-97-138, May 30, 1997).

              Head Start: Research Provides Little Information on Impact of Current
              Program (GAO/HEHS-97-59, Apr. 15, 1997).

              Child Welfare: States’ Progress in Implementing Family Preservation and
              Support Services (GAO/HEHS-97-34, Feb. 18, 1997).

              High-Risk Series: Medicare (GAO/HR-97-10, Feb. 1, 1997).

              Medical Device Reporting: Improvements Needed in FDA’s System for
              Monitoring Problems With Approved Devices (GAO/HEHS-97-21, Jan. 29,
              1997).

              Rural Health Clinics: Rising Program Expenditures Not Focused on
              Improving Care in Isolated Areas (GAO/HEHS-97-24, Nov. 22, 1996).

              Child Support Enforcement: States’ Experience With Private Agencies’
              Collection of Support Payments (GAO/HEHS-97-11, Oct. 23, 1996).

              Drug and Alcohol Abuse: Billions Spent Annually for Treatment and
              Prevention Activities (GAO/HEHS-97-12, Oct. 8, 1996).

              Information Management Review: Effective Implementation Is Essential
              for Improving Federal Performance (GAO/T-AIMD-96-132, July 17, 1996).

              At-Risk and Delinquent Youth: Multiple Federal Programs Raise Efficiency
              Questions (GAO/HEHS-96-34, Mar. 6, 1996).

              Medicare: Millions Can Be Saved by Screening Claims for Overused
              Services (GAO/HEHS-96-49, Jan. 30, 1996).




(108336)      Page 32                                GAO/HEHS-97-173R HHS’ Draft Strategic Plan
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