oversight

Defense's Acquisition of the Composite Health Care System

Published by the Government Accountability Office on 1990-03-15.

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

                    United   States General    Accounting   Office
                    Testimony
GAO

                                                                                              -
For Release          DEFENSE's ACQUISITION OF THE
on Delivery          coMposITE~ln         CARE SYSTEM
Expectedat
2:00 p.m. EST
Thursday
March 15, 1990




                      Statement of
                      Daniel C. White
                      Special Assistant       to the Assistant   Ccxt-@roller   General

                      Before the
                      Subcommittee on Military   Personnel and Ccmpensation
                      Ccmxnittee on Armed Services
                      United States House of Representatives




                                                            I                         _I_-
GAO/T-IMTEC-90-04
                                                                           GAO Form 160 (12/87)
Madame Chairman       and   Yembers    of   the   Committee:


        We appreciate      the opportunity    to comment on Defense's    on-going
efforts     to acquire     and test the Composite Health Care System--
commonly referred        to as CHCS. Defense is now involved        in the
operational       test and evaluation      (OT&E) phase and expects to
complete      this phase and be in a position       to make a deployment
decision       in October 1990.

        My testimony      today discusses      some of the uncertainties            Defense
is facing     in obtaining       the information      necessary     to make a
procurement/deployment           decision.     These uncertainties        relate
primarily     to whether Defense (1) has allowed             itself    sufficient
time to test and evaluate            CHCS adequately      and (2) can sufficiently
justify    the system's       estimated    $2 billion     in benefits     prior     to its
deployment      decision.      Today, we are issuing        our report      that
discusses,      in more detail,        the results    of our monitoring        efforts.

       CHCS is intended      as a state-of-the-art,           integrated       medical
information    system that is on the leading              edge of technology,           far
exceeding   the capabilities      of commercially-available                 and current
Defense hospital     information     systems.         Defense is planning         to
extend CHCS to all of its 767 medical               treatment      facilities
worldwide.

        Problems related      to prior   Defense efforts       and the high cost
associated       with developing    an integrated,      automated    hospital
information       system prompted the Congress to direct            Defense to
implement      measures aimed at reducing        development     risk and
controlling       costs.    For CHCS, the Congress directed          Defense to
conduct OT&E at no fewer than six sites              and submit a report         that
evaluates      OT&E results.     Defense is required        to provide     that
report      to the Senate and House Armed Services            Committees     along
with a recommendation         on how to proceed into deployment.


                                              1
I would     like   to   focus      my comments,       today,    on the    planned      test
schedule,      estimated        benefits,   life-cycle         costs,    and current
funding.

TESTING SCHEDULE HAS
BEEN COMPRESSED

        CHCS has experienced      delays      in its development         and planned
OThE schedule.       Originally     scheduled      for completion        in September
1989, OT&E is now scheduled          to be finished          at the 6 test sites        by
October    1990.    Defense's    current     plans show that about 38 percent
of system software        will  not be developed          and deployed       to the test
sites    by the planned completion         of OT&E. This untested              software
includes     some capabilities      currently      designated        as high priority
by the Surgeons General.           Defense officials           estimate    that the
system    software,   which will     be tested       by October 1990, will
provide    about 87 percent      of projected        dollar-valued       benefits     and
about 79 percent      of the high-priority           capabilities.

        Defense has reduced the time to perform and evaluate                 the
operational      tests   from 8 months to 4-6 months.            In February    1989,
when OT&E was first         extended,      Defense officials     estimated   that
they would need 8 months for system stabilization                   and to complete
testing     and evaluation.         They stated    that this time was needed to
reduce the government's           risk,    allow more software      to be developed
and tested,      and permit     the system to be in routine           use at more
sites    before a deployment         decision.     They also maintained      that
gathering     data from more-experienced           users    would improve their
ability     to better    demonstrate       system benefits.

       Compressing     the time to test and evaluate          CHCS system
performance    adds risk to Defense's         ability  to make a sound
deployment    decision    and will    require    close Defense monitoring.
While the system       at Fort   Knox--the    test-bed   facility--is     working
well,   the key question       is whether this system       can be successfully
                                                  2
deployed     to    the   six  additional      DT&E sites.        Defense is confident
that it has sufficient            time to demonstrate          that CHCS can be
successfully         deployed   to a full      range of Defense medical
facilities.         We believe      Defense's     current    test schedule    is
extremely      tight     and leaves little        room for slippage.       Defense will
need to monitor          the OT&E closely       to ensure that adequate
information        is obtained      and that its test and evaluation            is not
driven      by Defense's      desire     to complete      OT&E by October 1990.

CONCERNS ABOUT EXPECTED BENEFITS

       Defense's         projected     dollar     benefits      for CHCS total        more than
$2 billion.          The benefits       are based on deployment              to all 767
medical     facilities          and largely      depend on reducing          CHAMPUS
referrals.          Defense's      CHCS-benefit         study estimated        that about     95
percent     of the projected           benefits       is expected to occur in the
CHAMPUS program.              These projections           assume that CHCS will          improve
the availability            and timeliness        of patient       information,       reduce
unnecessary         repeat visits,        and eliminate         duplicate      tests.
According      to Defense,         this will      allow physicians          and nurses more
time    to treat        additional     patients.         Thus, some patients          who are
now referred          to civilian      medical      facilities       under CHAMPUS, would
instead,      be treated         at a military        facility.

        We have concerns         as to whether Defense will             be able to realize
the projected         CHAMPUS benefits.         While CHCS may allow facilities
to treat      more patients,       current     CHAMPUS regulations          allow
beneficiaries         to get outpatient        care from civilian          hospitals     and
physicians       without     Defense's     approval     and regardless        of whether
the military        facility     has excess capacity.          Additionally,         the
benefit     study did not consider           restrictions      on the number of
patients      specialists      may treat     during     a given period.          For
example,      the Naval Medical Command limits               obstetricians        to 20
deliveries       a month.      In the area served by a certain               Naval


                                                3
hospital,      this   change   alone    increased     the   average   monthly   CHAMPUS-
paid    obstetrics     cases   from    47 to   347.

     Defense agrees that estimating    CHCS benefits     is difficult                     and
is in the process of refining   the cost/benefit     analysis     that             will
be submitted  to the Congress at the conclusion      of OT&E.

ESTIMATED LIFE-CYCLE COSTS EXCEED
CONGRESSIONAL CEILING

        CHCS life-cycle        costs for full       deployment     are expected to be
$1.6 billion,       or $500 million        more than the Sl.l-billion
congressional       ceiling.       While we have not evaluated            the S500-
million    increase,       Defense states       that it is, primarily,        the result
of a decision       to extend the project's            life  cycle by 5 years.        As
part of its fiscal           year 1991 budget request          to the Congress,     the
program office        is requesting      that the ceiling         be raised   to $1.6
billion    to cover the estimated           life-cycle      costs.

APPROVED FUNDING INADEQUATE
FOR COMPLETE DEPLOYMENT

        The current,     congressionally-approved           funding     level    of $740
million    for CHCS is about $200 million            less than Defense believes
is needed to deploy CHCS to all 767 hospitals                     and clinics.
Defense estimates        that,    at this funding      level,      CHCS can be
deployed     to about one-half        of its medical      facilities,        which
supports     about 57 percent        of the services'       inpatient      care and 39
percent    of outpatient       care.

       Defense's    ability  to deploy CHCS is further      affected     by
reprogramming      actions  of the Army and Navy.    In 1989, the Defense
Inspector    General reported     that these two services      had
reprogrammed     into other areas about $27 million       in funds that were
going to be used to deploy CHCS. We have not analyzed                the
                                               4
appropriateness     of   these   reprosramming         actions,   but   will   followu~
on this as part     of our continuing        review.




        In our view, the major challenges         Defense faces are (1)
demonstrating     that CHCS can be deployed        and operated   at the 6 test
sites,    and (2) accurately     estimating     and demonstrating   the
benefits    to be derived    from CHCS by its planned October 1990
procurement/deployment       decision     date.

       We will  continue   to monitor    the progress      of CHCS and will     be
prepared   to report,    as required    by legislation,       30 days after   the
Armed Services    Committees    receive    Defense's    report   on the results
of OT&E.

      Madame Chairman, this concludes             my testimony,         and we would      be
pleased to respond to any questions              you may have.