    VA Health Care: Expanding Food Service Initiatives Could Save Millions
    (Letter Report, 11/30/2000, GAO/GAO-01-64).

    The Department of Veterans Affairs (VA) has opportunities to save
    millions of dollars by systematically considering consolidating food
    production, employing Veterans Canteen Service workers to provide
    inpatient food services, and competitive sourcing. VA already has
    experience in implementing these options at a number of locations,
    although VA's experience with food service contractors is limited. Using
    a systematic approach to assess available options at each location would
    allow VA to provide food service at the lowest cost while maintaining
    quality.

    --------------------------- Indexing Terms -----------------------------

     REPORTNUM:  GAO-01-64
         TITLE:  VA Health Care: Expanding Food Service Initiatives Could
    	     Save Millions
          DATE:  11/30/2000
       SUBJECT:  Food services
    	     Health services administration
    	     Cost effectiveness analysis
    	     Privatization
    	     Veterans benefits
    	     Cost control
    	     Patient care services
    	     Veterans hospitals
    IDENTIFIER:  VA Nutrition and Food Services Program
    	     VA Canteen Service Program
    	     VA Veterans Integrated Service Network

    ******************************************************************
    ** This file contains an ASCII representation of the text of a  **
    ** GAO Testimony.                                               **
    **                                                              **
    ** No attempt has been made to display graphic images, although **
    ** figure captions are reproduced.  Tables are included, but    **
    ** may not resemble those in the printed version.               **
    **                                                              **
    ** Please see the PDF (Portable Document Format) file, when     **
    ** available, for a complete electronic file of the printed     **
    ** document's contents.                                         **
    **                                                              **
    ******************************************************************

    GAO-01-64

    A

    Chairman, Subcommittee on Oversight and Investigations, Committee on
    Veterans' Affairs, House of Representatives

    November 2000 VA HEALTH CARE Expanding Food Service Initiatives Could Save
    Millions

    GAO- 01- 64

    Letter 3 Appendixes Appendix I: Scope and Methodology 30

    Appendix II: Locations Converting From Nutrition and Food Service to
    Veterans Canteen Service Workers, April 2000 33

    Appendix III: Comments From the Department of Veterans Affairs 34 Appendix
    IV: Comments From the American Federation of

    Government Employees 39 Appendix V: GAO Contact and Staff Acknowledgments 45

    Related GAO Products 46 Figures Figure 1: Reduction in Average Daily
    Inpatient Census,

    FY 1995– FY 1999 6 Figure 2: VA Decrease in Food Service Workers, FY
    1995– FY 1999 7 Figure 3: VA Inpatient Food Production Locations in
    Chicago Area 10 Figure 4: VA Inpatient Locations: Food Production
    Consolidations

    and Candidates for Consolidation 12

    Abbreviations

    AFGE American Federation of Government Employees NFS Nutrition and Food
    Services OMB Office of Management and Budget SPV Subsistence Prime Vendor VA
    Department of Veterans Affairs VCS Veterans Canteen Service

    Lett er

    November 30, 2000 The Honorable Terry Everett Chairman Subcommittee on
    Oversight and Investigations Committee on Veterans' Affairs House of
    Representatives

    Dear Mr. Chairman: The Department of Veterans Affairs (VA) provides food
    service for more than 36, 000 inpatients daily in its hospitals, nursing
    homes, and domiciliaries. 1 VA's Nutrition and Food Services (NFS) program
    spends about $324 million annually to provide these services in 177
    inpatient locations. About 70 percent of these expenditures are for the cost
    of labor of 7,000 NFS wage- grade employees 2 who cook and prepare food;
    distribute food to patients; and retrieve and wash plates, trays, and
    utensils. 3

    As agreed with your office, we assessed three major initiatives VA has taken
    to lower the costs of its inpatient food services: (1) consolidation of food
    production, (2) employing Veterans Canteen Service (VCS) workers to provide
    inpatient food services, and (3) competitive sourcing to determine if it is
    more cost effective to maintain services in- house or contract with the
    private sector. 4 We assessed the extent to which these initiatives have
    reduced costs in some inpatient locations and what additional savings may be
    possible if these initiatives are implemented in other locations. 5

    1 A VA domiciliary is a residential rehabilitation and health maintenance
    center for veterans who do not require hospital or nursing home care but are
    unable to live independently because of medical or psychiatric disabilities.

    2 Numbers of employees in this report refer to full- time equivalent
    employees. 3 These costs represent the direct production and distribution
    costs of inpatient food services. We excluded the clinical dietetic,
    technical, and administrative costs of NFS dietitians and other general
    schedule employees.

    4 VCS is a unit of VA that has authority to provide, at reasonable prices,
    merchandise and services (for example, food and vending machines) at VA
    inpatient locations and other health care locations (38 U. S. C. 7801).

    5 For baseline data on VA's inpatient food services, see VA Health Care:
    Food Service Operations and Costs at Inpatient Facilities( GAO/ HEHS- 00-
    17, Nov. 19, 1999).

    To conduct our work, we obtained data on food services from VA's 22 health
    care networks for all VA's inpatient locations for fiscal year 1999. We also
    obtained data from VA headquarters officials and conducted site visits and
    telephone interviews with local VA officials and with contractors. (See app.
    I for a complete description of our scope and methodology.) Our work was
    performed between October 1999 and November 2000 in accordance with
    generally accepted government auditing standards.

    Results in Brief To reduce the costs of inpatient food service operations
    over the past two decades, about one- fifth of VA's 177 inpatient locations
    have consolidated

    food production, shifted to VCS workers, or contracted with private- sector
    food service organizations. If VA systematically evaluated these options and
    implemented the most cost- effective one at each inpatient location, VA
    could save an estimated $79 million annually- about one- quarter of its
    inpatient food service expenditures.

    To enhance efficiency, VA has consolidated 28 food production locations into
    10. These locations transport food to other inpatient locations, generally
    within 90 minutes' driving distance. Currently, VA operates 63
    unconsolidated production locations that are within similar driving distance
    of another production location. Our assessment suggests that consolidating
    these 63 locations into 29 production locations could save an estimated $12
    million annually. To achieve these savings, VA could be required to make a
    one- time investment of an estimated $11 million for equipment.

    In addition, VA recently began to employ VCS workers, whose wage rates are
    lower than NFS employees, to provide inpatient food services at nine
    inpatient locations. The wage differences result from differences in how
    wage rates for their respective pay schedules are determined, but both are
    federal government employees with the same standard government benefit
    coverage. VCS job descriptions are similar to those of NFS and both receive
    similar training when providing inpatient food services. When VCS workers
    provide inpatient food services, NFS dietitians continue to ensure that
    patients at these locations receive quality nutrition as part of VA's health
    care program. Three other inpatient locations are scheduled to make the
    change from NFS to VCS employees. Before these changes, VCS only provided
    retail food services for employees, visitors, and outpatients at these and
    other inpatient locations. NFS employees still provide inpatient food
    service at 166 other inpatient locations; our assessment suggests that
    having VCS employees provide inpatient food services at these 166

    locations could save an estimated $67 million annually in addition to $12
    million in estimated savings from consolidations.

    VA also currently uses food service contractors to a limited extent.
    Contractors provide food service at two VA long- term- care inpatient
    locations that do not have VCS retail food services. VA may be able to
    reduce costs through competitive sourcing at other locations to determine if
    in- house or private sector operation is more cost effective. We cannot
    estimate potential savings from competitive sourcing because of uncertainty
    regarding the availability of interested contractors at each VA location,
    the price of contractor services, and variability by location in VA's
    ability to decrease the costs of its in- house service delivery as part of a
    competitive process. Difficulty in estimating potential savings is
    compounded by NFS's limited contracting experience and VCS's unwillingness
    to combine its retail business with NFS inpatient business when contractors
    are solicited.

    We recommend that VA systematically assess each inpatient food operation to
    determine if consolidation, employment of VCS workers, competitive sourcing,
    or a combination of these options would reduce costs while maintaining
    quality, and then implement the least- costly options in a timely manner. VA
    agreed in principle and stated that it has already initiated actions to
    implement these recommendations. However, VA did not provide concrete plans
    or timelines for implementing the least- costly options. By contrast, the
    American Federation of Government Employees, AFL- CIO (AFGE) opposed the use
    of all three options we recommended that VA assess, citing a number of
    concerns. Foremost, AFGE questioned whether VA should focus its cost
    containment strategies on efforts that, in its view, could further
    impoverish current workers or compromise food quality. While we understand
    and appreciate AFGE's legitimate concerns about current workers' wages and
    employment and the quality of food provided to veterans, we believe VA can
    adequately address these concerns when implementing our recommendations.

    Background In 1995, VA began transforming its delivery and management of
    health care to expand access to care and increase efficiency. As part of
    this

    transformation VA decentralized decision- making and budgeting authority to
    22 Veterans Integrated Service Networks, which became responsible for
    managing all VA health care. The networks and their health care locations
    became responsible for responding to changing inpatient food service needs
    and for maintaining or improving quality.

    Since 1995, the networks have focused on providing care in the most
    appropriate setting by following headquarters' guidance and responding to
    performance measurement incentives. This has resulted in an increase in
    outpatient care and a decrease in inpatient care. The inpatient average
    daily census numbers have declined by 35 percent during this period (see
    fig. 1).

    Figure 1: Reduction in Average Daily Inpatient Census, FY 1995– FY
    1999

    Average Daily Census

    60,000 56,283

    50,812 50,000

    42,798 40,000

    39,685 36,510

    30,000 20,000 10,000

    0 1995

    1996 1997 1998 1999 Fiscal Year

    Source: VA.

    Because the decreased number of inpatients meant less need for food
    services, VA downsized its inpatient food service staff by about 22 percent
    as a result of actions taken by networks and inpatient locations (see fig.
    2).

    Figure 2: VA Decrease in Food Service Workers, FY 1995– FY 1999

    10,000 9,000

    8958.7 FTEEs 8571.5

    8,000 7786.1

    7319.6 7,000

    6977.8 6,000 5,000 4,000 3,000 2,000 1,000

    0 1995

    1996 1997 1998 1999 Fiscal Year

    Note: Numbers of employees refer to full- time equivalent (FTEE) positions.
    Source: GAO calculations based on data from VA.

    Unlike most health care systems, VA divides its food service operations into
    inpatient and retail operations, usually with separate kitchens and staff at
    each inpatient location. The NFS program, funded by appropriations, is
    responsible for ensuring that VA's inpatients receive quality nutrition as
    an integrated part of their health care. VCS is generally responsible for
    providing food and other retail services to outpatients, visitors, and
    employees at VA's health care delivery locations. Although the law
    authorizes VCS to receive appropriations, VCS has operated for many years
    solely on funds earned from sales.

    As with direct health care services, VA's networks have also explored ways
    to improve services that support health care, such as food service
    operations. While VA networks have the option to focus exclusively on
    improving the efficiency of in- house provision of food service, they also

    have the option of competing their in- house operations versus contractors
    to improve efficiency. VA could do this through the Office of Management and
    Budget (OMB) Circular A- 76 process. In the A- 76 process, the government
    identifies the work to be performed- described in the performance work
    statement- and prepares an in- house cost estimate, based on its most
    efficient organization, to compare with the best offer from the private
    sector.

    Additional To enhance the efficiency of food service, VA has consolidated
    food

    Consolidation of Food production (the cooking and preparation of food) for
    28 inpatient locations

    into kitchens at 10 VA inpatient locations. One of these consolidations took
    Production Locations

    place in the Central Texas Healthcare System and resulted in elimination of
    Could Save Millions of

    food production at two facilities. This example illustrates key elements of
    Dollars

    the consolidation process. Before consolidation, the Temple, Waco, and
    Marlin locations each produced their own food for average daily inpatient
    populations of 664, 679, and 74, respectively. After consolidation, food for
    Waco and Marlin was produced at Temple because adequate space was available
    and driving distances (the time needed to transport food) to the receiving
    locations were less than 90 minutes. The consolidation was phased in over
    about 3 years and completed in 1998. The consolidation required one- time
    equipment purchases of about $1 million and resulted in recurring annual
    labor savings of about $1.3 million. 6 Labor savings were achieved by a
    reduction of 32 employees, primarily through attrition and buyouts.

    The Central Texas Healthcare System produces food in one location and
    transports it to other locations using an advance food preparation and
    delivery system. Food is prepared in advance and chilled for serving up to 5
    days later. The chilled food can be transported in refrigerated trucks from
    one location to another without losing freshness or becoming unsafe. The
    food is reheated at the location where it is served. VA reports that patient
    satisfaction at the Central Texas Health Care System is higher, as measured
    by patient surveys, since consolidation. VA's NFS dietitians continue to
    have responsibility for ensuring food quality and that the nutrition needs
    of patients are met.

    6 No equipment purchase was required at Waco because it already had the
    equipment needed for food delivery and reheating.

    Additional VA health care regions provide opportunities for consolidation.
    For example, four VA locations in the Chicago area are within a 1- hour
    drive of one another (see fig. 3); in fact, three are within 20 minutes of
    each other. Yet all four continue to prepare their own food for inpatients.
    The Chicago network is developing plans for food consolidation for some of
    these locations.

    Figure 3: VA Inpatient Food Production Locations in Chicago Area

    WISCONSIN

    94

    ILLINOIS

    41 45

    North Chicago 14 12

    Lake Michigan

    90 20

    Hines Chicago

    (Lakeside) Chicago 88

    (Westside) 30

    34 55

    80 41 52

    80

    ILLINOIS

    231

    Miles INDIANA

    45

    0 10 0 10 KM

    55

    Source: GAO analysis.

    Overall, VA currently has 63 unconsolidated production locations within 90
    minutes' drive of another production location. 7 Our analysis suggests that
    VA could increase its efficiency by consolidating food production for these
    63 locations into 29 production locations (see fig. 4). 8 These
    consolidations could save an estimated $12 million annually from a reduction
    of 348 employees, with as many as 38 positions eliminated in a single
    location. To achieve these savings, we estimate that VA may have to make a
    one- time investment of an estimated $11 million to purchase advance food
    preparation and delivery equipment. (One- time expenditures are held to this
    amount because 24 of the potential consolidation locations already own the
    advance food delivery equipment, which makes up the bulk of equipment
    costs.)

    7 We define consolidation as one VA location preparing at least 80 percent
    of the food consumed at another location. Some consolidations do not reach
    100 percent production at one location for consumption at another because
    some receiving locations continue to prepare certain food items, such as
    breakfasts or salads.

    8 Some of these 29 locations already produce food for other VA locations.

    Figure 4: VA Inpatient Locations: Food Production Consolidations and
    Candidates for Consolidation

    Source: GAO analysis.

    Making the changes required to consolidate food production requires
    management commitment to a process that may take several years and much
    effort to achieve but one that could yield significant savings. Network
    officials indicated in our survey of VA's health care networks that 29
    production locations are considering or planning to consolidate food
    production. In commenting on a draft version of this report, VA stated that
    networks 1 (Boston), 3 (Bronx), 8 (Bay Pines), 12 (Chicago), and 22 (Long
    Beach) have conducted feasibility studies to consider consolidated
    production. VA has already consolidated some food production locations in
    these networks. However, these networks could potentially consolidate 14
    additional locations into 7 locations.

    VA's actual savings from consolidations could exceed our estimates for two
    reasons. First, VA's Central Texas Health Care System consolidation, from
    which we obtained a benchmark for estimating potential savings, does not
    appear to have yet achieved its full savings potential, which suggests that
    our savings may be understated. VA officials have indicated that several
    food service positions will not be filled when they become vacant. Some
    positions were retained to minimize involuntary separation of employees.
    Second, we used a 90- minute driving distance to determine potential
    consolidations and it seems possible that VA could elect to use greater
    distances. For example, the VA facility in Dayton is preparing and
    delivering food as far as Butler, Pennsylvania- a 6- hour drive. The Dayton
    facility has technologies that can keep food safely chilled for more than 30
    days. In addition, two facilities in Texas that are about a 2- hour drive
    from one another are currently in the process of consolidating their food
    systems. Using greater travel distances could allow more facilities to be
    consolidated, thereby increasing cost savings.

    Expanded VA can save millions of dollars in labor costs by employing VCS
    workers,

    Employment of VCS rather than NFS workers, to provide inpatient food
    service. These savings

    can be achieved because these workers are paid, on average, about 30 Workers
    Could Save

    percent less than NFS wage grade employees. The wage differences Millions of
    Dollars

    between the two result from differences in how wage rates for their
    respective pay schedules are determined. 9 VCS job descriptions are similar

    9 The Office of Personnel Management developed the criteria used for both
    wage rate schedules under 5 U. S. C. 5341.

    to those of NFS and both receive similar training when providing inpatient
    food services. VCS workers are federal government employees paid under the
    Non Appropriated Funds Regular Wage Rate Schedule. NFS workers are also
    federal government employees but are paid under the Federal Wage System
    Regular and Special Production Facilitating Wage Rate Schedule. Both VCS and
    NFS employees have the same standard government benefit coverage. VA is able
    to employ VCS workers to provide inpatient services through NFS agreements
    with VCS under the Economy Act. 10

    Recently, nine VA locations began to employ VCS workers rather than NFS
    workers to provide inpatient food services (see app. II for a list of these
    locations). In some of these locations, VCS employees provide all inpatient
    food services; in others VCS workers are only beginning to be included in
    inpatient food services. In all cases, NFS dietitians continue to ensure
    food service quality. Before these changes to VCS inpatient food service,
    VCS had only provided retail food service at these locations.

    Three of the locations converting to VCS labor were at Marion, Illinois, and
    the Jefferson Barracks and John Cochran locations in St. Louis, Missouri.
    These examples illustrate different stages of VCS conversion and different
    sizes of health care facilities.

    VA began its VCS conversion in Marion, Illinois, in 1997. Today, Marion
    employs mostly VCS workers to serve an average daily census of 95 patients.
    VA reports that patient satisfaction is higher, as measured by patient
    surveys, than it was before and that NFS dietitians continue to be
    responsible for quality. When the conversion to VCS employees is complete,
    VA estimates that $375,000 a year could be saved through reductions in wage
    costs. NFS workers have left Marion inpatient food service through normal
    attrition, including retirement, moving to other VA jobs, or leaving VA
    voluntarily. Personnel changes were monitored by the facility's Labor
    Management Partnership Council, which included union representation. Those
    employees who remain retain their NFS salaries.

    St. Louis's two locations began VCS integration in 1999. Today the
    consolidated St. Louis locations serve an average daily census of 301

    10 The Economy Act (31 U. S. C. 1535) permits one government agency or a
    unit within an agency to purchase services from a unit in the same agency or
    another agency when in the best interest of the government.

    inpatients by employing NFS employees and a VCS manager. Other VCS employees
    are being recruited. When fully implemented, VA estimates that St. Louis
    could save $803,000 in wage costs annually. St. Louis expects to follow
    Marion's experience in protecting current NFS employees' job security and
    salary and phasing in VCS conversion.

    Our analysis suggests that VA could lower labor costs by an estimated $67
    million annually (in addition to the estimated $12 million consolidation
    savings discussed earlier) if less- expensive VCS workers are employed in
    place of NFS workers at 166 additional locations. The Marion and St. Louis
    experiences suggest that the full extent of these savings would be realized
    over a number of years as VCS conversion is phased in. However, some savings
    can be achieved in the first year of implementation. Currently, NFS wage
    grade workers provide inpatient food services at these 166 locations. VCS
    employees could cook and prepare food, distribute food to patients, and
    retrieve and wash dishes, trays, and utensils for inpatients at these
    locations while NFS dietitians continue to assure quality.

    Three locations- Kansas City, Leavenworth, and Topeka- are scheduled to
    begin conversion to VCS inpatient food service provision. In our survey of
    VA health care networks, VA officials indicated that another location is
    considering conversion. Making the changes required to convert to VCS
    inpatient food service provision requires management commitment to a process
    that may take several years and much effort to achieve but has the potential
    for significant cost savings.

    Actual savings may vary from our estimates because of many local factors at
    each inpatient location. To determine actual savings through the use of VCS
    employees, VA would need to conduct studies of each inpatient food location
    and weigh alternatives for providing the lowest- cost food service while
    maintaining quality. VA would also need to incorporate in this process
    consideration of the effect such changes could have on other VA priorities,
    such as maintaining job opportunities for veterans and compensated work
    therapy patients.

    A key element of such a study is recognition that VA's inpatient food
    service operations are developing along the lines of other hospital food
    service operations, which are changing the nature of the hospital food
    service industry. This includes the use of more pre- prepared food products,
    less need for specialized cooking skills, and more reliance on computer
    ordering for preparation and placement of food on patient trays. All of
    these processes reduce both the need for a higher- skilled work force and

    the degree of training needed to successfully produce and distribute
    hospital food, whether VA inpatient food service is provided by NFS or VCS.
    NFS and VCS managers agree that employees can be trained more quickly today
    than in the past to provide inpatient food services. VCS managers also
    believe that higher turnover rates for lower- paid employees would not
    adversely affect services.

    VA May Be Able to VA uses private contractors for inpatient food services at
    two inpatient

    Achieve Additional locations- Sodexho Marriott at its Anchorage domiciliary
    and SkyChef at

    the Honolulu nursing home. These locations have no VCS retail food Savings
    by Using

    services and have only a long- term- care inpatient mission. In addition,
    both Competitive Sourcing

    locations began inpatient food services with a contractor rather than with
    NFS employees.

    While VA has used competitive sourcing only to a limited extent, our
    analysis suggests that VA may be able to lower costs by determining if
    inhouse or private sector provision of food services is more cost effective.
    VA could realize additional savings by competing, through the use of OMB's
    Circular A- 76, the costs of government provision of these services versus
    the costs of private- sector provision. Our work at the Department of
    Defense shows that, by competitive sourcing under OMB Circular A- 76, costs
    decline through increased efficiencies whether the government or the private
    sector wins the competition to provide services. 11 This work indicates that
    savings are probable for VA, but we cannot estimate potential savings from
    competitive sourcing because of uncertainty regarding the availability of
    interested contractors at each VA location, the price of contractor
    services, and the extent to which VA food services units are able to
    decrease their operating costs in a competitive process. 12

    Savings from competitive sourcing might be higher if VA expanded competitive
    sourcing to include locations that combine NFS inpatient and VCS retail
    operations. When food contractors provide services to non- VA hospitals,
    they usually operate both inpatient and retail as one operation

    11 See DOD Competitive Sourcing: Some Progress but Continuing Challenges
    Remain in Meeting ProgramGoals( GAO/ NSIAD- 00- 106, Aug. 8, 2000) for a
    discussion of the benefits of competing various efficiency options using the
    OMB Circular A- 76 process. 12 See DOD Competitive Sourcing: Savings Are
    Occurring, but Actions Are Needed to Improve Accuracy of Savings Estimates(
    GAO/ NSIAD- 00107, Aug. 8, 2000) for a discussion

    of calculating savings under the OMB Circular A- 76 process.

    and most of their profits come from retail sales, according to food service
    contractors with whom we spoke.

    However, VA may not offer the most attractive business opportunity for food
    contractors for two reasons. First, VCS opposes consideration of contracting
    for retail food services because it uses profits from a minority of
    profitable locations to subsidize operations at the remainder. Moreover, VCS
    believes that some of its other retail activities, such as vending of
    toiletries and personal articles that are not generally provided by food
    service contractors, are not viable without retail food. This is important
    to VCS because it receives no appropriations and funds its operations based
    on revenues earned.

    Second, the small size of VA inpatient workloads at many locations may be
    less attractive to contractors because there is less opportunity to spread
    fixed costs over higher volume. For example, 27 percent of VA locations have
    an average daily census of less than 100 inpatients, and 56 percent have an
    average daily census of less than 200. However, it may be possible for
    potential contractors to combine food services at smaller locations with
    services at other nearby VA and non- VA locations to generate higher volume.

    To achieve savings through competitive sourcing, VA would need to conduct
    studies of each inpatient food location to weigh alternatives for providing
    the lowest- cost food service while maintaining quality. In these studies,
    VA would need to consider the effect such changes could have on other VA
    priorities, such as maintaining job opportunities for veterans and
    compensated work therapy patients. To date, however, VA has done little to
    explore either its own experience with using contractors or contractor
    interest. Although fostering competition among government and private
    contractors to provide food services can be a time- consuming process, it
    offers opportunities to create more efficient and less costly operations
    when in- house organizations win the competition, or savings when private
    competitors win. This process can be demanding, however, and requires strong
    management commitment to achieve.

    VA could foster competition among government and private providers in the
    provision of inpatient food service by using the competitive process of
    OMB's Circular A- 76. VA could compete all its food service operations or
    any part of these services at each location. VA could consider competitive
    sourcing alone or in combination with consolidation or use of VCS employees,
    as we discussed earlier.

    Conclusions VA has opportunities to save millions of dollars by
    systematically considering consolidating food production, employing VCS
    workers to

    provide inpatient food services, and competitive sourcing. VA already has
    experience in implementing these options at a number of locations, although
    VA's experience with food service contractors is limited. VA has not,
    however, systematically compared these options at all 177 inpatient
    locations. Using a systematic approach to assess available options at each
    location would allow VA to provide food service at the lowest cost
    consistent with maintaining quality.

    Recommendations for We recommend that the Acting Secretary of Veterans
    Affairs direct the

    Executive Action Under Secretary for Health to direct the 22 networks to (1)
    systematically

    assess each inpatient food service location to determine if consolidation,
    employment of VCS workers, competitive sourcing, or a combination of these
    options would reduce costs while maintaining quality; and (2) implement the
    least- costly options in a timely manner.

    Agency Comments and We received written comments on a draft of this report
    from VA's Acting

    Our Evaluation Secretary and the National President of AFGE. Their comments
    and our

    responses are discussed in the following sections. The comments in their
    entirety from VA and AFGE are in appendixes III and IV, respectively.

    Department of Veterans VA agreed in principle with our recommendations,
    noting that it is already

    Affairs consolidating food production locations, converting to VCS inpatient
    food

    service provision, and using competitive sourcing. VA should be commended
    for its progress to date. However, VA has not systematically assessed each
    of these options at each location as we recommend. VA stated that the three
    options we identified are part of its Nutrition and Food Service strategic
    plan for improving quality and cost effectiveness. In our review of the
    plan, we found the VCS option to be clearly identified. However, the
    consolidation option discussed in the plan appears to deal with NFS
    consolidation with other services rather than consolidating food production
    locations and we found no reference to competitive sourcing. In addition, we
    found no reference to the systematic assessments we recommend. We believe
    the strategic plan could help VA implement our recommendations if the plan
    clearly specified that all three options we

    identified to reduce costs are to be systematically assessed for each
    location.

    Although VA agreed with our recommendation for timely implementation, it
    provided no operational plan or timeline for conducting the assessments we
    recommended. VA states that it is assessing the feasibility and subsequent
    implementation of these options at a deliberate pace to carefully consider
    relevant factors. We agree that VA should carefully consider these factors
    but believe the recommended assessments should be completed as expeditiously
    as possible. Delay means that millions of dollars per year may be spent
    unnecessarily on food services.

    VA expressed several specific concerns on a number of issues. Consolidation
    of food production. VA raised issues regarding (1) the need to do a study at
    each location, (2) transportation of perishable food, (3) costs, (4) VA's
    Subsistence Prime Vendor (SPV) program, and (5) integration of NFS employees
    with environmental management services. First, VA stated that studies of
    food consolidation have already been done in Veterans Integrated Services
    Networks 1 (Boston), 3 (Bronx), 8 (Bay Pines), 12 (Chicago), and 22 (Long
    Beach), suggesting that additional studies are not needed at each location
    in these networks. We commend VA's efforts to study ways to reduce costs in
    these networks. However, based on our discussions with NFS officials at
    several of these networks and reviews of several of these studies, we
    disagree that VA has systematically assessed all three options in each
    network. VA focused more on the potential for consolidations, but this
    option may be even more costeffective if implemented in conjunction with the
    use of VCS employees or competitive sourcing in these networks. Because VA
    has not assessed all three options, it may not have identified the least-
    costly options in each network.

    Second, VA stated that the safety of transporting perishable food products
    and related logistics are key factors in determining the viability of
    consolidating VA facility food production. VA's statement suggests that, as
    a result, fewer locations may be able to consolidate than we estimated and
    that the speed of consolidation could be slow. We agree that VA needs to
    carefully consider these factors, but we factored in the transportation and
    logistical issues in our analysis based on VA's experience. As discussed in
    the report, VA has successfully addressed these factors in 28 other
    locations that are comparable to the potential locations we identified.
    Therefore, we do not view such factors as reasons for not moving ahead

    expeditiously but rather as factors that require strong management
    commitment in order to realize potential savings.

    Third, VA stated that large capital investment costs for equipment and space
    are key factors affecting the viability of potential consolidations. Again,
    we agree. However, investment costs must be assessed within the context of
    potential savings. For example, once fully implemented the savings realized
    in 1 year under the consolidation of food services in the Central Texas
    Healthcare System exceeded the investment costs, making that consolidation
    viable. We included in our assessments of the viability of consolidation at
    other VA locations the costs of a blast chill system of food production,
    such as that operated by the Central Texas Healthcare System, and the costs
    of the related advanced food delivery equipment. 13 Therefore, the potential
    consolidation locations we identified could result in annual savings greater
    than the required investment costs within a reasonable time period.

    Fourth, VA also stated that its SPV program needs to be considered in
    consolidation decisions. The SPV program reduces the costs of food items
    through high- volume purchases by all of VA and certain other government
    agencies. We agree that the SPV program should be considered in
    consolidation decisions at each location, but we are doubtful that this
    would affect a decision on whether to consolidate. Our review of
    consolidations showed that savings result from reduced labor costs, not
    reduced food costs. Moreover, we are doubtful that the SPV program will
    affect food costs in a consolidation because the same number of patients
    will be fed whether consolidation occurs or not and all VA locations already
    participate in the SPV program.

    Fifth, VA stated that integration of NFS employees with environmental
    management services should be considered in consolidations. NFS integration
    with environmental management services includes having some employees work
    in both services so that an employee with downtime in food services can work
    in environmental services and vice- versa. Again, we agree that this factor
    should be considered in consolidations at each location, but it is unclear
    how this would affect a consolidation decision. While integrating NFS
    workers with other services can reduce food production costs without
    consolidation by shifting unneeded staff time and charges to other services,
    it is unlikely to reduce costs to the degree they

    13 The blast chill system can chill food for up to 5 days before the food is
    consumed.

    would be reduced in consolidation. Consolidation reduces costs primarily
    through economies of scale whereby fewer workers in one location can produce
    food for patients in two or more locations than the smallest number of
    workers combined could produce food separately at each location. Therefore,
    consolidation would provide greater cost savings. In addition, NFS
    integration with environmental management services could be included in a
    consolidation.

    Employing VCS workers. VA raised issues regarding (1) time needed to phase
    in conversions, (2) variability in savings by location, (3) separation
    costs, and (4) training costs.

    First, VA stated in its comments, and we agree, that the savings from
    converting to VCS workers would take years to fully achieve. However, VA
    officials told us that some savings are possible in the first year of
    implementation. The magnitude of savings possible makes it worth the effort
    even if several years are required to fully achieve savings. Our report
    reflects this point. Our savings estimate of $67 million represents the
    total potential annual cost reductions for employing VCS workers to provide
    inpatient food services and not the savings that could be realized in fiscal
    year 2001. VA would not realize the full savings at each location for a
    number of years because VCS workers would only be phased in when NFS workers
    left through normal attrition such as retirement, voluntarily leaving for
    other VA jobs, or for jobs outside VA.

    Second, VA stated that potential savings from employing VCS workers to
    provide inpatient food services would vary from location to location, making
    it difficult to project a total cost benefit at this time. We agree that
    actual savings achieved would likely vary from location to location.
    However, we estimated total potential savings assuming that VA's locations
    could save an average of about 30 percent of combined wage and benefit
    costs. This rate approximates the rate VA is realizing in its conversion to
    VCS employees at Marion, Illinois. VCS headquarters managers and network and
    facility officials in the VCS conversions studied agreed that using a 30
    percent savings rate is reasonable for estimating nationwide savings.

    Third, VA also suggests that our estimated savings for employing VCS workers
    are overstated because of additional separation costs for NFS employees that
    would be required to implement this option. We do not agree. In the VCS
    conversions we reviewed, NFS workers typically continue working until they
    leave through normal attrition including

    retirement, moving to other jobs in VA, or leaving VA voluntarily. Thus, no
    special separation costs are incurred.

    Fourth, VA states that training costs could reduce our estimated savings. VA
    said these training costs would be for (1) NFS workers who leave food
    service to take other VA jobs, (2) VCS employees who replace NFS employees,
    and (3) part- time workers providing food service. We do not agree that
    these costs would reduce our estimated savings. As previously discussed, in
    VCS conversions NFS workers are expected to leave through normal attrition
    such as retirement, voluntarily leaving for other VA jobs, or voluntarily
    leaving for jobs outside VA. The training for NFS employees taking other
    jobs would be required whether NFS or non- NFS employees were hired for
    those jobs. Similarly, training for VCS employees replacing NFS employees
    would be required whether the replacements were VCS or other employees.
    Finally, both VCS and NFS already use many part- time workers and VA
    indicates it will continue this strategy. As a result, these training costs
    would be required in any event and are not additional costs.

    Competitive sourcing. Although VA concurred with our recommendation to
    consider competitive sourcing as an option in providing food services, VA
    raised concerns about the opportunities to use contractors in VA's inpatient
    settings. We agree, as stated in the report, that VA may not offer the most
    attractive business opportunity for food contractors because of VA's unique
    structure for providing inpatient and retail food services separately at its
    locations and because of the small inpatient workload at most locations.
    Because of these and other uncertainties we could not estimate the number of
    locations that could benefit from competitive sourcing or the potential
    savings. Nonetheless, we believe that competitive sourcing should be
    considered because of its potential to increase efficiency. As previously
    discussed, our work in other areas has shown that the competitive sourcing
    process reduces costs through increased efficiency whether the government or
    a contractor wins the competition to provide services.

    American Federation of AFGE opposed all three options we included for study
    in our

    Government Employees recommendations, expressing a number of concerns
    regarding these

    options. AFGE's overarching concern is whether VA should focus its cost
    containment strategies on efforts that, in its view, could further
    impoverish current workers or compromise food quality. While we understand
    and appreciate AFGE's legitimate concerns about current workers' wages and
    employment and the quality of food provided to veterans, we believe VA can
    adequately address these concerns when implementing our

    recommendations. In the past, VA has demonstrated the ability to implement
    comparable options without adversely affecting food service workers.
    Further, our discussions with VA officials indicate that they remain
    sensitive to the importance of taking appropriate steps to prevent adverse
    effects on current food service workers.

    We discuss AFGE's specific concerns below. Employing VCS workers. AFGE
    expressed six concerns about employing VCS workers in place of NFS workers
    to provide inpatient food service. First, AFGE stated that our estimate of
    $67 million in annual savings from employing VCS workers is misleading. AFGE
    said that the savings we estimated would be a one- time occurrence and
    establish a new baseline once achieved. We do not agree. Because there is no
    specific appropriation for inpatient food services, VA will not return
    savings from its food service operations to the U. S. Treasury and thereby
    establish a new lower baseline budget for VA. Rather, VA retains the savings
    achieved through management efficiencies in its budget, thereby making the
    savings available for other purposes in each subsequent year.

    Second, AFGE suggested that part of the savings we estimated are based on
    the government paying less for its match of employee health care premiums
    because lower- paid VCS employees will less frequently participate in
    government- sponsored health care plans than NFS employees. We did not
    assume that government costs would be less because fewer VCS workers would
    participate in government- sponsored health care plans than NFS workers.
    Information provided by VA shows that the proportion of NFS and VCS workers
    currently purchasing health insurance through government plans is 32 and 25
    percent, respectively.

    Third, AFGE said that our estimated savings for VA in employing VCS workers
    are overstated because they do not include increased federal costs for
    programs such as Medicaid, the Earned Income Tax Credit, the CHIP
    (Children's Health Insurance Program), Head Start, Housing and Urban
    Development rent subsidies, and other expenses related to increasing the
    ranks of the working poor. We disagree that our savings are overstated
    because our assessment of VA's recent experience suggests there would be
    little or no additional costs to other federal programs as a result of VCS
    conversion. Based on VA's experience to date, no NFS worker has had his or
    her wages reduced or lost employment under the VCS conversions we reviewed
    and no VCS worker was required to accept lower wages and benefits than they
    already had or could obtain elsewhere. In VCS

    conversions, NFS workers are being replaced as a result of normal attrition,
    including retirement, voluntarily moving to other jobs in VA, or voluntarily
    leaving for non- VA jobs. As such, the departing NFS workers would have the
    same impact on other federal programs as if there were no VCS conversion.
    Current VCS workers who replace NFS workers maintain their wages and
    benefits and therefore have no impact on other federal programs. Newly-
    hired VCS workers who replace NFS workers choose VCS over other employment
    opportunities. Presumably, wages for these new workers are competitive with
    wages in jobs these workers otherwise would have taken.

    Fourth, AFGE raised questions regarding the legality of VCS providing
    inpatient food services in place of NFS employees under the Economy Act.
    AFGE questioned if VCS could enter into an agreement under the Economy Act
    and supervise civil service employees, such as NSF employees, and if VCS and
    NFS employees with similar job descriptions could be paid different wages.
    We found no legal deficiency in these areas under VA's use of the Economy
    Act. An “instrumentality of the United States,” VCS is
    authorized to receive and has received appropriated funds credited to a
    revolving fund. VCS's revolving fund is a permanent, indefinite
    appropriation available to cover its operating expenses. Therefore, we agree
    with VA that VCS can be a party to an agreement under the Economy Act. In
    addition, VCS employees hold “excepted” positions within the
    federal civil service and are not barred from supervising NFS employees.
    Finally, VCS employee positions are exempt under 38 U. S. C. 7802 (5) from
    requirements of title 5 of the United States Code regarding equal pay and
    VCS employees are subject to a different pay scale than NFS employees.

    Fifth, AFGE said that it will take years to realize the estimated savings.
    We agree that it will take years to fully realize these savings, as our
    discussion of Marion and St. Louis indicate, but some savings can begin to
    accrue in the first year of implementation. Moreover, the amount of savings
    possible makes it worth the effort even if several years are required to
    fully achieve them.

    Sixth, AFGE said that higher VCS turnover rates will create problems for
    converting to VCS provision of inpatient food services. We do not agree.
    Based on experience to date, VCS managers at headquarters and at Marion have
    stated that turnover has not affected their ability to provide inpatient
    food services or affected quality.

    Consolidation of food production. AFGE expressed two concerns related to
    consolidation of food production and incorrectly stated that we said that
    VCS opposes consolidation. First, AFGE said that our estimates of kitchen
    consolidation savings are overstated because we underestimate the financial
    and practical costs of losing in- house food production. We do not agree.
    Our savings estimates account for additional costs required by consolidation
    that were identified by VA officials and representatives of the food service
    industry who have consolidated food production locations. As we discuss in
    our evaluation of the Central Texas Healthcare System, our savings model is
    conservative and probably understates savings.

    Second, AFGE stated that consolidations lower the quality of food provided
    to veterans. For example, AFGE expresses concerns regarding frozen food and
    other issues. We disagree. As we discussed in the report, VA reports that
    patient satisfaction increased at the Central Texas Healthcare System after
    consolidation, as measured by improvements in the taste and temperature of
    food. The Central Texas Healthcare System received an award from VA
    headquarters for reducing costs and maintaining quality in its consolidation
    activities. The award included citations for (1) provision of consistently
    high- quality meals, (2) improvements in timeliness, (3) increased patient
    satisfaction, and (4) maintenance of quality controls. Moreover, in all VA
    locations that consolidate, NFS dietitians continue to have quality control
    responsibility to ensure that veterans' nutrition needs are met.

    AFGE also stated that we noted that VCS opposes privatization and
    centralization. We said that VCS opposes privatizing the services it
    provides, but we did not say that VCS opposes consolidation. In fact, VCS
    officials told us that VCS does not oppose consolidation.

    Competitive sourcing. AFGE expressed five concerns about competitive
    sourcing. First, AFGE stated that there is no evidence that contracting
    saves money. We believe it is important to distinguish between an objective
    to contract and an objective to compete government versus private service
    provision. Our recommendation is that VA consider competitively sourcing
    food service operations rather than outright contracting as an end in
    itself. Competitive sourcing can result in the government either retaining
    its position as service provider, or contracting with a private provider. As
    we have discussed, our work shows that competitive sourcing reduces cost
    through increased efficiency. The costs are reduced whether government or
    the private contractor wins the competition. We believe it would be a

    mistake to eliminate the competitive sourcing option for reducing VA's
    costs.

    Second, AFGE expressed concern as to whether VA would use the OMB Circular
    A- 76 process for competitive sourcing or contract without the benefit of a
    public- private competition. We agree that VA could, under limited
    circumstances specified in OMB's Circular A- 76, convert to contract
    performance without cost comparison. However, our recommendation to VA was
    that it consider competitive sourcing rather than contracting. VA agreed in
    principal with our recommendation.

    Third, AFGE also expressed concern about the quality of food service under
    contracting. We do not share AFGE's concern because the same quality
    controls VA currently uses for in- house provision of food service could be
    included and enforced in the contract if a private firm chooses to compete
    and wins the competition under competitive sourcing. We note that some of
    VA's medical affiliates, including major university hospitals, provide
    inpatient food service through contractors.

    Fourth, AFGE expressed concern that veterans currently employed in VA's in-
    house food production could lose their jobs if a contractor wins the
    competition. We agree this is possible. As stated in the report, we believe
    that VA should include this as a consideration in its assessments of food
    service at each location. We note, however, that government employees
    adversely affected by decisions under the OMB A- 76 process competition
    often are offered positions with winning contractors. VA could specify, as
    other agencies have, that a contractor hire such employees if it wins the
    competitive sourcing competition.

    Fifth, AFGE stated that there is little opportunity for a contractor to
    provide services less expensively than VA if VA uses lower- paid VCS
    employees. AFGE believes that the only way to lower costs in contracting is
    to lower wages and does not believe this is possible if a contractor is
    competing with VCS's wage rates. We disagree. Competitive sourcing is an
    incentive to both government and the contractor to increase efficiency as
    much as possible to achieve cost reductions. These increased efficiencies
    can be achieved through improvements in process operations that reduce the
    amount of capital or human resources needed to process the same workload.

    As arranged with your staff, we are sending copies of this report to the
    Honorable Hershel W. Gober, Acting Secretary of Veterans Affairs; interested
    congressional committees; and other interested parties. We will make copies
    available to others upon request.

    If you have any questions about this report, please call me at (202) 512-
    7101. Other staff who contributed to this report are listed in appendix V.

    Sincerely yours, Stephen P. Backhus Director, Health Care�Veterans' and

    Military Health Care Issues

    Appendi Appendi xes xI

    Scope and Methodology We reviewed the Department of Veterans Affairs (VA)
    inpatient food services for fiscal year 1999 to assess potential savings
    nationwide if VA were to implement system- wide the three types of
    initiatives it has used in some of its VA inpatient health care locations:
    (1) consolidating food production, (2) employing Veterans Canteen Service
    (VCS) rather than Nutrition and Food Service (NFS) workers to provide
    inpatient food services, and (3) competitive sourcing.

    We interviewed VA headquarters officials in NFS, VCS, the Office of General
    Counsel, and other offices. We obtained documents from headquarters on the
    consolidation of food service, the use of VCS labor, and contracting with
    private food service contractors.

    We obtained data on food services at each inpatient location by surveying
    each Veterans Integrated Service Network. We obtained information on food
    service needs, how VA provides services, costs, and number of meals at each
    VA inpatient location. Networks and locations also provided us with
    information on advance food technologies and excess capacity, and with
    additional information on consolidating food services, the use of VCS, and
    private contractors.

    We also obtained additional data through interviews, documents, and physical
    inspections of kitchen facilities and food delivery at VA locations. We
    visited Veterans Integrated Service Network 17 (Dallas) locations in Temple,
    Marlin, Waco, and Dallas. We also visited locations in Marion, Illinois, and
    Jefferson Barracks and John Cochran in St. Louis, Missouri, in Veterans
    Integrated Network 15 (Kansas City).

    To estimate savings from consolidation, we first identified areas with
    multiple food production locations, using the criterion that two or more
    locations were located within 90 minutes' driving distance of each other. We
    then examined the combined workloads and costs of unconsolidated locations
    in these markets to determine whether savings could be achieved through
    consolidation. Locations were considered to be already consolidated if they
    received 80 percent or more of their food from another location or produced
    80 percent or more of the food for another location.

    Our analysis of VA cost data and discussions with VA officials suggested
    that the ratio of employees to the average number of daily patients (average
    daily inpatient census) is an appropriate measure for benchmarking savings
    in food services. We confirmed this relationship using 1999 data by
    regressing average daily patients on total employees. The resulting model

    showed that the average daily patients accounted for 86 percent of the
    variation in staffing.

    We computed savings estimates for the consolidations using the staffing
    ratio of one employee per 6. 7 average daily patients. This staffing ratio
    was achieved by the Central Texas Healthcare System after completing
    consolidation of inpatient food services at Temple, Marlin, and Waco. To
    validate this measure we spoke to VA officials representing both NFS and
    VCS, who agreed that using the Central Texas Healthcare System staffing
    ratio after consolidation was a reasonable, perhaps conservative, estimate
    of achievable staffing levels. Some VA production locations, in fact, are
    more efficient (lower ratio of employees to the average number of daily
    patients) than operations at the Central Texas Healthcare System.

    To calculate total savings from food consolidation we first multiplied the
    total average number of daily patients of the proposed market by the Central
    Texas Healthcare System staffing ratio (one employee per 6. 7 average daily
    patients) to arrive at a projected employee total for the consolidated
    market. 1 We then subtracted this projected total from the fiscal year 1999
    employee total of the individual locations in an area to determine the
    number of employees not needed, if any. Cost savings for the area were
    computed by multiplying the number of positions saved by the average salary
    costs of NFS wage grade, including benefits, within each market. We
    aggregated savings from each market to determine the total savings from food
    consolidation.

    The one- time investment for equipment was estimated by assuming that one
    location in each consolidated area required an advance food preparation
    system and every location required an advance food delivery system. To
    project the total cost of advance food preparation equipment (a fixed cost
    that includes items such as the blast chiller), we multiplied the cost of
    Central Texas Healthcare System's advance food preparation system (purchase
    amount adjusted to 1999 dollars) by the number of locations within areas
    that required this system. We calculated the total cost for the advance food
    delivery systems (a variable cost that includes items such as reheating
    carts, trays, and plates) by multiplying the total average daily patients of
    locations without this system by Central Texas

    1 We adjusted the average daily inpatient census workload of locations where
    NFS provides noninpatient meals (or provides meals to non- VA locations) by
    adding one inpatient to the average daily inpatient census for three
    noninpatient meals served daily.

    Healthcare System's cost per average daily patients (adjusted to 1999
    dollars).

    We calculated the costs of transporting food from a central location using
    data obtained from the Central Texas Healthcare System. To project the total
    costs of transportation for the consolidated areas, we multiplied the annual
    cost of one leased refrigerated truck by the total number of consolidated
    areas. Because this cost recurs each year, we subtracted this cost from the
    annual recurring savings from consolidation.

    We determined the potential savings from converting from NFS to VCS labor by
    applying a 30 percent savings reduction to NFS employee costs. VCS salaries
    are based on the Department of Defense's survey of food service worker wages
    in a local area, and are competitive with the private sector. Nationally,
    NFS salaries average about 70 percent of total NFS food production costs.
    VCS salaries are normally about 30 percent below NFS salaries. VCS
    headquarters established this percentage, and network and facility officials
    have agreed that using a 30 percent savings rate is reasonable.

    We also conducted a literature review of the food services industry,
    interviewed selected non- VA food service officials and officials from the
    private vendor sector and food service industry organizations, and visited
    contractor food production facilities.

    We validated survey data used to construct cost estimates by comparing
    questionable data supplied on the 1999 survey with VA data sources. When
    necessary, we also contacted survey respondents and/ or VA officials to
    clarify or correct data. We performed our review between October 1999 and
    November 2000 in accordance with generally accepted government auditing
    standards.

    Locations Converting From Nutrition and Food Service to Veterans Canteen
    Service

    Appendi xII

    Workers, April 2000 Percentage VCS VA inpatient

    Year conversion inpatient food

    1999 Average daily location agreement signed

    service workforce a census

    Martinez, California 1996 100 97 Marion, Illinois 1997 70 95 Poplar Bluff,
    Missouri 1998 41 50 Wichita, Kansas 1998 21 36 Columbia, Missouri 1999 13 88
    Mather, California 1999 100 9 Orlando, Florida b 1999 100 10 St. Louis
    Jefferson Barracks, Missouri c 1999 0 d 218

    St. Louis John Cochran, Missouri c 1999 0 d 83 a NFS dietitians continue to
    provide quality assurance but are not part of the inpatient food service
    workforce. b Food is produced at Tampa, Florida, location.

    c VCS food manager is on staff at the St. Louis consolidated locations;
    recruiting continues for other VCS positions. d Most food is produced at St.
    Louis Jefferson Barracks location.

    Comments From the Department of Veterans

    Appendi xI II Affairs

    Comments From the American Federation of

    Appendi xI V Government Employees

    Appendi xV

    GAO Contact and Staff Acknowledgments ' GAO Contact Paul R. Reynolds, (202)
    512- 7109 Staff

    Deborah L. Edwards, James C. Musselwhite, William R. Stanco, John R.
    Acknowledgments

    Kirstein, Thomas A. Walke, Elsie M. Picyk, Susan Lawes, John G. Brosnan, and
    Roger J. Thomas contributed to this report.

    Related GAO Products VA Laundry Service: Consolidations and Competitive
    Sourcing Could Save Millions( GAO/ 01- 61, Nov. 30, 2000).

    VA Health Care: VA Is Struggling to Respond to Asset Realignment Challenges(
    GAO/ T- HEHS- 00- 91, Apr. 6, 2000).

    VA Health Care: VA Is Struggling to Address Asset Realignment Challenges
    (GAO/ T- HEHS- 00- 88, Apr. 5, 2000).

    VA Health Care: Laundry Service Operations and Costs( GAO/ HEHS- 00- 16,
    Dec. 21, 1999).

    VA Health Care: Food Service Operations and Costs at Inpatient Facilities
    (GAO/ HEHS- 00- 17, Nov. 19, 1999).

    Veterans' Health Care: Fiscal Year 2000 Budget( GAO/ HEHS- 99- 189R, Sept.
    14, 1999).

    VA Health Care: Improvements Needed in Capital Asset Planning and Budgeting(
    GAO/ HEHS- 99- 145, Aug. 13, 1999).

    VA Health Care: Challenges Facing VA in Developing an Asset Realignment
    Process( GAO/ T- HEHS- 99- 173, July 22, 1999).

    VA Health Care: Progress and Challenges in Providing Care to Veterans (GAO/
    T- HEHS- 99- 158, July 15, 1999).

    Veterans' Affairs: Progress and Challenges in Transforming Health Care (GAO/
    T- HEHS- 99- 109, Apr. 15, 1999).

    VA Health Care: Capital Asset Planning and Budgeting Need Improvement (GAO/
    T- HEHS- 99- 83, Mar. 10, 1999).

    (406182) Lett er

    Ordering Information The first copy of each GAO report is free. Additional
    copies of reports are $2 each. A check or money order should be made out to

    the Superintendent of Documents. VISA and MasterCard credit cards are
    accepted, also.

    Orders for 100 or more copies to be mailed to a single address are
    discounted 25 percent.

    Orders by mail: U. S. General Accounting Office P. O. Box 37050 Washington,
    DC 20013

    Orders by visiting: Room 1100 700 4th St. NW (corner of 4th and G Sts. NW)
    U. S. General Accounting Office Washington, DC

    Orders by phone: (202) 512- 6000 fax: (202) 512- 6061 TDD (202) 512- 2537

    Each day, GAO issues a list of newly available reports and testimony. To
    receive facsimile copies of the daily list or any list from the past 30
    days, please call (202) 512- 6000 using a touchtone phone. A recorded menu
    will provide information on how to obtain these lists.

    Orders by Internet: For information on how to access GAO reports on the
    Internet, send an e- mail message with “info” in the body to:
    info@ www. gao. gov or visit GAO's World Wide Web home page at: http:// www.
    gao. gov

    To Report Fraud,

    Contact one:

    Waste, or Abuse in

    Web site: http:// www. gao. gov/ fraudnet/ fraudnet. htm

    Federal Programs

    e- mail: fraudnet@ gao. gov 1- 800- 424- 5454 (automated answering system)

    GAO United States General Accounting Office

    Page 1 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Contents

    Page 2 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 3 GAO- 01- 64 Reducing Inpatient VA Food Service Costs United States
    General Accounting Office

    Washington, D. C. 20548 Page 3 GAO- 01- 64 Reducing Inpatient VA Food
    Service Costs

    Page 4 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 5 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 6 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 7 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 8 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 9 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 10 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 11 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 12 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 13 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 14 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 15 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 16 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 17 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 18 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 19 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 20 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 21 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 22 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 23 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 24 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 25 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 26 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 27 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 28 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 29 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 30 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix I

    Appendix I Scope and Methodology

    Page 31 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix I Scope and Methodology

    Page 32 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 33 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix II

    Page 34 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix III

    Appendix III Comments From the Department of Veterans Affairs

    Page 35 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix III Comments From the Department of Veterans Affairs

    Page 36 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix III Comments From the Department of Veterans Affairs

    Page 37 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix III Comments From the Department of Veterans Affairs

    Page 38 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 39 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix IV

    Appendix IV Comments From the American Federation of Government Employees

    Page 40 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix IV Comments From the American Federation of Government Employees

    Page 41 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix IV Comments From the American Federation of Government Employees

    Page 42 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix IV Comments From the American Federation of Government Employees

    Page 43 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix IV Comments From the American Federation of Government Employees

    Page 44 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Page 45 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    Appendix V

    Page 46 GAO- 01- 64 Reducing Inpatient VA Food Service Costs

    United States General Accounting Office Washington, D. C. 20548- 0001

    Official Business Penalty for Private Use $300

    Address Correction Requested Bulk Rate

    Postage & Fees Paid GAO Permit No. GI00
    *** End of document. ***