Department of Veterans Affairs: Key Management Challenges in	 
Health and Disability Programs (08-MAY-03, GAO-03-756T).	 
                                                                 
In previous GAO reports and testimonies on the Department of	 
Veterans Affairs (VA), and in its ongoing reviews, GAO identified
major management challenges related to enhancing access to health
care, improving the efficiency of health care delivery, and	 
improving the effectiveness of disability programs. This	 
testimony underscores the importance of continuing to make	 
progress in addressing these challenges and ultimately overcoming
them.								 
-------------------------Indexing Terms------------------------- 
REPORTNUM:   GAO-03-756T					        
    ACCNO:   A06849						        
  TITLE:     Department of Veterans Affairs: Key Management Challenges
in Health and Disability Programs				 
     DATE:   05/08/2003 
  SUBJECT:   Disability benefits				 
	     Health care programs				 
	     Veterans benefits					 
	     Health care services				 
	     Internal controls					 
	     VA Capital Asset Realignment for			 
	     Enhanced Services Initiative			 
                                                                 

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GAO-03-756T

Testimony Before the Committee on Veterans* Affairs, House of
Representatives

United States General Accounting Office

GAO For Release on Delivery Expected at 10: 00 a. m. Thursday, May 8, 2003
DEPARTMENT OF

VETERANS AFFAIRS Key Management Challenges in Health and Disability
Programs

Statement of Cynthia A. Bascetta Director, Health Care* Veterans*

Health and Benefits Issues

GAO- 03- 756T

VA has taken actions to address key challenges in its health care and
disability programs. However, growing demand for health care and a
potentially larger and more complex disability workload may make VA*s
challenges in these areas more complex.

 Enhancing access to health care. VA is challenged to deliver timely,
convenient health care to its enrolled veteran population. Too many
veterans continue to travel too far and wait too long for care. However,
shifting care closer to where veterans live is complicated by stakeholder
interests. In addition, VA*s efforts to reduce waiting times may be
complicated by an anticipated short- term surge in demand for specialty
outpatient care. VA also faces difficult challenges in providing equitable

access to nursing home care services to a growing elderly veteran
population.  Improving the efficiency of health care delivery. VA is
challenged to

find more efficient ways to meet veterans* demand for health care. VA
operates a large portfolio of aged buildings that is not well aligned to
efficiently meet veterans* needs. As a result, VA faces difficult
realignment decisions involving capital investments, consolidations,
closures, and contracting with local providers. VA also faces challenges
in implementing management changes to improve the efficiency of patient
support services, such as food and laundry services.

 Improving the effectiveness of disability programs. VA is challenged to
find more effective ways to compensate veterans with disabilities. VA*s
outdated disability determination process does not reflect a current view
of the relationship between impairments and work capacity. Advances in
medicine and technology have allowed some individuals with disabilities to
live more independently and work more effectively. VA also faces
continuing challenges to improve the timeliness, quality and consistency
of claims processing. Major improvements may require fundamental program
changes.

GAO designated federal real property, including VA health care
infrastructure, and federal disability programs, including VA disability
benefits, as high- risk areas in January 2003. GAO did this to draw
attention to the need for broad- based transformation in these areas,
which is critical to improving the government*s performance and ensuring
accountability within expected resource limits. In previous GAO reports
and testimonies on the Department of Veterans Affairs (VA), and in its

ongoing reviews, GAO identified major management challenges related to
enhancing access to health care, improving the efficiency of health care
delivery, and improving the effectiveness of disability programs. This

testimony underscores the importance of continuing to make progress in
addressing these challenges and ultimately overcoming them.

What Remains to Be Done

VA remains challenged to:  ensure timely, convenient, and

equitable access to health care, including hospital, specialty outpatient,
and nursing home

care;  realign its health care delivery

infrastructure and implement other management initiatives to increase the
efficiency of the delivery of patient support

services; and  seek solutions to modernize its disability programs as
well as

improve the timeliness and quality of disability claims decisions.

www. gao. gov/ cgi- bin/ getrpt? GAO- 03- 756T. To view the full report,
including the scope and methodology, click on the link above. For more
information, contact Cynthia A. Bascetta at (202) 512- 7101. Highlights of
GAO- 03- 756T, a testimony

before the Committee on Veterans* Affairs, House of Representatives May 8,
2003

DEPARTMENT OF VETERANS AFFAIRS

Key Management Challenges in Health and Disability Programs

Page 1 GAO- 03- 756T

Mr. Chairman and Members of the Committee: Thank you for inviting me to
discuss our past and current work on veterans* health care and disability
benefits* two major program areas at the Department of Veterans Affairs
(VA). As you know, VA*s budget submission for fiscal year 2004 includes
about $64 billion and 214,000 staff. In fiscal year 2002, VA spent about
$23 billion to provide health care to over 4 million veterans and about
$26 billion to provide cash disability benefits to over 3 million
veterans, family members, and survivors.

It is especially fitting, with the recent deployment of our military
forces to armed conflict, that we reaffirm our commitment to provide high
quality services in a convenient and timely manner to those who serve our
nation in its times of need. Meeting this commitment as efficiently and
effectively as possible is also of paramount importance. In this regard,
my statement focuses on challenges that VA faces to ensure reasonable
access to health care, use its health care resources efficiently, and
manage its disability

programs effectively. My comments today are based on numerous reports and
testimonies issued over the last 7 years, including significant
recommendations we have made and VA*s progress in implementing them. (See
Related GAO Products.) We did our work in over 100 VA health care delivery
locations and conducted surveys of all 21 health care networks and reviews
of

disability management issues covering all 57 disability claims processing
regional offices. We are also reporting preliminary results of ongoing
health care work that started in November 2002. This involves visits to
delivery locations, document reviews, and interviews with VA officials in
headquarters and the networks. We did our work in accordance with

generally accepted government auditing standards. In summary, VA is
challenged to meet the acute and nursing home care needs of veterans in a
timely, convenient, and equitable manner. Despite VA*s significant access
enhancements over the past several years, too many veterans continue to
travel too far and wait too long for appointments, especially when they
require hospital admissions or

consultations with specialists on an outpatient basis. When trying to
reduce travel times, VA faces difficult decisions because shifting care
closer to where veterans live can have significant ramifications for
stakeholders, such as medical schools, as well as for the use of VA*s
existing resources. In addition, VA*s efforts to reduce waiting times may
be complicated by an anticipated surge in demand for VA specialty
outpatient care over the next 10 years. Also, the population most in need
of nursing

Page 2 GAO- 03- 756T

home care* veterans who are 85 years old or older* is growing. As a
result, VA faces difficult decisions concerning the delivery and sizing of
nursing home care services to equitably meet these needs.

VA is also challenged to find ways to use available health care resources
more efficiently to meet veterans* demand for health care. For example, VA
operates and maintains a large portfolio of aged health care assets,
primarily buildings. This infrastructure is no longer effectively aligned
with VA*s new delivery model that emphasizes outpatient care. As a result,
VA faces difficult realignment decisions involving capital investments,
consolidations, closures, and contracting with local providers. These may
have significant ramifications for stakeholders, such as medical schools
and unions, primarily because realignments involve a shifting of workload
among delivery locations or workforce reductions. VA also faces challenges
in implementing management changes to improve the efficiency of patient
support services, such as food and laundry services. In addition, VA is
challenged to find ways to compensate disabled veterans

in a more meaningful and timely manner. For example, VA uses a disability
determination process that is based on economic conditions in 1945 and, as
such, does not accurately reflect current relationships between

impairments and the skills and abilities needed to work in today*s
business environment. Moreover, the consequences of some medical
conditions for many individuals have been reduced through advances in
medicine and technology, which allow individuals to live with greater
independence and function more effectively in work settings. Besides
modernizing the

economic and medical underpinnings of the program, VA remains in the midst
of significant challenges to improve the quality, timeliness, and
consistency of disability claims processing. Despite its recent efforts,
too many disabled veterans wait too long for disability decisions.
Significant and sustainable improvements may not be possible without
fundamental

program design changes, including those that require legislative actions
to implement. VA and the Congress could face significant stakeholder
resistance to such changes.

I would also like to point out that we designated federal real property
and federal disability programs as high- risk areas in January 2003. 1 We
did this

1 U. S. General Accounting Office, High- Risk Series: An Update, GAO- 03-
119 (Washington, D. C.: Jan. 1, 2003); U. S. General Accounting Office,
High- Risk Series: Federal Real Property, GAO- 03- 122 (Washington, D. C.:
Jan. 1 2003).

Page 3 GAO- 03- 756T

to draw attention to the need for broad- based transformation in these
areas, which is critical to improving the government*s performance and
ensuring accountability within expected resource limits. If this
transformation is well implemented, agencies will be better positioned to
achieve mission effectiveness, reduce operating costs, improve facility
conditions, and enhance security and safety.

During World War I, Public Health Service hospitals treated returning
veterans and, at the end of the war, several military hospitals were
transferred to the Public Health Service to enable it to continue treating
injured soldiers. In 1921, those hospitals were transferred to the newly
established Veterans* Bureau. By the early 1990s, the veterans* health
care system had grown into one of our nation*s largest direct providers of
health care, comprising more than 172 hospitals. In October 1995, VA began
to transform its health care system from a

hospital- dominated model to one that provides a full range of health care
services. A key feature of this transformation involves the development of
community- based, integrated networks of VA and non- VA providers that

could deliver health care closer to where veterans live. At that time,
about half of all veterans lived more than 25 miles from a VA hospital;
about 44 percent of those admitted to VA hospitals lived more than 25
miles away. 2 In making care more proximate to veterans* homes, VA also
began shifting the delivery of health care from high- cost hospital
settings to lower- cost outpatient settings.

To facilitate VA*s transformation, the Congress passed the Veterans*
Health Care Eligibility Reform Act of 1996, which furnishes tools that VA
said were key to a successful transformation, including:

 new eligibility rules that allow VA to treat veterans in the most
appropriate setting;  a uniform benefits package to provide a continuum
of services; and  an expanded ability to purchase services from private
providers.

2 U. S. General Accounting Office, VA Health Care: How Distance From VA
Facilities Affects Veterans* Use of VA Services GAO/ HEHS- 96- 31
(Washington, D. C.: Dec. 20, 1995). Background

Page 4 GAO- 03- 756T

Today, VA operates over 800 delivery locations nationwide, including over
600 community- based outpatient clinics and 162 hospitals. VA*s delivery
locations are organized into 21 geographic areas, commonly referred to as
networks. Each network includes a management office responsible for making
basic budgetary, planning, and operating decisions concerning the delivery
of health care to its veterans. Each office oversees between 5 and 11
hospitals, as well as many community- based outpatient clinics.

To promote more cost- effective use of resources, VA is authorized to
share resources with other federal agencies to avoid unnecessary
duplication and overlap of activities. VA and the Department of Defense
(DOD) have entered into agreements to exchange inpatient, outpatient, and
specialty care services as well as support services. Local facilities also
have arranged to jointly purchase pharmaceuticals, laboratory services,
medical supplies, and equipment.

Also, VA has been authorized to enter into agreements with medical schools
and their teaching hospitals. Under these agreements, VA hospitals provide
training for medical residents, and appoint medical school faculty as VA
staff physicians to supervise resident education and patient care.
Currently, about 120 medical schools and teaching hospitals

have affiliation agreements with VA. About 28,000 medical residents
receive some of their training in VA facilities every year.

Veterans* eligibility for health care also has evolved over time. Before
1924, VA health care was available only to veterans who had wounds or
diseases incurred during military service. Eligibility for hospital care
was gradually extended to war- time veterans with lower incomes and, in
1973, to peace time veterans with lower incomes. By 1986, all veterans
were eligible for hospital and outpatient care for service- connected
conditions as well as for conditions unrelated to military service. 3 VA
implemented an enrollment process in 1998 that was established

primarily as a means of prioritizing care if sufficient resources were not
available to serve all veterans seeking care. About 6.2 million veterans
had enrolled by the end of fiscal year 2002. In contrast, the overall
veteran population is estimated to be about 25 million. VA projects a
decline in the

3 U. S. General Accounting Office, VA Health Care: Issues Affecting
Eligibility Reform Efforts, GAO/ HEHS- 96- 160 (Washington, D. C.: Sept.
11, 1996).

Page 5 GAO- 03- 756T

total veteran population over the next 20 years while the enrolled
population is expected to decline more slowly as shown in table 1.

Table 1: Veteran Population and Enrollment Projections between Fiscal
Years 2007 and 2022 (in millions) 2007 2012 2017 2022

Veteran population 22.8 20.6 18.6 16.9 Enrollment 6.3 6.3 6.1 5. 7

Source: VA

In addition to health care, VA provides disability benefits to those
veterans with service- connected conditions. Also, VA provides pension
benefits to low- income wartime veterans with permanent and total
disabilities

unrelated to military service. Further, VA provides compensation to
survivors of service members who died while on active duty. Disabled
veterans are entitled to cash benefits whether or not employed

and regardless of the amount of income earned. The cash benefit level is
based on the percentage evaluation, commonly called the *disability
rating,* that represents the average loss in earning capacity associated
with the severity of physical and mental conditions. VA uses its Schedule
for Rating Disabilities to determine which disability rating to assign to
a veteran*s particular condition. VA*s ratings are in 10 percent
increments, from 0 to 100 percent.

Although VA generally does not pay disability compensation for
disabilities rated at 0 percent, such a rating would make veterans
eligible for other benefits, including health care. About 65 percent of
veterans receiving disability compensation have disabilities rated at 30
percent or lower; about 8 percent are 100 percent disabled. Basic monthly
payments range from $104 for a 10 percent disability to $2,193 for a 100
percent disability.

To process claims for these benefits, VA operates 57 regional offices.
These offices made almost 800,000 rating- related decisions 4 in fiscal
year 2002. Regional office personnel develop claims, obtain the necessary

4 Rating- related claims are primarily original claims for compensation
and pension benefits and *reopened* claims; for example, when a veteran
claims that a service- connected claim has worsened.

Page 6 GAO- 03- 756T

information to evaluate claims, and determine whether to grant benefits.
In doing so, they consider veterans* military service records, medical
examination and treatment records from VA health care facilities, and
treatment records from private providers. Once claims are developed, the
claimed disabilities are evaluated, and ratings are assigned based on
degree of disability. Veterans with multiple disabilities receive a
single, composite rating. For veterans claiming pension eligibility, the
regional office also determines if the veteran served in a period of war,
is

permanently and totally disabled for reasons unrelated to military
service, and meets the income thresholds for eligibility.

Over the past several years, VA has done much to ensure that veterans have
greater access to health care. Despite this, travel times and waiting
times are still problems. Another problem faced by aging veterans is
potentially inequitable access to nursing home care.

The substantial increase in VA health care delivery locations has enhanced
access for enrolled veterans in need of primary care, although many still
travel long distances for primary care. 5 In addition, many who need to
consult with specialists or require hospitalization often travel long
distances to receive care. Nationwide, for example, more than 25 percent
of veterans enrolled in VA health care* over 1.7 million* live over 60
minutes driving time from a VA hospital. These veterans would have to
travel a long distance if they require admissions or consultations with
specialists, such as urologists or cardiologists, located at the closest
VA hospitals.

In October 2000, VA established the Capital Asset Realignment for Enhanced
Services (CARES) program, which has a goal of improving veterans* access
to acute inpatient care, primary care, and specialty care. CARES is
intended to identify how well the geographic distribution of VA

health care resources matches projected needs and the shifts necessary to
better align resources and needs. Toward that end, VA has divided, for
analytical purposes, its 21 networks into 76 geographic areas* groups of
counties* in order to determine the extent to which enrollees* travel
times exceed VA*s access standards.

5 U. S. General Accounting Office, VA Health Care: Community- Based
Clinics Improve Primary Care Access, GAO- 01- 678T (Washington, D. C.: May
2, 2001). Access to Health Care

Could Be Enhanced Many Veterans Travel Too Far for Hospital Admissions and
Specialty Consultations

Page 7 GAO- 03- 756T

For example, as part of CARES, VA has mandated that the 21 network
directors identify ways to ensure that at least 65 percent of the veterans
in their areas are within VA*s access standards for hospital care* 60
minutes for veterans residing in urban counties, 90 minutes for those in
rural counties, and 120 minutes for those in highly rural counties. VA has
identified 25 areas that do not meet this 65 percent target. In these
areas, over 900,000 enrolled veterans have travel times that exceed VA*s
access standards. In addition, as part of CARES, VA identified 51 other
areas where access enhancements may be addressed at the discretion of
network directors, given that at least 65 percent of all enrolled veterans
in those areas have travel times that meet VA*s standard. In these areas,

about 875,000 enrolled veterans have travel times that exceed VA*s
standards.

By contrast, VA has not mandated that network directors enhance access for
veterans who travel long distances to consult with specialists. Unlike
hospital care, VA has not established standards for acceptable travel
times for specialty care. Currently, nearly 2 million enrolled veterans
live more than 60 minutes driving time from specialists located at the
closest VA hospital.

When considering ways to enhance access for veterans, VA network directors
may consider three basic options: construct a new VA- owned and operated
delivery location; negotiate a sharing agreement with another federal
entity, such as a DOD facility; or contract with nonfederal health care
providers. Shifting the delivery of health care closer to where veterans
live may have significant ramifications for other stakeholders, such as
medical schools. For example, within the 76 areas, there are smaller
geographic areas that contain large concentrations of enrollees outside
VA*s access standards* 10,000 or more* who live closer to nonVA hospitals
than they do to the nearest VA hospitals. Such enrolled veterans could
account for significant portions of the hospital workload at the nearest
VA delivery locations. Therefore, a shifting of this workload closer to
veterans* residences could reduce the size of residency training
opportunities at existing VA delivery locations.

Enhancing veterans* access can also have significant ramifications
regarding the use of VA*s existing resources. Currently, VA has most of
its resources dedicated to costs associated with its existing hospitals
and other infrastructure, including clinical and support staff, at its
major health care delivery locations. Reducing veterans* travel times
through contracting with providers in local communities or other options
could reduce demand for services at VA*s existing, more distant delivery

Page 8 GAO- 03- 756T

locations. Efficient operation of those locations could become more
difficult given the smaller workloads in relation to the operating costs
of existing hospitals.

We also have found that excessive waiting times for VA outpatient care
persist* a situation that we have reported on for the last decade. For
example, in August 2001, we reported that veterans frequently wait longer
than 30 days* VA*s access standard* for appointments with specialists at
VA delivery locations in Florida and other areas of the country. 6 More
recently, a Presidential task force reported in its July 2002 interim
report

that veterans are finding it increasingly difficult to gain access to VA
care in selected geographic regions. 7 For example, the task force found
that the average waiting time for a first outpatient appointment in
Florida, which has a large and growing veteran population, is over a year.

Although there is general consensus that waiting times are excessive, we
reported, and VA agreed, that its data did not reliably measure the scope
of the problem. 8 To improve its data, VA is in the process of developing
an

automated system to more systematically measure waiting times. VA has also
taken several actions to mitigate the impact of long waiting times,
including limiting enrollment of lower priority veterans and granting
priority for appointments to certain veterans with service- connected
disabilities. 9 VA faces an impending challenge, however, reducing the
length of times

veterans wait for appointments. Specifically, VA*s current projections of
acute health care workload indicate a surge in demand for acute health 6
U. S. General Accounting Office, VA Health Care: More National Action
Needed to Reduce Waiting Times, but Some Clinics Have Made Progress, GAO-
01- 953 (Washington, D. C.:

Aug. 31, 2001). 7 President*s Task Force to Improve Health Care Delivery
for Our Nation*s Veterans: Interim Report, (Washington, D. C.: July 31,
2002). 8 U. S. General Accounting Office, Veterans* Health Care: VA Needs
Better Data on Extent and Causes of Waiting Times, GAO/ HEHS- 00- 90
(Washington, D. C.: May 31, 2000). 9 The Veterans* Health Care Eligibility
Reform Act of 1996 required VA to establish priority categories for
enrollment to manage access in relation to available resources. VA has 8

priority categories, with Priority 1 veterans* those with service-
connected disabilities rated 50 percent or more* having the highest
priority for enrollment. By contrast, Priority 8 veterans are primarily
veterans with no service- connected disabilities and higher incomes. Many
Veterans Wait Too Long for Appointments

Page 9 GAO- 03- 756T

care services over the next 10 years. For example, specialty outpatient
demand nationwide is expected to almost double by fiscal year 2012.

VA*s long- term care infrastructure, including nursing homes it operates,
was developed when the concentration of veteran population was distributed
differently by region. Consequently, the location of VA*s current
infrastructure may not provide equitable access across the country. In
addition, when VA developed its long- term care infrastructure, it relied
more on nursing home care and less on home and communitybased services
than current practice. To help update VA*s long- term care policy, the
Federal Advisory Committee on the Future of VA Long- Term Care recommended
in 1998 that VA maintain its nursing home capacity at the level of that
time but meet the growing veteran demand for long term

care by greatly expanding home and community- based service capacity. 10
The House Committee on Veterans* Affairs has expressed concern that VA
needs to maintain its nursing home capacity workload at 1998 levels. VA
currently operates its own nursing home care units in 131 locations,
according to VA headquarters officials. In addition, it pays for nursing
home care under contract in community nursing homes. VA also pays part of
the cost of care for veterans at state veterans* nursing homes and in
addition pays a portion of the construction costs for some state veterans*
nursing homes. In all these settings combined, VA*s nursing home workload*
average daily census* has declined by more than 1,800 since 1998. See
table 2. The biggest decline has been in community nursing home care where
the average daily census was 31 percent less in 2002 than in 1998. Average
daily census in VA- operated nursing homes also declined by 11 percent
during this period. A 9 percent increase in state veterans* nursing homes*
average daily census offsets some of the decline in average daily census
in community and VA- operated nursing homes.

10 VA Long- Term Care At The Crossroads: Report of the Federal Advisory
Committee on the Future of VA Long- Term Care, (Washington, D. C.: June,
1998). Veterans* Access to

Nursing Home Care May Be Inequitable

Page 10 GAO- 03- 756T

Table 2: Nursing Home Average Daily Census Provided or Paid for by VA in
Fiscal Years 1998- 2002

Type of nursing home 1998 1999 2000 2001 2002

VA nursing homes 13,426 12,653 11,828 11,674 11,974 Community nursing
homes 5,575 4,547 3,682 4,010 3,831 State veterans* nursing homes 14,602
15,051 15,286 15,593 15,941

Total 33,603 32,251 30,796 31,277 31,746

Source: VA. Note: The average daily census represents the total number of
days of nursing home care divided by the number of days in the year.

VA headquarters officials told us that the decline in nursing home average
daily census could be the result of a number of factors. These factors
include providing more emphasis on shorter- term care for post- acute care
rehabilitation, providing more home and community- based services to
obviate the need for nursing home care, assisting veterans to obtain
placement in community nursing homes where care is financed by other
payers, such as Medicaid, when appropriate, and difficulty recruiting
enough nursing staff to operate all beds in some VA- operated nursing
homes.

VA policy provides networks broad discretion in deciding what nursing home
care to offer those patients that VA is not required to provide nursing
home care to under the provisions of the Veterans Millennium Health Care
and Benefits Act of 1999. 11 Networks* use of this discretion appears to
result in inequitable access to nursing home care. For example, some
networks have policies to provide long- term nursing home care to these
veterans who need such care if resources allow, while other networks do
not have such policies. As a result, these veterans who need long- term
nursing home care may have access to that care in some networks but not
others. This is significant because about two- thirds of

VA*s current nursing home users are recipients of discretionary nursing
home care.

11 This act requires that VA provide nursing home care to veterans with
service- connected disabilities of 70 percent or more and those who need
such care because of a serviceconnected disability. This provision of the
act expires on December 31, 2003.

Page 11 GAO- 03- 756T

VA intended to address veterans* access to nursing home care as part of
its larger CARES initiative to project future health care needs and
determine how to ensure equitable access. However, initial projections of
nursing home need exceeded VA*s current nursing home capacity. VA said
that the projections did not reflect its long- term care policy and
decided not to include nursing home care in its CARES initiative. Instead,
VA officials told us that they have developed a separate process to
provide projections for nursing home, and home and community- based
services needs. These

officials expect that new projections will be developed for consideration
by the Under Secretary for Health by July 2003. VA officials also told us
that VA will use this information in its strategic planning initiatives to
address nursing home and other long- term care issues at the same time
that VA implements its CARES initiatives.

Because VA has not systematically examined its nursing home policies and
access to care, veterans have no assurance that VA*s $2 billion nursing
home program is providing equitable access to care to those who need it.
This is particularly important given the aging of the veteran population.

The veteran population most in need of nursing home care* veterans 85
years old or older* is expected to increase from almost 640,000 to over 1
million by 2012 and remain at about that level through 2023. Until VA
develops a long- term care projection model consistent with its policy, VA
will not be able to determine if its nursing home care units in 131
locations

and other nursing home care services it pays for provide equitable access
to veterans now or in the future.

In recent years, VA has made an effort to realign its capital assets,
primarily buildings, to better serve veterans* needs as well as institute
other needed efficiencies. Despite this, many of VA*s buildings remain
underutilized and patient support services are not always provided
efficiently. VA could make better use of its resources by taking steps to
partner with other public and private providers, purchase care from such
providers, replace obsolete assets with modern ones, consolidate
duplicative care provided by multiple locations serving the same
geographic areas where it would be cost effective to do so, and assess
various management options to improve the efficiency of patient support
services. Efficiency Could Be

Improved through Health Care Asset Realignment and Other Management
Actions

Page 12 GAO- 03- 756T

VA has a large and aged infrastructure, which is not well aligned to
efficiently meet veterans* needs. In recent years, as a result of new
technology and treatment methods, VA has shifted delivery from inpatient
to outpatient settings in many instances and shortened lengths of stay
when hospitalization was required. Consequently, VA has excess inpatient
capacity at many locations.

For example, in August 1999, we reported that VA owned about 4,700
buildings, over 40 percent of which had operated for more than 50 years,
and almost 200 of which were built before 1900. Many organizations in the
facilities management environment consider 40 to 50 years to be the useful
life of a building. 12 Moreover, VA used fewer than 1,200 of these
buildings (about one- fourth of the total) to deliver health care services
to veterans. The rest were used primarily to support health care
activities, although many had tenants or were vacant. 13 In addition, most
delivery locations had mission- critical buildings that VA considered
functionally obsolete. These included, for example, inpatient rooms not up
to industry standards concerning patient privacy; outpatient clinics with
undersized examination rooms; and buildings with safety concerns, such as
vulnerability to earthquakes.

As part of VA*s transformation, begun in 1995, its networks implemented
hundreds of management initiatives that significantly enhanced their
overall efficiency and effectiveness. 14 The success of these strategies*
shifting inpatient care to more appropriate settings, establishing primary
care in community clinics, and consolidating services in order to achieve
economies of scale* significantly reduced utilization at most of VA*s
inpatient delivery locations. For example, VA operated about 73,000
hospital beds in fiscal year 1995. In 1998, veterans used on average fewer
than 40,000 hospital beds per day, and by 2001 usage had further declined
to about 16,000 hospital beds per day.

12 Price Waterhouse, Independent Review of the Department of Veterans
Affairs* Office of Facilities Management (Washington, D. C.: June 17,
1998). 13 Health care support buildings include warehouses, engineering
shops, laundries, fire stations, day care centers and boiler plants. 14 U.
S. General Accounting Office, Veterans* Affairs: Progress and Challenges
in Transforming Health Care, GAO/ T- HEHS- 99- 109 (Washington, D. C.:
April 15, 1999). Capital Assets Not WellAligned

to Meet Veterans* Needs

Page 13 GAO- 03- 756T

In 1999, we concluded that VA*s existing infrastructure could be the
biggest obstacle confronting VA*s ongoing transformation efforts. 15
During a hearing in 1999 before this Committee*s Subcommittee on Health,
we pointed out that, although VA was addressing some realignment issues,
it did not have a plan in place to identify buildings that are no longer
needed to meet veterans* health care needs. We recommended that VA develop
a

market- based plan for restructuring its delivery of health care in order
to reduce funds spent on underutilized or inefficient buildings. In turn
those funds could be reinvested to better serve veterans* needs by placing
health care resources closer to where they live.

To do so, we recommended that VA comply with guidance from the Office of
Management and Budget. The guidance suggested that market- based
assessments include (1) assessing a target population*s needs, (2)
evaluating the capacity of existing assets, (3) identifying any

performance gaps (excesses or deficiencies), (4) estimating assets* life
cycle costs, and (5) comparing such costs to other alternatives for
meeting the target population*s needs. Alternatives include (1) partnering
with other public or private providers, (2) purchasing care from such
providers, (3) replacing obsolete assets with modern ones, or (4)
consolidating services duplicated at multiple locations serving the same
market.

During the 1999 hearing, the subcommittee chairman urged VA to implement
our recommendations and VA agreed to do so. In August 2002, VA announced
the results of a pilot study in its Great Lakes network,

which includes Chicago and other locations. VA selected three realignment
strategies in this network * consolidation of services at existing
locations, opening of new outpatient clinics, and closure of one inpatient
location. Currently, VA is analyzing ways to realign health care delivery
in its 20 remaining networks. VA expects to issue its plans by the end of
2003. To date, VA has projected veterans* demand for acute health care
services through fiscal year 2022, evaluated available capacity at its
existing delivery locations, and targeted geographic areas where
alternative delivery strategies could allow VA to operate more efficiently
and effectively while ensuring access consistent with its standards for
travel time.

15 U. S. General Accounting Office, VA Health Care: Capital Asset Planning
and Budgeting Need Improvement, GAO/ T- HEHS- 99- 83 (Washington, D. C:
Mar. 10, 1999).

Page 14 GAO- 03- 756T

For example, VA has the opportunity to achieve efficiencies through
economies of scale in 30 geographic areas where two or more major health
care delivery locations that are in close proximity provide duplicative
inpatient and outpatient health care services. VA may also achieve similar
efficiencies in 38 geographic areas where two or more tertiary care
delivery locations are in close proximity. VA considers delivery locations
to be in close proximity if they are within 60 miles of one another for
acute care and within 120 miles for tertiary care. In addition, VA may
achieve additional efficiencies in 28 geographic areas where existing
delivery locations have low acute medicine workloads, which VA has defined
as serving less than 40 hospital patients per day. VA also identified more
than 60 opportunities for partnering with the DOD to better align the
infrastructure of both agencies. 16 VA faces difficult challenges when
attempting to improve service delivery

efficiencies. For example, service consolidations can have significant
ramifications for stakeholders, such as medical schools and unions,
primarily due to shifting of workload among locations and workforce
reductions. Understandably, medical schools are reluctant to change
longstanding business relationships involving, among other things,
training of medical residents. For example, VA tried for 5 years to reach
agreement on how to consolidate clinical services at two of Chicago*s four
major health care delivery locations before succeeding in August 2002.
This is because such restructuring required two medical schools to use the
same location to train residents, a situation that neither supported.

Unions, too, have been reluctant to support planning decisions that result
in a restructuring of services. This is because operating efficiencies
that result from the consolidation of clinical services into a single
location could also result in staffing reductions for such support
services as grounds maintenance, food preparation, and housekeeping. For
example, as part of its ongoing transformation, VA proposed to consolidate
food preparation services of 9 delivery locations into a single location
in New York City in order to operate more efficiently. Two unions*
objections,

16 In May 2000, we reported that most VA/ DOD sharing activity involved a
relatively small number of sharing agreements and joint ventures. U. S.
General Accounting Office, VA and Defense Health Care: Evolving Health
Care Systems Require Rethinking of Resource Sharing Strategies, GAO/ HEHS-
00- 52 (Washington, D. C.: May 17, 2000). The Congressional

Commission on Servicemembers and Veterans Transition Assistance also
reported that opportunities exist for greater sharing and partnering
between VA and DOD. See Report of the Congressional Commission on
Servicemembers and Veterans Transition Assistance

(Washington, D. C.: Jan. 14, 1999).

Page 15 GAO- 03- 756T

however, slowed VA*s restructuring, although VA and the unions
subsequently agreed on a way to complete the restructuring.

VA also faces difficult decisions concerning the need for and sizing of
capital investments, especially in locations where future workload may
increase over the short term before steadily declining. In large part,
such declines are attributable to the expected nationwide decrease in the
overall veteran population by more than one- third by 2030; in some areas,
veteran population declines are expected to be steeper. It may be in VA*s
best interests to partner with other public or private providers for
services to meet veterans* demands rather than risk making a major capital
investment that would be underutilized in the latter stages of its useful
life. In cases when VA*s realignment results in buildings that are no
longer

needed to meet veterans* health care needs, VA faces other difficult
decisions regarding whether to retain or dispose of these buildings. VA
has several options, including leasing, demolition, or transferring
buildings to the General Services Administration (GSA), which has the
authority to

dispose of excess or surplus federal property. When there is no leasing
potential, VA faces potentially high demolition costs as well as uncertain
site preparation costs associated with the transfer of buildings to GSA.

Given that such costs involve the use of health care resources, ensuring
that disposal decisions are based on systematic analyses of costs and
benefits to veterans poses another realignment challenge. 17 The challenge
of dealing with a misaligned infrastructure is not unique to

VA. In fact, we identified federal real property management as a high-
risk area in January 2003. For the federal government overall and VA in
particular, technological advancements, changing public needs,
opportunities for resource sharing, and security concerns will call for a
new way of thinking about real property needs. In VA*s case, it has
recognized the critical need to better manage its buildings and land and
is in the process of implementing CARES to do so. VA has the opportunity
to lead other federal agencies with similar real property challenges.
However, VA and other agencies have in common persistent problems,
including competing stakeholder interests in real property decisions.
Resolving these problems will require high- level attention and effective
leadership.

17 U. S. General Accounting Office, VA Health Care: Improved Planning
Needed for Management of Excess Real Property, GAO- 03- 326 (Washington,
D. C.: Jan. 29, 2003).

Page 16 GAO- 03- 756T

As VA continues to transform itself from an inpatient- to an
outpatientbased health care system, it must find more efficient,
systemwide ways of providing patient care support services, such as
consolidation of services and the use of competitive sourcing. For
example, VA*s shift in emphasis from inpatient to outpatient health care
delivery has significantly reduced the need for inpatient care support
services, such as food and laundry

services. To make better use of resources, some VA inpatient facilities
have consolidated food production locations, used lower- cost Veterans
Canteen Service (VCS) workers instead of higher- paid Nutrition and Food
Service workers 18 to provide inpatient food services, or contracted out
for

the provision of these services. Some VA facilities have also consolidated
two or more laundries into a single location, contracted for labor to
operate VA laundries, or contracted out laundry services to commercial
organizations.

VA needs to systematically explore the further use of such options across
its health care system. In November 2000, we recommended that VA conduct
studies at all of its food and laundry service locations to identify and
implement the most cost- effective way to provide these services at each
location. 19 At that time, we identified 63 food production locations that
could be consolidated into 29, saving millions of dollars annually. We
estimated that VA could potentially save millions of dollars by
consolidating both food and laundry production locations.

VA may also be able to reduce its food and laundry service costs at some
facilities through competitive sourcing* through which VA would determine
whether it would be more cost- effective to contract out these services or
provide them in- house. VA must ensure, however, that, if a decision to
contract for services is made, contract terms on payments and service
quality standards will continue to be met. For example, we found

that weaknesses in the monitoring of VA*s Albany, New York laundry 18 The
wage differences between the two result from differences in how wage rates
for their respective pay schedules are determined. 19 U. S. General
Accounting Office, VA Health Care: Expanding Food Service Initiatives
Could Save Millions, GAO- 01- 64 (Washington, D. C.: Nov. 30, 2000); U. S.
General

Accounting Office, VA Laundry Service: Consolidations and Competitive
Sourcing Could Save Millions, GAO- 01- 61 (Washington, D. C.: Nov. 30,
2000). Patient Support Services

Could Be Provided More Efficiently

Page 17 GAO- 03- 756T

contract appear to have resulted in overpayments, reducing potential
savings. 20 In August 2002, VA issued a directive establishing policy and

responsibilities for its networks to follow in implementing a competitive
sourcing analysis to compare the cost of contracting and the cost of
inhouse performance to determine who can do the work most cost
effectively. VA has announced that, as part of the President*s Management
Agenda, it will complete studies of competitive sourcing of 55,000
positions by 2008. VA plans to complete studies of competitive sourcing
for all its laundry positions by the end of calendar year 2003. Similar
initiatives for food services and other support services are in the
planning stages at VA. Overall, VA*s plan for competitive sourcing shows
promise.

However, VA has not yet established a timeline for implementing an
assessment of competitive sourcing and the other options we recommended
for all its inpatient food service locations. Until VA completes these
assessments and takes action to reduce costs, it may be paying more for
inpatient food services than required and as a result have fewer resources
available for the provision of health care to veterans.

We recognize that one of the options we recommended that VA assess, the
competitive sourcing process set forth in the Office of Management and
Budget (OMB) Circular A- 76, historically has been difficult to implement.
Specifically, there are concerns in both the public and private sectors
regarding the fairness of the competitive sourcing process and the extent
to which there is a *level playing field* for conducting public- private
competitions. It was against this backdrop that the Congress in 2001,
mandated that the Comptroller General establish a panel of experts to
study the process used by the government to make sourcing decisions. The
Commercial Activities Panel that the Comptroller convened conducted a
yearlong study, and heard repeatedly about the importance of competition
and its central role in fostering economy, efficiency, and continuous
performance improvement. The panel made a number of recommendations for
improving sourcing policies and processes.

As part of the administration*s efforts to implement the recommendations
of the Commercial Activities Panel, OMB published proposed changes to 20
U. S. General Accounting Office, Inadequate Oversight of Laundry Facility
at the

Department of Veterans Affairs Albany, New York, Medical Center, GAO- 01-
207R (Washington, D. C.: Nov. 30, 2000).

Page 18 GAO- 03- 756T

Circular A- 76 for public comment in November 2002. In our comments on the
proposal to the Director of OMB this past January, we noted the absence of
a link between sourcing policy and agency missions, unnecessarily
complicated source selection procedures, certain unrealistic time frames,
and insufficient guidance on calculating savings. The administration is
now considering those and other comments as it finalizes the revisions to
the Circular.

Significant program design and management challenges hinder VA*s ability
to provide meaningful and timely support to disabled veterans and their
families. VA relies on outmoded medical and economic disability criteria.
VA also has difficulty providing veterans with accurate, consistent, and
timely benefit decisions, although recent actions have improved
timeliness.

In assessing veterans* disabilities, VA remains mired in concepts from the
past. VA*s disability programs base eligibility assessments on the
presence of medically determinable physical and mental impairments.
However, these assessments do not always reflect recent medical and
technological advances, and their impact on medical conditions that affect
the ability to work. VA*s disability programs remain grounded in an
approach that

equates certain medical impairments with the incapacity to work. Moreover,
advances in medicine and technology have reduced the severity of some
medical conditions and allowed individuals to live with greater
independence and function more effectively in work settings. Also, VA*s
rating schedule updates have not incorporated advances in assistive
technologies* such as advanced wheelchair design, a new generation of
prosthetic devices, and voice recognition systems* that afford some
disabled veterans greater capabilities to work.

VA has made some progress in updating its rating schedule to reflect
medical advances. Revisions generally consist of (1) adding, deleting, and
reorganizing medical conditions in the Schedule for Rating Disabilities,
(2) revising the criteria for certain qualifying conditions, and (3)
wording changes for clarification or reflection of current medical
terminology. However, VA*s effort to update its disability criteria within
the context of current program design has been slow and is insufficient to
provide the up- to- date criteria VA needs to ensure meaningful and
equitable benefit Fundamental Changes Could Improve

Effectiveness of VA*s Disability Programs VA*s Disability Criteria Are
Outmoded

Page 19 GAO- 03- 756T

decisions. Completing an update of the schedule for one body system has
generally taken 5 years or more; the schedule for the ear and other sense
organs took 8 years. In August 2002, 21 we recommended that VA use its
annual performance plan to delineate strategies for and progress in
updating its disability rating schedule. VA did not concur with our
recommendation because it believes that developing timetables for future
updates to the rating schedule is inappropriate while the initial review
is ongoing.

In addition, VA*s disability criteria have not kept pace with changes in
the labor market. The nature of work has changed in recent decades as the
national economy has moved away from manufacturing- based jobs to service-
and knowledge- based employment. These changes have affected the skills
needed to perform work and the settings in which work occurs.

For example, advancements in computers and automated equipment have
reduced the need for physical labor. However, the percentage ratings used
in VA*s Schedule for Rating Disabilities are primarily based on
physicians* and lawyers* estimates made in 1945 about the effects that
serviceconnected impairments have on the average individual*s ability to
perform jobs requiring manual or physical labor. VA*s use of a disability
schedule that has not been modernized to account for labor market changes
raises questions about the equity of VA*s benefit entitlement decisions;
VA could be overcompensating some veterans, while under- compensating or
denying compensation entirely to others.

In January 1997, we suggested that the Congress consider directing VA to
determine whether the ratings for conditions in the schedule correspond to
veterans* average loss in earnings due to these conditions and adjust
disability ratings accordingly. Our work demonstrated that there were
generally accepted and widely used approaches to statistically estimate
the effect of specific service- connected conditions on potential
earnings. These estimates could be used to set disability ratings in the
schedule that are appropriate in today*s socio- economic environment. 22
21 U. S. General Accounting Office, SSA and VA Disability Programs: Re-
Examination of

Disability Criteria Needed to Help Ensure Program Integrity, GAO- 02- 597
(Washington, D. C.: Aug. 9, 2002). 22 U. S. General Accounting Office, VA
Disability Compensation: Disability Ratings May Not Reflect Veterans*
Economic Losses, GAO/ HEHS- 97- 9 (Washington, D. C.: Jan. 7, 1997).

Page 20 GAO- 03- 756T

In August 2002, we recommended that VA use its annual performance plan to
delineate strategies for and progress in periodically updating labor
market data used in its disability determination process. VA did not
concur with our recommendation because it does not plan to perform an

economic validation of its disability rating schedule, or to revise the
schedule based on economic factors. According to VA, the schedule is
medically based; represents a consensus among stakeholders in the
Congress, VA, and the veteran community; and has been a valid basis for
equitably compensating disabled veterans for many years.

Even if VA*s schedule updates were completed more quickly, they would not
be enough to overcome program design limitations in evaluating
disabilities. Because of the limited role of treatment in VA disability
programs* statutory and regulatory design, its efforts to update the
rating schedule would not fully capture the benefits afforded by treatment
advances and assistive technologies. Current program design limits VA*s
ability to assess veterans* disabilities under corrected conditions, such
as the impact of medications on a veteran*s ability to work despite a
severe mental illness. In August 2002, we recommended that VA study and
report to the Congress on the effects that a comprehensive consideration
of medical treatment and assistive technologies would have on its
disability programs* eligibility criteria and benefit package. This study
would include estimates of the effects on the size, cost, and management
of VA*s disability programs and other relevant VA programs; and would
identify any legislative actions needed to initiate and fund such changes.
VA did not concur with our recommendation because it believes this would
represent a radical change from the current programs, and it questioned
whether stakeholders in the Congress and the veterans* community would
accept such a change.

VA*s disability program challenges are not unique. For example, the Social
Security Administration*s (SSA) disability programs 23 remain grounded in
outmoded concepts of disability. Like VA, SSA has not updated its
disability criteria to reflect the current state of science, medicine,
technology and labor market conditions. Thus, SSA also needs to reexamine
the medical and vocational criteria it uses to determine whether
individuals are eligible for benefits.

23 Disability Insurance (DI) provides benefits to workers with severe
long- term disabilities who have enough work history to be insured for
coverage under the program. Supplemental Security Income (SSI) provides
benefits to disabled, blind, or aged individuals with low income and
limited resources, regardless of their work histories.

Page 21 GAO- 03- 756T

Even if VA brought its disability criteria up to date, it would continue
to face challenges in ensuring quality and timely decisions, including
ensuring that veterans get consistent decisions* that is, comparable
decisions on benefit entitlement and rating percentage* regardless of the
regional office making the decisions. VA has made some progress in
improving disability program administration, but much remains to be done
before VA has a system that can sustain production of accurate,
consistent, and timely decisions.

VA is making changes that will allow it to better identify accuracy
problems at the national, regional office, and individual employee levels.
In turn, this will allow VA to identify underlying causes of inaccuracies
and target corrective actions, such as additional training. In response to
our March 1999 recommendation, 24 VA has centralized accuracy reviews
under its Systematic Technical Accuracy Review (STAR) program to meet
generally applicable government standards on segregation of duties and
organizational independence. Also, the STAR program began reviewing more
decisions in fiscal year 2002, with the intent of obtaining statistically
valid accuracy data at the regional office level; regional office- level

accuracy goals have been incorporated into regional directors* performance
standards. Further, VA is developing a system to measure the accuracy of
individual employees* work; this measurement is tied to employee
performance evaluations.

While VA has made changes to improve accuracy, it continues to face
challenges in ensuring consistent claims decisions. In August 2002, we
recommended that VA establish a system to regularly assess and measure the
degree of consistency across all levels of VA claims adjudication. 25
While VA agreed that consistency is an important goal, it did not fully

respond to our recommendation regarding consistency because it did not
describe how it would measure consistency and evaluate progress in
reducing any inconsistencies it may find. Instead, VA said that
consistency is best achieved through comprehensive training and
communication among VA components involved in the adjudication process. We
continue

24 U. S. General Accounting Office, Veterans* Benefits Claims: Further
Improvements Needed in Claims- Processing Accuracy, GAO/ HEHS- 99- 35
(Washington, D. C.: Mar. 1, 1999).

25 U. S. General Accounting Office, Veterans* Benefits: Quality Assurance
for Disability Claims and Appeals Processing Can Be Further Improved, GAO-
02- 806 (Washington, D. C.: Aug. 16, 2002). VA Is Trying to Improve

the Quality and Timeliness of Claims Processing

Page 22 GAO- 03- 756T

to believe that VA will be unable to determine the extent to which such
efforts actually improve consistency of decision- making across all levels
of VA adjudication now and over time. VA*s major focus over the past 2
years has been on producing more timely

decisions for veterans, and it has made significant progress in improving
timeliness and reducing the backlog of claims. The Secretary established
the VA Claims Processing Task Force, which in October 2001 made specific
recommendations to relieve the veterans* claims backlog and make claims
processing more timely. The task force observed that the work management
system in many regional offices contributed to inefficiency and an
increased number of errors. The task force attributed these problems
primarily to the broad scope of duties performed by regional office staff*
in particular, veterans service representatives (VSR). For example, VSRs
were responsible for both collecting evidence to support claims and
answering claimants* inquiries. Based on the task force*s recommendations,
VA implemented its claims process improvement (CPI) initiative in fiscal
year 2002. Under this initiative, regional office claims processing
operations were reorganized around specialized teams to handle specific
stages of the claims process. For example, regional offices have teams
devoted specifically to claims development, that is, obtaining evidence
needed to evaluate claims.

Also, VA focused on increasing production of rating- related decisions to
help reduce inventory and, in turn, improve timeliness. In fiscal years
2001 and 2002, VA hired and trained hundreds of new claims processing
staff. VA also set monthly production goals for fiscal year 2002 for each
of its regional offices, incorporating these goals into regional office
directors* performance standards. VA completed almost as many decisions in
the first half of 2003 (404,000) than in all of fiscal year 2001
(481,000). This increase in production has contributed to a significant
inventory reduction; on March 31, 2003, the rating- related inventory was
about 301,000 claims, down from about 421,000 at the end of fiscal year
2001. Meanwhile, rating- related decisions timeliness has been improving
recently; an average of 199 days for the first half of fiscal year 2003,
down from an average of 223 days in fiscal year 2002.

While VA has made progress in getting its workload under control and
improving timeliness, it will be challenged to sustain this performance.
Moreover, it will be difficult to cope with future workload increases due
to factors beyond its control, such as future military conflicts, court
decisions, legislative mandates, and changes in the filing behavior of
veterans. VA is not alone in facing these challenges; SSA is also
challenged

Page 23 GAO- 03- 756T

to improve its ability to provide accurate, consistent, and timely
disability decisions to program applicants. For example, after failing in
its attempts since 1994 to redesign a more comprehensive quality assurance
system, SSA has recently begun a new quality management initiative. Also,
SSA has taken steps to provide training and enhance communication to
improve the consistency of decisions, but variations in allowances rates
continue and a significant number of denied claims are still awarded on
appeal. SSA has recently implemented several short- term initiatives not
requiring

statutory or regulatory changes to reduce processing times but is still
evaluating strategies for longer- term solutions.

More dramatic gains in timeliness and inventory reduction might require
program design changes. For example, in 1996, the Veterans* Claims
Adjudication Commission noted that most disability compensation claims

are repeat claims* such as claims for increased disability percentage* and
most repeat claims were from veterans with less severe disabilities. The
Commission questioned whether concentrating processing resources on these
claims, rather than on claims by more severely disabled veterans, was
consistent with program intent. Another possible program design change
might involve assigning priorities to the processing of claims. For
example, claims from veterans with the most severe disabilities and
combat- disabled veterans could receive the highest priority attention.
Program design changes, including those to address the Commission*s
concerns, might require legislative actions.

In addition to program design changes, outside studies of VA*s disability
claims process identified potential advantages to restructuring VA*s
system of 57 regional offices. In its January 1999 report, the
Congressional Commission on Servicemembers and Veterans Transition
Assistance stated that some regional offices might be so small that their
disproportionately large supervisory overhead unnecessarily consumes
personnel resources. Similarly, in its 1997 report, the National Academy
of Public Administration stated VA should be able to close a large number
of regional offices and achieve significant savings in administrative
overhead

costs. Apart from the issue of closing regional offices, the Commission
highlighted a need to consolidate disability claims processing into fewer
locations. VA has consolidated its education assistance and housing loan
guaranty programs into fewer than 10 locations, and the Commission
encouraged VA to take similar action in the disability programs. VA
proposed such a consolidation in 1995 and in that proposal enumerated
several potential benefits, such as allowing VA to assign the most

Page 24 GAO- 03- 756T

experienced and productive adjudication officers and directors to the
consolidated offices; facilitating increased specialization and as- needed
expert consultation in deciding complex cases; improving the completeness
of claims development, the accuracy and consistency of rating decisions,
and the clarity of decision explanations; improving overall adjudication
quality by increasing the pool of experience and expertise in critical
technical areas; and facilitating consistency in

decisionmaking through fewer consolidated claims- processing centers. VA
has already consolidated some of its pension workload (specifically,
income and eligibility verifications) at three regional offices. 26 Also,
VA has consolidated at its Philadelphia regional office dependency and
indemnity compensation claims by survivors of servicemembers who died on
active duty, including those who died during Operation Enduring Freedom
and Operation Iraqi Freedom.

Mr. Chairman, this concludes my prepared statement. I will be happy to
answer any questions that you or Members of the Committee may have.

For further information, please contact me at (202) 512- 7101. Individuals
making key contributions to this testimony include Paul R. Reynolds, James
C. Musselwhite, Jr., Irene P. Chu, Pamela A. Dooley, Cherie* M. Starck,
William R. Simerl, Richard J. Wade, Thomas A. Walke, Cheryl A. Brand,
Kristin M. Wilson, Greg Whitney, and Daniel Montinez.

26 These are the VA regional offices in St. Paul, Minnesota; Philadelphia,
Pennsylvania; and Milwaukee, Wisconsin. Contact and Acknowledgments

Page 25 GAO- 03- 756T

VA Health Care: Improved Planning Needed for Management of Excess Real
Property. GAO- 03- 326. Washington, D. C.: January 29, 2003.

High- Risk Series: An Update. GAO- 03- 119. Washington, D. C.: January 1,
2003.

High- Risk Series: Federal Real Property. GAO- 03- 122. Washington, D. C.:
January 1, 2003.

Major Management Challenges and Program Risks: Department of Veterans
Affairs. GAO- 03- 110. Washington, D. C.: January 1, 2003.

Veterans* Benefits: Quality Assurance for Disability Claims and Appeals
Processing Can Be Further Improved. GAO- 02- 806. Washington, D. C.:
August 16, 2002.

SSA and VA Disability Programs: Re- Examination of Disability Criteria
Needed to Help Ensure Program Integrity. GAO- 02- 597. Washington, D. C.:
August 9, 2002.

VA Long- Term Care: The Availability of Noninstitutional Services Is
Uneven. GAO- 02- 652T. Washington, D. C.: April 25, 2002.

VA Long- Term Care: Implementation of Certain Millennium Act Provisions Is
Incomplete, and Availability of Noninstitutional Services Is Uneven. GAO-
02- 510R. Washington, D. C.: March 29, 2002. VA Health Care: More National
Action Needed to Reduce Waiting Times,

but Some Clinics Have Made Progress. GAO- 01- 953. Washington, D. C.:
August 31, 2001.

VA Health Care: Community- Based Clinics Improve Primary Care Access. GAO-
01- 678T. Washington, D. C.: May 2, 2001.

Inadequate Oversight of Laundry Facility at the Department of Veterans
Affairs Albany, New York, Medical Center. GAO- 01- 207R. Washington, D.
C.: November 30, 2000. VA Health Care: Expanding Food Service Initiatives
Could Save

Millions. GAO- 01- 64. Washington, D. C.: November 30, 2000.

VA Laundry Service: Consolidations and Competitive Sourcing Could Save
Millions. GAO- 01- 61. Washington, D. C.: November 30, 2000. Related GAO
Products

Page 26 GAO- 03- 756T

Veterans* Health Care: VA Needs Better Data on Extent and Causes of
Waiting Times. GAO/ HEHS- 00- 90. Washington, D. C.: May 31, 2000.

VA and Defense Health Care: Evolving Health Care Systems Require
Rethinking of Resource Sharing Strategies. GAO/ HEHS- 00- 52. Washington,
D. C.: May 17, 2000.

VA Health Care: VA Is Struggling to Address Asset Realignment Challenges.
GAO/ T- HEHS- 00- 88. Washington, D. C.: April 5, 2000.

VA Health Care: Improvements Needed in Capital Asset Planning and
Budgeting. GAO/ HEHS- 99- 145. Washington, D. C.: August 13, 1999.

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

Veterans* Affairs: Observations on Selected Features of the Proposed
Veterans* Millennium Health Care Act. GAO/ T- HEHS- 99- 125. Washington,
D. C.: May 19, 1999.

Veterans* Affairs: Progress and Challenges in Transforming Health Care.
GAO/ T- HEHS- 99- 109. Washington, D. C.: April 15, 1999. VA Health Care:
Capital Asset Planning and Budgeting Need Improvement. GAO/ T- HEHS- 99-
83. Washington, D. C.: March 10, 1999.

Veterans* Benefits Claims: Further Improvements Needed in ClaimsProcessing
Accuracy. GAO/ HEHS- 99- 35. Washington, D. C.: March 1, 1999.

VA Health Care: Closing a Chicago Hospital Would Save Millions and Enhance
Access to Services. GAO/ HEHS- 98- 64. Washington, D. C.: April 16, 1998.

VA Hospitals: Issues and Challenges for the Future. GAO/ HEHS- 98- 32.
Washington, D. C.: April 30, 1998.

VA Health Care: Status of Efforts to Improve Efficiency and Access.

GAO/ HEHS- 98- 48. Washington, D. C.: February 6, 1998.

Page 27 GAO- 03- 756T

VA Disability Compensation: Disability Ratings May Not Reflect Veterans*
Economic Losses. GAO/ HEHS- 97- 9. Washington, D. C.: January 7, 1997.

VA Health Care: Issues Affecting Eligibility Reform Efforts. GAO/ HEHS96-
160. Washington, D. C.: September 11, 1996.

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