VA and Defense Health Care: Evolving Health Care Systems Require
Rethinking of Resource Sharing Strategies (Letter Report, 05/17/2000,
GAO/HEHS-00-52).

Pursuant to a congressional request, GAO provided information on the
Department of Veterans Affairs' (VA) and Department of Defense's (DOD)
shared health care resources, focusing on: (1) the benefits gained from
sharing; (2) the extent to which VA and DOD are sharing health care
resources; and (3) barriers and challenges VA and DOD face in their
efforts to share health resources.

GAO noted that: (1) as a provider of services, VA most frequently cited
increased revenue as a benefit and DOD most often cited the opportunity
to enhance staff proficiency; (2) VA and DOD providers also cited fuller
utilization of staff and equipment as benefits; (3) as a receiver of
services, VA cited improved beneficiary access and DOD cited reduced
cost of services as benefits; (4) for fiscal year (FY) 1998, sharing
activity occurred under 412, or about three-quarters, of the existing
local sharing agreements; (5) direct medical care accounted for about
two-thirds of services exchanged--the remaining one-third included
ancillary services, such as laboratory testing, and support services,
such as laundry; (6) most of this activity occurred under a few
agreements and at a few facilities, usually in locations where multiple
DOD facilities were near VA hospitals or where DOD facilities provided
specialized services; (7) overall, 75 percent of direct medical care
episodes occurred under just 12 agreements for inpatient care, 19
agreements for outpatient care, and 12 agreements for ancillary care;
(8) reimbursements for care provided under sharing agreements were
similarly concentrated; (9) in FY 1998, three-quarters of the $29
million in reimbursements for provided care was collected by only 26 of
the 145 facilities participating in active agreements; (10) at the joint
venture sites, where another $21 million in services was exchanged, GAO
found activity was concentrated at the two locations where VA and DOD
integrated many hospital services and administrative processes; (11)
specifically, almost 300,000 episodes of care were provided, and $3.2
million in cost avoidance was measured at these two locations; (12) two
barriers identified most often by both VA and DOD are: (a) inconsistent
reimbursement and budgeting policies; and (b) burdensome agreement
approval processes; (13) a more recent barrier centers on DOD policies
and guidance in implementing its managed care program; (14) a DOD legal
opinion and subsequent policy in effect prohibits military treatment
facilities from using existing sharing agreements with VA for direct
medical care; (15) consequently, DOD's contracts with private health
care companies may supersede the sharing of direct medical care between
VA and DOD facilities; and (16) while the policy supports VA facilities'
participation in the contractors' health care networks, the military
Surgeons General and local VA and DOD officials told GAO that the policy
is causing confusion over what services can be shared.

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

 REPORTNUM:  HEHS-00-52
     TITLE:  VA and Defense Health Care: Evolving Health Care Systems
	     Require Rethinking of Resource Sharing Strategies
      DATE:  05/17/2000
   SUBJECT:  Health care services
	     Health services administration
	     Veterans benefits
	     Interagency relations
	     Joint ventures
	     Health resources utilization
	     Data bases
IDENTIFIER:  DOD TRICARE Program
	     VA Veterans Integrated Service Network
	     CHAMPUS
	     VA/DOD Health Care Resources Sharing Program
	     VA/DOD Federal Health Care Resources Sharing Database
	     Civilian Health and Medical Program of the Uniformed
	     Services

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GAO/HEHS-00-52

Appendix I: Scope and Methodology

36

Appendix II: Facilities With Active Agreements

39

Appendix III: Other Medical Services Provided

45

Appendix IV: Comments From the Department of Veterans Affairs

48

Appendix V: Comments From the Department of Defense

54

Appendix VI: GAO Contacts and Staff Acknowledgments

56

Table 1: Inpatient, Outpatient, and Ancillary Care Provided and
Reimbursements Collected by VA and DOD Under Sharing Agreements, Fiscal Year
1998 12

Table 2: Facilities Collecting Most Reimbursements Under Sharing Agreements
in Fiscal Year 1998, by Provider of Services 13

Table 3: Volume of Activity at Joint Ventures by Type of Joint
Venture, Fiscal Year 1998 18

Table 4: Joint Purchasing Arrangements Among VA and DOD
Facilities Participating in Local Sharing Agreements,
Fiscal Year 1998 21

Table 5: DOD Services' Response Rates 38

Table 6: VA Facilities With Active Local Sharing Agreements and
Their Locations 39

Table 7: DOD Facilities With Active Sharing Agreements and
Their Locations 43

Table 8: Other Medical Services Provided by VA 45

Table 9: Other Medical Services Provided by DOD 46

Table 10: Support Services Provided by VA and DOD and
Reimbursements Collected in Fiscal Year 1998 47

Figure 1: Types of Benefits Reported by VA and DOD Survey
Respondents 9

Figure 2: Locations of Facilities Collecting Most Reimbursements
Under Sharing Agreements in Fiscal Year 1998 16

AFB Air Force Base

CHAMPUS Civilian Health and Medical Program of the Uniformed Services

DOD Department of Defense

MEPS military entrance processing station

MMSO military medical support office

MTF military treatment facility

VA Department of Veterans Affairs

VAMC VA medical centers

VISN Veterans Integrated Service Network

Health, Education, and
Human Services Division

B-282020

May 17, 2000

The Honorable Clifford Stearns
Chairman, Subcommittee on Health
Committee on Veterans Affairs
House of Representatives

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

The Honorable Christopher Shays
Chairman, Subcommittee on National Security,
Veterans Affairs and International Relations
Committee on Government Reform
House of Representatives

The Department of Veterans Affairs (VA) and the Department of Defense (DOD)
provide health care services to more than 12 million beneficiaries. VA and
DOD operate a total of more than 700 medical facilities at a combined cost
of about $34 billion annually. To promote more cost-effective use of these
resources and more efficient delivery of care, we recommended in 1978
legislation that would encourage the sharing of federal health care
resources between VA and DOD.1 In May 1982, the Congress enacted the VA and
DOD Health Resources Sharing and Emergency Operations Act (Sharing Act).2
Since then, we have identified

several eligibility and reimbursement policies that have limited sharing
between VA and DOD3; legislation has been enacted to remove these
obstacles.4

To learn more about the status of sharing, you asked us to (1) describe the
benefits gained from sharing, (2) determine the extent to which VA and DOD
are sharing health care resources, and (3) identify any barriers and
challenges VA and DOD face in their efforts to share health resources. In
addition, you asked us to identify opportunities for improving VA and DOD's
annual reporting to the Congress on their sharing activities.

For this review, we spoke with VA and DOD headquarters officials and
obtained information through a mail survey sent to over 400 VA medical
facilities and DOD units participating in local sharing agreements. We
conducted site visits at four VA and three DOD medical facilities
participating in local sharing agreements in Florida, Illinois, and
Virginia. In addition, we visited two sites, New Mexico and Nevada, that
have initiated joint venture agreements to provide integrated VA and DOD
services in a single facility. We also visited the joint venture site in
Florida, where VA and DOD share space in a new jointly constructed facility,
and conducted telephone interviews with officials at the other sites where
VA and DOD share space: Alaska, California, Hawaii, Oklahoma, and Texas. We
also analyzed information in the VA/DOD Federal Health Care Resources
Sharing Database, which is solely maintained by VA and used to develop the
agencies' joint annual reports to the Congress, and held discussions with
DOD's managed care contractors to obtain their views on the resource sharing
program. (For details on our methodology, see app. I.) We conducted our work
between January 1999 and April 2000 in accordance with generally accepted
government auditing standards.

Over the last 20 years, VA and DOD have pursued opportunities to share
health care resources through local agreements, joint ventures, national
sharing initiatives, and other collaborative efforts. As both providers and
receivers of services, local VA and DOD officials identified a number of
benefits--qualitative and quantitative--resulting from the sharing program.
As a provider of services, VA most frequently cited increased revenue as a
benefit and DOD most often cited the opportunity to enhance staff
proficiency. VA and DOD providers also cited fuller utilization of staff and
equipment as benefits. As a receiver of services, VA cited improved
beneficiary access and DOD cited reduced cost of services as benefits. In
addition, some cost savings were measured. For example, some facilities
compared the costs associated with sharing and the costs of purchasing
services from private providers. Some cost savings were measured by
determining the costs avoided.

Through our survey and fieldwork, we found that while a majority of the
local and joint venture sharing agreements were active, activity was
concentrated. For fiscal year 1998, sharing activity occurred under 412, or
about three-quarters, of the existing local sharing agreements. Direct
medical care accounted for about two-thirds of services exchanged; the
remaining one-third included ancillary services, such as laboratory testing,
and support services, such as laundry. However, most of this activity
occurred under a few agreements and at a few facilities, usually in
locations where multiple DOD facilities were near VA hospitals or where DOD
facilities provided specialized services. Overall, 75 percent of direct
medical care episodes occurred under just 12 agreements for inpatient care,
19 agreements for outpatient care, and 12 agreements for ancillary care.
Reimbursements for care provided under sharing agreements--another indicator
of activity--were similarly concentrated. In fiscal year 1998,
three-quarters of the $29 million in reimbursements for provided care was
collected by only 26 of the 145 facilities participating in active
agreements. At the joint venture sites, where another $21 million in
services was exchanged, we found activity was concentrated at the two
locations where VA and DOD integrated many hospital services and
administrative processes. Specifically, almost 300,000 episodes of care were
provided, and $3.2 million in cost avoidance was measured at these two
locations. Participation by local facilities in 10 nationwide sharing
efforts or other collaborative efforts outside the Sharing Act was minimal.

VA and DOD officials reported a number of barriers that could jeopardize
current and future sharing agreements. Among the barriers identified most
often by both VA and DOD, two are long-standing barriers that we have
previously reported on: inconsistent reimbursement and budgeting policies
and burdensome agreement approval processes. The lack of flexibility to
negotiate rates that are mutually beneficial has discouraged sharing and
impeded collaboration. A more recent barrier--one that has major
implications for the nature and future of sharing--centers on DOD policies
and guidance in implementing its managed care program. Specifically, a DOD
legal opinion and subsequent policy in effect prohibits military treatment
facilities (MTF) from using existing sharing agreements with VA for direct
medical care--which constitute the majority of the sharing agreements.
Consequently, DOD's contracts with private health care companies may
supersede the sharing of direct medical care between VA and DOD facilities.
While the policy supports VA facilities' participation in the contractors'
health care networks, the military Surgeons General and local VA and DOD
officials told us that the policy is causing confusion over what services
can be shared. In light of this policy and other recent changes in VA's and
DOD's health care systems, we are recommending that DOD reevaluate its
position regarding sharing and, together with VA, determine what actions are
needed to ensure the most cost-effective use of federal health care
resources.

Despite the benefits and activity reported to us through our survey and
fieldwork, the lack of comparable historical information precluded an
assessment of the sharing program's actual progress. Although VA and DOD's
joint database shows substantial growth in the number of local sharing
agreements, it does not show the volume of activity--the actual number of
services provided and the compensation for each of these services--under
these agreements, nor does it capture activity under the joint venture
agreements and the 10 national initiatives. Collaborative efforts occurring
outside the act--another important indicator of sharing--are also not
systematically recorded. In addition, data in VA and DOD's joint database
are of questionable accuracy. For example, we found discrepancies between
the number of agreements reported in the database and the number actually in
effect. Without a baseline of activity or complete and accurate data, we
could not analyze trends in the level of sharing activity over the years. To
better enable VA and DOD to monitor sharing activity and measure the
program's progress, we are recommending that VA and DOD broaden the scope of
the information captured in their joint database and improve the quality of
the information.

VA operates one of the world's largest health care systems, spending about
$18 billion a year to provide care to approximately 4.1 million veterans who
receive health care through 181 VA medical centers and 272 outpatient
clinics nationwide. DOD spends about $16 billion on health care for over

5 million beneficiaries, including active duty personnel, military retirees,
and dependents. Most DOD health care is provided at the more than 500 Army,
Navy, and Air Force military hospitals and clinics worldwide.

To encourage the sharing of federal health care resources between VA and
DOD, the Sharing Act authorizes VA medical centers (VAMC) and DOD's MTFs to
become partners and enter into sharing agreements to buy, sell, and barter
medical and support services. The law states that the head of each medical
facility of either agency can enter into agreements; local officials propose
the agreements, and VA and DOD headquarters officials review the proposals
for final approval. Agreements can be valid for up to 5 years.

VA and DOD sharing activities fall into four categories:

ï¿½ Local sharing agreements allow VAMCs and MTFs to exchange health and
support services to maximize their resources. Under a local sharing
agreement, partners can be a provider of services, a receiver of services,
or both. Health services shared under these agreements include inpatient and
outpatient care; ancillary services, such as diagnostic and therapeutic
radiology; dental care; and specialty care services, such as services for
the treatment of spinal cord injury. Shared support services include
administration and management, research, education and training, patient
transportation, and laundry.

ï¿½ Joint venture sharing agreements , as distinguished from local sharing
agreements, aim to avoid costs by pooling resources to build new facilities
or to capitalize on existing facilities. There are three types of joint
ventures: (1) VA and DOD services integrated in a single facility, (2) VA
sharing DOD facility space, and (3) the construction of a separate VA
facility adjacent to an existing DOD facility on DOD property. Joint
ventures require more cooperation and flexibility than local agreements do
because two separate health care systems must develop multiple sharing
agreements that allow them to operate as one system. VA and DOD partners
must work together to draft these agreements and establish operational
procedures for the joint facility, such as joint medical reviews and patient
recordkeeping.

ï¿½ National sharing initiatives are being developed by the VA/DOD Executive
Council, a management-level group created under the Sharing Act and
revitalized in February 1998 as part of the Vice President's Reinventing
Government initiative. The council's goal is to identify and implement
interagency initiatives that are national in scope--such as the joint
disability discharge initiative, which eliminated the duplicative physical
examinations that military personnel were required to undergo to be
discharged and receive VA disability benefits. The council consists of each
department's chief health officers and key deputies, and the Surgeon General
from each military branch. The council generally meets monthly.5

ï¿½ Other collaborative efforts not specifically covered under the Sharing Act
are also being explored by local VA and DOD facilities. For example, in
1998, VA and DOD collaborated on the joint purchasing of pharmaceuticals,
laboratory services, medical supplies and equipment, and other support
services.

As required by the Sharing Act, VA and DOD report annually to the Congress
on the status of VA/DOD sharing.

Over the years, VA and DOD have identified numerous benefits associated with
sharing health resources, including significant improvements in resource and
facility utilization at the local level. VA and DOD partners responding to
our survey attributed a number of specific benefits to their local sharing
agreements. (See fig. 1.) As providers, VA survey respondents most
frequently cited as benefits increased revenue and fuller utilization of
staff and equipment; DOD respondents cited increased medical staff
proficiency through, for example, broadening the range of populations that
physicians treat, such as older patients and patients with more severe or
multiple conditions. As receivers, about 70 percent of both VA and DOD
respondents cited reduced cost of services and improved beneficiary access
and patient satisfaction as benefits to sharing.

Figure 1: Types of Benefits Reported by VA and DOD Survey Respondents

Source: GAO survey, 1999.

Agreements and Facilities

To measure the activity that occurred under sharing agreements in fiscal
year 1998 and establish a baseline for measuring future growth, we surveyed
VA and DOD sharing partners on the health and support services they provided
under sharing agreements and the type of compensation--measured by
reimbursements and barter arrangements--made to the facility providing the
service. We found that under three-quarters of the agreements, services were
provided, compensation was made, or both. Most services provided were for
direct medical care. However, activity was concentrated under a small
percentage of agreements and facilities, usually in locations where multiple
DOD facilities were near VA hospitals or where DOD facilities provided
specialized services. Activity under the joint ventures, while generally
robust, was similarly concentrated at the two sites where the local partners
have integrated many hospital services and administrative processes. These
two joint ventures reported over 300,000 episodes of care and $3.2 million
in actual cost savings to the government, compared with the remaining four
joint ventures that were operational as of 1998, which reported a total of
about 60,000 episodes of care and about $21.5 million in reimbursements.

Local participation in the 10 national sharing initiatives, even those that
have been fully developed, has been minimal. Some local VA and DOD sharing
partners also reported sharing arrangements not covered by the Sharing Act,
such as using joint purchasing agreements to augment the individual buying
power of VA and DOD. However, the data for these arrangements have not been
systematically collected and consequently, the benefits are not readily
quantifiable.

Care Accounting for Most Services Provided

In fiscal year 1998, 72 percent (412) of the 572 existing sharing
agreements6 had some activity.7 Of the 412 active agreements, VA provided
services under 352 agreements at 108 facilities. DOD provided services under
60 agreements at 37 facilities. VA and DOD partners also reported a total of
$29 million in sharing agreement reimbursements for providing health and
support services in fiscal year 1998--less than 1 percent of VA and DOD's
combined health care budget of $34 billion.8 Of the $29 million, VA received
over $22 million from DOD and DOD received about $7 million from VA. Under
58 of the 412 active agreements, services were bartered. Of these bartered
agreements, 35 were for training services, such as an agreement with VA for
DOD to train its medical reserve units at VA hospitals. For 33 of the
training agreements, VA provided space to DOD reserve units for training
purposes; for the remaining 2, DOD provided education and training
opportunities for VA. The remaining agreements were for various health and
support services. Although dollar values were not generally assigned for the
bartered agreements, those that did assign a value reported a total of about
$775,000.

Direct medical care accounted for over 60 percent of the 412 agreements
active in fiscal year 1998, with VA providing most of this care. Outpatient
care accounted for most of the services exchanged, and inpatient services
accounted for most of the reimbursements. Of the total reimbursements, VA
and DOD provided a breakdown for $22 million: 84 percent of the
reimbursements was for medical care and 16 percent was for support services.

VA and DOD also provided other health services under their sharing
agreements in fiscal year 1998, including pharmacy, dental, vision, and
physical therapy services. VA provided 21 other types of health services and
DOD provided 18, receiving about $4 million and almost $900,000,
respectively. (See tables 8 and 9 in app. III.) VA and DOD also provided a
number of support services, such as transportation and laundry, with
reimbursements totaling over $3.5 million. Although most of these agreements
were for education and training services, laundry services accounted for
most of the reimbursements for support activities. Specifically, over $2
million was collected by VA and nearly $400,000 was collected by DOD for
laundry services. (See table 10 in app. III.)

Collected by a Few Facilities

Although 72 percent of the sharing agreements were active in fiscal year
1998, the services exchanged and the revenue collected varied widely from
agreement to agreement (see table 1). For example, under active agreements
for inpatient care, the number of services provided by DOD ranged from 1 to
221 per agreement; reimbursements for services under an agreement ranged
from about $2,000 to $1.6 million. Under active agreements for outpatient
care, the number of services provided by VA ranged from 1 to more than 6,000
per agreement; reimbursements for services ranged from $90 to almost $1.7
million.

Table 1: Inpatient, Outpatient, and Ancillary Care Provided and
Reimbursements Collected by VA and DOD Under Sharing Agreements, Fiscal Year
1998

                                    Services            Reimbursements
                                   provideda
                     Facilities
 ProviderActive      with active Total  Range     Total      Range
         agreements
                     agreements
 Inpatient admissions
 VA      70          34          333    1-49      $2,585,733 $352-1,437,874
 DOD     16          13          556    1-221     2,905,140  1,935-1,600,000
 Outpatient visits
 VA      154         53          39,202 1-6,023   5,167,051  90-1,683,537
 DOD     23          12          13,438 2-8,574   433,886    506-177,330
 Ancillary care procedures b
 VA      115         41          34,368 1-11,953  1,650,906  5-609,079
 DOD     21          17          14,860 3-2,624   759,481    8-198,914

Note: Agreements may have covered more than one type of care and, therefore,
would be counted more than once. Not all survey respondents provided all
requested information.

aActual episodes of care.

bThese procedures include laboratory and radiology services.

Notably, we found that inpatient, outpatient, and ancillary services were
provided under a few agreements or by a few facilities. Inpatient care
provided under 12 active agreements at 6 VA and 6 DOD facilities accounted
for 75 percent of inpatient services shared. Similarly, outpatient care
provided under 19 agreements at 11 VA and 4 DOD facilities and ancillary
care provided under 12 agreements at 6 VA and 6 DOD facilities accounted for
75 percent of these services. In addition, 75 percent of the total
reimbursements under the active agreements was collected by 26, or 18
percent, of the 146 facilities with sharing agreements (see table 2).

Table 2: Facilities Collecting Most Reimbursements Under Sharing Agreements
in Fiscal Year 1998, by Provider of Services

Continued

  Provider of                                     Number of
   services      Facilities receiving services   agreements  Reimbursements
 VA provided

 Louisville,    Fort Knox; Navy Military
 Ky.            Medical Support Office (MMSO);   3           $2,577,783
                Columbus Air Force Base (AFB)
                Fort Eustis; Fort Lee; Fort Lee
 Richmond, Va.  Kenner Clinic; Langley AFB;      9           2,482,830
                DOD-wide (for spinal cord
                injuries)
                Onizuka Air Station; Travis
                AFB; Army National Guard; Army
 Palo Alto,     Defense Finance Accounting
 Calif.         Service; Army Camp Parks;        7           1,823,666
                California Medical Detachment;
                DOD-wide (for all medical care)
                Army 347th Reserves; Fort Sam
                Houston; Navy MMSO; Navy
 Miami, Fla.    Reserve, Hialeah; Navy Clinic,   8           1,239,533
                Key West; Coast Guard, Norfolk,
                Va.
                Fort Knox, Ky.; 114th Combat
                Army Hospital; Grand Forks AFB,
                N.Dak.; Army National Guard
 Minneapolis,   Reserve; Air Force 934th
 Minn.          Squadron; Air National Guard     9           904,640
                133rd Medical Squadron; Navy
                MMSO; Navy and Marine Reserves;
                Coast Guard, Norfolk, Va.
                Keller Army Medical Hospital,
                West Point; Massachusetts
 Brockton/West  National Guard; Hanscom AFB;
 Roxbury, Mass. Army 399th Combat Hospital;      5           873,332
                Army Research Institute of
                Environmental Medicine
                Ireland Army Hospital, Fort
                Knox, Ky.; Army Reserves; Army
 Indianapolis,  Reserves 337th Combat; Army
 Ind.           Defense Finance Accounting       7           847,371
                Service; Navy MMSO; Navy
                Reserves; Wright Patterson AFB
                Military Entrance Processing
 Cleveland,     Station (MEPS); Fort Knox Army
 Ohio           Medical Activity; Ohio National  3           784,811
                Guard

 Tomah, Wis.    Fort Knox; Air Force, Volk       5           750,890
                Field; Navy MMSO
                Irwin Army Hospital, Fort
                Riley; Munson Army Hospital,
                Fort Leavenworth; Army Dental
                Clinic Command; Kansas Army
                National Guard; Kansas Air
 Leavenworth,   National Guard-190th; Kansas
 Kans.          Air National Guard at McConnell  14          687,866
                AFB; Army Health Services; Army
                4204th Reserve Hospital; Army
                Reserve 7211th Medical Support
                Unit; Army 325th Field
                Hospital; Navy MMSO; Coast
                Guard, Norfolk, Va.
                Army Command; Army National
 Long Beach,    Guard; Los Angeles AFB; Navy,
 Calif.         Port Hueneme; Navy Reserve;      7           600,369
                Navy MMSO; Coast Guard,
                Norfolk, Va.
 Pittsburgh,    339th General Hospital; Army
 Pa.            Medical Department; Navy MMSO    3           486,000
                Air Force 66th Medical Group;
                Air Force 109th Medical Group;
                Air Force 109th Medical
 Albany, N.Y.   Squadron; Air National Guard,    10          447,426
                Stratton; Army National Guard;
                364th General Hospital; MEPS,
                Albany; Fort Drum; Navy
                Hospital, Oakland; Navy MMSO
                Mississippi Air National Guard;
                Mississippi Army National
                Guard; Fort Sam Houston Army
 Jackson, Miss. Medical Command; Army Reserve;   10          411,287
                Naval Air Station, Meridian;
                Navy MMSO; Jackson State
                University Reserve Officers
                Training Corps

 North Texas VA Army, Fort Sam Houston; MEPS;
 Health Care    Texas Army National Guard;
 System,        Sheppard AFB 82nd Medical        6           404,463
 Dallas, Tex.   Squadron; Navy, Corpus Christi;
                Navy MMSO
                Wilford Hall Medical Center,
 South Texas    Lackland AFB; Brooke Army
 Health Care    Medical Center, Fort Sam
 System, San    Houston; Navy, Corpus Christi;   6           352,136
 Antonio, Tex.  Naval Reserve Fleet Hospital
                21; Navy MMSO
                Army Reserve 81st Command; Army
                Reserve Regional Support; Naval
 Tampa, Fla.    Air; Florida National Guard;     6           328,199
                Navy MMSO; Coast Guard,
                Norfolk, Va.
                Army, Fort
 Brooklyn, N.Y. Monmouth/Ainsworth/Patterson;    5           325,356
                Army MEPS; Navy MMSO; Coast
                Guard, Norfolk, Va.

 Augusta, Ga.   Dwight David Eisenhower Army     3           306,993
                Medical Center, Fort Gordon
 DOD provided
 Brooke Army
 Medical
 Center, San    South Texas VAMC                 3           1,677,000
 Antonio, Tex.
 Womack Army
 Hospital, Fort Fayetteville VAMC; Durham VAMC   4           839,065
 Bragg, N.C.
 Keesler AFB
 Medical
 Center,        Biloxi VAMC                      1           586,857
 Biloxi, Miss.
 Walter Reed
 Army Medical
 Center,        VA Lakeside, Chicago, Ill.;      9           557,044
 Washington,    Washington, D.C., VAMC
 D.C.
 Naval
 Hospital, Guam Honolulu VA                      1           528,393
 Bassett Army
 Community
 Hospital, Fort
 Wainwright,    Alaska VA Healthcare System      1           468,423
 Fairbanks,
 Alaska
 Madigan Army
 Medical        Seattle/Puget Sound VA Health
 Center,        Care System                      1           442,858
 Tacoma, Wash.
 Total                                           146         $21,734,591

Most sharing activity measured by reimbursement occurred in the eastern
portion of the country and in areas where VA and DOD facilities are in
proximity to each other (see fig. 2). For example, Walter Reed Army Medical
Center in Washington, D.C., received over $400,000 from VA for providing
inpatient services under three sharing agreements. For ancillary care
procedures, the VAMC in Louisville, Kentucky, received over $600,000 in
payments from Fort Knox under one sharing agreement--more than a third of
the total reimbursements for all ancillary care services provided by VAMCs
under active sharing agreements.

Figure 2: Locations of Facilities Collecting Most Reimbursements Under
Sharing Agreements in Fiscal Year 1998
While sharing activity under the joint ventures was substantial--as would be
expected, given the effort required to establish a joint venture--most
activity was found at the two joint venture sites where local partners
integrated many hospital services and administrative processes: Nevada and
New Mexico. For example, in fiscal year 1998, these two joint ventures
provided almost 300,000 episodes of medical care and together reported a
combined cost avoidance--or savings to the government--of over $3.2
million.9 In contrast, only about 60,000 episodes of care were provided at
the remaining four joint ventures operational as of 1998, with
reimbursements between these partners totaling about $21.5 million (see
table 3).

Table 3: Volume of Activity at Joint Ventures by Type of Joint Venture,
Fiscal Year 1998

Continued

    Joint venture and                              Activity for fiscal year
        partners              Facility type                 1998
 Integrated
                         Construction of 110-bed
                         hospital for VA and DOD
 Alaska: Elmendorf AFB,  patients in 1999, with
 3rd Medical Group and   10 intensive care unit   a
 Anchorage VAMC          beds staffed by VA and
                         25 surgical beds staffed
                         by Air Force.
                                                  VA reported $2 million in
                                                  cost avoidance. The
                                                  facility provided VA and
                                                  DOD beneficiaries a total
 Nevada: Nellis AFB and  Begun in 1991,           of 17,961 inpatient days
 VA Southern Nevada      construction of 114-bed  (12,501 VA and 5,460 Air
 Health Care System, Las hospital for Air Force   Force) and 198,916
 Vegas                   and VA patients;         outpatient visits (158 VA
                         completed in 1994.
                                                  and 198,758 Air Force).
                                                  (Note: VA has separate
                                                  ambulatory outpatient
                                                  facilities.)
                         Two efforts have been    VA and DOD reported in
                         completed:               excess of $1.2 million in
                                                  cost avoidance. The
                         --integrated existing    facility provided VA and
 New Mexico: Kirtland AFB375-bed hospital in 1987 DOD beneficiaries a total
 and Albuquerque VAMC    and                      of 48,044 inpatient days
                                                  (47,025 VA and 1,019 Air
                         --new Air Force          Force) and 15,894
                         outpatient clinic built  outpatient visits (9,000
                         in 1989.                 VA and 6,894 Air Force).
 Shared space
                                                  VA reimbursed the DOD
 California: David Grant                          medical center $7.2
 Medical Center, Air     Begun in 1993, 468-bed   million for 1,691
 Force 60th Medical      Air Force hospital       inpatient care
 Group, and VA Northern  remodeled to accommodate admissions, 5,768
 California Health Care  VA patients.             outpatient visits, 274
 Systemb                                          ancillary services, and
                                                  524 radiation and
                                                  hyperbarics services.c
                         Initiative begun in
 Florida: Key West Naval 1994; construction of
 Branch Clinic           outpatient clinic
 (Jacksonville Naval     completed January 2000,  d
 Hospital) and Miami VAMCwith VA and Navy sharing
                         space.
                         Three efforts have been
                         phased in since 1991:

                         --VA psychiatric ward in
                         Army hospital opened in  VA reimbursed the DOD
                         1994,                    medical center $9.4
 Hawaii: Tripler Army                             million for 1,105
 Medical Center and      --construction of 60-bed inpatient admissions,
 Honolulu VAMC           center for aging         10,704 outpatient visits,
                         completed in 1997, and   and over 6,200
                                                  consultations.
                         --construction of
                         ambulatory clinic will
                         be completed in May
                         2000.
 V A facility constructed on DOD property
                         Initiative begun in
 Oklahoma: Reynolds Army 1990; construction of VA VA reimbursed the DOD
 Community Hospital at   outpatient clinic        hospital $201,291 for
 Fort Sill and Oklahoma  adjacent to Army         radiology, laboratory,
 City VAMC               Hospital completed in    custodial, and food
                         1995.                    services.
                                                  VA reimbursed the DOD
                         Initiative begun in      medical center $4.7
 Texas: William Beaumont 1987; construction of    million for 3,585
 Army Medical Center at  ambulatory care center   inpatient admissions,
 Fort Bliss and El Paso  adjacent to the Army     22,559 outpatient visits,
 VAMC                    hospital completed in    1,009 ancillary
                         1995.                    procedures, and support
                                                  services (6 security
                                                  guards).

aThe hospital opened in May 1999. It will track data on bed occupancy,
laboratory procedures, radiology, and MRI (magnetic resonance imaging)
tests, and emergency room visits by VA and DOD patients.

bIncludes outpatient clinics at Chico, Fairfield, Mather, Marc Island,
Martinez, Oakland, and Redding.

cHyperbarics is the administration of oxygen under increased pressure while
the patient is in an airtight chamber. These treatment facilities--which
have been used to treat carbon monoxide poisoning, gas gangrene, burns,
smoke inhalation, and decompression sickness (bends)--are expensive to build
and operate and are needed by only a small number of patients.

dThe clinic opened in January 2000; therefore, measurable activity has not
occurred.

Minimal

We found little participation among local sharing partners in 10 initiatives
introduced by the VA/DOD Executive Council since its inception--even 2 that
have been fully developed. The first--a Military and Veterans Health
Coordination Board established by the President in November 1998--works
through the VA/DOD Executive Council to conduct studies and research and
provide ongoing direction to ensure national coordination among VA, DOD, and
the Department of Health and Human Services on military and veterans health
matters. Even though this initiative provides many opportunities for local
involvement, we found little evidence of local participation. The second
fully developed council initiative was implemented in September 1999 when
DOD issued procedures for conducting joint disability discharge physical
examinations to do away with duplicate examinations of military personnel
applying for a service-connected disability. By requiring only one
examination, the program is expected to eliminate costly redundancies in
physical examinations and accelerate the processing of disability claims.
Nevertheless, only 21 VA facilities and 18 DOD facilities reported
participating in the joint disability discharge initiative.

Few survey respondents reported participation in the council's remaining
eight initiatives, which are in various stages of development. These also
have direct implications for local sharing:

ï¿½ Cost reimbursement : To create a uniform cost-reimbursement methodology
for sharing health resources.

ï¿½ Medical/surgical supply acquisition : To pursue joint clinical and
pharmacy functions and to eliminate redundancies in reviews, contracts,
prescribing guidelines, and utilization management.

ï¿½ Specialized treatment system/centers of excellence : To use existing VA
and DOD capability for specialized services and to combine programs to
reduce infrastructure overlaps, such as designating the Albuquerque VAMC as
the national center for neuroimaging for both VA and DOD.

ï¿½ Information management and technology : To encourage VA and DOD to
collaborate on technical standards for developing systems to jointly manage
information such as patient medical records.

ï¿½ Medical technology assessments : To examine VA's and DOD's acquisition and
use of medical technology to avoid duplicate purchases and better use
existing equipment.

ï¿½ Patient safety : To develop a process for sharing lessons learned on
patient safety and develop best practices to reduce preventable adverse drug
events.

ï¿½ Clinical practice guidelines : To develop VA/DOD evidence-based guidelines
for disease treatment to improve patient outcomes.

ï¿½ Joint congressional interaction : To improve communication between DOD and
VA congressional contacts on the extent of interdepartmental sharing.

Of the survey respondents, 13 VAMCs and 22 MTFs reported that they had
entered into one or more joint purchasing arrangements in fiscal year 1998
to purchase pharmaceuticals, laboratory services and supplies, medical
supplies and equipment, and other types of services (see table 4). For
example, the Madigan Army Medical Center in Tacoma, Washington, and the
Roosevelt Roads Naval Hospital in Puerto Rico reported to us that they use
VA's Subsistence Prime Vendor Program to jointly purchase food and supplies.
Other joint arrangements involve several VA and DOD facilities.

Table 4: Joint Purchasing Arrangements Among VA and DOD Facilities
Participating in Local Sharing Agreements, Fiscal Year 1998

    Purchasing arrangement         Number of VA           Number of DOD
                                    facilities             facilities
 Pharmaceuticals              2                      8
 Laboratory services/supplies 8                      11
 Medical supplies             6                      7
 Medical equipment            2                      11
 Other services               4                      22

Some respondents reported savings as a result of their joint purchasing
activities. For example, under one medical purchasing contract--involving
three VAMCs and nine DOD facilities--VA and DOD expect cost savings of $4.5
million over the 5-year contract period. VA and DOD also reported that their
joint purchasing contract for medical transcription services at the VAMC and
Naval Hospital in San Diego saved over $200,000 in fiscal year 1999; over
the 5-year contract, they anticipate saving over $1 million.

Program

Local VA and DOD officials identified a number of barriers that could
jeopardize current sharing agreements or impede further sharing of health
care resources. The barrier identified most often by DOD was the geographic
distance between the VA and DOD partner facilities, making it difficult for
them to rely on each other to provide services and reasonable access to
their beneficiaries, while VA has found that its ability to provide services
to DOD beneficiaries has been limited by VA beneficiaries' full utilization
of its VAMCs. Survey respondents continue to identify two long-standing
barriers--policies governing reimbursement and budget and processes for
approving sharing agreements--which we have previously reported on.10

Significant transformations in VA's and DOD's health care delivery systems
have also affected how VA and DOD share resources. For example, both
agencies are purchasing more health care services from private providers and
implementing managed care principles. In response, VA and DOD have each
developed service regions that have operational control over providers and
facilities, including hospitals. Among the barriers identified, recent
policies and guidance governing DOD's managed care program, TRICARE, may
have the most significant implications for sharing because they have
resulted in confusion among the military Surgeons General and local VA and
DOD partners about what can be shared and how that sharing can occur.

Agreements Are Long-Standing Barriers

Since 1978, we have reported that certain reimbursement and budgeting
policies discouraged sharing between VA and DOD. Specifically, we found that
due to a lack of understanding among local officials, some VA and DOD
hospitals set reimbursement rates at total costs rather than at incremental
costs. However, recovering incremental costs would give providers more
incentive to share because recovering these costs increases the facilities'
revenues and also decreases per-unit costs for the remainder of the
providers' patients. We have also reported that MTFs' incentive to share was
reduced because they submit reimbursements received for services provided
under sharing agreements to a centralized DOD account, instead of keeping
the reimbursements for their own use, as VAMCs do.

Although certain actions have been taken to address these two barriers, they
still exist. To address the first barrier, the VA/DOD Executive Council
Healthcare Financial Management Committee approved in December 1997 guiding
principles and recommendations for costing of services to provide local
flexibility to negotiate rates that are beneficial to both VA and DOD.
Subsequently, each branch of the service drafted implementing guidelines.
However, some survey respondents reported that, as of August 1999, these
reimbursement issues remained. For example, VA guidance stresses using
incremental costs for sharing agreements, but some VAMCs reported charging
the total cost of providing care to DOD beneficiaries, including overhead
costs, such as administration. While some MTFs bill at less than total cost
for care provided to VA beneficiaries, others bill at the total cost.
Regarding the second barrier, the council believes that local officials may
be misinterpreting DOD's guidelines on the authority to retain
reimbursements from VA partners and has recommended better articulation of
these guidelines. According to local DOD officials, some MTFs still deposit
these funds into a centrally managed DOD account, although DOD guidance
states that MTFs can keep funds received from sharing agreements. In our
survey, a number of respondents specifically noted that flexibility to
negotiate rates and clarification of reimbursement guidelines would provide
a greater incentive to share.

A related barrier, according some VA and DOD local officials, centers on
"dual eligible beneficiaries"--retired military who are also veterans. These
beneficiaries who seek care under a sharing agreement have dual access to
care--based on space available at MTFs and VA eligibility status. Each
agency tries to shift to the other the responsibility for treatment and
payment, making collaboration on sharing agreements for this population
particularly difficult.

Other long-standing barriers VAMCs and MTFs reported relate to VA's and
DOD's budgeting processes. For example, Air Force officials at both the
Nevada and New Mexico joint ventures told us that their budget requests for
medical personnel and operations and maintenance funding only take into
account the DOD patient load, even though, as an integrated joint venture
site, the Air Force facilities treat significant numbers of VA patients. An
official at the Nevada joint venture believes that, as a result of this
restriction, the facility's staffing levels--including those for doctors and
technicians--were reduced in fiscal year 1999 and, consequently, the
facility's capacity to serve veterans was also reduced. VA's and DOD's
budgeting also encourages local facilities to keep beneficiaries within
their own system. For example, a VAMC might transfer a VA patient to another
VAMC to avoid having to use its funds to reimburse the DOD partner--even
though the care may be less costly at the DOD partner facility and provide
better patient access.

Thirty-one percent of VA survey respondents and 25 percent of DOD
respondents also cited the process for approving sharing agreements as a
barrier to sharing. Local VAMCs generally have the authority to approve
their participation in sharing opportunities that they have identified. Once
agreements have been reached locally, VA headquarters gives approval for
entry into the sharing database and grants local officials program
oversight. According to VA headquarters' officials, this approval process
has been expedited and now is completed within 3 work days. MTFs, on the
other hand, must receive approval from DOD headquarters to participate.
According to local DOD officials, this requirement prolongs the process and
has resulted in some agreements not being entered into. Some local DOD
officials indicated that such experiences have discouraged them from seeking
other potential sharing arrangements.

Sharing Program

Over the past 2 decades, changes in beneficiary populations, resources, and
the health care environment have significantly influenced VA's and DOD's
health care delivery systems and how the two agencies share health
resources. Since 1980, the veteran population has declined from more than 30
million veterans to about 26 million in 1998. Barring a buildup of military
forces, the veteran population is expected to continue to decline--VA
estimates that the number of veterans will drop to 16 million by 2020. At
the same time, however, the number of veterans aged 85 and older--a
population frequently requiring nursing home care--has been projected to
increase from about 150,000 in 1990 to over 1 million by 2010. DOD's
beneficiary population is also changing. While the number of active duty
personnel is declining, the number of military retirees is increasing as is
the number of dependents. Over the past several years, DOD and VA resources
have also changed. For example, DOD closed one-third of its MTFs, and VA has
consolidated a number of its health care facilities.

To respond to these changes, VA and DOD have made significant changes in
their health care systems, mainly adopting managed care principles and
shifting care from inpatient to outpatient treatment. In October 1995, VA
began to transform its hospital-based health care delivery system into a
community-based system. VA developed 22 Veterans Integrated Service Networks
(VISN)--geographic service areas defined by patient populations, referral
patterns, and facility locations. Each VISN has operational control over and
responsibility for a capitated budget for all service providers and patient
care facilities, including hospitals. In addition to purchasing from the
private sector some services that VA historically provided, VISNs are
forming alliances with neighboring VA medical facilities, entering sharing
agreements with other government providers, and purchasing services directly
from the private sector. Over a 3-year period ending fiscal year 1998, VA
reduced its inpatient workload by 38 percent and bed days of care per 1,000
veterans by 47 percent, resulting in a reduction of more than 20,000
hospital beds and consolidation of numerous administrative and clinical
services. VA needs to continue with its efforts to realign its current
assets.

DOD's health care system has undergone a similar transformation. In March
1995, DOD established its managed health care program, TRICARE, and created
12 service regions, each with a capitated budget primarily based on the
total number of beneficiaries in the region. Under TRICARE,

beneficiaries can choose one of three program options:11 TRICARE Prime,
similar to a health maintenance organization; TRICARE Extra, similar to a
preferred provider organization; and TRICARE Standard, a fee-for-service
benefit intended to replace CHAMPUS.12 In October 1999, DOD implemented
TRICARE Prime Remote to serve active duty personnel at locations 50 miles or
more from an MTF. Each TRICARE service region is administered by a lead
agent who coordinates the health efforts of the three military departments
and is responsible for ensuring that the provider network is adequate.
Through competitive bid procedures, DOD contracts with private health care
companies for services that DOD facilities are unable to provide. These
regionwide contracts with provider networks represent a significant change
in the delivery of DOD health care.

DOD Policy May Eliminate Local Sharing of Direct Medical Care

A number of VA and DOD officials, including each service's Surgeon General,
stated that TRICARE has the potential to limit the services VA provides
under the sharing program. In response to a DOD legal opinion stating that
local sharing agreements for direct medical care represent competing
networks with TRICARE contractors, DOD issued a policy memorandum in May
1999 that, in effect, nullifies these agreements.13 According to the legal
opinion, MTFs are required to refer DOD beneficiaries to TRICARE network
providers for health care when such care is not available at the MTF, and
referring a beneficiary to a VAMC partner violates the TRICARE contract
unless the VAMC is a member of the network. All five TRICARE contractors
told us that VA sharing agreements have had little effect on their current
workload and profit. While the policy still allows sharing for support
services, it calls into question all of the local sharing agreements in
which VA provides direct medical care, which compose about 80 percent of the
services covered under the agreements that were reported to us as active.
For example, with the recent rollout of TRICARE Prime Remote, more than 100
active agreements where VA provides medical care to military beneficiaries
located 50 miles or more from an MTF could effectively be eliminated.

According to DOD policy, TRICARE contractors are encouraged to include VA
health care facilities in their networks, as authorized under the Veterans'
Health Care Eligibility Reform Act of 1996.14 As of September 1999, DOD
reported that almost 80 percent (or 137) of 172 VAMCs were TRICARE
subcontractors. However, among VA survey respondents, only 53 percent
reported being TRICARE contractors in fiscal year 1998, while 44 percent
indicated providing some level of service under TRICARE. In addition, VA
officials believe that, as network providers, VAMCs will not be used as
extensively as they were under the sharing agreements because they will be
among many other providers from which beneficiaries can choose. The use of
VA providers under TRICARE may be most extensive in remote locations, as the
five TRICARE contractors told us that they rely on subcontracts with VA in
these locations to ensure an adequate network.

TRICARE Payment Practices May Discourage Future Sharing

On October 1, 1999--subsequent to the administration of our survey--DOD
issued a policy that transfers funding and payment responsibility for all
MTF-referred care--or supplemental care--from the MTFs to TRICARE support
contractors. VA officials told us that because this new policy went into
effect, VA sharing partners have been paid late, have received payments for
services provided under sharing agreements at less than the sharing
agreement negotiated rate, or have not received payment at all. These
payment problems are the result of VA's and the TRICARE contractors'
different billing processes. For sharing agreements, VA submits one bill for
all medical and professional services, whereas TRICARE requires itemized
bills for each service. Therefore, when TRICARE support contractors receive
bills for sharing agreements, they often reimburse for only one service,
resulting in VA's not getting reimbursed for a number of the services it
provided. According to VA officials, the new policy has negatively affected
the current sharing agreements and may become a disincentive to future
sharing. DOD officials told us that they are aware of the billing and
reimbursement problems that VA partners are encountering under the new
policy. However, DOD has not described how or when it will resolve this
issue.

Since 1987, VA and DOD have reported annually to the Congress on the status
of the sharing program, as required under the Sharing Act. The reports are
developed using information from the VA/DOD Federal Health Care Resources
Sharing Database, which is maintained by VA. While the annual reports show
growth in sharing, this growth is based on the number of agreements entered
into and the range of services they cover. This measure is inadequate for
determining program status because it does not reflect actual sharing
activity through the volume of services provided and reimbursements
collected. Although we collected such information through our survey,
without comparable historical data, program progress cannot be determined.
In addition, the information in the joint database is incomplete and
inaccurate.

In 1984, VA and DOD reported to the Congress that there was a combined total
of 102 VA and DOD facilities with local sharing agreements.15 By 1994, the
number of facilities with sharing agreements totaled 284. For fiscal year
1998, the most recent year for which the annual report was issued,16 VA and
DOD claimed significant growth in sharing, stating that virtually all VAMCs
were involved in sharing agreements with virtually all MTFs. VA and DOD also
claimed growth in the number of services covered under these agreements. In
1987, they reported that 1,387 services were covered; by 1998, this number
had increased to 10,586 services,17 including those covered under TRICARE
contracts.18 Program results, however, cannot be measured by increases in
the number of sharing agreements and the number of services covered. Such
numbers indicate only the potential for sharing, not the actual volume of
services shared. Without measuring the actual activity--that is, the volume
of services exchanged and the reimbursements collected or costs avoided--VA
and DOD's claims of growth in the sharing program can be misleading, as the
numbers suggest that more sharing is occurring than may be the case.

VA and DOD have also provided in their annual reports to the Congress a
general description of the eight joint venture agreements. However, as with
the local sharing agreements, the actual activity at the joint venture sites
is not measured, nor is the progress of the 10 national sharing initiatives.
Collaborative activities occurring under authority other than the Sharing
Act are also not reported. Although VA and DOD are not required to report on
activities occurring outside the act, the full extent of sharing cannot be
determined without capturing such information.

Of the 355 VA and DOD facilities that responded to our survey and were
listed as a sharing partner in the VA/DOD sharing database as of April 1999,
83 (64 DOD facilities and 19 VA facilities) told us that they do not
participate in sharing agreements--a discrepancy that indicates the database
overstated the number of partners by 31 percent. We also found discrepancies
between the number of sharing agreements in the VA/DOD database and the
number of agreements that facilities reported to us during each of our site
visits. In some cases, the number of agreements was understated in the
database. For example, an agreement between the Southern Nevada Health Care
System and the Air Force hospital in Las Vegas, Nevada, was not listed in
the sharing database. In other cases, the number of agreements was
overstated. For example, the sharing database listed 17 agreements between
the New Mexico VAMC and Kirtland AFB, while documentation provided by VA and
DOD officials at these sites listed only 8 agreements.

We found several weaknesses in the management of the database that could
account for some of these discrepancies:

ï¿½ Expired and terminated agreements are deleted from the database only once
a year, according to VA database managers. Therefore, many agreements may be
listed as active when they are not.

ï¿½ New and terminated agreements are not consistently reported by sharing
partners to VA database managers. For example, we found that 21 VAMCs did
not submit the required forms for reporting new sharing agreements to VA for
inclusion in the database.

ï¿½ Education and training agreements are underreported because some sharing
partners do not know that they are required to report them, although VA and
DOD's reporting policy clearly requires that these agreements be included.

VA and DOD sharing partners generally believe the sharing program has
yielded benefits in both dollar savings and qualitative gains, illustrating
what can be achieved when the two agencies work together. Although the
benefits have not been fully quantified, it seems worthwhile to continue to
pursue opportunities to share resources where excess capacity and cost
advantages exist, consistent with the law. However, reductions in excess
capacity for certain services resulting from various efficiency and
right-sizing initiatives, along with extensive contracting for services,
especially through TRICARE, have changed the environment in which resource
sharing occurs. In particular, DOD's policy regarding referrals under
TRICARE has, in effect, thrown the resource sharing program into turmoil and
put VA and DOD at odds on how to make the most effective use of excess
resources where they still exist. Additionally, ongoing changes within VA's
and DOD's health care systems--such as the implementation of managed care,
the shift from inpatient to outpatient delivery settings, and projected
decreases in patient populations--have altered and will continue to change
the scope and magnitude of sharing opportunities.

Under these circumstances, the criteria and conditions that make resource
sharing a cost-effective option for the federal government--not just VA or
DOD alone--need to be reviewed and the strategies for sharing rethought. To
determine the most appropriate courses of action, several questions require
answers. For example, does VAMC treatment of TRICARE patients result in
lower overall cost for the government than contracting with private
providers? Would requiring VAMCs to be considered the equivalent of MTFs
yield a more efficient and cost-effective way to provide needed care to
beneficiaries? Are there additional joint contracting opportunities that
would provide needed services to VA's and DOD's respective populations more
cost-effectively than each agency providing such care itself? Also, if
sharing is to be optimized, can significant and long-standing barriers be
overcome, such as the need for processes that facilitate billing,
reimbursement, budgeting, and timely approval of sharing agreements? VA and
DOD need to work in concert to answer such questions. However, reaching
timely agreement could prove difficult given the different business models
VA and DOD are using to provide health care services to their beneficiaries.
Therefore, we are advising that, in the event such an agreement is not
reached, it may be necessary for the Congress to provide specific guidance
to both VA and DOD, clarifying the criteria, conditions, and expectations
for VA and DOD collaboration. In addition, we have identified specific steps
each agency needs to take to stabilize the current sharing program until a
reassessment of its direction, goals, structure, and criteria can be made.

The Secretaries of VA and DOD should jointly assess how best to achieve the
goals of health resource sharing, considering the changes that have occurred
over the last decade in the VA and DOD health care systems and the
populations they serve. This assessment should include a determination of
the most cost-effective means of providing care to beneficiaries from the
federal government's perspective--not just from the perspective of either VA
or DOD. As part of this assessment, DOD and VA should determine the
appropriate mix of purchasing care directly from contractors or providing
care directly through their own systems, including medical sharing
opportunities, by identifying current and expected excess capacities.

In addition, to the extent sharing opportunities and potential are
identified, we recommend that the agencies jointly address the barriers that
have impeded sharing and collaboration, by establishing procedures to
accommodate each other's budgeting and resources management functions as
well as facilitate timely billing, reimbursement, and agreement approval.

Finally, to increase the usefulness of the joint VA/DOD database as a means
for assessing and reporting sharing progress to the Congress, we recommend
that the Secretaries direct, respectively, the Under Secretary for Health
and the Assistant Secretary of Defense (Health Affairs) to include in the
joint database

ï¿½ the volume and types of services provided, reimbursements collected, and
costs avoided under local and joint venture sharing agreements between VA
and DOD facilities by having facilities report this activity to the medical
sharing office and

ï¿½ similar information on the progress and activity occurring under national
initiatives and other sharing activities authorized outside of the Sharing
Act.

To provide stability to the current sharing program while DOD and VA
reassess how best to achieve the goals of resource sharing legislation, we
recommend that the Secretary direct the Assistant Secretary (Health Affairs)
to review and clarify, for each category of beneficiary, DOD's policy on the
extent to which direct medical sharing is permitted with VA, including
whether the current sharing agreements are still in effect and under what
circumstances DOD requires VA to be part of the TRICARE network in order to
share resources; provide clear guidance to contractors on how to process
claims to ensure timely reimbursements; and take a more proactive role in
managing the joint VA/DOD sharing database.

To increase the attractiveness of VAMCs as cost-effective providers of
services to DOD, we recommend that the Secretary of VA direct the Under
Secretary for Health to ensure that VAMCs follow VA's guidelines and charge
incremental costs rather than total costs under sharing agreements.

As the health care environment in which VA and DOD share resources continues
to evolve, VA and DOD will likely continue to be challenged in their
collaborations on how best to make effective use of excess federal health
care resources. If the two agencies are unable to resolve their differences
in a reasonable amount of time, the Congress should consider providing
direction and guidance that clarifies the criteria, conditions, roles, and
expectations for VA and DOD collaboration.

We provided VA and DOD a draft of this report for comment (see apps. IV and
V, respectively). Generally, each agency agrees that there are opportunities
to improve the administration of the sharing program. However, regarding our
recommendation to jointly reassess how best to achieve the goals of health
resources sharing, the two agencies responded very differently. VA did not
concur with our recommendation. It stated that our draft report seriously
downplayed DOD's resistance to cooperative federal sharing activity and that
it has taken strong actions to remove virtually all barriers to
comprehensive sharing. VA did comment, though, that it would continue to
seek ways to work cooperatively with DOD and to actively participate with
other program officials in reassessing and implementing improved program
goals. DOD, on the other hand, agreed with our recommendation and stated
that a Health Care Sharing Work Group is being created under the Executive
Council to facilitate sharing and resolve sharing-related issues. DOD's and
VA's widely different responses to our recommendation, in our opinion,
typifies the current chasm between them on sharing-related matters and
clearly points to the need for the two agencies to try harder to resolve
their differences. Therefore, we stand by our recommendation that VA and DOD
work together to rethink how they can best meet the goals of sharing and
have added to the recommendation some of the areas that VA and DOD should
consider in this collaboration. Further, because VA's and DOD's comments
indicate that they may be unwilling or unable to work together to address
our recommendation in a timely manner, we have added a matter for
congressional consideration to provide VA and DOD direction and guidance if
the agencies fail to act within a reasonable time.

Regarding TRICARE, VA believes that our report should point out that DOD's
policy effectively prohibits VAMCs and MTFs from sharing for direct medical
care. However, DOD commented that the policy does not prohibit such
sharing--which seems to contradict its legal opinion on TRICARE. Our draft
report described the implications of the policy on sharing, and we have
added material to underscore the confusion that surrounds the interpretation
and implementation of this policy. In response to our recommendation to
reassess its TRICARE policy on referring patients to VAMCs, DOD said that
the policy requires clarification. However, DOD did not indicate that it
would reassess the policy in light of the effects it has had on sharing.
Therefore, we expanded our recommendations to specifically call for DOD to
review and clarify (1) the extent to which direct medical care is permitted
with VA for all categories of beneficiaries, (2) the circumstances under
which VA must be a part of the TRICARE network, and (3) whether current
sharing agreements remain in effect.

Regarding our recommendation addressed to VA to increase the usefulness of
the VA/DOD sharing database by expanding the data it captures, VA commented
that the database was not designed to be used as a broad evaluative tool
but, instead, was created to develop data for the annual report to the
Congress, as required under the law. VA's statement implies that the intent
of the law for reporting to the Congress is not to provide information that
can be used to assess the effects and progress of the sharing program. We
disagree and believe that in requiring VA and DOD to report annually on the
sharing program, the Congress is seeking information that will help it
gauge, over time, how the agencies are responding to the mandate that they
seek opportunities to share federal health care resources and thereby hold
down federal costs.

VA also had concerns regarding the effort it believes will be required to
implement our recommendation to gather more comprehensive data on sharing
activity. We believe, however, that the approach VA outlined in its comments
is more than is needed to improve the database and that VA misinterpreted
the intent of our recommendation. For example, VA states that to measure the
actual exchange of services between local and joint venture sharing
partners, it would need to use clinical workload data and ensure
compatibility with DOD's workload data. However, VA and DOD could collect
data on the actual exchange of services through other less
resource-intensive and costly undertakings, such as a simple reporting of
activity by each VA and DOD facility to show the number and types of
services provided. We collected this information on sharing activity through
our survey. VA also commented that, in addition to having sole
administrative responsibility for the database, it alone has borne the costs
for two system upgrades. To the extent that VA is concerned about this, it
should work out an agreement with DOD to share costs.

VA also disagreed that VAMCs generally charge the full cost of providing
care to DOD beneficiaries and noted that its guidance stresses incremental
costs. In response, we discuss VA's guidance regarding incremental costs but
note that some VAMCs reported to us that they charged the total cost of
providing care to DOD beneficiaries, including overhead costs.

VA also expressed concern that certain information on the sharing program
was not included in our draft report. For example, VA noted that it was
working with DOD to develop joint telemedicine standards. In our report, we
highlighted the VA/DOD Executive Council's 10 initiatives; telemedicine is
part of medical technology assessment. In addition, our survey asked VA and
DOD partners to provide information on sharing activities occurring under
authority other than the Sharing Act; none of the respondents reported
participating in the telemedicine effort. Further, VA and DOD's most recent
annual report to the Congress does not discuss telemedicine. VA also
commented that we did not discuss MTF use of VA's Subsistence Prime Vendor
Program. Our draft cited this contract as an example of a joint purchasing
arrangement; we revised the report to name the program. Last, VA commented
that there are many sharing agreements for dental services; we reported this
information in appendix III of the draft report submitted to VA (see table
8).

VA and DOD also provided technical comments, which we incorporated where
appropriate.

Copies of this report are being sent to the Honorable Togo West, Secretary
of Veterans Affairs; the Honorable William S. Cohen, Secretary of Defense;
and other interested parties. We will also make copies available to other
upon request. Please contact me at (202) 512-7101 if you or your staff have
any questions concerning this report. Staff contacts and other contributors
are listed in appendix VI.

Cynthia Bascetta
Associate Director, Veterans' Affairs and
Military Health Care Issues

Scope and Methodology

We spoke with VA and DOD headquarters officials and obtained information
through a mail survey sent to every VA medical facility and DOD unit
identified by the agencies as participating in local sharing agreements. We
also conducted site visits to VA and DOD medical facilities participating in
local sharing agreements in Florida (Miami VAMC and the Jacksonville Naval
Hospital Branch Clinic in Key West), Illinois (North Chicago VAMC and Great
Lakes Naval Hospital), and Virginia (Hampton VAMC, Richmond VAMC, and Fort
Lee Kenner Clinic). We also met with VA and DOD officials at three joint
venture sites: Florida (Miami VAMC and Jacksonville Naval Hospital Branch
Clinic in Key West), Nevada (Nellis AFB Michael O'Callaghan Federal Hospital
and Las Vegas VA Outpatient Clinic), and New Mexico (Albuquerque VAMC and
Kirtland AFB); we conducted telephone interviews with officials at the
remaining joint ventures in Alaska (Anchorage VAMC and Elmendorf AFB),
California (Air Force 60th Medical Group at David Grant Medical Center and
VA Northern California Health Care System), Hawaii (Honolulu VA Outpatient
Clinic and Tripler Army Medical Center), Oklahoma (VAMC Oklahoma City and
Reynolds Army Community Hospital at Fort Sill), and Texas (El Paso VAMC and
William Beaumont Army Medical Center).

In addition, we analyzed information maintained in the VA/DOD Federal Health
Care Resources Sharing Database, which is used to develop the agencies'
joint annual reports to the Congress. We also interviewed officials from
DOD's five managed care contractors (Anthem Alliance for Health, Foundation
Health Federal Services, Humana Military Health Care Services, Sierra
Military Health Services, and TriWest Health Care Alliance) to obtain their
views on any effect DOD's TRICARE managed care program may have on the
sharing agreements. We also conducted a literature search to obtain
background information and reviewed previous GAO studies conducted on VA/DOD
sharing in the past.

To develop questions used in the survey, we spoke with VA and DOD officials
about sharing agreements under Public Law 97-174. Our questions focused on
services provided or received, experiences encountered with the agreements,
and other types of sharing activities such as national initiatives or joint
purchasing arrangements.

Before mailing our questionnaire, we pretested it with VA and DOD officials
knowledgeable about sharing activities at four VA medical facilities and
three DOD facilities. We refined the questionnaire in response to their
comments to help ensure that the potential respondents could provide the
information requested and that our questions were fair, relevant, unbiased,
and answerable with readily available information.

To identify survey recipients, we used the VA/DOD Federal Health Care
Resources Sharing Database. As of April 1999, the database indicated that
547 VA and DOD facilities had at least one VA/DOD sharing agreement and that
the number of agreements totaled 803. We adjusted our population to 447 (154
VA and 293 DOD) facilities, omitting the 8 joint venture partners, 11
duplicate partners in the VA/DOD database, 6 inactivated units, and 75
facilities where DOD was unable to provide mailing addresses.19

In identifying facilities, we frequently could not determine from the
information in the database which branch of service the DOD partner
represented. For example, a partner may have been listed as "10th Medical
Group." To determine the specific branch of service for each DOD partner, we
met with VA officials who provided us information from either their
knowledge of the DOD unit's participation or from DOD documents. Identifying
reserve and national guard units was also difficult, particularly since DOD
points of contact are not included in the database. We mailed the
questionnaires to the 154 VAMC directors in June 1999 and to the 293
individual DOD unit commanders in June and July 1999. We conducted two
follow-up mailings and telephone follow-ups to nonrespondents.

We ended our data collection in November 1999. To adjust for the
consolidation and integration of some facilities,20 the closing of some
facilities, and duplicate submissions, we further reduced our population by
33 facilities. Our final adjusted population was 414 facilities (138 VA
facilities and 276 DOD facilities), with a response rate of 100 percent for
VA facilities and 79 percent for DOD facilities. (See table 5 for individual
DOD services' response rates.)

Table 5: DOD Services' Response Rates

             Adjusted population  Responses  Response rate
 Army        116                  83         72%
 Air Force   75                   64         85
 Coast Guard 25                   24         96
 Navy        60                   46         77
 Total       276                  217        79%

Of the 355 facilities that responded, 272 indicated that they were a
provider or receiver of medical or support services and 83 reported that
they did not participate in sharing agreements. Therefore, we restricted our
analysis to the 272 respondents who indicated that they were a provider or a
receiver of shared medical or support services. These responding facilities
participated in 572 agreements.

Facilities With Active Agreements

In fiscal year 1998, 108 VA and 37 DOD facilities had active agreements.
Table 6 lists the 108 VA facilities by VA's 22 Veterans Integrated Service
Network (VISN) areas--geographic service areas defined by patient
populations, referral patterns, and facility locations; table 7 lists the 37
DOD facilities by branch of service.

Table 6: VA Facilities With Active Local Sharing Agreements and Their
Locations

Continued

                     Facility                           City and state
 VISN 1
 Edith Nourse Rogers Memorial VA Hospital          Bedford, Mass.
 Boston VA Medical Center                          Boston, Mass.
 Brockton/West Roxbury VA Medical Center           Brockton, Mass.
 Northampton VA Medical Center                     Northampton, Mass.
 Manchester VA Medical Center                      Manchester, N.H.
 VA Connecticut Health Care System--Newington
 Campus                                            Newington, Conn.
 White River Junction VA Regional Outpatient       White River Junction,
 Clinic                                            Vt.
 VISN 2
 Samuel S. Stratton VA Medical Center              Albany, N.Y.
 VA Western New York Health Care System--Buffalo   Buffalo, N.Y.
 Canandaigua VA Medical Center                     Canandaigua, N.Y.
 VA Health Care Network Upstate New York at
 Syracuse                                          Syracuse, N.Y.
 VISN 3
 Bronx VA Medical Center                           Bronx, N.Y.
 Brooklyn VA Medical Center                        Brooklyn, N.Y.
 VA Hudson Valley Castle Point VA Medical Center   Castle Point, N.Y.
 Northport VA Medical Center                       Northport, N.Y.
 VISN 4
 James E. Van Zandt VA Medical Center              Altoona, Pa.
 Coatesville VA Medical Center                     Coatesville, Pa.
 Lebanon VA Medical Center                         Lebanon, Pa.
 Philadelphia VA Medical Center                    Philadelphia, Pa.
 VA Pittsburgh Healthcare System--Highland Drive
 Campus                                            Pittsburgh, Pa.
 Wilkes-Barre VA Medical Center                    Wilkes-Barre, Pa.
 Wilmington VA Medical Regional Outpatient Clinic  Wilmington, Del.
 VISN 5
 Baltimore VA Medical Center                       Baltimore, Md.
 Louis A. Johnson VA Medical Center                Clarksburg, W.Va.
 Beckley VA Medical Center                         Beckley, W.Va.
 Hampton VA Medical Center                         Hampton, Va.
 Hunter Holmes McGuire VA Medical Center           Richmond, Va.
 VISN 6
 Salem VA Medical Center                           Salem, Va.
 Asheville VA Medical Center                       Asheville, N.C.
 Durham VA Medical Center                          Durham, N.C.
 Fayetteville VA Medical Center                    Fayetteville, N.C.
 Salisbury VA Medical Center                       Salisbury, N.C.
 VISN 7
 Atlanta VA Medical Center                         Atlanta, Ga.
 Augusta VA Medical Center                         Augusta, Ga.
 Birmingham VA Medical Center                      Birmingham, Ga.
 Tuscaloosa VA Medical Center                      Tuscaloosa, Ala.
 Ralph H. Johnson VA Medical Center                Charleston, S.C.
 William Jennings Bryan Dorn VA Medical Center     Columbia, S.C.
 VISN 8
 Bay Pines VA Medical Center                       Bay Pines, Fla.
 North Florida/South Georgia Veterans Health
 System                                            Gainesville, Fla.
 James A. Haley Veterans Hospital                  Tampa, Fla.
 West Palm Beach VA Medical Center                 West Palm Beach, Fla.
 San Juan VA Medical Center                        San Juan, P.R.
 VISN 9
 Huntington VA Medical Center                      Huntington, W.Va.
 Louisville VA Medical Center                      Louisville, Ky.
 Lexington VA Medical Center                       Lexington, Ky.
 Memphis VA Medical Center                         Memphis, Tenn.
 James H. Quillen VA Medical Center                Mountain Home, Tenn.
 Alvin C. York VA Medical Center                   Murfreesboro, Tenn.
 Nashville VA Medical Center                       Nashville, Tenn.
 VISN 10
 Cincinnati VA Medical Center                      Cincinnati, Ohio
 VA Healthcare System of Ohio                      Cleveland, Ohio
 VA Outpatient Clinic                              Columbus, Ohio
 Dayton VA Medical Center                          Dayton, Ohio
 VISN 11
 Ann Arbor VA Medical Center                       Ann Arbor, Mich.
 Battle Creek VA Medical Center                    Battle Creek, Mich.
 Aleda E. Lutz VA Medical Center                   Saginaw, Mich.
 Richard L. Roudebush VA Medical Center            Indianapolis, Ind.
 VISN 12
 North Chicago VA Medical Center                   North Chicago, Ill.
 Marion VA Medical Center                          Marion, Ill.
 William S. Middleton Memorial Veterans Hospital   Madison, Wis.
 Tomah VA Medical Center                           Tomah, Wis.
 Clement J. Zablocki VA Medical Center             Milwaukee, Wis.
 VISN 13
 Fargo VA Medical Regional Outpatient Clinic       Fargo, N.Dak.
 VA Black Hills Healthcare System--Fort Meade      Fort Meade, S.Dak.
 VA Black Hills Healthcare System--Hot Springs     Hot Springs, S.Dak.
 Royal C. Johnson VA Medical Regional Outpatient
 Clinic                                            Sioux Falls, S.Dak.
 Minneapolis VA Medical Center                     Minneapolis, Minn.
 St. Cloud VA Medical Center                       St. Cloud, Minn.
 VISN 14
 VA Central Iowa Healthcare System--Des Moines     Des Moines, Iowa
 Iowa City VA Medical Center                       Iowa City, Iowa
 Lincoln VA Medical Center                         Lincoln, Nebr.
 Omaha VA Medical Center                           Omaha, Nebr.
 VISN 15
 Harry S. Truman Memorial Veterans' Hospital       Columbia, Mo.
 St. Louis VA Medical Center--John Cochran
 Division                                          St. Louis, Mo.
 Dwight D. Eisenhower VA Medical Center            Leavenworth, Kans.
 Wichita VA Medical Regional Outpatient Clinic     Wichita, Kans.
 VISN 16
 Biloxi VA Medical Center                          Biloxi, Miss.
 G. V. (Sonny) Montgomery VA Medical Center        Jackson, Miss.
 Alexandria VA Medical Center                      Alexandria, La.
 New Orleans VA Medical Center                     New Orleans, La.
 Overton Brooks VA Medical Center                  Shreveport, La.
 Oklahoma City VA Medical Center                   Oklahoma City, Okla.
 Little Rock VA Medical Center                     Little Rock, Ark.
 VISN 17
 Houston VA Medical Center                         Houston, Tex.
 VA North Texas Health Care System--Sam Rayburn
 Memorial Veterans Center                          Bonham, Tex.
 Central Texas Veterans Health Care System--Thomas
 T. Connally Medical Center                        Marlin, Tex.
 South Texas Veterans Health Care System--Audie L.
 Murphy Memorial Veterans Hospital                 San Antonio, Tex.
 Amarillo VA Medical Center                        Amarillo, Tex.
 VISN 18
 Carl T. Hayden VA Medical Center                  Phoenix, Ariz.
 Tucson VA Medical Center                          Tucson, Ariz.
 VISN 19
 Cheyenne VA Medical Center                        Cheyenne, Wyo.
 VA Medical Center--Sheridan                       Sheridan, Wyo.
 Denver VA Medical Center                          Denver, Colo.
 Salt Lake City VA Medical Center                  Salt Lake City, Utah
 VISN 20
 Boise VA Medical Center                           Boise, Idaho
 Portland VA Medical Center                        Portland, Oreg.
 VA Puget Sound Healthcare System--Seattle         Seattle, Wash.
 Spokane VA Medical Center                         Spokane, Wash.
 VISN 21
 VA Central California Health Care System          Fresno, Calif.
 VA Palo Alto Health Care System                   Palo Alto, Calif.
 San Francisco VA Medical Center                   San Francisco, Calif.
 Ioannis A. Lougaris VA Medical Center             Reno, Nev.
 VISN 22
 Jerry L. Pettis Memorial VA Medical Center        Loma Linda, Calif.
 Long Beach VA Medical Center                      Long Beach, Calif.
 VA Greater Los Angeles Healthcare
 System--Wadsworth Division (West Los Angeles VA   Los Angeles, Calif.
 Medical Center)
 VA Greater Los Angeles Healthcare
 System--Southern California System of Clinics     Sepulveda, Calif.
 San Diego VA Medical Center                       San Diego, Calif.

Note: The eight VA facilities that are partners in joint ventures are not
listed.

Table 7: DOD Facilities With Active Sharing Agreements and Their Locations

Continued

                       Facility                           City and state
 Army
 Keller Army Community Hospital, West Point            West Point, N.Y.
 Tobyhanna Army Depot                                  Tobyhanna, Pa.
 Walter Reed Army Institute of Research                Washington, D.C.
 Walter Reed Army Medical Center                       Washington, D.C.
 Medical Research Materiel Command, Fort Detrick       Frederick, Md.
 U.S. University of Health Sciences                    Bethesda, Md.
 DeWitt Army Community Hospital, Fort Belvoir          Fort Belvoir, Va.
 Womack Army Medical Center, Fort Bragg                Fayetteville, N.C.
 Moncrief Army Hospital, Fort Jackson                  Columbia, S.C.
 Dwight David Eisenhower Army Medical Center, Fort
 Gordon                                                Augusta, Ga.
 Bayne-Jones Army Community Hospital, Fort Polk        Leesville, La.
 Irwin Army Community Hospital, Fort Riley             Manhattan, Kans.
 Darnell Army Community Hospital, Fort Hood            Killeen, Tex.
 Brooke Army Medical Center, Fort Sam Houston          San Antonio, Tex.
 4005th Army Augmentation Reserve Unit                 Houston, Tex.
 Raymond W. Bliss Army Community Hospital, Fort
 Huachuca                                              Sierra Vista, Ariz.
 Madigan Army Medical Center, Fort Lewis               Tacoma, Wash.
 Bassett Army Community Hospital, Fort Wainwright      Fairbanks, Alaska
 Air Force
 107th Medical Squadron, New York Air National Guard   Niagara Falls, N.Y.
 74th Medical Group, Wright-Patterson AFB              Dayton, Ohio
 375th Medical Group, Scott AFB                        Scott AFB, Ill.
 Arnold Air Force Station                              Tullahoma, Tenn.
 2nd Medical Group, Barksdale AFB                      Shreveport, La.
 81st Medical Group, Keesler AFB                       Biloxi, Miss.
 59th Medical Wing, Lackland AFB                       San Antonio, Tex.
 319th Medical Group, Grand Forks AFB                  Grand Forks, N.Dak.
 Minot AFB, 5th Medical Group                          Minot, N.Dak.
 355th Medical Group, Davis--Monthan AFB               Tucson, Ariz.
 77th Medical Group, Mather AFB                        Mather AFB, Calif.
 157th Medical Squadron, Air Mobility Command, Army
 National Guard                                        Peese, N.H.
 92nd Medical Group, Fairchild AFB                     Spokane, Wash.
 Coast Guard
 U.S. Coast Guard Academy                              New London, Conn.
 Navy
 Naval Hospital                                        Portsmouth, Va.
 Naval Hospital                                        Pensacola, Fla.
 Navy Reserve (Fleet Hospital Cheyenne)                Cheyenne, Wyo.
 Navy Reserve                                          Spokane, Wash.
 Naval Hospital Guam                                   Guam

Other Medical Services Provided

The results of our survey show that VA provided 21 categories of other
medical services under 49 active agreements and DOD provided 18 categories
of other medical services under 17 active agreements. VA reported receiving
more than $4 million from DOD for these other services (see table 8). Of
this amount, $898,719 was reported for dental services, ranging from $37 to
$521,119 per agreement, excluding bartered agreements. Another $183,702 was
reported for pharmacy services provided to DOD beneficiaries, ranging from
$60 to $180,162 per agreement. DOD reported receiving almost $900,000 from
VA for these other medical services; more than a third ($355,790) was for
filling prescriptions for VA beneficiaries (see table 9). Support services
provided by VA and DOD in fiscal year 1998 and the reimbursements collected
are shown in table 10.

Table 8: Other Medical Services Provided by VA

Continued

       VA-provided medical service        Amount received
 Dental                                   $898,719
 Prosthetic devices/implants              328,696
 Women's clinic                           194,143
 Pharmacy                                 183,702
 Physical therapy                         83,300
 Psychologist supervision                 73,177
 Physical examinations/preventive care    56,010
 Ears                                     39,360
 Nuclear medicine                         12,378
 Bone scans                               6,949
 Depleted uranium outpatient servicesa    6,000
 PET (positron-emission tomography) scans 5,800
 Echocardiogram interpretations           4,020
 Dietician                                3,517
 Mental health                            3,312
 Laboratory services                      2,061
 Eyeglasses                               68
 Health and medical technicians           b
 Nursing supervision                      b
 Nursing                                  b
 Miscellaneous other medical servicesc    2,245,297
 Total                                    $4,146,509

aServices to treat patients who have had contact with or have been
contaminated by depleted uranium--a low-level radiation hazard that results
when the waste products of uranium processing are used in weapons, such as
shell casings.

bFacility could either not break out amount received for individual service
or service was bartered.

cIncludes other services for five VA hospitals that were unable to break out
costs by specific services.

Table 9: Other Medical Services Provided by DOD

 DOD-provided medical service         Amount received
 Pharmacy                             $355,790
 Hyperbaricsa                         153,340
 General surgeon support              75,194
 Nuclear medicine                     44,585
 Blood                                42,800
 Obstetrician/gynecology              33,402
 Preventive care                      27,619
 Sleep studies                        12,100
 Laboratory                           5,683
 Physician assistant                  5,265
 Nursing supervision                  3,173
 Ambulatory surgical unit             2,124
 Dietician                            840
 Dental                               b
 Health and medical technicians       b
 Orthopedic surgery                   b
 PET scans                            b
 Miscellaneous other medical services 134,570
 Total                                $896,485

aHyperbarics is the administration of oxygen under increased pressure while
the patient is in an airtight chamber. These treatment facilities--which
have been used to treat carbon monoxide poisoning, gas gangrene, burns,
smoke inhalation, and decompression sickness (bends)--are expensive to build
and operate and are needed by only a small number of patients.

bFacility could either not break out amount received for individual service
or service was bartered.

Table 10: Support Services Provided by VA and DOD and Reimbursements
Collected in Fiscal Year 1998

                              VA                            DOD
 Support service     Number of      Amount        Number of       Amount
                    agreements   collecteda      agreements    collecteda
 Laundry           23           $2,063,848      3             $347,219
 Research          2            161,475         5             138,661
 Administration
 and management    4            65,071          4             0
 Education and
 training          55           8,496           3             0
 Otherb            22           421,656         6             376,116
 Total             105c         $2,720,546      18c           $861,996

aNot all survey respondents provided reimbursements collected.

bIncludes services such as housekeeping, waste collection, police and fire
protection, and pest control.

cAgreements can contain more than one service; therefore, columns do not add
to total.

Comments From the Department of Veterans Affairs

Comments From the Department of Defense

GAO Contacts and Staff Acknowledgments

Ann Calvaresi-Barr, (202) 512-6986
Karyn Papineau, (202) 512-7155

In addition to those named above, the following staff made key contributions
to this report: Wendy Fleischer, Susan Lawes, Elsie Picyk, Mary Reich, Karen
Sloan, Connie Wilson, and Craig Winslow.

(101623)

Table 1: Inpatient, Outpatient, and Ancillary Care Provided and
Reimbursements Collected by VA and DOD Under Sharing Agreements, Fiscal Year
1998 12

Table 2: Facilities Collecting Most Reimbursements Under Sharing Agreements
in Fiscal Year 1998, by Provider of Services 13

Table 3: Volume of Activity at Joint Ventures by Type of Joint
Venture, Fiscal Year 1998 18

Table 4: Joint Purchasing Arrangements Among VA and DOD
Facilities Participating in Local Sharing Agreements,
Fiscal Year 1998 21

Table 5: DOD Services' Response Rates 38

Table 6: VA Facilities With Active Local Sharing Agreements and
Their Locations 39

Table 7: DOD Facilities With Active Sharing Agreements and
Their Locations 43

Table 8: Other Medical Services Provided by VA 45

Table 9: Other Medical Services Provided by DOD 46

Table 10: Support Services Provided by VA and DOD and
Reimbursements Collected in Fiscal Year 1998 47

Figure 1: Types of Benefits Reported by VA and DOD Survey
Respondents 9

Figure 2: Locations of Facilities Collecting Most Reimbursements
Under Sharing Agreements in Fiscal Year 1998 16
  

1. See Legislation Needed to Encourage Better Use of Federal Medical
Resources and Remove Obstacles to Interagency Sharing (GAO/HRD-78-54, June
14, 1978 ).

2. P.L. 97-174, 96 Stat. 70.

3. See VA/DOD Health Care: Further Opportunities to Increase the Sharing of
Medical Resources (GAO/HRD-88-51, Mar. 1, 1988 ).

4. The National Defense Authorization Act of 1990 and 1991 authorized the
use of Civilian Health and Medical Program of the Uniformed Services
(CHAMPUS) funds to pay VA for services rendered to CHAMPUS beneficiaries.

5. The council is responsible for preparing five reports on VA/DOD Sharing,
as required by the Secretaries of VA and DOD to meet a congressional
mandate. One report has been issued; four are pending.

6. Of the total number of sharing agreements, 481 covered VA-provided
services and 91 covered DOD-provided services.

7. We considered an agreement active if the respondent provided data on the
number of services actually provided, the compensation received, or some
combination of these. For a listing of VA and DOD facilities with active
agreements, see app. II.

8. In January 1999, the Congressional Commission on Servicemembers and
Veterans Transition Assistance issued a report on the effectiveness of
programs providing benefits and services to active duty military personnel
and veterans. In the commission's view, sharing activity based on the
estimated revenue generated from the sharing agreements has been inadequate
when compared to VA and DOD's combined health care budget.

9. Because these integrated joint ventures operate seamlessly, they collect
financial information based on cost avoidance rather than the total
reimbursements made to each other.

10. GAO/HRD-78-54, June 14, 1978, and GAO/HRD-88-51, Mar. 1, 1988.

11. A fourth program--TRICARE Senior Prime, a managed care option for
certain beneficiaries age 65 and older--is currently in the demonstration
phase.

12. CHAMPUS finances private sector care for dependents of active duty
members, retirees and their dependents, and survivors. The program is still
in effect.

13. The opinion was written to clarify language in TRICARE contracts
covering three regions (I, II, and V); presumably, sharing for medical care
does not violate the TRICARE contracts in the other regions.

14. P.L. 104-262 sec. 302(a). The act expanded the authority for entering
into sharing agreements between VA's and DOD's managed care contractors.

15. VA and DOD did not begin reporting the total number of agreements until
fiscal year 1992.

16. The fiscal year 1999 report was under review at the time of our work.

17. The number of services appears high because VA and DOD count each
service listed for each agreement.

18. Although not included in the annual sharing report to Congress, VA
financial records beginning in 1990 track the total revenue VA received from
sharing agreements and the revenue it pays to DOD for services it provides
VA. In 1990, VA collections for sharing agreements totaled $23,013,257;
payments to DOD totaled $2,916,528. In 1999, VA collections for sharing
agreements totaled $32,194,216, and payments to DOD totaled $23,853,957.
According to VA officials, the increase in VA payments to DOD can be
attributed to the joint venture locations where DOD is the host.

19. We did not mail surveys to the eight joint ventures because sharing
activity is assumed; we did interview officials at all the joint ventures.
In addition, we did not mail a survey to the Navy's Military Medical Support
Office (MMSO), Great Lakes, Illinois, because it is a fiscal intermediary
for the Navy and Marine Corps and is neither a receiver nor provider of
services. We did interview MMSO officials and obtained information on the
more than 100 sharing agreements that it oversees.

20. A number of VA hospitals have recently integrated and developed one
management team to oversee numerous hospitals within a geographic service
area. In 15 cases, the integrated facility completed one questionnaire for
all the hospitals within the integrated system.
*** End of document. ***