Veterans' Health Care: Service Delivery for Veterans on Guam and the
Commonwealth of the Northern Mariana Islands (Letter Report, 11/04/98,
GAO/HEHS-99-14).

Pursuant to a congressional request, GAO reviewed the need for
establishing a Department of Veterans Affairs (VA) inpatient facility on
Guam, focusing on: (1) how VA currently meets Guam and the Commonwealth
of the Northern Mariana Islands (CNMI) veterans' health care needs; (2)
veterans' possible future demand for health care and VA's ability to
meet this demand; and (3) the cost to establish a veterans' inpatient
ward at the U.S. Naval Hospital on Guam.

GAO noted that: (1) to meet the health care needs of veterans on Guam
and CNMI, VA currently provides services through a network of providers;
(2) this network includes outpatient and inpatient care provided on Guam
as well as by military or private hospitals in Hawaii or the continental
United States, which is accessed through aeromedical evacuations; (3) in
discussing their concerns about the VA health care system, veterans on
Guam told GAO that medical evacuations, while necessary, are
inconvenient and that they would like the U.S. Naval Hospital on Guam to
provide cardiac care to reduce the need for some of these evacuations;
(4) however, VA and Naval Hospital records indicate that only 15 percent
of the 1,140 medical evacuations provided to military beneficiaries and
veterans over the past 3 years were for cardiac care, which, according
to Department of Defense officials, is an insufficient workload to
maintain quality care for this specialty; (5) in the future, VA and Navy
officials expect to be able to continue to meet veterans' demand for
health care; (6) VA and Navy officials told GAO that they expect to
continue providing the same type of health care to Guam and CNMI
veterans that is currently available, including the services provided by
the U.S. Naval Hospital; (7) even if there were a significant increase
in veterans' demand for inpatient medical care in the future, U.S. Naval
Hospital officials believe that their hospital could handle the
potential veteran inpatient workload; (8) currently, the U.S. Naval
Hospital has a total capacity of 146 beds--consisting of 29 active beds
and 117 inactive beds; (9) in fiscal year 1997, of the 29 active beds,
military beneficiaries used 22 beds per day on average and veterans used
less than 1 on average; (10) GAO's analyses indicate that, under a
high-demand scenario, Guam and CNMI veterans would use, on average, 14
inpatient beds per day; (11) while it is highly unlikely that Guam and
CNMI veterans' demand for inpatient health care will ever reach this
level, Navy officials told GAO that the U.S. Naval Hospital could hire
staff and activate additional beds, if needed, to meet this demand; (12)
these officials said that apart from a large conflict or war, which they
could not predict, they were confident that the U.S. Naval Hospital on
Guam could handle any likely increase in veteran inpatient workload; and
(13) in light of GAO's analysis, establishing an inpatient ward at the
U.S. Naval Hospital is not warranted and would be expensive.

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

 REPORTNUM:  HEHS-99-14
     TITLE:  Veterans' Health Care: Service Delivery for Veterans on 
             Guam and the Commonwealth of the Northern Mariana
             Islands
      DATE:  11/04/98
   SUBJECT:  Health resources utilization
             Veterans hospitals
             Hospital care services
             Patient care services
             Veterans benefits
             Health services administration
             Territories and possessions
             Cost effectiveness analysis
             Hospital bed count
IDENTIFIER:  VA Veterans Integrated Service Network
             Guam
             Northern Mariana Islands
             Hawaii
             
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Cover
================================================================ COVER


Report to Congressional Requesters

November 1998

VETERANS' HEALTH CARE - SERVICE
DELIVERY FOR VETERANS ON GUAM AND
THE COMMONWEALTH OF THE NORTHERN
MARIANA ISLANDS

GAO/HEHS-99-14

Veterans' Health Care on Guam and CNMI

(101612)


Abbreviations
=============================================================== ABBREV

  CNMI - Commonwealth of the Northern Mariana Islands
  DOD - Department of Defense
  VA - Department of Veterans Affairs
  VAMROC - Veterans Affairs Medical and Regional Office Center
  VISN - Veterans Integrated Service Network

Letter
=============================================================== LETTER


B-279603

November 4, 1998

The Honorable Robert A.  Underwood
The Honorable Lane Evans
The Honorable Paul McHale
House of Representatives

The Department of Veterans Affairs (VA) offers a range of health care
benefits to our nation's veterans, including about 9,400 veterans who
reside on Guam and the Commonwealth of the Northern Mariana Islands
(CNMI).  On Guam alone, about 700 veterans received VA health care in
1997, at a cost of about $1.2 million.  In addition to providing care
through its outpatient clinic, VA purchased care from the Navy and
private providers on Guam as well as from military and private
providers in Hawaii and the continental United States. 

Veterans groups have expressed some concerns about the health care
provided on Guam and the inconvenience of traveling to Hawaii and
other locations when appropriate care is not available on Guam.  They
have also expressed concern about the possibility that the Navy may
reduce or eliminate services in its hospital on Guam in the future. 
They believe that VA could better meet veterans' health care needs if
VA established an inpatient facility at the U.S.  Naval Hospital on
Guam.  Several years ago, the Navy studied whether a VA inpatient
facility should be established at the U.S.  Naval Hospital on Guam
and concluded in a March 1996 report that the veteran inpatient
workload at the hospital for fiscal years 1992 to 1995 was too low to
support a VA inpatient facility.  VA did not conduct its own study,
but it agreed with the Navy's conclusion. 

In light of veterans' concerns, you asked us to (1) describe how VA
currently meets Guam and CNMI veterans' health care needs, (2)
estimate these veterans' possible future demand for health care and
assess VA's ability to meet this demand, and (3) estimate the cost to
establish a veterans' inpatient ward at the U.S.  Naval Hospital on
Guam. 

To examine these issues, we reviewed VA and Department of Defense
(DOD) policies and procedures and interviewed VA and DOD officials in
headquarters and field locations regarding veterans' health care on
Guam.  We visited VA and Navy health care facilities on Guam and met
with representatives of veterans organizations on Guam and with
Government of Guam officials to discuss veterans' concerns with VA
health care.  We also projected the future veteran population and the
possible demand for and use of inpatient health care through the year
2010.  Further, we obtained VA estimates of the cost to construct,
outfit, and staff a possible veterans' inpatient facility at the U.S. 
Naval Hospital.  We estimated the facility's cost for ancillary,
overhead, and other expenses as well as VA's cost to obtain future
veterans' health care under its existing sharing agreement with the
U.S.  Naval Hospital on Guam.  We conducted our review between March
1998 and October 1998 in accordance with generally accepted
government auditing standards.  Appendix I provides more detail on
our scope and methodology. 


   RESULTS IN BRIEF
------------------------------------------------------------ Letter :1

To meet the health care needs of veterans on Guam and CNMI, VA
currently provides services through a network of providers.  This
network includes outpatient and inpatient care provided on Guam as
well as care provided by military or private hospitals in Hawaii or
the continental United States, which is accessed through aeromedical
evacuations.  In discussing their concerns about the VA health care
system, veterans on Guam told us that medical evacuations, while
necessary, are inconvenient and that they would like the U.S.  Naval
Hospital on Guam to provide cardiac care to reduce the need for some
of these evacuations.  However, VA and Naval Hospital records
indicate that only 15 percent of the 1,140 medical evacuations
provided to military beneficiaries and veterans over the past 3 years
were for cardiac care, which, according to DOD officials, is an
insufficient workload to maintain quality care for this specialty. 

In the future, VA and Navy officials expect to be able to continue to
meet veterans' demand for health care.  VA and Navy officials told us
that they expect to continue providing the same type of health care
to Guam and CNMI veterans that is currently available, including the
services provided by the U.S.  Naval Hospital.  Even if there were a
significant increase in veterans' demand for inpatient medical care
in the future, U.S.  Naval Hospital officials believe that their
hospital could handle the potential veteran inpatient workload. 
Currently, the U.S.  Naval Hospital has a total capacity of 146
beds--consisting of 29 active (staffed and equipped) beds and 117
inactive (equipped only) beds.  In fiscal year 1997, of the 29 active
beds, military beneficiaries\1 used 22 beds per a day on average and
veterans used less than 1 on average.  Our analyses indicate that,
under a high-demand scenario, Guam and CNMI veterans would use, on
average, 14 inpatient beds per day.  While it is highly unlikely that
Guam and CNMI veterans' demand for inpatient health care will ever
reach this level, Navy officials told us that the U.S Naval Hospital
could hire staff and activate additional beds, if needed, to meet
this demand.  These officials said that apart from a large conflict
or war, which they could not predict, they were confident that the
U.S.  Naval Hospital on Guam could handle any likely increase in
veteran inpatient workload. 

Establishing an inpatient ward at the U.S.  Naval Hospital would be
expensive.  VA officials estimated that it would cost between $3.7
million and $6.9 million to establish a fully outfitted 14-bed VA
inpatient facility at the U.S.  Naval Hospital.  The first estimate
is for renovating existing space in the hospital; the second estimate
is for constructing an inpatient facility.  A VA inpatient facility
would have additional average annual operating costs of at least $4
million.  The estimated average annual cost to provide inpatient care
to veterans under the existing sharing agreement between VA and DOD
is about $3.7 million. 


--------------------
\1 The term "military beneficiary," as used here, includes active
duty personnel, eligible National Guard and Reservists, and military
retirees, as well as survivors and dependents. 


   BACKGROUND
------------------------------------------------------------ Letter :2

Guam and CNMI natives are U.S.  citizens, and many serve in the U.S. 
military.  Upon discharge from the U.S.  military, veterans, based on
their eligibility, can obtain health care at VA facilities or from
non-VA providers through VA sharing agreements. 

Guam is a 212-square-mile island located roughly 6,000 miles west of
the continental United States and 1,500 miles southeast of Japan. 
Guam was ceded to the United States in 1898 and became a territory in
1950.  Since its cession, it has had important U.S.  military
significance, given its strategic location in the Pacific Ocean.  In
1995, the population of Guam was estimated at 149,249.  As of fiscal
year 1997, there were about 9,400 veterans living on Guam and CNMI
and about 20,000 military beneficiaries living on Guam.\2

CNMI is a self-governing commonwealth of the United States.\3 The
people of CNMI were granted U.S.  citizenship in 1986.  CNMI consists
of 14 islands with a total land area of about 184 square miles; its
main island of Saipan is located about 100 miles northeast of Guam. 
In 1995, CNMI's population was estimated at 59,913 persons.  While
CNMI is currently considered part of VA's domestic program, the
Director of VA's Health Administration Center, which administers the
Foreign Medical Program, recently requested a legal opinion from VA's
General Counsel to determine whether veterans residing in CNMI are
entitled to benefits under VA's domestic program or whether they
should be covered by VA's Foreign Medical Program.\4 At the time our
report was issued, however, VA's General Counsel had not yet made a
determination on the legal status of veterans residing on CNMI. 
Figure 1 illustrates the location of Guam and CNMI in relation to the
U.S.  mainland and Japan. 

   Figure 1:  Guam and CNMI in
   Relation to U.S.  Mainland and
   Japan

   (See figure in printed
   edition.)

VA provides health care services to its veterans on a priority basis,
depending on factors such as the presence and extent of a
service-connected disability,\5 income level, duration of military
service, and type of discharge from the military.  VA assigns each
veteran to one of seven priority groups it established for providing
health care:  (1) veterans with service-connected disabilities rated
at 50 percent or higher; (2) veterans with service-connected
disabilities rated at 30 or 40 percent; (3) former prisoners of war
and veterans with service-connected disabilities rated at 10 or 20
percent; (4) catastrophically disabled veterans and veterans
receiving increased nonservice-connected disability pensions because
they are housebound or need the aid and attendance of another person
to accomplish the activities of daily life; (5) veterans unable to
defray the cost of medical care; (6) all other veterans in the
so-called "core" group, including veterans of World War I and
veterans with a priority for care based on presumed environmental
exposure; and (7) all other veterans.\6

VA recently implemented a change that restricted access to VA health
care for some veterans in the Pacific region.  In October 1997, VA
began phasing out the medical care offered to Pacific region veterans
in priority group 7--veterans who have no compensable
service-connected disabilities and annual incomes above the statutory
threshold.  This change affected veterans residing in VA's Pacific
Islands region, including about 30 veterans on Guam.\7 According to
VA officials, this change was made as a result of increasing medical
costs and declining budgets; these officials stated that VA needed to
make this change in order to continue serving Pacific region veterans
with service-connected disabilities. 

In 1996, VA created 22 Veterans Integrated Service Networks (VISN) to
serve as the basic budgetary and decisionmaking units in VA's health
care system for veterans within their geographic boundaries.  VISN-21
has geographic responsibility for Northern California and VA's
Pacific Islands region.\8 It relies on the VA Medical and Regional
Office Center (VAMROC)--located in Honolulu, Hawaii--to oversee
health care and other veterans' benefits for veterans living in the
Pacific Islands region of Guam, CNMI, the Hawaiian Islands, and
American Samoa. 

In addition to its outpatient clinic on Guam, VA has a sharing
agreement with the U.S.  Naval Hospital to provide inpatient,
specialty outpatient, and ancillary health care services to veterans. 
The U.S.  Naval Hospital opened on Guam in 1954.  Its primary mission
is to provide medical support to forward-deployed military personnel
and U.S.  ships in the Pacific and to respond to wartime medical
casualties.  It also responds to medical emergencies and disasters,
such as caring for typhoon victims and survivors of the recent Korean
Airlines plane crash on Guam. 

   Figure 2:  U.S.  Naval Hospital
   on Guam

   (See figure in printed
   edition.)

Source:  U.S.  Naval Hospital on Guam. 

In 1996, responding to a congressional mandate, the U.S.  Navy
studied the possibility of establishing a VA inpatient facility
within the U.S.  Naval Hospital on Guam to serve the health care
needs of veterans.\9 The Navy analyzed VA inpatient admissions at the
U.S.  Naval Hospital from fiscal years 1992 through 1995 and
determined that, on average, less than one VA beneficiary received
inpatient care at the hospital each day.  The Navy also found that
these few patients were integrated into normal hospital operations
and were cared for in the hospital location most appropriate to their
medical condition.  The Navy concluded that VA inpatient workload
data did not support the establishment of a veterans' inpatient
facility at the U.S.  Naval Hospital.  (See app.  II for the March
1996 Navy report.)


--------------------
\2 Approximately 2,000 of these military beneficiaries are retirees
and are included in the 9,400 estimated veterans residing on Guam or
CNMI. 

\3 As a commonwealth, CNMI is under the sovereignty of the United
States. 

\4 Veterans covered by VA's Foreign Medical Program can travel to a
domestic VA facility at their own expense or seek health care locally
for treatment of service-connected disabilities on a reimbursable
basis. 

\5 A service-connected disability is one that results from an injury
or disease or other physical or mental impairment incurred or
aggravated during active military service. 

\6 For a more detailed explanation of VA's priority groups and how VA
delivers medical care to its veterans, see VA Hospitals:  Issues and
Challenges for the Future (GAO/HEHS-98-32, Apr.  30, 1998). 

\7 There were no CNMI veterans that sought VA medical care under VA
priority group 7, so no CNMI veterans were affected by this change. 

\8 See VA Health Care:  Resource Allocation Has Improved, but Better
Oversight Is Needed (GAO/HEHS-97-178, Sept.  17, 1997). 

\9 The House National Security Committee in H.R 104-131, accompanying
H.R.  1530, directed the Secretary of the Navy to study a possible
cooperative arrangement with VA to establish a veterans' wing within
the U.S.  Naval Hospital on Guam. 


   GUAM AND CNMI VETERANS' HEALTH
   CARE NEEDS MET THROUGH VA'S
   NETWORK OF PROVIDERS
------------------------------------------------------------ Letter :3

Veterans residing on Guam and CNMI receive VA health care through a
network of providers, including outpatient care provided through the
VA clinic, inpatient and specialty care provided at the U.S.  Naval
Hospital, and other specialty health care through Guam's private
sector.  When certain care, such as cardiac care, is not available on
Guam, veterans are sent via aeromedical evacuations to VA, military,
or private hospitals in Hawaii or the continental United States. 
Although veterans we spoke with on Guam would prefer that the U.S. 
Naval Hospital provide cardiac care to avoid medical evacuations, the
annual cardiac workload does not meet DOD's minimum workload
requirement for this specialty.  According to DOD officials, this
requirement is needed to maintain the skill level of cardiac
specialists and ensure that quality of care is not compromised. 


      VETERANS' HEALTH CARE
      PROVIDED THROUGH A NETWORK
      OF VA, NAVY, AND PRIVATE
      SECTOR PROVIDERS
---------------------------------------------------------- Letter :3.1

Veterans seeking health care on Guam or CNMI typically enter the VA
health care system through VA's outpatient clinic.  If they cannot
receive the needed treatment there, they are referred to one of
several providers, depending on the type and availability of care
needed.  According to VAMROC records and officials, during fiscal
years 1995 through 1997, VA spent an average of $1.2 million per year
to provide health care to Guam and CNMI veterans.\10

The VA outpatient clinic is staffed by one full-time internal
medicine physician, one part-time psychiatrist under contract to VA,
one full-time psychiatric clinical nurse, and two administrative
staff.\11 As the primary point of entry for veterans seeking medical
care, the clinic conducts eligibility determinations and provides
outpatient services, such as primary care and psychiatric treatment. 
According to veteran satisfaction surveys from 1995 through 1997,
nearly all veterans were very or extremely satisfied with VA care at
the clinic. 

Over the past 3 years, the number of veterans seeking care through
VA's outpatient clinic on Guam has increased by 24 percent--from 562
veterans in fiscal year 1995 to 697 in fiscal year 1997.\12 According
to VA's outpatient clinic administrator, this increase is partially
due to increased outreach by VA and veteran service organizations on
Guam to inform veterans of available health care and encourage them
to use the clinic. 

When veterans on Guam or CNMI require inpatient, specialty
outpatient, or ancillary health care services, such as general
surgery, preventive medicine, or pharmacy, VA refers them to the U.S. 
Naval Hospital.  In emergency situations, veterans may be treated in
or directly admitted to the hospital.  During fiscal years 1995,
1996, and 1997, the number of veteran inpatient admissions to the
U.S.  Naval Hospital were 43, 42, and 36, respectively, representing
an average of less than one veteran inpatient admission per week. 
The hospital's current total bed capacity is 146 beds (29 active and
117 inactive), with an expanded wartime capacity of 266.\13

The hospital currently provides a number of surgical, medical, and
ancillary services.  (See table 1.)



                          Table 1
          
           Health Care Services Available at the
                U.S. Naval Hospital on Guam

Service area        Services
------------------  --------------------------------------
Surgical            --General surgery
                    --Orthopedics
                    --Otolaryngology
                    --Ophthalmology
                    --Oral surgery
                    --General dentistry
                    --Obstetrics, gynecology
                    --Anesthesia
                    --Urology

Medical             --Emergency medicine
                    --Family practice
                    --Pediatrics
                    --Psychiatry
                    --Dermatology
                    --Internal medicine
                    --General medicine
                    --Flight surgery
                    --Diving medicine
                    --Preventive medicine
                    --Occupational medicine

Ancillary           --Pathology
                    --Laboratory
                    --Radiology
                    --Optometry
                    --Occupational health
                    --Pharmacy
                    --Diet, food service
                    --Physical therapy
                    --Social work
                    --Family advocacy
----------------------------------------------------------
Source:  U.S.  Naval Hospital on Guam. 

The U.S.  Naval Hospital on Guam, in some instances, also uses
telemedicine as a way to enhance the health care it provides to both
military beneficiaries and veterans.  Telemedicine is used to
transfer patient data--via text, image, and video--among DOD military
facilities.  The U.S.  Naval Hospital is participating in
telemedicine with Tripler Army Medical Center in Hawaii in areas such
as cancer tumor diagnosis, telepathology, and teleradiology.  For
example, U.S.  Naval Hospital and Tripler physicians meet weekly via
teleconferencing to discuss medical cases for U.S.  Naval Hospital
patients with tumors and examine possible treatment options using
current data, which are exchanged over a computer network. 

If VA's outpatient clinic or the U.S.  Naval Hospital cannot readily
provide care to a veteran, VA may refer the veteran to the private
medical sector on Guam for treatment.  For example, VA occasionally
refers veterans to physicians on Guam for ear, nose, and throat care
because the demand for this care is high and the U.S.  Naval
Hospital's outpatient specialty clinic sometimes does not have an
adequate number of physicians available to treat these conditions. 
In addition, the U.S.  Naval Hospital shares ancillary services such
as magnetic resonance imaging and other specialized equipment with
the island's one private hospital, Guam Memorial Hospital. 


--------------------
\10 Of this average total, $370,100 was paid to Navy for care
provided through its hospital on Guam:  $256,800 for inpatient care,
$81,500 for specialty outpatient care, and $31,800 for pharmacy
services.  The remaining $856,700 of the average total was for costs
such as salaries, VA mail-order prescriptions, and care obtained from
health care providers other than Navy.  The average total does not
include indirect overhead and administrative support costs. 

\11 Since October 1995, the Guam VA clinic has sent a physician
specializing in internal medicine, a psychiatrist, and a benefits
counselor monthly to the Saipan hospital in CNMI. 

\12 About 180 of the 697 veterans who sought VA health care during
fiscal year 1997 were military retirees. 

\13 In the event of a war, the U.S.  Naval Hospital would increase
its capacity (medical personnel and beds) to provide care to injured
active duty military personnel. 


      FOR CARDIAC CARE AND OTHER
      SERVICES NOT AVAILABLE ON
      GUAM, AEROMEDICAL
      EVACUATIONS ARE USED
---------------------------------------------------------- Letter :3.2

When veterans require health care that is not available on Guam, VA
will send them (as DOD does for its military beneficiaries) via a
military or commercial aircraft to a VA, military, or private
hospital in Hawaii or the continental United States.  Regularly
scheduled military evacuation flights are provided twice per week
from Guam to Hawaii or the continental United States.  Because of the
routing military evacuation aircraft follow, it can take over 24
hours for the veteran to reach the destination; however, if the
condition requires immediate medical attention, a special military
medical evacuation can be arranged.\14

In addition to military aircraft flights, medical evacuations via
commercial airlines are available to veterans on Guam.  For example,
according to VA's outpatient clinic administrator, a commercial
airline is used when a veteran does not possess a U.S.  passport that
would allow entry into Japan, which is necessary on military medical
evacuation flights.  On nonstop commercial flights, it takes about 7
hours for veterans to reach Hawaii from Guam. 


--------------------
\14 The aircraft's scheduled route on Tuesday is Guam to Okinawa,
Japan; to Yokota, Japan; and then on to Honolulu, Hawaii.  This
flight requires an overnight stay in Japan.  The Saturday route is
direct from Guam to Yokota, Japan; to Honolulu, Hawaii; and then on
to Travis Air Force Base in California. 


      PROVIDING CARDIAC SURGERY ON
      GUAM COULD COMPROMISE
      QUALITY OF CARE
---------------------------------------------------------- Letter :3.3

During our discussions with representatives of veterans organizations
about VA health care on Guam, they told us that medical evacuations
were inconvenient because of the lengthy flight times associated with
medical evacuations and the time evacuees spent away from their
families.  These representatives told us that veterans would prefer
to have cardiac surgery available at the U.S.  Naval Hospital to
eliminate the need for evacuations for cardiac care. 

Establishing a cardiac surgery capability at the U.S.  Naval
Hospital, however, would require much more demand for these
procedures than currently exists in order to provide sufficient
quality.  According to DOD requirements for cardiac surgical
procedures, such as coronary bypass and cardiovascular procedures,
standards set by the American Board of Cardiothoracic Surgeons and
the Health Care Financing Administration require that a hospital
perform or expect to perform a minimum of 150 surgical procedures per
year to begin providing or maintain this medical specialty. 
According to DOD officials, these standards are necessary to ensure
enough workload to maintain the specialists' skill level and the
resultant quality of care. 

Overall, the combined military beneficiary and veteran inpatient
workload for cardiac care on Guam does not meet DOD requirements for
establishing a cardiac surgery unit at the U.S.  Naval Hospital on
Guam to ensure quality of care.  According to VA and DOD records, in
fiscal years 1995 through 1997, a total of 1,140 medical evacuations
were provided--1,071 for military beneficiaries and 69 for veterans. 
Cardiac care, which is the most frequently cited reason for medical
evacuations, accounted for 15 percent of these evacuations--on
average, about 56 per year.  The remaining 85 percent were for
various medical reasons, including orthopedic, neurological, renal,
oncology, and psychiatric treatment. 


   VA CAN LIKELY MEET FUTURE
   DEMAND FOR HEALTH CARE TO
   VETERANS ON GUAM AND CNMI
------------------------------------------------------------ Letter :4

While representatives of veterans organizations on Guam expressed
concern about the future availability of health care on Guam, DOD and
VA officials believe that VA's network for providing outpatient care,
inpatient care, and medical evacuations will continue into the future
even if there is an increase in demand for these services.  With the
aging of the veteran population, if current treatment patterns (in
terms of patient treatment rates and average lengths of stay) do not
change, these veterans' projected use of inpatient health care could
increase from the current one-half bed per day to a little over one
bed per day, on average, by the year 2010.  If veteran demand for
health care on Guam and CNMI mirrored one of the highest utilization
rates in the VA system, then use of inpatient care could increase to
14 beds per day by 2010.  However, given its current capacity and
workload and a continued sharing agreement with VA, the U.S.  Naval
Hospital should be able to absorb even this unlikely increase in
veteran demand for inpatient care. 


      VA PLANS TO CONTINUE
      PROVIDING CARE TO GUAM AND
      CNMI VETERANS
---------------------------------------------------------- Letter :4.1

In our discussions with representatives of veterans organizations on
Guam, concern was raised about potential downsizing at the U.S. 
Naval Hospital.  This concern may stem from the fact that since 1993,
the U.S.  military presence on Guam has downsized approximately 17
percent in active duty personnel and dependents.  In addition, other
than health care provided by the VA and U.S.  Naval Hospital health
care systems, health care options on Guam are limited.  For example,
there is only one other hospital on Guam.\15

However, both VA and DOD officials told us that veterans will
continue to have access to outpatient and inpatient care through VA,
the U.S.  Naval Hospital, and the private sector on Guam.  VA and DOD
recently renewed their sharing agreement at the U.S.  Naval Hospital
for an additional 5 years.  The U.S.  Naval Hospital's budget is
projected to remain stable through fiscal year 2001, and hospital
officials stated that they do not plan to reduce the total bed
capacity or the number of medical specialties currently available to
veterans at the hospital.  Finally, DOD and VA officials expect that
necessary medical evacuations--both commercial and military--will
continue to be available to Guam and CNMI veterans. 


--------------------
\15 This hospital, Guam Memorial, had its accreditation revoked by
the Joint Commission on Accreditation of Healthcare Organizations in
the 1980s, but hospital officials hope to regain accreditation by the
year 2001. 


      DESPITE A SLIGHT DECREASE IN
      POPULATION, GUAM AND CNMI
      VETERANS MAY DEMAND MORE VA
      HEALTH CARE IN THE FUTURE
---------------------------------------------------------- Letter :4.2

Although our projections show a slight decrease in the Guam and CNMI
veteran population from 1990 through 2010, these veterans may demand
more VA health care in the future.\16 In 1990, the combined veteran
population on Guam and CNMI was 8,526, according to U.S.  Census
data.  Using VA's veteran population projection methodology, our
analysis indicates that this veteran population peaked at about 9,400
veterans in 1996 and will steadily decline to 8,406 in 2010.\17 This
represents a 1.4 percent decrease from 1990 and an 11 percent
decrease from its peak population in 1996.\18 Although Guam and CNMI
veterans are relatively young compared to the veteran population
nationwide, they will likely require more frequent and intensive
medical care as they age over the next decade.  In 1990, only about
41 percent of the veterans on Guam and CNMI were older than 45 years;
by fiscal year 2010, over three-quarters--or about 77 percent--of
these veterans are projected to be 45 years or older.  As indicated
by historical inpatient utilization at the U.S.  Naval Hospital on
Guam, veterans aged 35 to 44 had 2.6 inpatient admissions per 1,000,
while veterans aged 45 to 54 had 4.4 inpatient admissions per 1,000. 
Corresponding lengths of stay also increased. 

To estimate the potential increase in veteran demand for VA inpatient
health care in the future, we analyzed a high-demand scenario and a
low-demand scenario.  Our low-demand scenario assumes that the
current level of veteran demand for VA inpatient care on Guam--one of
the lowest utilization rates in the VA system--will continue into the
future, adjusted for aging of the Guam and CNMI veteran population. 
Under this scenario, we estimate that by the year 2010, these
veterans could potentially need 1.01 inpatient beds per day, on
average, up from the 1997 utilization of about 0.5 beds per day, on
average.  Our high-demand scenario assumes that the veteran demand
for VA inpatient care on Guam would mirror that on Puerto Rico--which
has one of the highest utilization rates in the VA system--adjusted
for aging of the Guam and CNMI veteran population.  Under this
scenario, we estimate that by the year 2010, Guam and CNMI veterans
could potentially need up to 14 inpatient beds per day, on average. 


--------------------
\16 VA annually updates veteran population projections for all 50
states and Puerto Rico; it does not update the veteran projection for
Guam and CNMI because annual U.S.  Census data are not available for
this population. 

\17 In fiscal year 1996, about 1,760 of the 9,400 veterans residing
on Guam and CNMI were also military retirees. 

\18 This projected decrease is much lower than that projected by VA
for its total national veteran population, which is expected to
decrease by about 26 percent from 1990 to 2010. 


      PROJECTED FUTURE INPATIENT
      WORKLOAD COULD BE HANDLED BY
      THE U.S.  NAVAL HOSPITAL
---------------------------------------------------------- Letter :4.3

With a current capacity of 146 beds--consisting of 29 active and 117
inactive beds--U.S.  Naval Hospital officials believe that the
hospital could handle even the upper limit of a projected increase in
future veteran inpatient workload.\19 In fiscal year 1997, the
hospital needed, on average, about 23 beds to care for all its
patients, including veterans.  U.S.  Naval Hospital officials told us
that the hospital could handle even the highest potential veteran
inpatient need, projected under the high-demand scenario of up to 14
inpatient beds by the year 2010.  Although only 29 beds are currently
staffed and equipped, U.S.  Naval Hospital officials are confident
that--using VA reimbursements for veteran inpatient care--they could
activate beds and hire additional staff to care for these veterans,
if needed. 

U.S.  Naval Hospital officials told us that their hospital has
historically met VA's veteran inpatient and specialty outpatient care
needs with existing staffing.  Further, DOD officials explained that,
while unlikely, the only factors that may limit the hospital's
ability to provide health care services to veterans would be (1) war,
(2) lack of providers for specialized care, (3) operational
commitments, (4) downsizing of staff, (5) cuts in funding, and (6)
increased military presence on Guam.  Apart from a large conflict or
war, which they could not predict, Navy officials felt confident that
they had or could obtain sufficient resources to handle any likely
increase in veteran inpatient workload. 


--------------------
\19 Of the total 146 beds at the U.S.  Naval Hospital, 29 beds are
currently set up and ready in all respects for care of patients to
include supporting space, equipment, and staff.  In addition, 117
beds are ready for the care of patients to include supporting space
and equipment but not staffing. 


   A VA INPATIENT FACILITY AT THE
   U.S.  NAVAL HOSPITAL WOULD COST
   MILLIONS
------------------------------------------------------------ Letter :5

According to VA officials, establishing a 14-bed VA inpatient
facility could range between $3.7 million to $6.9 million in
construction costs, depending on whether the facility is renovated or
newly constructed.  In addition, it would cost at least $4 million
annually to operate such a facility.\20 Further, VA's average annual
cost to purchase the care equivalent to the 14 inpatient veteran beds
from the U.S.  Naval Hospital under the current sharing agreement
between VA and DOD is about $3.7 million.\21

According to VA officials, if space were available within the U.S. 
Naval Hospital and no significant upgrades were required by the year
2010, such as adding structural support to make the facility safer
during earthquakes, the estimated cost to renovate approximately
12,000 square feet of space for a VA inpatient facility would be
about $3.7 million.  This existing space would have to be modified to
make it suitable for inpatient health care activities.  However, if
by the year 2010, space were not available within the U.S.  Naval
Hospital or significant seismic upgrades were required, the estimated
cost to construct and outfit a 14-bed VA inpatient facility adjacent
to the hospital would be about $6.9 million.  If a future engineering
assessment concluded that a seismic upgrade were required, VA
officials told us that renovating the space within the U.S.  Naval
Hospital could cost more than constructing a new facility.\22

To determine the average annual operating cost of a possible new
veterans' inpatient facility at the U.S.  Naval Hospital, VA
officials estimated that a 14-bed inpatient facility would need four
physicians and 23 other staff (primarily nurses), at an annual cost
of $2.8 million.  Other annual operating costs would include
ancillary services; other expenses, such as laundry and food service;
housekeeping, maintenance, and utilities; and overhead.  When added
together, staffing and other operating costs total an estimated
annual operating cost of at least $4 million. 

Further, we estimated VA's average annual cost to purchase the care
equivalent to the 14 inpatient veteran beds from the U.S.  Naval
Hospital under the existing sharing agreement between VA and DOD. 
Currently, when veterans obtain inpatient care at the U.S.  Naval
Hospital, VA reimburses the U.S.  Naval Hospital for this care based
on actual veteran admissions.  Based on VA's historical expenditures
per veteran admission, by age category, we estimated that, under the
high-demand scenario, VA's annual costs to deliver care to these same
veterans would be about $3.7 million.\23


--------------------
\20 We did not estimate the cost of establishing a VA inpatient
facility under the low-demand scenario of one bed per day. 

\21 All cost estimates are stated in current 1998 dollars. 

\22 Guam has a high incidence of seismic events. 

\23 Under the low-demand scenario of 1.01 inpatient beds needed by
veterans in the year 2010, VA's cost to deliver care to these
veterans would be about $358,000. 


   CONCLUSIONS
------------------------------------------------------------ Letter :6

In its March 1996 report, the Navy concluded that a VA inpatient wing
was not needed due to the low veteran inpatient workload, and our
recent work confirms that the veteran inpatient workload averages
less than one bed per day.  Also, in the unlikely event that Guam and
CNMI veteran demand for services increased significantly, U.S.  Navy
officials believe that the U.S.  Naval Hospital will be able to meet
even the highest projected workload.  Last, constructing a new VA
inpatient facility or renovating space within the U.S.  Naval
Hospital would cost from $3.7 to $6.9 million, with additional annual
operating costs of at least $4 million. 

While veterans consider evacuations inconvenient and would like the
U.S.  Naval Hospital on Guam to offer cardiac surgery procedures to
reduce the number of evacuations, the veteran and military
beneficiary population on Guam and CNMI has required far fewer than
the minimum 150 procedures per year recommended by DOD guidance to
ensure acceptable quality of care.  Without sufficient workload to
maintain the skills of the surgeon and other supporting team members,
the U.S.  Naval Hospital on Guam would not be able to offer cardiac
surgery and ensure quality of care. 


   AGENCY COMMENTS AND OUR
   EVALUATION
------------------------------------------------------------ Letter :7

We provided a draft of this report to DOD and VA for official
comments.  DOD and VA agreed with the report's findings.  DOD also
provided one technical change, which we incorporated. 


---------------------------------------------------------- Letter :7.1

As agreed with your office, unless you publicly announce its contents
earlier, we plan no further distribution of this report until 13 days
from the date of this letter.  At that time, we will send copies to
the Secretary of Veterans Affairs, the Secretary of Defense, and
interested congressional committees.  We will also make copies
available to others upon request. 

If you have any questions about this report, please call me at (202)
512-7101 or Ronald J.  Guthrie, Assistant Director, at (303)
572-7306.  Other major contributors to this report were Lisa P. 
Gardner, Dawn Shorey, Paul Reynolds, Deborah Edwards, Alicia Cackley,
Karen Sloan, and Sylvia Shanks. 

Stephen P.  Backhus
Director, Veterans Affairs and
 Military Health Care Issues


SCOPE AND METHODOLOGY
=========================================================== Appendix I

We were asked to (1) describe how VA currently meets Guam and CNMI
veterans' health care needs, (2) estimate these veterans' possible
future demand for health care and assessed VA's ability to meet this
demand, and (3) estimate the cost to establish a veterans' inpatient
ward at the U.S.  Naval Hospital on Guam. 

To determine how VA meets Guam and CNMI veterans' health care needs,
we met with and obtained information from DOD and VA officials in
Washington, D.C.; Hawaii; and Guam.  We also reviewed and analyzed
relevant laws and regulations pertinent to VA's responsibility and
authority to provide care to veterans on Guam and CNMI.  Although the
legal opinion from VA's General Counsel regarding the status of CNMI
veterans--whether they are entitled to benefits under VA's domestic
program or should be covered by VA's Foreign Medical Program--is
still pending, the decision would not affect the outcome of our
analyses in this report. 

To learn more about VA and DOD policies and practices for providing
health care to veterans on Guam and CNMI, we contacted VA and DOD
officials stateside and on Guam.  Specifically, we contacted VA
officials at VA Headquarters in Washington, D.C.; VISN-21 in northern
California; the VA Medical and Regional Office Center in Honolulu,
Hawaii; and VA's outpatient clinic on Guam.  We contacted DOD
officials at the Navy's Bureau of Medicine and Surgery in Washington,
D.C.; the U.S.  Pacific Command in Hawaii; Tripler Army Medical
Center in Hawaii; and the U.S.  Naval Hospital on Guam.  We also
reviewed VA and DOD documents on veteran health care policies,
practices, and eligibility as well as budget data.  We compiled and
analyzed (1) the cost of health care for the last 3 fiscal years
provided at the VA outpatient clinic on Guam and the U.S.  Naval
Hospital, (2) referrals to private sector providers, and (3) medical
evacuations to Hawaii or the continental United States.  We further
analyzed the frequency and medical reasons for medical evacuations
provided to veterans and military beneficiaries on Guam.  We did not
verify the reliability of VA or U.S.  Naval Hospital medical
evacuation data. 

We also met with officials of the Government of Guam Veterans Affairs
Office and with Guam representatives of the Veterans of Foreign Wars,
Vietnam Veterans of America, and American Legion to better understand
and describe veterans' concerns about their VA care.  During our
meeting with the Guam Veterans Affairs Office, we reconciled
differences between its veteran population estimate and the estimate
from the Guam 1990 Census data.\24 We also reviewed Guam VA
outpatient clinic satisfaction survey results for the last 3 years. 
We further met with Guam Memorial Hospital officials to discuss
health care issues on Guam and the hospital's accreditation status. 

To assess VA's ability to meet our projected demand, we interviewed
VA, DOD, Air Force, and Navy officials and reviewed DOD staffing
estimates and U.S.  Naval Hospital budget projections. 


--------------------
\24 The Guam Veterans Affairs Office had originally estimated that
15,000 veterans live on Guam, compared to the 8,526 from the 1990
Census data.  An official in the Guam Veterans Affairs Office told us
that some of the veterans were deceased or moved away from Guam and
estimated the actual number of veterans residing on Guam to be closer
to 9,100. 


      ESTIMATING FUTURE DEMAND FOR
      HEALTH CARE ON GUAM
------------------------------------------------------- Appendix I:0.1

To determine Guam and CNMI veterans' possible demand for health care
in the future, we estimated the current veteran population on Guam
and CNMI and analyzed possible changes in level of veteran demand for
care and patterns of inpatient utilization.\25

We projected Guam's total veteran population to the year 2010 by
adjusting 1990 Census data to reflect the aging of the current
population since 1990 and recent and expected future separations from
the military.\26 We relied on survival data obtained from the
Government of Guam Department of Public Health and Social Services
and separation data obtained from VA's Office of Policy and Planning
for this projection. 

To estimate how much VA inpatient care veterans on Guam and CNMI
could potentially require over the next decade, we developed two
different health care demand scenarios, based on actual low and high
veteran inpatient utilization rates within the VA system.  These
scenarios represent a range of potential demand and are not intended
to predict a specific future demand.\27 We then used VA's inpatient
planning model and Puerto Rico and Guam current veteran inpatient
utilization rates (patient treated rates and average lengths of stay)
to compute total bed days of care and inpatient bed requirements for
both the low- and high-demand scenarios.\28 Both scenarios age the
veteran population through the year 2010 and provide for the same
type of hospital beds (medical, surgical, and intensive care) that
are currently available at the U.S.  Naval Hospital. 


--------------------
\25 Annual U.S.  Census data are not available for the veteran
population for Guam and CNMI; therefore, VA does not update the
veteran projection for this population. 

\26 Separations, as used here, are defined as new veterans separating
from the service and returning to Guam and CNMI as their home of
record. 

\27 To estimate utilization of inpatient health care, we analyzed
U.S.  Naval Hospital data on veteran inpatient admissions for the
last 3 years, including veteran age, length of hospital stay, reason
for admission, and cost of care.  We did not independently assess the
reliability of the U.S.  Naval Hospital data we used for this
analysis, but these data are used for billing purposes and are
reviewed monthly by VA. 

\28 VA uses its inpatient planning model, originally developed in
cooperation with GAO, to estimate veterans' future use of hospital
beds.  The model is driven by several variables, including veterans'
ages; average length of hospital stays in selected medical services,
such as surgery; and the number of patients treated in selected
medical services. 


      ESTIMATING THE COST OF A VA
      INPATIENT FACILITY
------------------------------------------------------- Appendix I:0.2

To estimate the cost of a VA inpatient facility at the U.S.  Naval
Hospital on Guam, VA prepared two cost estimates for a 14-bed VA
inpatient facility within the U.S.  Naval Hospital on Guam--one
estimate was for renovating the existing space, the other was for new
construction.  These estimates provided 10 medical or surgical beds
and four intensive care beds, all fully outfitted and within 11,588
square feet (VA's space planning criteria).  VA officials adjusted
its renovation and construction cost estimates to reflect that
construction on Guam is twice as expensive as in the continental
United States. 

Annual operating costs for either VA inpatient facility would consist
of staffing; ancillary services; other expenses, such as laundry and
food service; housekeeping, maintenance, and utilities; and overhead. 
VISN-21 estimated staffing costs for 27 VA staff, including 4
physicians.  We estimated ancillary and other expenses using the U.S. 
Naval Hospital average costs per bed day of care in 1997 multiplied
by the projected number of VA inpatient bed days of care for 2010. 
We also estimated housekeeping, maintenance, and utilities based on
the U.S.  Naval Hospital costs per square foot multiplied by the
square footage of the proposed VA facility.  We included overhead
costs equal to 10 percent of total operating costs.  Both a VA and a
Naval Hospital official reviewed the methodologies we used to
estimate ancillary and other costs and concluded that the approaches
would result in a conservative estimate of the potential costs. 

Last, we computed the cost to obtain inpatient care required by the
projected high- and low-demand scenarios under the existing VA and
DOD sharing agreement at the U.S.  Naval Hospital.  Our estimate was
derived by calculating a 3-year historical average cost per veteran
admission at the U.S.  Naval Hospital by age category.  The resulting
historical average cost by age group was then applied to the high-
and low-demand veteran admissions by age group in 2010. 

VA and Navy officials reviewed the estimated construction and
staffing costs obtained from VA.  All cost estimates are in current
1998 dollars. 




(See figure in printed edition.)Appendix II
NAVY'S MARCH 1996 REPORT ON
ESTABLISHING A VA INPATIENT WING
=========================================================== Appendix I



(See figure in printed edition.)



(See figure in printed edition.)


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