From fiscal year 1997 to fiscal year 2002, the number of  patients medical centers in the network treated increased by 27 percent. Medical Centers in Network 9 (Nashville) Received About $1 Billion in Fiscal Year 2002 from the Network and Other Sources

The six medical centers in Network 9 (Nashville) received about $1 billion  in fiscal year 2002 from three sources: the network, VA headquarters, and  resources from collections. The network allocated the  largest share of this total—83 percent or about $825 million of the total  resources received by the six medical centers. Finally, the six medical centers also collected about  7 percent of the total resources medical centers received or $73 million in  resources from collections of third-party insurance payments, veteran  copayments, and reimbursements primarily for services provided to non- VA healthcare providers. From fiscal year 1997 through fiscal year 2003, Network 9  (Nashville) allocated more than 80 percent of medical center resources  each year. A large portion of the resources allocated  on the basis of fixed-capitation amounts for patient workload and case  mix came from the network and a smaller portion came from VA  headquarters. The other resources that medical centers received in fiscal  year 2002 were based on a variety of other factors such as network  managers’ determination of the financial needs of medical centers during  the course of the year. These resources came from the network, VA  headquarters, and collections. Since VA changed its resource allocation  system in fiscal year 1997, medical centers in Network 9 (Nashville)  received about three-quarters of their resources based on fixed-capitation  amounts and about one-quarter based on other factors each year from  fiscal years 1997 through 2003. Medical Centers Received About One-Quarter of Their Resources Based on a Variety of Other Factors

Medical centers in Network 9 (Nashville) received about 23 percent of  their total resources, or $232 million, in fiscal year 2002 based on a variety  of factors other than fixed-capitation amounts for patient workload and  case mix. Another contact and key  contributors are listed in appendix V.

Appendix I: Objectives, Scope, and Methodology

We reviewed Network 9 (Nashville) allocations to its medical centers for  fiscal year 2002 to determine: (1) the amount of resources medical centers  in the network received and the source of those resources, (2) the basis on  which medical centers in the network received these resources, and  (3) the extent to which network office expenditures were greater than in  fiscal year 1997 and the primary reasons accounting for any increase. We estimated the portion of these  direct VA allocations to medical centers in the network that was based on  fixed-capitation amounts for patient workload and case mix by assuming  that during this period the portion was the same as in fiscal year 2002,  when such resources amounted to 20 percent of VA headquarters’ direct  allocations to the network. VA Health Care: Changes Needed to Improve Resource Allocation to  Health Care Networks.
Why GAO Did This Study

Since fiscal year 1997, the Department of Veterans Affairs (VA) has relied primarily on its 21 health care networks to allocate resources to its medical centers. VA headquarters also directly allocates some resources to the medical centers. In addition, medical centers collect resources from third-party insurance payments and other sources. VA provides general guidance to\ networks for resource allocation to medical centers, but permits variation in networks' allocation methodologies. Representatives from veterans groups and others have expressed concerns regarding resource allocations to medical centers in Network 9 (Nashville) known as the Mid South Healthcare Network. GAO was asked to report for fiscal year 2002 (1) the amount of resources medical centers in the network received and the source of those resources and (2) the basis on which medical centers in the network received these resources. GAO was also asked to supplement findings for fiscal year 2002 with information for fiscal years 1997 through 2003.

What GAO Found

The six medical centers in Network 9 (Nashville), known as the Mid South Healthcare Network, received a total of about $1 billion in resources in fiscal year 2002. The network allocated 83 percent of the total, or $825 million, to its medical centers. The medical centers received smaller amounts from VA headquarters (9 percent of the total or about $93 million) and resources from collections (7 percent of the total or about $73 million). As in fiscal year 2002, the network allocated more than 80 percent of medical center resources each year from fiscal years 1997 through fiscal year 2003. Medical centers in Network 9 (Nashville) received about 77 percent of their resources, or $760 million, in fiscal year 2002 based on fixed-per-patient amounts, referred to as fixed-capitation amounts, for patient workload and case mix. Patient workload is the number of patients treated, and case mix is a classification of patients into categories based on health care needs and related costs. The largest portion of these resources allocated on this basis came from the network while a smaller portion came from VA headquarters. Medical centers in the network received about 23 percent of their total resources, or $232 million, in fiscal year 2002 based on a variety of other factors such as network managers' determination of the financial needs of medical centers during the course of the year. These resources came from the network, VA headquarters, and collections. Since VA changed its resource allocation system in fiscal year 1997, the medical centers in the network received about the same portions of their resources based on fixed capitation amounts and on a variety of other factors each year from fiscal years 1997 through 2003. VA agreed with GAO's findings.