VERA allocates nearly 90 percent of VA’s medical care appropriation. VERA’s Design Is a Reasonable Approach to Resource Allocation

VERA’s design is a reasonable approach to resource allocation and has  helped promote more comparable resource allocations for comparable  workloads in VA. Consistent with the literature and expert views on  resource allocation, VERA allocates resources primarily on the basis of  network patient workload, attempts to adjust network resources for  factors beyond the control of network management, and provides  protection to patients against network budget shortfalls. As a result of VERA’s  approach, resources have shifted among regions to better reflect workload. In  fiscal year 2001, VERA shifted approximately $921 million among networks  compared to what the allocations would have been if networks received  the same proportion of funding they received in fiscal year 1996, the year  before VERA was implemented. To correct these weaknesses we  made several recommendations which if implemented would better align  approximately $200 million in resources with workloads in VA’s health care  networks. VA Could Better Align Resources With Workload and Network Cost Differences

To improve its network workload calculation, VERA should account for all  veteran workload served—including Priority 7 veterans, who have higher  incomes and no service-connected disability. To improve its adjustment for cost differences beyond networks’ control,  we also recommended that VERA use more case-mix categories to  adequately adjust for differences in patients’ health care needs across  networks. 3). Our analysis shows that doing so would better allocate about  $200 million annually. The amount of  resources provided to networks through the supplemental funding process  for the National Reserve Fund has continued to increase, yet VA has not  been able to determine the relative contribution of factors such as  imperfections in VERA, network inefficiency, or lack of managerial  flexibility to close or consolidate programs or facilities to the need for  supplemental resources.
Why GAO Did This Study

The Veterans Equitable Resource Allocation (VERA) system allocated $17.8 billion of its $20.3 billion health care budget to 22 regional health care networks in fiscal year 2001. Before Vera resources were allocated to facilities on the basis of their historical expenditures. By aligning resources with workloads VERA shifted about$921 million among VA's networks in fiscal year 2001. VERA's design is reasonable for equitably allocating resources, but improvements could better allocate comparable resources for comparable workloads. VERA's allocations are based primarily on network workload, with adjustments made for factors beyond the control of network management. These include the health care needs of veterans and some local cost differences. VERA's design also protects patients from the effects of network budget shortfalls.

What GAO Found

However, GAO found that $200 million annually that could be reallocated to better align network resources with workloads. First, VERA's measurement of network workload is not accurate enough to determine each network's allocation because VERA excludes most veterans with higher incomes who do not have service-connected disabilities--about one-fifth of VA's workload. Second, VERA does not accurately adjust for cost differences among networks for differences in patients' health care needs or case mix across networks. GAO also found that the Veterans Administration has not analyzed whether the networks' need for supplemental resources--provided through the National Reserve Fund--is the result of potential problems in VERA, network inefficiency, or other factors. Without such information, VA can neither ensure the appropriateness of supplemental funding nor take corrective action.