VA and DOD’s Evaluation of the FHCC Included Both Separate and Joint Reviews

VA and DOD’s approach for evaluating the FHCC included conducting  both separate and joint reviews to determine whether it should continue  operating as an integrated facility with a unified governance structure,  workforce, and budget or revert to a “joint venture.” Under a joint venture  arrangement, the departments would continue sharing medical facility  space, but would manage their operations with separate governance  structures, staff, and budgets. As a result,  their recommendations to continue operating the FHCC as an integrated  facility had more weight in DOD’s final determination. They reviewed the work of the subject matter teams,  including the teams’ recommendations related to whether the FHCC  should continue operating as an integrated facility as well as specific  improvements the teams recommended implementing if the FHCC  continued to operate as an integrated facility. They also studied the  implications of either operating the FHCC as an integrated facility or  converting it to a joint venture, and concluded that the latter was not  advisable or achievable for two main reasons:
The former Naval Hospital Great Lakes had been demolished, and  funding for the replacement facility was used to expand the former  North Chicago VA Medical Center as part of the demonstration. Returning all or some of the 470 civilian employees from VA to DOD’s  personnel system would require complex negotiations and could  result in job reclassifications and salary changes. VA and DOD Did Not Provide Time Frames for Implementing the Recommended Improvements for the FHCC in Their Report to Congress

Although the departments’ report to Congress outlined a number of  recommended improvements for the FHCC as part of their decision to  continue operating it as an integrated facility, the report did not include  time frames for implementing them. VA and DOD officials have been  routinely tracking each of the recommended improvements through  meetings held twice monthly, and have developed a spreadsheet that  includes information on status and next steps. As we  have previously reported, leading practices for organizational planning  call for results-oriented organizations to develop comprehensive plans  that provide tools to ensure accountability, among other things. Time frames and interim milestones could be  used to monitor progress, hold staff accountable for achieving desired  results, and make mid-course corrections, if needed. However, without time frames and interim milestones for most of the  recommended improvements, VA and DOD officials are unable to ensure  that these improvements will be implemented in a timely and efficient  manner. Despite Acknowledging the Demonstration’s High Costs, VA and DOD Did Not Include an Updated Cost-Effectiveness Analysis of the FHCC in Their Report to Congress

In the letter that accompanied the report to Congress, both departments  acknowledged that the costs associated with the demonstration project  were “very high” and not in keeping with the initial goal of delivering more  cost-effective health care. Specifically, the contractor found that integration was  not more cost-effective than a joint venture and that the FHCC was not  consistently performing as well as the separate VA and Navy facilities  were before integration. The contractor’s analyses of the FHCC’s cost-effectiveness used cost  data that ended in fiscal year 2014. Since that time, the FHCC has had a  change in leadership and has made additional improvements that VA and  DOD officials believe would positively impact cost-savings. In addition, VA and DOD officials stated that they did not have sufficient  time to conduct their own analysis with updated cost data to include in the  report to Congress after receiving the contractor’s final report in  September 2015. According to OMB’s capital programming guide, at many key decision  points, a cost-benefit or cost-effectiveness analysis of operations would  be useful to help make decisions. Additionally, based on our prior work  on evaluating physical infrastructure and management consolidation  initiatives, the goals and likely costs and benefits of a consolidation are  key questions to consider. Such an  analysis would provide a baseline from which to measure and track the  FHCC’s future efficiency, including the effect of the recommended  improvements, once implemented. Recommendations for Executive Action

We recommend that the Secretaries of Veterans Affairs and Defense  collaborate to take the following actions: develop time frames and interim milestones for tracking and  implementing each of their jointly developed recommended  improvements; and  conduct a cost-effectiveness analysis for the FHCC to establish a  baseline for measuring the facility’s efficiency over time.
Why GAO Did This Study

The National Defense Authorization Act for Fiscal Year 2010 (NDAA 2010) authorized VA and DOD to establish a 5-year demonstration to integrate their medical facilities in North Chicago, Ill. The NDAA 2010 also required VA and DOD to submit a report of their evaluation of the demonstration and their recommendation as to whether it should continue operating as a fully integrated facility after 5 years. In July 2016, VA and DOD submitted a report to Congress recommending that the FHCC continue operating as an integrated facility.
The NDAA 2015 included a provision for GAO to assess VA and DOD's evaluation to Congress. In this report, GAO assesses VA and DOD's approach for evaluating the FHCC and making the determination to continue operating it as an integrated facility. To do this, GAO reviewed the report to Congress and relevant supporting documents, and interviewed officials about the evaluation. In analyzing the evaluation, GAO used as criteria its prior work on planning practices, evaluating physical infrastructure, and management consolidation initiatives, as well as the Office of Management and Budget's (OMB) capital programming guide.

What GAO Found

The Department of Veterans Affairs (VA) and the Department of Defense's (DOD) evaluation to determine whether the Captain James A. Lovell Federal Health Care Center (FHCC) should continue operating as an integrated facility or revert to a “joint venture” included conducting both separate and joint reviews. As an integrated facility, the FHCC has a unified governance structure, workforce, and budget. As a joint venture, the departments would continue sharing medical facility space, but would manage their operations with separate governance structures, workforces, and budgets. VA and DOD's joint review team concluded that converting the FHCC to a joint venture was not advisable or achievable because the Navy hospital had been demolished and money to replace it was used to expand the VA facility. In addition, returning the civilian employees from VA's to DOD's personnel system would require complex negotiations that could result in job reclassifications and salary changes. As a result, officials recommended continuing the FHCC as an integrated facility with the implementation of specific recommended improvements with the caveat that no similar integration efforts be undertaken until they “get it right” at the FHCC.
In the report to Congress, VA and DOD outlined 17 recommended improvements for the FHCC but did not include time frames for implementing them. As GAO has previously reported, leading practices for planning call for results-oriented organizations to develop plans that provide tools to assure accountability, such as time frames and interim milestones that could be used to monitor progress, hold staff accountable for achieving desired results, and make mid-course corrections, if needed. Although officials routinely track each improvement through twice monthly meetings, and use a spreadsheet to monitor status and next steps, they have not specified time frames and interim milestones. Without this information, officials cannot ensure that they will implement the recommended improvements in a timely and efficient manner.
The letter that accompanied the report to Congress stated that the FHCC's costs were “very high” and not in keeping with the initial goal of delivering more cost-effective health care. VA and DOD officials told GAO that this statement was based on their contractor's evaluation of the facility, which found that the FHCC was not more cost-effective than a joint venture. Officials told GAO that their contractor's analyses used cost data that ended in fiscal year 2014, and since that time, the FHCC has made improvements they believe would positively impact cost savings. However, officials said that they did not have sufficient time for the contractor to update the analysis after receiving the contractor's report in September 2015, and that one additional year of data would not likely have changed their conclusions or recommendations. According to OMB's capital programming guide, at many key decision points, a cost-effectiveness analysis of operations would be useful to help make decisions. Without an updated cost-effectiveness analysis for the FHCC, officials will not have a baseline from which to measure and track the FHCC's future efficiency, including the effect of the recommended improvements, once implemented.

What GAO Recommends

GAO recommends that the Secretaries of VA and DOD collaborate to establish time frames and interim milestones for tracking the implementation of the jointly recommended improvements and to conduct a cost-effectiveness analysis for the FHCC. VA and DOD concurred with GAO's recommendations.