Section 702 of the NDAA for Fiscal Year 2017 required that  the Secretary of Defense develop a plan to implement section 1073c of  title 10, United States Code, that includes the following four elements:  A.  how the Secretary will carry out subsection (a) of section 1073c of title  10 of the United States Code;  B.  efforts to eliminate duplicative activities carried out by the elements of  the DHA and military departments;  C.  efforts to maximize efficiencies in the activities carried out by the  DHA; and  D.  how the Secretary will implement section 1073c in a manner that  reduces the number of members of the armed forces, civilian  employees who are full-time equivalent employees, and contractors  relating to the headquarters activities of the Military Health System, as  of the date of the enactment of the act. Section 702 of the NDAA for Fiscal Year 2017 also included a provision  for us to review DOD’s interim and final reports on the implementation  plan. Additionally, the  NDAA for Fiscal Year 2019 extended the date for the transfer of the  administration of the MTFs to the DHA from the original deadline of  October 1, 2018, to September 30, 2021. DOD Addressed the Statutory Elements for the Transfer of the Administration of the MTFs to the DHA

DOD addressed each of the four statutory elements in its June 2018 plan. DOD dedicated most of the plan to describing the governance structure of  DOD’s new administrative framework and to describing the schedule for  the phased transfer of the administration of approximately 457 MTFs to  the DHA by October 1, 2021. Information on reducing headquarters-level military, civilian, and  contractor personnel within the Military Health System. However, the plan does not provide specific details  about how it will achieve the 10-percent reduction while the DHA  experiences personnel growth during each phase. Additional Information Would Be Useful to Demonstrate How the Plan Will Reduce or Better Manage Duplication and Improve Efficiencies

DOD’s June 2018 plan takes steps toward reducing duplication and  improving effectiveness and efficiency, as previously discussed. However, the plan has two weaknesses that could be mitigated with  additional information from DOD. Specifically, DOD cannot be reasonably  assured that its plan will reduce or better manage duplication and improve  efficiency since (1) certain functions are excluded from the transfer to the  DHA and (2) it is unclear, based on the information in the plan and  supporting planning documents, how implementation of the plan will result  in the achievement of the stated goal of reducing headquarters-level  personnel, including contractor personnel, by 10 percent. Therefore, dental care was  considered to be an operational readiness function rather than a health  care delivery function, according to these same officials. Further, senior-level officials  from the Assistant Secretary of Defense for Health Affairs and the DHA  acknowledged that transferring the dental care function from the military  departments to the DHA could potentially reduce duplicative activities and  result in more efficiencies. However, DOD’s plan and supporting documents do  not provide details on how DOD established the 10-percent reduction of  headquarters-level military, civilian, and contractor personnel by 2021,  when the administration of the 457 MTFs is to have been transferred to  DHA. Regarding contractor data, DOD did not include any detailed information  related to the reduction of contractor personnel in the plan. First, DOD has not validated headquarters-level personnel  requirements. Until DOD validates headquarters-level personnel requirements and  conducts a comprehensive review that considers the least costly mix of  personnel, DOD may not be able to achieve its goal of reducing  headquarters-level personnel by 10 percent while maintaining the efficient  and effective provision of healthcare services. Furthermore, Congress will  lack important information to determine the extent to which the transfer of  the administration of the MTFs to the DHA is being planned and  implemented effectively and efficiently. Conclusions

Congress required DOD to provide a plan to transfer the administration of  the MTFs from the military departments to the DHA. Without defining  and analyzing the 16 functions currently excluded from transfer to the  DHA, validating headquarters-level personnel requirements, and  conducting a comprehensive review to determine, per DOD guidance, the  least costly mix of personnel, DOD and congressional decisionmakers are  not positioned to know how, whether, and to what extent undertaking this  significant reform effort will improve effectiveness and efficiency in the  administration of the MTFs. Recommendations for Executive Action

We are making the following three recommendations to the DOD:  The Secretary of Defense should ensure that the Assistant Secretary of  Defense for Health Affairs, in coordination with Director of the DHA and  the Surgeons General of the military departments, define and analyze   the 16 operational readiness and installation-specific medical functions  currently excluded from transfer to the DHA to determine whether  opportunities exist to reduce or better manage duplicative functions   and improve efficiencies in the administration of the MTFs. (Recommendation 3)

	Agency Comments and Our Evaluation

In written comments reproduced in appendix II, DOD concurred with all  three recommendations and noted the actions it was taking to address  each recommendation.
Why GAO Did This Study

In fiscal year 2017, DOD provided health care to 9.4 million beneficiaries, including servicemembers, retirees, and their families at a cost of $43 billion. For more than a decade, partially in response to congressional mandates, DOD has worked to address inefficiencies in the Military Health System to control costs.
To further achieve efficiencies, the NDAA for Fiscal Year 2017 required DOD to develop an implementation plan that addressed four elements related to transferring the administration of the MTFs to the DHA. DOD issued the plan in June 2018.
The NDAA also included a provision for GAO to review the plan. GAO determined whether (1) DOD's plan included the statutory elements related to the transfer of administration of the MTFs to the DHA and (2) additional information would be useful to demonstrate that the plan will reduce or better manage duplication and improve efficiencies. GAO assessed DOD's plan against the required elements and, where appropriate, considered the extent to which the plan provided detailed information related to key change management practices identified in past GAO work.

What GAO Found

The Department of Defense's (DOD) June 2018 plan addressed the four statutory elements for the transfer of the administration of the military treatment facilities (MTFs) from the military departments to the Defense Health Agency (DHA). Specifically, the plan provided information on (1) how the DHA will take administrative responsibility of the MTFs; (2) efforts to eliminate duplicative activities; (3) efforts to maximize efficiencies in the DHA's activities; and (4) reductions of headquarters-level military, civilian, and contractor personnel. DOD dedicated most of the plan to describing the governance structure of the proposed administrative framework and to describing the timeline for a phased transfer of the approximately 457 MTFs to the DHA by October 1, 2021. Initially, DOD was to transfer responsibility for the administration of the MTFs to the DHA by October 1, 2018. However, Congress in the National Defense Authorization Act (NDAA) for Fiscal Year 2019 amended the law to allow, among other things, DOD to complete the transfer by September 30, 2021.
DOD has taken key steps in its June 2018 plan to improve the effectiveness and efficiency of the administration of MTFs. However, DOD's plan has two weaknesses that could be mitigated with additional information. Specifically,
DOD excluded 16 operational readiness and installation-specific medical functions from consideration for transfer to the DHA. DOD did not define or analyze the potential effect of excluding these functions, which include dental care, substance abuse, and occupational health. Senior officials from the DHA and the Assistant Secretary of Defense for Health Affairs acknowledged that transferring the dental care function, for example, from the military departments to the DHA could potentially reduce duplicative activities.
DOD's plans to achieve the stated goal of reducing headquarters-level personnel, including contractor personnel, by 10 percent are unclear. In its June 2018 plan, DOD states that the DHA will experience personnel growth during each phase of the transition, but that it expects to reduce headquarters-level personnel by 10 percent by 2021. However, the plan does not provide specific details about how DOD will achieve the established goal of reducing headquarters-level personnel by 10 percent while the DHA experiences personnel growth. Further, the plan does not address whether and how contractor personnel factor into the reduction. This lack of clarity exists because DOD has not validated headquarters-level personnel requirements or conducted a comprehensive review to identify the least costly mix of military, civilian, and contractor personnel to meet the validated requirements.
Until DOD takes action to resolve these two weaknesses, DOD will likely not be well positioned to reduce or better manage duplication and improve efficiencies, including reducing headquarters-level personnel across the Military Health System. Furthermore, Congress will lack important information to determine the extent to which the transfer of the administration of the MTFs to the DHA is being planned and implemented effectively and efficiently.

What GAO Recommends

GAO recommends that DOD define and analyze the 16 operational readiness and installation-specific medical functions for duplication, validate headquarters-level personnel requirements, and identify the least costly mix of personnel. DOD concurred with all three recommendations and noted actions it was taking to address each one.