The Department of Defense (DOD) operates a large and complex health care system that employs more than 150,000 military, civilian, and contract personnel working in military hospitals and clinics, commonly referred to as military treatment facilities. Each military department operates its own facilities, and each generally contracts separately for health care professionals such as nurses, family practice doctors, and medical assistants to supplement care provided within these facilities. In fiscal year 2011, DOD spent about $1.14 billion contracting for health care professionals.
Fiscal year 2011 was the latest year for which complete data were available when GAO began its review.
DOD does not have a consolidated agency-wide strategy to contract for health care professionals, resulting in a contracting approach that is largely fragmented. In the absence of a DOD-wide strategy, the military departments have attempted to consolidate some health care staffing requirements, but these efforts have been limited. For example, according to DOD data, joint-use contracts among military departments accounted for approximately 8 percent of the $1.14 billion in obligations for health care professionals in fiscal year 2011. Other efforts have involved actions within the departments, such as using contracts for health care professionals awarded to multiple health care staffing companies, to consolidate intraservice staffing requirements. These contracts, known as multiple-award contracts, are generally set up in the Army and Navy by U.S. geographical region and by provider type to meet the requirements of more than one facility. For example, the Army and the Navy each have regional multiple-award contracts for nurses, and one in each region for doctors. In 2012, the Navy had six multiple-award contracts on the West Coast and five on the East Coast, involving many types of health care professionals. In contrast, the Air Force uses multiple-award contracts that are set up nationally to be used by all of its military treatment facilities for many types of health care professionals. The Army awarded national contracts for health care professionals in fiscal year 2003, but officials said this approach was unsuccessful because not enough companies were able to compete to provide health care staffing services on a national scale. DOD officials stated that multiple award contracts have facilitated the streamlining of acquisitions and the standardization of contract requirements, which saves time and contract administration costs.
Although each of the military departments has been using multiple-award contracts to acquire the services of health care professionals, the potential remains for consolidation of task orders issued under these contracts. For example, in May 2013, GAO identified several instances where numerous task orders were awarded by a single military department for the same type of provider in the same area or facility, such as 24 task orders in fiscal year 2011 for medical assistants, 16 separate task orders for licensed practical nurses, 8 for clinical psychologists, and 6 for family practitioners—all at the same military treatmentfacility.
Over the last decade, various DOD groups as well as GAO have recommended that DOD take steps toward a more consolidated strategy, including a DOD Inspector General report on reducing duplication and fragmentation in medical services contracts, and a DOD-wide council which was tasked to develop a strategy for sourcing key health care labor categories. But DOD still does not have an agency-wide acquisition strategy to consolidate these types of requirements. Such a strategy would involve a shift away from numerous individual procurements to a broader aggregate approach, reduce fragmentation, and could provide cost savings. In March 2011, GAO reported on opportunities to reduce duplication, overlap, and fragmentation in government programs and noted that consolidating common administrative, management, and clinical functions within the Military Health System could increase efficiencies and significantly reduce costs, but that DOD had taken only limited actions in this area. Further, as GAO reported in 2013, DOD does not collect and maintain standardized data on health care professionals, which hampers efforts to develop a joint and strategic approach to contracting for health care professionals. For example, labor categories are not standardized across DOD. Also, DOD’s 2007 Task Force report on the Future of Military Health Care concluded that there were significant issues with the Military Health System cost accounting that affect the correct calculation of unit costs, specifically characterizing the data as unreliable. DOD and military department officials who spoke with GAO confirmed this assessment during GAO’s 2013 review.
Each military department continues to take a fragmented approach to contracting for medical professionals without considering the collective needs of the Military Health System. On October 1, 2013, DOD established a new Defense Health Agency (DHA) to assume management responsibility of numerous functions of its medical health care system, including some contracting functions. While DOD is moving forward incrementally with its plans to transform the Military Health System structure and set up the Defense Health Agency, decisions about contracting for health care staffing requirements remain outstanding. Prior to the establishment of DHA, DOD created a medical services contracting subworking group, which, according to DOD officials, is in the process of examining issues related to contracting for health care professionals. As of March 2014, the group had not completed its work. As a part of the medical governance restructuring, DOD has an opportunity to revisit the need for a DOD-wide strategic sourcing strategy with both near-term and long-term dimensions, including reliable and detailed agency-wide data. Without such a strategy, the Military Health System may be missing opportunities to contract for health care professionals in the most cost-effective manner.
DOD has not estimated the amount of savings achieved via these joint-use contracts because the data are not readily available to calculate savings.
A joint-use contract is a multiple award contract used by more than one military department or used at joint military facilities and a multiple-award contract is an indefinite-delivery, indefinite-quantity contract that is awarded to two or more sources under the same solicitation. Section 16.504(c) of the Federal Acquisition Regulation provides requirements and guidance on the award and use of multiple-award contracts.
In fiscal year 2011, Army obligations for health care professionals totaled $286 million, Navy fiscal year 2011 obligations totaled $293 million, and Air Force fiscal year obligations totaled $454 million.
A task order is an order for services placed against an existing contract.
DOD Inspector General, Acquisition: Direct Care Medical Services Contracts, D-2004-094 (Arlington, Va.: June 2004).
DOD, Task Force Report on the Future of Military Health Care, December 2007.
GAO recommended in May 2013 that the Secretary of Defense take the following action:
Due to the lack of reliable and detailed agency-wide data, it is not possible to estimate the extent of potential cost savings associated with DOD-wide contracting for health care professionals.
The information contained in this analysis is based on findings from products listed in the related GAO products section. To address health care contracting practices, GAO analyzed data obtained from the Federal Procurement Data System-Next Generation on medical services contracts funded in fiscal year 2011, the latest year for which complete data were available when GAO began its review. To assess the consolidation of health care staffing requirements, GAO obtained data from the military departments on the number and dollar value of contracts for health care professionals. GAO also interviewed and obtained documentation from officials within organizations in each military department responsible for contracting for professional health care services, as well as 11 military treatment facilities and DOD’s TRICARE Management Activity.
Table 2 in Appendix IV lists the programs GAO identified that might have similar or overlapping objectives, provide similar services, or be fragmented across government missions. Overlap and fragmentation might not necessarily lead to actual duplication, and some degree of overlap and duplication may be justified.
In commenting on the May 2013 report on which this analysis is based, DOD concurred with GAO’s recommendation. The department agreed that it is at an opportune time to revisit a Military Health System strategic sourcing strategy due to the organizational transformation that is occurring in the formation of the new Defense Health Agency. DOD stated that a Shared Services Contracting subworking group would include GAO’s findings and recommendation in their comprehensive review of contracting strategies, governance, and processes.
GAO provided a draft of this report section to DOD for review and comment. DOD did not provide comments on this issue.
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