VA Health Care:

Allocation Changes Would Better Align Resources with Workload

GAO-02-338: Published: Feb 28, 2002. Publicly Released: Feb 28, 2002.

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The Department of Veterans Affairs (VA) spent $21 billion in fiscal year 2001 to treat 3.8 million veterans--most of whom had service-connected disabilities or low incomes. Since 1997, VA has used the Veterans Equitable Resource Allocation (VERA) system to allocate most of its medical care appropriation. GAO found that VERA has had a substantial impact on network resource allocations and workloads. First, VERA shifted $921 million from networks located primarily in the northeast and midwest to networks located in the south and west in fiscal year 2001. In addition, VERA, along with other VA initiatives, has provided an incentive for networks to serve more veterans. VERA's overall design is a reasonable approach to allocate resources commensurate with workloads. It provides a predetermined dollar amount per veteran served to each of VA's 22 health care networks. This amount varies depending upon the health care needs of the veteran served and local cost differences. This approach is designed to allocate resources commensurate with each network's workload in terms of veterans served and their health care needs. GAO identified weaknesses in VERA's implementation. First, VERA excludes about one fifth of VA's workload in determining each network's allocation. Second, VERA does not account well for cost differences among networks resulting from variation in their patients' health care needs. Third, the process for providing supplemental resources to networks through VA's National Reserve Fund has not been used to analyze how the need for such resources is caused by potential problems in VERA's allocation, network inefficiency, or other factors.

Recommendations for Executive Action

  1. Status: Closed - Not Implemented

    Comments: In the fiscal year 2004 allocation, VA provided an additional allocation to networks for high cost patients whose annual costs exceed an established threshold. Networks would receive an additional allocation based on costs above the threshold. The top one percent high cost adjustment will provide networks with additional funding for patients' costs that exceed a $70,000 threshold regardless of the reason for the high costs. However, this action does not address the recommendation because this methodology does not identify individual patients with unexpectedly high costs and provide additional resources to those networks. Instead, this methodology could result in networks that are higher in cost due to inefficiency receiving additional VERA resources. In fiscal year 2005, VA raised the high cost adjustment threshold to $75,000, but continues to use the same basic methodology.

    Recommendation: To continue to improve the allocation of comparable resources for comparable workloads through VERA, the Secretary of Veterans Affairs should direct the Under Secretary for Health to establish a mechanism in the National Reserve Fund to partially offset the cost of networks' highest cost complex care patients.

    Agency Affected: Department of Veterans Affairs

  2. Status: Closed - Not Implemented

    Comments: VA reported that, in fiscal year 2004, VA does not expect that networks will need a supplemental appropriation because of refinements made to the Veterans Equitable Resource Allocation (VERA) methodology. VA has not developed a process to determine if different factors cause networks to need supplemental resources. In the fiscal year 2004 allocation, VA provided an additional allocation to networks for high cost patients whose annual costs exceed an established threshold. Networks would receive an additional allocation based on costs above the threshold. The top one percent high cost adjustment will provide networks with additional funding for patients' costs that exceed a $70,000 threshold regardless of the reason for the high costs. Some of these high costs could have been due to inefficiencies. Without this high cost adjustment some networks may have needed supplemental funds from VA. As a result, VA's actions have not addressed the recommendation, because VA has not determined the factors that cause certain networks to need additional resources and taken action to address those factors within the control of management. In fiscal year 2005, VA increased the threshold to $75,000 for the top one percent of high cost patients.

    Recommendation: To continue to improve the allocation of comparable resources for comparable workloads through VERA, the Secretary of Veterans Affairs should direct the Under Secretary for Health to determine in the supplemental funding process the extent to which different factors cause networks to need supplemental resources and take action to address limitations in VERA or other factors that may cause budget shortfalls.

    Agency Affected: Department of Veterans Affairs

  3. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, VA eliminated the case-mix weights for the basic and complex care categories that were based on fiscal year 1995 expenditures. For the fiscal year 2003 allocation, VA used the most current cost expenditure data, rather than the 1995 expenditure data it had been using.

    Recommendation: To continue to improve the allocation of comparable resources for comparable workloads through VERA, the Secretary of Veterans Affairs should direct the Under Secretary for Health to update VERA's case-mix weights using the best available data on clinical appropriateness and efficiency.

    Agency Affected: Department of Veterans Affairs

  4. Status: Closed - Implemented

    Comments: VA incorporated more case-mix categories into the Veterans Equitable Resource Allocation (VERA) system for fiscal year 2003. VA refined VERA by increasing the number of case-mix categories from three to 10 case-mix categories. The 10 case-mix categories include six basic care categories and four complex care categories.

    Recommendation: To continue to improve the allocation of comparable resources for comparable workloads through VERA, the Secretary of Veterans Affairs should direct the Under Secretary for Health to incorporate more categories into VERA's case-mix adjustment.

    Agency Affected: Department of Veterans Affairs

  5. Status: Closed - Implemented

    Comments: In response to GAO's recommendation, VA included Priority 7 veterans--primarily higher-income veterans without a service-connected disability--in its fiscal year 2004 allocation, better reflecting actual workload served. Since fiscal year 1997, VA has used the Veterans' Equitable Resource Allocation (VERA) system to allocate most of its medical care appropriation to its health care networks. VA had excluded most Priority 7 veterans from VERA even though this group represented about one-fifth of patients served in fiscal year 2001. VA told GAO that including all Priority Group 7 Basic Care patients in VERA is more consistent with VA's current enrollment policy and better aligns the VERA workload with actual workload served.

    Recommendation: To continue to improve the allocation of comparable resources for comparable workloads through VERA, the Secretary of Veterans Affairs should direct the Under Secretary for Health to better align VERA measures of workload with actual workload served regardless of veteran priority group.

    Agency Affected: Department of Veterans Affairs

 

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