Defense Health Care:

Applying Key Management Practices Should Help Achieve Efficiencies within the Military Health System

GAO-12-224: Published: Apr 12, 2012. Publicly Released: Apr 12, 2012.

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What GAO Found

The Department of Defense (DOD) has identified 11 initiatives aimed at slowing its rising health care costs, but has not fully applied results-oriented management practices in developing plans to implement and monitor its initiatives. Results-oriented management practices include developing plans that identify goals, activities, and performance measures; resources and investments; organization roles, responsibilities, and coordination; and key external factors that could affect goals, such as a decrease of funding to a program. At the conclusion of GAO’s review, DOD had completed and approved a detailed implementation plan, including a cost savings estimate, for just 1 of its 11 initiatives. Developing cost savings estimates is critical to successful management of the initiatives for achieving the 2010 Quadrennial Defense Review’s call for reduced growth in medical costs. DOD also has not completed the implementation of an overall process for monitoring progress across its portfolio of health care initiatives and has not completed the process of identifying accountable officials and their roles and responsibilities for all of its initiatives. Without comprehensive, results-oriented plans, a monitoring process, and clear leadership accountability, DOD may be hindered in its ability to achieve a more cost-efficient Military Health System, address its medical readiness goals, improve its overall population health, and improve its patients’ experience of care.

Additionally, DOD has another set of initiatives, which were approved in 2006 to change aspects of its medical governance structure. GAO found that DOD had implemented some of the initiatives but had not consistently employed several key management practices that would have helped it achieve its stated goals and sustain its efforts. DOD approved the implementation of the seven governance initiatives with the goal of achieving economies of scale and operational efficiencies, sharing common support functions, and eliminating administrative redundancies. Specifically, DOD expected the initiatives to save at least $200 million annually once implemented; however, to date, only one initiative has projected any estimated financial savings. DOD officials stated that the other governance initiatives have resulted in efficiencies and have significant potential for cost savings. Further, the governance initiatives that are further developed were driven primarily by requirements of Base Realignment and Closure Commission recommendations and their associated statutory deadlines for completion. Additionally, GAO found that DOD had not consistently employed several key management practices, which likely hindered the full implementation of the initiatives. For example, the initiatives’ initial timeline was high-level and generally not adhered to, a communication strategy was not prepared, an overall implementation team was never established, and performance measures to monitor the implementation process and achievement of the goals were not established. With more emphasis on the key practices of a successful transformation, DOD will be better positioned in the future to realize efficiencies and achieve its goals as it continues to implement the initiatives.

Why GAO Did This Study

DOD’s health care costs have risen significantly, from $19 billion in fiscal year 2001 to $48.7 billion in its fiscal year 2013 budget request, and are projected to increase to $92 billion by 2030.

GAO reviewed DOD’s efforts to slow its rising health care costs by changing selected clinical, business, and management practices. Specifically, GAO determined the extent to which DOD has (1) identified initiatives to reduce health care costs and applied results-oriented management practices in developing plans for implementing and monitoring them and (2) implemented its seven medical governance initiatives approved in 2006 and employed key management practices. For this review, GAO analyzed policies, memorandums, directives, and cost documentation, and interviewed officials from the Office of the Secretary of Defense, from the three services, and at each of the sites where the governance initiatives were under way.

What GAO Recommends

GAO recommends that DOD (1) complete and fully implement comprehensive results-oriented plans for each of its medical initiatives; (2) fully implement an overall monitoring process across the portfolio of initiatives and identify accountable officials and their roles and responsibilities; and (3) complete its governance initiatives and employ key management practices to show financial and nonfinancial outcomes and evaluate interim and long-term progress. In written comments on a draft of this report, DOD concurred with each of these three recommendations.

For more information, contact Brenda S. Farrell at (202) 512-3604 or farrellb@gao.gov.

Recommendations for Executive Action

  1. Status: Open

    Comments: As of September 2015, DOD had not fully completed or implemented plans that incorporate desired characteristics of results-oriented management practices for each of its 11 initiatives, as GAO recommended in April 2012. A senior DOD official stated that as part of the development of its Military Health System Strategic Plan, DOD has identified a link between the 11 initiatives and the 22 objectives of the new strategic plan. The official stated that DOD's management approach will include analysis of metrics towards achievement of MHS-wide goals. However, as the plan is not yet published, we are unable to verify the steps that DOD may have taken.

    Recommendation: In order to enhance DOD's efforts to manage rising health care costs and demonstrate sustained leadership commitment for achieving the performance goals of the Military Health System (MHS's) strategic initiatives, the Under Secretary of Defense for Personnel and Readiness should direct the Assistant Secretary of Defense for Health Affairs, in conjunction with the service surgeons general, to complete and fully implement, within an established time frame, the dashboards and detailed implementation plans for each of the approved health care initiatives in a manner that incorporates the desired characteristics of results-oriented management practices, such as the inclusion of performance metrics, investment costs, and cost savings estimates.

    Agency Affected: Department of Defense: Office of the Under Secretary for Personnel and Readiness

  2. Status: Closed - Implemented

    Comments: DOD completed the implementation of its overall monitoring process of its health care initiatives consistent with GAO's April 2012 recommendation by identifying accountable officials and their roles and responsibilities and approving a standardized process that implements an 11-step project plan. Specifically, DOD has assigned each initiative a working group, an initiative leader, and executive sponsor, all of whom are to work to help ensure that their initiative stays on schedule, on budget, and achieves performance goals. Additionally, the Review and Analysis group, consisting of the Assistant Secretary of Defense (Health Affairs) and the Service Surgeons General, approves the initiatives and reviews their status on a quarterly basis. DOD information notes that its oversight of executive sponsorship of the initiatives and their leadership is ongoing and reviewed at each meeting of the Review and Analysis group.

    Recommendation: In order to enhance DOD's efforts to manage rising health care costs and demonstrate sustained leadership commitment for achieving the performance goals of the MHS's strategic initiatives, the Under Secretary of Defense for Personnel and Readiness should direct the Assistant Secretary of Defense for Health Affairs, in conjunction with the service surgeons general, to complete the implementation of an overall monitoring process across DOD's portfolio of initiatives for overseeing the initiatives' progress and identifying accountable officials and their roles and responsibilities for all of its initiatives.

    Agency Affected: Department of Defense: Office of the Under Secretary for Personnel and Readiness

  3. Status: Closed - Implemented

    Comments: As a result of one of DOD's many efforts over the years to control the increase in health care costs through studying the governance structure of the Military Health System and to recommend major organizational realignments, DOD established the Defense Health Agency on October 1, 2013 with full operating capability to be reached on October 1, 2015. With the establishment of this agency and as part of its implementation plan, DOD developed objectives for the Defense Health Agency which essentially incorporated each of the existing seven governance initiatives into various parts of the newly established organization and did so by employing the key management practices that we noted were necessary to more adequately facilitate the transition. Because DOD has taken these actions, it established a new agency that was in a better position to gauge progress, identify areas of requiring corrective actions, achieve cost savings, and to provide decision makers the full scope of information they need to understand the full magnitude of implementation costs and efficiencies estimated to be gained by the reform.

    Recommendation: In order to enhance DOD's efforts to manage rising health care costs and demonstrate sustained leadership commitment for achieving the performance goals of the MHS's strategic initiatives, the Under Secretary of Defense for Personnel and Readiness should direct the Assistant Secretary of Defense for Health Affairs, in conjunction with the service surgeons general, to complete the implementation of the governance initiatives that are already under way by employing key management practices in order to show financial and nonfinancial outcomes and to evaluate both interim and long-term progress of the initiatives.

    Agency Affected: Department of Defense: Office of the Under Secretary for Personnel and Readiness

 

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