Defense Health Care Reform:

Additional Implementation Details Would Increase Transparency of DOD's Plans and Enhance Accountability

GAO-14-49: Published: Nov 6, 2013. Publicly Released: Nov 6, 2013.

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Brenda S. Farrell
(202) 512-3604
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What GAO Found

GAO determined that the Department of Defense’s (DOD) March and June 2013 submissions on establishing a Defense Health Agency (DHA) to reform the governance of the Military Health System (MHS) met three statutory requirements to include information on goals, performance measures, and staffing; partially met one requirement to include information on timelines; and was not required to include information on shared services because the reporting time frame was not applicable. GAO also assessed the submissions to determine the extent to which DOD incorporated key management practices from GAO’s prior work on business-process reengineering. DOD’s submissions provided some useful information but did not fully incorporate some key management practices as explained below.

• DOD presented 87 performance measures under its seven goals for its MHS reform. However, those measures do not fully exhibit the attributes of successful performance measures that can help agencies determine whether they are achieving their goals as well as identify areas for improvement. Examples of key attributes include clarity, measurable targets, and baseline data. None of DOD’s measures included an accompanying explanation, definition, or a quantifiable target nor did they include information regarding relevant baseline assessments.

• DOD provided a list of major governance milestones and an overall schedule for activities related to establishing the DHA. However, DOD’s implementation timeline did not include interim milestones for four of the seven goals of its reform. A key practice for agencies undergoing business transformations is to develop a detailed implementation plan with milestones for all actions so that progress can be closely monitored.

• In its June submission, DOD provided an estimate of authorized staff needed as of October 1, 2013, for the DHA. However, DOD does not have the information to determine how the creation of the DHA will affect the total number of MHS headquarters staff because it has not completed an updated baseline assessment of current staffing levels. Key management practices require agencies to be aware of the size, knowledge, skills, and abilities of their workforces to pursue their missions. DOD planned to submit revised estimated staffing levels in a September 30, 2013 submission to Congress.

• DOD presented business cases that included a breakdown of estimated implementation costs and aggregated cost-savings estimates for the consolidation of four shared services. However, some key details of a sound business case were missing, such as the basis for the savings. DOD’s business cases aggregated the separate business lines of its shared services, which obscures the size and cost of planned efficiencies for each discrete business line, and it did not assess the risk that implementation costs could increase.

Without more clear, complete, and transparent information on DOD’s plan for establishment of the DHA, it will be difficult for decision makers to gauge progress and identify areas of risk that will need to be monitored during implementation.

Why GAO Did This Study

Over the past decade, the cost of DOD’s MHS has increased to almost $50 billion and is expected to double by 2030. Section 731 of the National Defense Authorization Act for Fiscal Year 2013 required DOD to provide three submissions detailing its plan to reform its MHS governance structure and also mandated that GAO submit an analysis of DOD’s first two submissions. This report addresses the extent to which DOD’s March and June 2013 submissions met the statutory requirements and reflect key management practices. GAO compared DOD’s submissions for reforming its MHS governance structure with the (1) statutory requirements and (2) key management practices contained in GAO’s Business Process Reengineering Assessment Guide and other relevant GAO work. Additionally, GAO interviewed DOD officials from the Office of the Assistant Secretary of Defense for Health Affairs, the MHS Transition Office, and the military services’ Surgeons General offices.

What GAO Recommends

To provide decision makers with more complete information on the implementation of DOD’s newly created DHA, GAO recommends that DOD develop and present to Congress fully developed performance measures, interim timelines, and staffing baseline assessments, and refined cost savings estimates. In written responses to this report, DOD concurred with each of GAO’s recommendations.

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

Recommendations for Executive Action

  1. Status: Open

    Comments: The DHA has made progress in developing measures to assess the progress of its ten shared services toward achieving their respective goals; however, these measures continue to not fully demonstrate key elements that can contribute to success in assessing performance. Since our November 2013 review, DHA has made progress in developing performance measures to assess its shared services. Specifically, all ten shared services have measures that demonstrate at least some of these attributes; however, collectively, they do not demonstrate all of the attributes, as we had previously recommended. Because these measures continue to lack key elements that can contribute to success in assessing performance, we continue to believe that our prior recommendation is still valid and should be completely implemented.

    Recommendation: To provide decision makers with more-complete information on the planned implementation, management, and oversight of DOD's newly created DHA, the Secretary of Defense should direct the Assistant Secretary of Defense (Health Affairs) to develop and present to Congress performance measures that are clear, quantifiable, objective, and include a baseline assessment of current performance.

    Agency Affected: Department of Defense

  2. Status: Open

    Comments: As of September 2015, DOD has not submitted a comprehensive timeline that includes interim milestones for all reform goals. Further, as we reported in September 2015, DOD?s plan for assessing the personnel requirements of the DHA lacks a detailed timeline with milestones and interim steps. Until DOD develops a comprehensive timeline for its reform, this recommendation should remain open.

    Recommendation: To provide decision makers with more-complete information on the planned implementation, management, and oversight of DOD's newly created DHA, the Secretary of Defense should direct the Assistant Secretary of Defense (Health Affairs) to develop and present to Congress a comprehensive timeline that includes interim milestones for all reform goals that could be used to show implementation progress.

    Agency Affected: Department of Defense

  3. Status: Open

    Comments: As we reported in September 2015, DOD has taken some action to implement this recommendation for 8 of its 10 shared services. The DHA's internal leadership briefings now identify additional information on each of the eight shared services. For example, the Medical Logistics shared service team now identifies discrete costs and cost savings for each product line, Supply Management, Health Care Technology, and MEDLOG Services (Housekeeping). After accounting for implementation costs, the net savings estimate for each product line within this shared service from fiscal years 2014 through 2019 range from $5.96 million for services to $197.86 million for supplies. By differentiating between these product lines, decision makers are able to obtain a sense of the relative size and scope of each proposed change. However, the DHA has not yet fully developed the business case for its remaining 2 shared services - Public Health and Medical Education and Training. Until the DHA addresses shortcomings with these shared services, this recommendation should remain open.

    Recommendation: To provide decision makers with more-complete information on the planned implementation, management, and oversight of DOD's newly created DHA, the Secretary of Defense should direct the Assistant Secretary of Defense (Health Affairs) to provide Congress with a more-thorough explanation of the potential sources of cost savings from the implementation of its shared services projects.

    Agency Affected: Department of Defense

  4. Status: Open

    Comments: As we reported in September 2015, DOD has taken some action on this recommendation for 8 of its 10 shared services. The DHA?s internal leadership briefings now identify the major types of implementation costs where relevant, or otherwise address their potential impact. For example, information technology costs are identified as one primary type of costs for the Health Information Technology and Medial Logistics shared services, while contract costs are identified for the Budget and Resource Management, Medical Logistics, and Health Information Technology shared services. By identifying the major types of implementation costs, decision makers are better able to gauge the sensitivity of areas of uncertainty as they make decisions concerning future investments in shared services. However, the DHA has not fully developed business case analyses for its Medical Education and Training and Public Health shared services, and cannot identify the major types of implementation costs. Until DOD addresses shortcomings with these final 2 shared services, this recommendation should remain open.

    Recommendation: To provide decision makers with more-complete information on the planned implementation, management, and oversight of DOD's newly created DHA, the Secretary of Defense should direct the Assistant Secretary of Defense (Health Affairs) to monitor implementation costs to assess whether the shared-services projects are on track to achieve projected net cost savings or if corrective actions are needed.

    Agency Affected: Department of Defense

  5. Status: Open

    Comments: We reported in September 2015 that DOD has neither finalized personnel levels for the DHA nor completed a baseline assessment of MHS personnel levels. While DOD has initiated the process to determine the DHA's personnel requirements, this process will not be completed by the DHA?s proposed full operating capability in October 2015, and it lacks a detailed timeline. DOD officials stated that this assessment will be completed by September 2016, more than two years after it was to be submitted to Congress. Further, this assessment is not comprehensive in that it does not address key issues, including the final size of the agency and its workforce mix. During the course of this review, officials from the Office of the Assistant Secretary of Defense (Health Affairs) stated that they do not plan to identify a historical baseline estimate of MHS headquarters and administrative personnel levels prior to the establishment of the DHA. Officials stated that it would prove impossible to retroactively establish such a baseline estimate. Until DOD establishes this baseline and finalizes its personnel requirements, this recommendation should remain open.

    Recommendation: To provide decision makers with more-complete information on the planned implementation, management, and oversight of DOD's newly created DHA, the Secretary of Defense should direct the Assistant Secretary of Defense (Health Affairs) to develop and present to Congress a baseline assessment of the current number of military, civilian, and contractor personnel currently working within the MHS headquarters and an estimate for DHA at full operating capability, including estimates of changes in contractor full-time equivalents

    Agency Affected: Department of Defense

 

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