VA Health Care:

Actions Needed to Control Major Construction Costs

HRD-93-75: Published: Feb 26, 1993. Publicly Released: Apr 1, 1993.

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Pursuant to a congressional request, GAO reviewed the Department of Veterans Affairs' (VA) management of its major construction program, focusing on whether VA: (1) uses reasonable methods to identify construction needs and set funding priorities; (2) construction projects exceed program needs; and (3) uses sound project cost estimates for construction funding.

GAO found that: (1) VA uses reasonable methods to identify needed construction and renovation projects and set funding priorities, but it does not consider veterans' income and insurance coverage, or lower-cost alternatives such as use of state and community resources and joint ventures with the Department of Defense (DOD); (2) a universal health care system could reduce the demand for VA inpatient care and create excess hospital capacity, which could be converted to nursing home beds at a lower cost than new construction; (3) VA construction projects often exceed program needs because of VA overestimates, excess space, or numerous costly design changes; (4) VA nursing home construction costs are higher than private-sector costs because VA adapts the facilities' designs to fit on medical center grounds and designs the facilities to meet hospital criteria rather than nursing home criteria; and (5) appropriating construction funds for projects before design completion can lead to unnecessary spending or insufficient funding.

Matter for Congressional Consideration

  1. Status: Closed - Implemented

    Comments: VA again sought funds for constructing two new hospitals in its FY 1997 budget request. GAO reviewed plans for both projects and found them unjustified. Congress did not fund either project.

    Matter: Because actions that would reduce the number of uninsured veterans could reduce the need for new VA construction and create excess capacity in existing facilities, Congress may wish to consider limiting construction of additional VA acute care capacity until the VA role is determined. Such action could: (1) free up funds for deficit reduction without affecting current VA health care services; (2) prevent construction of capacity that could become excess before it is completed; and (3) permit portions of available construction funds to be used by certain facilities to speed correction of seismic deficiencies, other life safety deficiencies, and essential renovations.

Recommendations for Executive Action

  1. Status: Closed - Implemented

    Comments: VA implemented a new restructuring plan, Veterans Integrated Service Networks (VISN), in October 1995, and individual facility missions were reevaluated as part of the strategic alliances formed between facilities. VISNs developed strategic plans during late 1996.

    Recommendation: The Secretary of Veterans Affairs should develop methods to better: (1) anticipate changes in facility missions; and (2) project workloads in order to minimize the need for significant changes in facility designs to accommodate unanticipated changes.

    Agency Affected: Department of Veterans Affairs

  2. Status: Closed - Not Implemented

    Comments: Congress has essentially terminated plans for new VA construction in the foreseeable future.

    Recommendation: The Secretary of Veterans Affairs should develop methods for considering the socioeconomic characteristics of the veteran population in the area to be served by a facility in determinations of need and location.

    Agency Affected: Department of Veterans Affairs

  3. Status: Closed - Not Implemented

    Comments: VA claims to conduct in-depth cost analyses of whether to construct new facilities or to contract for nursing home and hospital beds in a community. According to VA, many community facilities are not willing to contract with VA at a cost VA can pay. VA also claims that its construction process includes considering vacant military space and DOD-VA joint ventures, as is reflected in sharing opportunities between VA and the Army in Hawaii and Texas and between VA and the Air Force in California, New Mexico, Alaska, and Nevada. VA plans no action to change its process. GAO's work, however, shows that the analyses and consideration are largely superficial.

    Recommendation: The Secretary of Veterans Affairs should establish procedures to help ensure that VA medical centers work with state and local health planners and military facilities to determine whether: (1) adequate resources exist in the community to meet VA needs without the need for new construction; and (2) health care construction and operating costs could be reduced through joint ventures and sharing agreements with DOD or private sector hospitals.

    Agency Affected: Department of Veterans Affairs

  4. Status: Closed - Implemented

    Comments: Construction Management found no supporting data for completing design development before constructing funding. There was not any significant differences in project costs changes after comparing projects having design development done before or after OMB budget submission during the 11 years studied. A review of the Design Change Review Board action supports the Construction Management position that the Board serves a useful purpose in the construction process.

    Recommendation: The Secretary of Veterans Affairs should assess the effectiveness of VA program reforms reported to Congress in April 1990, particularly reforms relating to: (1) delaying construction funding until design development is complete; and (2) reviewing and approving design changes proposed after construction funding is appropriated.

    Agency Affected: Department of Veterans Affairs

  5. Status: Closed - Not Implemented

    Comments: VA completed a study that compared its construction standards and building delivery process with those of other public and private programs. 35 recommendations for change and improvement are under consideration. VA expects to undertake another study to review the feasibility of reducing nursing home construction costs without adversely affecting patient care. VA, however, has not started the study and has no plans to do so in the near future. VA indicated that it is not planning to fund construction of any additional nursing homes.

    Recommendation: The Secretary of Veterans Affairs should evaluate the cost and patient care tradeoffs between VA nursing home construction methods and private sector methods to identify ways to reduce costs without unduly sacrificing patient care.

    Agency Affected: Department of Veterans Affairs


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