Fast Facts

How much does it cost to get a new medical facility for veterans up and running? The Veterans Health Administration (VHA) spent more than $4 billion staffing and equipping (“activating”) such facilities from fiscal year 2012 through 2018.

But VHA doesn’t have a clear definition of allowable activation expenses or a process to estimate total activation costs.

Our recommendations address these issues to improve VHA’s oversight of activation costs.

Medical staff and equipment can be activation expenses for new medical facilities

A person in scrubs using a large piece of medical equipment

A person in scrubs using a large piece of medical equipment

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Highlights

What GAO Found

The Veterans Health Administration (VHA) under the Department of Veterans Affairs (VA) is constructing and leasing new medical facilities, such as outpatient clinics, to better serve and meet the changing needs of veterans. VHA equips and staffs these new facilities in a multi-year process called “activation.” From fiscal year 2012 through 2018, VHA channeled more than $4 billion to major medical facilities undergoing activation, which these facilities could use toward furniture, equipment, and new staffing costs, among other start-up expenses.

Activation Costs Include Equipment Purchases and Installation, among Others

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VHA lacks processes and clear definitions for estimating total activation costs and for comparing actual expenses against these estimates. Specifically,

  • VHA's current cost estimation process does not cover the full duration of activation.
  • Headquarters officials have never compared activation costs against estimated costs because until recently, officials said, VHA lacked the accounting mechanisms to facilitate such comparisons; however, while VHA now possesses these mechanisms, it has not documented the process for how the new information should be used.
  • VHA documentation does not clearly define allowable activation expenses or the appropriate spending timeframes. Local and regional officials expressed confusion over what items could be purchased with activation funds. In addition, local officials held inconsistent beliefs regarding how long expenses could qualify as activation-related.

VHA management's priorities include data-driven decision-making. Further, the Office of Management and Budget's guidance states that agencies should compare actual project costs against planned expenses so managers can determine if cost goals are being met. Without processes and clear definitions associated with measuring activation costs, VHA does not have reasonable assurance that it will be able to effectively manage the resources associated with activation.

Why GAO Did This Study

VHA operates one of the nation's largest health care systems with more than 1,200 sites across the country; however, many facilities were built decades ago and do not align with the agency's current emphasis on outpatient and specialized care. Additionally, new or expanded facilities are needed to accommodate veterans returning from recent conflicts. VHA is constructing and leasing new facilities to respond to these needs. GAO was asked to review VHA's efforts to activate new major medical facilities.

This report examines the extent to which VHA is able to compare the actual costs of activation against the estimated costs, among other objectives.

GAO analyzed VHA's documentation on estimating activation costs. GAO also interviewed officials and analyzed cost information reported by a non-generalizable selection of eight medical facilities. The facilities had more than $1 million in annual rent or $20 million in construction costs, reported finishing activation in fiscal years 2016 and 2017, and were located in various regions.

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Recommendations

GAO recommends that VA (1) develop and document a process for estimating total activation costs, (2) develop and document a process for comparing actual activation costs to the estimates, (3) define allowable activation expenses, and (4) clarify when facilities should cease to classify expenses as activation-related. VA agreed with GAO's recommendations.

Recommendations for Executive Action

Agency Affected Recommendation Status
Office of the Under Secretary for Health The Assistant Deputy Under Secretary for Health for Administrative Operations should develop and document a process for estimating total activation costs for major medical facility projects. This process should reflect the 12 steps for developing a reliable cost estimate outlined in the GAO Cost Guide. (Recommendation 1)
Open

Recommendation status is Open.

When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Office of the Under Secretary for Health The Assistant Deputy Under Secretary for Health for Administrative Operations should develop and document a process for comparing actual activation costs for major medical facility projects to estimates. This process should identify the personnel responsible for comparing the estimated costs to the actual expenses and document their responsibilities. (Recommendation 2)
Open

Recommendation status is Open.

When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Office of the Under Secretary for Health The Assistant Deputy Under Secretary for Health for Administrative Operations should define and document what items and services officials can purchase with activation funds. (Recommendation 3)
Open

Recommendation status is Open.

When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.
Office of the Under Secretary for Health The Assistant Deputy Under Secretary for Health for Administrative Operations should define and document when facilities should cease to spend activation funds. (Recommendation 4)
Open

Recommendation status is Open.

When we confirm what actions the agency has taken in response to this recommendation, we will provide updated information.

Full Report