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Defense Health Care: DOD Should Reevaluate Market Structure for Military Medical Treatment Facility Management

GAO-23-105441 Published: Aug 21, 2023. Publicly Released: Aug 21, 2023.
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Fast Facts

In 2016, Congress directed the Defense Health Agency to run military medical facilities. As part of the multiyear transition of these facilities to DHA oversight, the agency set up 22 offices to manage facilities that it grouped into 36 U.S. "markets" and 2 overseas regions.

But staffing the offices has been hard. DHA estimated it needs over 1,400 personnel to do so—which exceeds expected resources.

An earlier plan for DHA's management structure would've set up 2 U.S. regions with 2 offices each. Our recommendations include reevaluating the "market" structure to ensure DHA uses available resources efficiently.

Stethoscope and military IDs on an American flag.

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What GAO Found

In November 2022, the Department of Defense (DOD) completed its multiyear transition of military medical treatment facilities from the military departments—the Army, the Navy, and the Air Force—to the Defense Health Agency (DHA). This means DHA is responsible for the management and administration of about 700 facilities (including dental clinics) in the United States and overseas. DOD accomplished the transition with a series of steps following a 2019 plan. For example, DHA grouped facilities into 36 markets in the United States and two regions overseas and established 22 offices to manage them. DHA relies on the military departments to provide active-duty personnel to staff the facilities and the offices, and augments them with civilian employees and contractors.

DHA is working to mitigate staffing shortfalls at the military medical treatment facilities that predated the transition. For example, DHA and the military departments agreed on a process to staff military personnel to all facilities in 2024 and beyond. However, DOD has not studied and validated the number of personnel required to staff the market and regional offices. The estimate of over 1,400 personnel for the 22 offices could be higher than needed and exceeds expected budgetary and personnel resources. DHA has faced difficulties staffing these offices with military and civilian personnel in the first years of operations. Yet, DOD has not revaluated the efficiency of the current structure since adopting it in 2019 to replace the 2018 plan. The 2018 plan would have established two U.S. regions with two offices each, compared with the 2019 plan's 20 offices to manage 36 markets (see fig.). Until DOD reevaluates the efficiency of the market structure and updates personnel requirements, DOD may risk not accomplishing its vision for an integrated health delivery system that efficiently uses available personnel and budgetary resources.

Changes to DHA's Management Structure for Military Medical Treatment Facilities


Note: The two DHA overseas regions did not change after 2018 and so are not shown here.

DOD officials stated that the transition may lead to savings in future years as DHA matures its managerial capabilities, but GAO found that the extent to which DOD has realized or will realize savings is unclear. For example, in fiscal year 2022, DHA began 10 initiatives reforming clinical and business processes to save over $1.6 billion by fiscal year 2026. However, DOD officials were unable to identify performance goals to track execution of the initiatives. Without doing so, DOD may not know whether the initiatives are achieving intended cost savings.

Why GAO Did This Study

The National Defense Authorization Act for Fiscal Year 2017 mandated sweeping reforms to the military health system, including transitioning military medical treatment facilities to DHA. These facilities deliver health care to service members to ensure their medical readiness. The facilities also provide essential on-the-job training for active-duty medical providers, and care for service members' families, retirees, and other eligible beneficiaries.

The joint explanatory statement accompanying the Consolidated Appropriations Act for Fiscal Year 2021 includes a provision for GAO to review the transition. This report examines (1) the status of the transition of facilities to DHA management, and the extent to which DHA has (2) addressed any transition-related staffing challenges and (3) identified cost savings and assessed efficiency initiatives.

GAO reviewed DOD reports and briefings and analyzed data on medical headquarters personnel numbers and budgetary resources, both before and after the transition. GAO interviewed DOD officials from six market offices and six facilities selected on the basis of market establishment date, patients served, and location.


GAO recommends that DOD (1) reevaluate its market structure for facility management and (2) establish performance goals for reform initiatives and monitor savings. DOD concurred with the first recommendation and partially concurred with the second. GAO continues to believe the second recommendation is warranted, as discussed in the report.

Recommendations for Executive Action

Agency Affected Recommendation Status
Department of Defense The Secretary of Defense should ensure that the Deputy Secretary of Defense, in coordination with the Under Secretary of Defense for Personnel and Readiness, prioritizes a reevaluation of its organizational approach for DHA's market-based management structure, including the possible consolidation under DHA headquarters of some or all management activities currently vested with market offices, and use the conclusions to study and validate workloads and personnel requirements. (Recommendation 1)
Open – Partially Addressed
DOD concurred with this recommendation. In December 2022 and April 2023, DOD completed two studies that evaluated the market-based management structure and options to replace it. Specifically, the studies reviewed the organization of DHA's headquarters and markets and the reporting structure between them. According to DHA officials, the results of these studies informed the adoption of a new approach to replace the markets beginning in October 2023. DOD's new organizational approach realigns its 36 U.S. markets and two overseas regions into nine Defense Health Networks. In doing so, DOD reduced the number of management organizations that report to DHA headquarters from 22 to nine. DOD's actions address part of our recommendation calling for a reevaluation of the market-based management structure. However, DOD did not provide evidence that it studied or validated workloads and personnel requirements, as we recommended. We believe this part of the recommendation remains valid to inform DOD's network approach for managing military medical treatment facilities. According to information that DOD provided in January 2024, the department is in the process of identifying performance measures for the effective use of personnel across the military health system. When we receive information about the results of this effort and their application, if any, to the new networks, we will determine whether DOD has fully addressed our recommendation.
Department of Defense The Secretary of Defense should ensure that the Under Secretary of Defense for Personnel and Readiness establishes performance goals for its transition-related clinical and business reform initiatives, and then monitors the results in relation to projected savings. (Recommendation 2)
DOD partially concurred with this recommendation. In response to our recommendation, DOD stated that the transition-related reform initiatives were completed. DHA officials further explained that the initiatives cannot be tracked retroactively to determine whether they achieved their intended savings. However, we believe the recommendation is still valid. As of January 2024, DOD stated that any new initiatives associated with Military Health System and DHA Strategic Plans are to include management oversight to closely monitor the resource utilization of both personnel and funds. Further, DOD stated that updated management and review processes will be incorporated into future program and budget development. When DOD provides evidence of its new oversight and review processes to track future savings initiatives, we will review the information to determine whether it addresses our recommendation.

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