Summary: To keep pace with societal and industry changes, the Department of Veterans Affairs (VA) began to transform its health care system in October 1995 from large hospitals to community-based integrated networks of VA and non-VA providers. It established primary care as the dominant delivery model, shifted medical care from inpatient to outpatient settings, and consolidated administrative and clinical services. During the last three years, VA has served 400,000 additional veterans while realizing a nonappropriated revenue surplus of $496 million, having reduced operating costs by more than $1 billion. However, VA has prolonged decisions on the much needed restructuring of aged capital assets, including hospital closures, which could result in billions of dollars in unnecessary outlays during the next several years. VA's fiscal year 2000 budget request for $18.4 billion is based on an unduly optimistic assumption that its health care system overhaul will save $1.4 billion in fiscal year 2000. For example, VA anticipates that employment reductions will be more than three times greater than expected fiscal year 1999 reductions, but it has not taken the underlying management actions necessary to make that possible. Moreover, VA might have to resort to large-scale employee furloughs to operate within its proposed budget, which could harm veterans' quality of care. VA should, as Congress intended, use its new enrollment process to manage access to its health care services within available resources.
