Panel Questions VA Formula for Funding Hospitals

"Should allocations be formula driven or standards based with real-time analysis?" asked Rep. Steve Buyer of Indiana, the committee's ranking minority member, at a Dec. 2 hearing. He said funding decisions should be driven by careful planning and performance measures.

Funding is a critical issue for VA as it embarks on its first-ever attempt at working with a two-year budget for its medical operations. Congress approved advanced appropriations for the department earlier this year after VA leaders and veterans groups argued that hospitals can hire more and operate better if they know their budget in advance. The fiscal 2010 budget, still awaiting Senate approval, will also contain the 2011 budget for the VA's medical operations.

There are 21 veterans' networks nationwide overseeing the country's VA medical facilities, but not all divide money the same way, said Rita Reed, VA's acting assistant secretary for management.

Some networks use the number of patients to determine funding, while others adjust the previous year's base funding, she said.

"The basic principle of this allocation process is that health care occurs locally," she said.

That system means some medical centers operate at a disadvantage. Clyde Parkis, former director of VA's health care system in Ohio, said appropriations should better reflect the costs of providing services in an area.

His district saw enrollments increase between 5 percent and 8 percent each year from 2001 to 2006 and health care costs rise 10 percent each year. In contrast, the budget increased about 5 percent each year, posing an "enormous" challenge, he said.

Buyer said he's also concerned that VA has misdirected stimulus funds intended to pay overtime and speed up the processing of backlogged disability claims. Instead, Buyer said the funds have been used to process claims under the post-9/11 GI bill education benefits program, which ran into problems almost immediately after its Aug. 1 launch.

"The VA is diverting resources from a disability-related program with huge backlogs to pay for a non-disability program," Buyer said.

VA officials at the hearing did not respond to Buyer's claim.

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