The U.S. Department of Defense and U.S. Department of Veterans Affairs health systems operate purchased care programs that govern how beneficiaries see providers in their communities. This preliminary feasibility assessment examined how an integrated approach to purchasing care could affect access, quality, and costs and identified general legislative, policy, and contractual challenges to implementing such a program.

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Integrating Department of Defense and Department of Veterans Affairs Purchased Care

Preliminary Feasibility Assessment

by Carrie M. Farmer, Terri Tanielian, Christine Buttorff, Phillip Carter, Samantha Cherney, Erin Lindsey Duffy, Susan D. Hosek, Lisa H. Jaycox, Ammarah Mahmud, Nicholas M. Pace, et al.

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Research Questions

  1. What purchased care authorities do DoD and VA currently operate under?
  2. How do DoD and VA purchased care programs compare?
  3. What legal gaps or barriers would impede DoD or VA from purchasing care through a joint contract?
  4. What operational challenges would DoD and VA have to address in executing an integrated purchased care approach?
  5. What is the potential impact on patients, providers, and costs under an integrated purchased care approach?

The U.S. Department of Defense (DoD) and U.S. Department of Veterans Affairs (VA) health systems provide services through a mix of direct care, delivered at government facilities, and purchased care, provided through the private sector, mainly by community-based providers who have entered into contracts with third-party administrators (TPAs). In the interest of expanding DoD-VA resource sharing that may lead to greater efficiencies and cost savings, the DoD/VA Joint Executive Committee is exploring options to integrate DoD and VA's purchased care programs. This preliminary feasibility assessment examined how an integrated approach to purchasing care could affect access, quality, and costs for beneficiaries, DoD, and VA and identified general legislative, policy, and contractual challenges to implementing an integrated purchased care program.

An integrated approach to purchasing care is feasible under current legal and regulatory authorities, but policy changes may be needed — and the practicality of such an approach depends on the contract and network design. For example, legal/regulatory changes in how contracts are established would be required to achieve any real savings to the government. There are also differences in the populations served by TRICARE (DoD health care) and VA, particularly in terms of age and geographic location. Implementation would be further complicated by contractual differences in the TPA contracts for VA and DoD as they relate to network standards, provider payments, network participation requirements, and reporting requirements and incentive structures. As a result, there are significant uncertainties with respect to increased efficiency or cost savings for the government.

Key Findings

An integrated purchased care approach is feasible, but it may not be practical

  • An integrated purchased care approach (including a joint contract and shared list of providers) would be legally permissible under existing authorities; however, some changes would be required, specifically to how appropriations language refers to the relevant DoD and VA programs for purchasing care.
  • Without significant changes to how DoD and, particularly, VA engage with TPAs, any operational efficiencies would be limited.
  • An integrated approach to purchasing care may expand the number of providers available to both departments, but it is uncertain whether this expansion would fill health care gaps or provide beneficiaries with a sufficient number of providers in the locations where they are needed.
  • It is unlikely that the government will achieve greater cost-efficiency by negotiating lower payments to providers because both departments are already paying near Medicare rates to their contracted providers.

The evolving policy landscape will have implications for an integrated approach to purchased care

  • In recent years, there have been significant changes to how DoD and VA manage health care. Additional policies could disrupt ongoing efforts to implement prior changes.
  • Policies affecting the U.S. health care system overall also affect DoD and VA. Of particular concern are changes that affect veterans' access to other sources of health insurance and thus affect their demand for VA services.
  • Changes in the size of the covered populations or eligibility for DoD or VA health care would affect how DoD and VA balance health care delivery across their direct and purchased care programs.

Recommendations

  • If DoD and VA opt to move forward in integrating their purchased care functions, additional analyses will be needed to examine similarities and differences in demand for purchased care across both departments, specific staffing capabilities and needs, and various options for oversight.
  • DoD and VA should consider designing and implementing a series of pilots or demonstrations, collaborating with Congress to outline the parameters for one or more of these efforts to examine the effects of integrating of various dimensions of purchased care.

Table of Contents

  • Chapter One

    Background

  • Chapter Two

    Overview of DoD and VA Health Care

  • Chapter Three

    DoD and VA Use of Purchased Care and Overview of Existing Purchased Care Provider Networks

  • Chapter Four

    Legal and Regulatory Authorities Underlying an Integrated Approach to Purchased Care for DoD and VA

  • Chapter Five

    Barriers with Respect to Operational Execution of an Integrated Purchased Care Approach

  • Chapter Six

    Potential Impact on Patients and Providers

  • Chapter Seven

    Potential Impact on Costs

  • Chapter Eight

    Summary Observations and Recommendations

Research conducted by

This research was jointly sponsored by the Defense Health Agency and VHA and was conducted within the Forces and Resources Policy Center of the RAND National Defense Research Institute and the Payment, Cost, and Coverage Program in RAND Health Care.

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