Over-Budget Hospitals

March 31, 2015
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The Veterans Health Administration (VHA) is plagued with problems. Veterans wait months for medical care and have few options for accessing non-VHA providers. In addition to all of the issues relating to providing health care, construction of VA medical facilities is mismanaged, which costs taxpayers billions of dollars in extra costs.

However, the VHA might be trying to change direction. Glenn Haggstrom, the individual who oversees VHA construction, “stepped down” last week after being put under internal investigation. Hopefully, he will be replaced by a reform-minded leader. In 2013 the Government Accountability Office (GAO) studied the four largest VHA construction projects, which are located in Denver, Orlando, New Orleans, and Las Vegas. GAO found a host of problems. All four projects had major cost overruns and schedule delays.

GAO discovered that the combined costs for the projects have doubled, from $1.5 billion to $3 billion. Construction of the Denver facility was 144 percent over budget and the Orlando facility was 143 percent over budget. The New Orleans facility was only 59 percent over-budget.The construction projects are also taking much long than planned. The Denver and New Orleans projects were 14 months behind schedule. The Las Vegas project was 74 months behind scheduled. GAO put much of the blame for these problems on the VHA: “Our review of VA’s four largest projects indicates that weaknesses in VA’s construction management processes…contributed to cost increases and schedule delays.” These sorts of problems have continued since GAO’s 2013 analysis. Costs at the Denver facility have continued to skyrocket. The most recent estimate in 2015 put total costs at $1.73 billion, five times greater than its original projected cost of $328 million, and $900 million more than GAO’s 2013 estimate.

Members of Congress were furious with the latest cost estimate. Many called for all VHA construction to be shifted to the Army Corps of Engineers, which handles construction for many federal agencies. The Chairman of the House Armed Services Committee said, “One thing is certain: Congress will not authorize another dime until VA gets its construction affairs in order.” These problems increased the pressure on Haggstrom. The VHA launched an investigation into the agency’s handling of construction issues. Haggstrom decided to step down, but not before collecting $64,000 in bonuses over the last several years. Since Haggstrom left voluntarily, he will continue to be eligible for his federal pension.

Haggstrom’s investigation and departure is a good first step to remedying the problems surrounding VHA hospital construction, but much more reform is needed. The failures with VHA construction projects are endemic. The inefficiencies related to the construction of VHA hospitals is another reason why veterans health care should be shifted to a system based on private providers.

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