Review of VA's Patient-Centered Community Care (PC3) Contracts' Estimated Costs Savings

In April 2014, the Office of Inspector General (OIG) received a request from the U.S. House of Representatives Committee on Appropriations to review VA’s FY 2014 Patient-Centered Community Care (PC3) costs and the $13 million cost savings estimate presented in VA’s budget submission. We could not attest to the reliability and accuracy of VA information regarding the methodology and calculation of the PC3 cost savings estimate. Our analysis of available PC3 data determined that inadequate price analysis, high up-front contract implementation fees, and low PC3 utilization rates impeded VA from achieving its $13 million PC3 cost saving estimate. We found that in FY 2014 PC3 cost about $14.9 million more than if VA had used the non-VA care program to purchase the same health care services. VA assumed that the PC3 contractors would develop adequate provider networks; VA medical facilities would achieve desired 25 to 50 percent contract utilization rates; and accrued PC3 cost savings for health care services would more than offset the contractors’ fees. These flawed assumptions contributed to significant PC3 contract performance problems and a 9 percent PC3 utilization rate in FY 2014. We recommended the Interim Under Secretary for Health revise VA’s PC3 cost analyses and address VA’s low PC3 utilization rates. Additionally, we recommended the Executive Director, Office of Acquisition, Logistics, and Construction, ensure all required contract documents are maintained in the PC3 contract files.