Wednesday, May 16, 2007

Why Did VA Officials Get Bonuses for Questionable Performance?

The US Department of Veterans Affairs (VA) health care system, a national health care system that provides care to many veterans of the armed forces, has been held up lately as a model health care system. For example, after one study showed that diabetes care based on several quantitative measures was better in the VA system than in commercial managed care(1), the VA has been held up as an exemplar of quality improvement.(2)

But lately a bit of tarnish has appeared on its luster. And it appears that an organization that has put a lot of effort into improving performance in clinical care may conceive of performance very differently for top leaders.

Two weeks ago the Associated Press reported (here via the Boston Herald) that VA officials involved in various management blunders had nonetheless received performance bonuses.

Months after a politically embarrassing $1 billion shortfall that put veterans’ health care in peril, Veterans Affairs officials involved in the foul-up got hefty bonuses ranging up to $33,000.

The list of bonuses to senior career officials at the Veterans Affairs Department in 2006, obtained by The Associated Press, documents a generous package of more than $3.8 million in payments by a financially strapped agency straining to help care for thousands of injured veterans returning home from Iraq and Afghanistan.

Among those receiving payments were a deputy assistant secretary and several regional directors who crafted the VA’s flawed budget for 2005 based on misleading accounting. They received performance payments up to $33,000 each, a figure equal to about 20 percent of their annual salaries.

Also receiving a top bonus was the deputy undersecretary for benefits, who helps manage a disability claims system that has a backlog of cases and delays averaging 177 days in getting benefits to injured veterans.

The bonuses were awarded even after government investigators had determined the VA repeatedly miscalculated _ if not deliberately misled taxpayers _ with questionable methods used to justify Bush administration cuts to health care amid a burgeoning Iraq war.

Annual bonuses to senior VA officials now average more than $16,000 _ the most lucrative in government.

But yesterday, the Associated Press followed that up (here via San Diego Union-Tribune) with allegations that many of the VA officials who got bonuses themselves sat on the boards which made decisions about bonuses, which would seemingly lead to major conflicts of interest.

Nearly two dozen officials who received hefty performance bonuses last year at the Veterans Affairs Department also sat on the boards charged with recommending the payments.

Documents obtained by The Associated Press raise questions of conflicts of interest or appearances of conflicts in connection with the bonuses
, some of which went to senior officials involved in crafting a budget that came up $1.3 billion short and jeopardized veterans' health care.

The documents show that 21 of 32 officials who were members of VA performance review boards received more than half a million dollars in payments themselves.

Among them: nearly a dozen senior officials who devised the flawed 2005 budget. Also rewarded was the deputy undersecretary for benefits, who manages a system with severe backlogs of veterans waiting for disability benefits.

Deputy undersecretaries who sit on the review boards, which are appointed by VA Secretary Jim Nicholson, also had input on bonus recommendations involving themselves, fellow members and spouses that made questionable performance claims and neglected agency problems.

The VA, which has defended the bonuses as necessary to retain hardworking senior employees, says board members do not participate in bonus decisions that involve themselves or fellow board members. In those cases, recommendations are made by agency heads in consultation with deputy undersecretaries, who usually serve as supervisors to their fellow board members, the agency says.

But government watchdogs were harshly critical, saying the process does little to instill public confidence in the fairness of awards.

In one case, Michael Walcoff, associate deputy undersecretary for field operations who sits on two of the review boards, and his wife, Kimberly, a VA director, received a package of bonuses totaling $42,000.

'This is a scandal in the making,' said Paul C. Light, professor of public service at New York University who specializes in government reform. He said the VA bonuses pointed to possible 'featherbedding' and other favoritism.

Under a federal law passed in 1978 to increase government accountability by tying bonuses more closely to performance, agencies are required to appoint performance review boards yearly to guarantee bonus awards are “fair and credible.”

According to guidance by the U.S. Office of Personnel Management, performance boards must ensure that bonuses are given based not only on individual accomplishments cited by supervisors, but also the department's overall success.

However, 2006 bonus proposals obtained by the AP show that senior officials who received top payments of $33,000 were sometimes credited for achievements that were questionable, if not inaccurate.

The matter has just been referred to an oversight agency, the US Office of Personnel Management, again per the AP via the Boston Herald.

This appears to be another example of how leaders of large health care organizations, whether governmental, commercial, or not-for-profit, are often treated differently from you and me. Not only may the leaders be rewarded for "performance" that often amounts to poor performance, but they may get to decide on their own rewards. And this can happen even in organizations that put a lot of effort into performance improvement on the ground.

Is it any wonder that health care lead by such winds up expensive, inaccessible, and not of the best quality, and why health care professionals are often demoralized?

1. Kerr EA, Gerzoff RB, Krein SL et al. Diabetes care quality in the Veterans Affairs health care system and commercial managed care: The TRIAD Study. Ann Intern Med 2004; 141: 272-281. (link here).
2. Kupersmith J, Francis J, Kerr EA et al. Advancing evidence-based care for diabetes: lessons from the Veterans Health Administration. Health Affairs 2007; 26: w156-w168. (link here)

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