Criticisms of the Veterans Administration health care system have centered in part on the ability of the system to reallocate resources in response to the changing needs of veterans. VA hospitals use traditional budgeting and planning processes; new programs and projected increases in workload are added to the previous year's budget to yield the budget for the succeeding year. Since these activities occur on an individual institution basis, there is little effort to plan cooperatively between hospitals or to reassess the fundamental allocation of resources based on veteran needs. Over the past two years, the VA has devised a program of regionalized budgeting and planning. The publicity surrounding VA regionalization reflects the idealized potential of shared resources and joint planning within each of the newly created VA medical districts. The reality of the program, however, when examined on a national basis and illustrated by an in-depth study of five hospitals in one district, indicates that there has been little use of resource allocation methodology and that few planning resources have been allocated to this effort. As a result, the district program is a collation of individual hospital budgets, and plans to yield the district budget and plans. Regionalization is unlikely of succeed in any meaningful manner within the VA unless further changes occur in district resource allocation methods.