Value for taxpayers' dollars: what VA care would cost at medicare prices.

Critics charge that Veterans Health Administration (VA) medical centers are inefficient and the cost of veteran health care would be reduced if VA purchased care for its patients directly from private-sector providers. This analysis compares VA medical care expenditures with estimates of total payments under a hypothetical Medicare fee-for-service payment system reimbursing providers for the same counts of each service VA medical centers provided in fiscal 1999. At six study sites, hypothetical payments were more than 20 percent greater than actual budgets. Nationally, this represented more than 3 billion US dollars in 1999 and more than 5 billion US dollars in 2003. Data limitations suggest the estimate is conservative. Less than half of the difference is due to VA's low pharmacy costs. The study demonstrates the potential savings to patients and taxpayers of the VA health care system.

Estimating private sector professional fees for VA providers.

OBJECTIVES: To describe new methods used to estimate inpatient and outpatient Medicare-based professional fees for Veterans Health Administration (VA) services. METHODS: National VA utilization files provided estimates of inpatient physician services, whereas local provider and utilization files gave counts of outpatient services by physicians, nurse practitioners, physician assistant, clinical psychologists, and clinical social workers. Services from ambulatory surgery, emergency room, and clinics (eg, dermatology and gastroenterology) were coded by study health information management staff (coders). VA-based billing information was edited against Medicare guidelines. Estimates for VA services without comparable Medicare fees were obtained from other commercial sources. RESULTS: Hypothetical professional fees for VA services were 17% more ($109 million vs. $93 million) than the VA budget for physicians over 1 fiscal year at six sites. Total payments of nearly $21 million were generated for VA inpatient care. In fiscal year 1999, there were 30,209 admissions (of which 4549 were psychiatric) to the study sites; 30,518 discharges; 229,783 inpatient days, including 27,235 in critical care units; and 38,348 surgical days of care. DISCUSSION: Differences between the VA and the private sector maybe overstated because VA salaries of nonphysicians were not included in the VA budgets. Conversely, the extent to which VA professional services were undercounted in VA information systems used in this study may understate the difference. Future research may consider additional data collection approaches or information systems enhancements to enumerate more accurately all provider services that are reimbursable in the private sector.

Methods to determine private sector payment for VA outpatient services: institutional payments to providers.

OBJECTIVES: To describe methods used to estimate hospital institutional (facility) payments for providing Veterans Health Administration (VA) outpatient services. METHODS: A series of audits compared the accuracy of outpatient coding at six VA medical centers in federal fiscal year 1999 with private sector standards. Outpatient records were processed through industry standard software to determine validity and remove inappropriate services. Private sector payments were estimated by applying average payment data from Medicare cost reports and Medicare outpatient prospective payment schedules to counts of VA services. RESULTS: Coding audits found little difference in accuracy between VA and the community. Physician visits generated the most estimated payments and deviated most from Medicare payment experience. Radiology and laboratory services were the next highest expenditure categories for both the VA and Medicare. The proportion of radiology payments in VA data was notably lower and ambulatory surgery notably higher than Medicare's experience. Within major categories, the relative rankings of VA and Medicare services were consistent. DISCUSSION: Differences in payment criteria make exact cost comparisons of hospital-based and office-based settings difficult, particularly physician visits. Two VA clinical software applications, radiology and laboratory, provide information not readily convertible to a claims format; these applications need significant changes to be used for these purposes. They understate radiology services and overstate laboratory services compared with private sector standards. In addition, the laboratory application contains inappropriate or unspecified codes that cannot be accurately valued for many reasons.

Methods to estimate and compare VA expenditures for assistive devices to Medicare payments.

OBJECTIVE: To describe the methods used to estimate and compare Veterans Health Administration (VA) annual expenditures for assistive devices and their repair at six VA hospitals with payments for those same devices in the private sector. METHODS: Information about dispensed assistive devices and their costs was extracted from (1) the VA's National Prosthetic Patient Database, (2) each site's listing of the VA's Denver Distribution Center cost center in the Cost Distribution Jurisdictional Report, and (3) review of invoices for implanted prosthetics at each study site. We estimated private sector payments by applying Medicare geographically adjusted rates for purchases or rentals, where rates existed, or by inflating VA costs by 30%. RESULTS: The VA spent a total of $30.6 million for prosthetics at the six sites in fiscal year 1999, of which $14.2 million was for items captured in the National Prosthetic Patient Database, $3.4 million for the Denver Distribution Center, and more than $8.1 million for implants. Indirect VA costs were estimated at $4.8 million. Hypothetical private sector payments were estimated at $49.8 million. CONCLUSIONS: Unlike Medicare, VA both contracts to provide assistive devices (through a competitive bidding process) and dispenses devices it has purchased. This approach results in significantly lower expenditures, consistent with other reports. Generalizing these cost savings to other private or federal programs covering assistive devices requires further study.