Estimating the Cost of Health Care: VA Costs

1. Estimating the Cost of Health Care: VA Costs Paul Barnett May 16, 2007

2. Overview of Cost Presentations

3. Specific Learning Objectives • Understand VA data sources for patient and encounter costs • Be familiar with their methods of cost determination • Be able to choose between data sources • Know how to access the data

4. VA Cost Data Sets • Two possible sources: • HERC average cost estimates • Non-VA data on relative values adjusted for VA expenditures • DSS cost estimates • Activity based cost allocation system

5. Which cost data for my study? • Randomized trial comparing two types of Cardiac Artery Bypass Graph (CABG) surgery • Graphs using saphenous vein vs. radial artery • What cost data should be used to estimate costs during the 2-year follow-up period?

6. HERC Average Cost Datasets

7. HERC method of distributing costs to hospital stays and outpatient visits • Acute medical surgical stays • Estimate of what stay would have cost in a Medicare hospital, based on a regression model • Other inpatient care • Length of stay • Outpatient care • Hypothetical Medicare payment based on procedure codes assigned to visit

8. Cost data used to build HERC average cost datasets • Cost incurred at each medical center in each category of care • FY98-03 Cost Distribution Report • FY04-present Tabulation of DSS data

9. HERC Method: Acute Medical/Surgical Hospitalizations • Cost regression estimated using Medicare data • Length of stay • Days of intensive care • Diagnosis Related Group (DRG) • Stay is assigned to one of 511 groups based on diagnosis and procedures • Medicare relative value weights for DRG

10. HERC Method: Acute Medical/Surgical Stays (cont). • HERC identifies acute medical surgical components of stays in the VA Patient Treatment File (PTF) • Consistent with non-VA hospital definition • Contiguous medical-surgical bed section segments

11. HERC Method: Acute Medical/Surgical Stays (cont). • HERC applies regression parameters to VA stays to estimate what stay would have cost in a Medicare hospital • Estimates adjusted to reflect actual VA expenditures

12. HERC Method: Other stays • Costs assumed to be proportional to length of stay • Rehabilitation • Blind rehabilitation • Spinal cord injury • Psychiatry • Substance abuse • Intermediate medicine • Domiciliary • Psychosocial residential rehabilitation • Long-Term Care

13. HERC Cost File: Inpatient Discharge Data • Cost of each VA hospital discharge reported in Patient Treatment File (PTF) • Stays ending in discharge in Fiscal Year • Excludes stays that began before FY98 • Length of stay, costs at national and local rates

14. HERC Cost File: Inpatient Discharge Data (cont.) Subtotals of days and costs in 10 categories: Medicine and surgery Rehabilitation Blind rehabilitation Spinal cord injury Psychiatry Substance abuse Intermediate medicine Domiciliary Psych. residential rehab. Nursing home

15. HERC Cost File: Bed Section Data • Most studies don’t need this data set • Used to build HERC discharge data • Stays that occurred in year, regardless of discharge • Days and costs by PTF bed section segment (or group of acute medical surgical bed section segments)

16. HERC Method: Outpatient costs • HERC assigns hypothetical payment • based on Current Procedure Terminology (CPT) and HCPCS codes, up to 20 per visit • Physician reimbursement rates from Medicare and other payers • Facility reimbursement rates from Medicare • Adjusted to reflect expenditures in the category of outpatient care, defined using clinic stop (DSS identifier)

17. HERC Cost File: Outpatient Cost Data Set • Cost of each VA outpatient record in the National Patient Care Database outpatient events file (SE) • National and local costs • Hypothetical Medicare payment

18. HERC Cost File: Person-Level Annual Cost • One person per record • FY1998-FY2004 • Total VA cost and costs of five inpatient and five outpatient categories, LOS for inpatient care • Includes DSS outpatient pharmacy • Stays that cross fiscal years are assigned cost in proportion to the days in fiscal year.

19. DSS National Data Extracts

20. DSS determines cost of products • Cost assigned to cost center • Staff activities reports and financial data • Cost of overhead departments distributed • Products of each department tabulated • Relative values assigned to products • Unit cost of each product determined

21.  X Total cost of encounter (Visit or stay) = DSS assigns cost to encounters Workload Count of each intermediate product used in encounter Unit cost of each intermediate product

22. Where do DSS data come from? VISTA workload, clinical, & financial data Time allocation Relative values DSS VISN Level Production Databases (at Austin but limited access) National Data Extracts of DSS (SAS Files at Austin)

23. DSS National Data Extracts • Inpatient files • Treating specialty file • Discharge file • Outpatient Encounter Files • Pharmacy files • Intermediate Product Department files • Clinical Files

24. DSS Cost File: Inpatient Discharge File • Care of patients discharged in fiscal year • Record represents one discharge (even if stay involves multiple bed sections) • Includes cost incurred in prior fiscal years • May exclude stays that began before DSS implementation

25. DSS Cost File: Inpatient Treating Specialty File • Treating specialty is synonymous with bed section • File includes: • Care provided during fiscal year • Stays not yet over • One record per bed section (treating specialty) per month

26. DSS Cost Files: Outpatient files • One record per patient per day per clinic stop • NPCD events file allows more than 1 record per clinic stop per day • DSS includes care not in NPCD events file, e.g., prosthetics • Four regional files ~100 million records per year

27. DSS Cost Files: Pharmacy files • Daily outpatient pharmacy cost files • One record per day • Cost but not names of drugs dispensed • Prescription level files • One record per dispensed prescription • Includes drug, cost, quantity, dose • Includes file with inpatient prescriptions

28. DSS Cost Files: Intermediate Product Department Files • Both inpatient and outpatient files • One record with costs incurred in each intermediate product department in stay/visit • Not yet documented

29. Clinical DSS National Data Files • Laboratory Tests • All tests, inpatient and outpatient • Radiology • Cost of each procedure • Laboratory Results • 59 laboratory tests

30. Which data to use: HERC or DSS?

31. Criteria: • Is costing method consistent with study goals? • What is study time frame? • Are pharmacy or contract care costs needed? • Are data needed on characteristics of care? • Are cost-subtotals needed? • Which data are more accurate?

32. Is costing method consistent with study goals? • Study to determine cost-effectiveness for U.S. health care system • HERC uses non-VA relative values, HERC costs more like costs typical of non-VA health care settings • Study to determine efficiency of different VA providers • DSS costs estimate reflect differences in productivity, efficiencies, economies of scale, etc. • Strong assumptions make HERC estimates inappropriate for this type of study

33. Time Frame • HERC begins with FY98. HERC has documented how to estimate cost of earlier years • DSS begins same year, but early years of uncertain accuracy

34. Outpatient Pharmacy Cost • DSS has pharmacy data, HERC does not • Pharmacy data also available from Pharmacy Benefits Management system • No direct access, must file request and wait for it to be fulfilled • PBM costs include only drug cost (not dispensing or overhead cost) • PBM data are available for years before DSS

35. VA Contract Care • VA purchases about 4% of care from non-VA providers • DSS data on contract care • Community nursing home costs in DSS outpatient file • Increasing effort to include contract care in DSS • HERC excludes contract care • See VA fee basis files for cost of this care • Fee basis files are also incomplete!

36. Data Needed on Care Characteristics? • Cost data sets have limited information on patient, stay, or encounter • These data must be obtained from PTF or NPCD outpatient care files • HERC or DSS inpatient discharge data easily merged • HERC outpatient data more easily merged to NPCD • HERC average cost data are easier to use

37. Ease of merging HERC files with utilization files VA Utilization Data HERC Cost Data easy PTF Discharge files Discharge easy Outpatient NPCD Outpatient easy Rehab, mental health, long term care, etc. PTF Bed section files hard Med/surg

38. Ease of merging DSS NPCD with utilization files VA Utilization Data DSS Cost Data easy PTF Discharge files Discharge moderate NPCD Outpatient Files Outpatient very hard PTF Bed section files Treating specialty

39. Are cost subtotals needed? • HERC inpatient discharge dataset • 10 sub-total fields • HERC outpatient dataset • Category of care (CAT) can be used to generate cost sub-totals

40. Are cost-subtotals needed? • DSS inpatient discharge • No totals by type of care (e.g., medical-surgical vs. long term care • Must be done using treating specialty, but hard to aggregate treating specialty records when stay crosses a fiscal year • HERC plans to create file with cost subtotals • DSS outpatient • User must define categories based on clinic stop • HERC average cost data are easier to use.

41. Which cost data are more accurate: DSS or HERC average costs?

42. Costing Methods More precise Less precise Pseudo-bill Reduced list costing Direct measurement Average cost per visit Clinical cost function DSS Outpatient HERC AC Costs Inpatient HERC Med/Surg Inpt. Rehab, HERC MH, LTC

43. Potential errors in HERC methods • Inpatient costs: • Regression may not do a good job of estimating cost of acute medical surgical stays costs that are at the extremes • Outpatient costs estimates depend CPT codes • Codes may be used inappropriately • E.g.. At one site methadone visits ($10) coded as medical care ($150) • CPT modifiers not used • Not possible to tell if medical equipment code represents one time purchase or daily rental

44. Potential errors in DSS methods • Outlier costs • Mismatch of cost and utilization can result in unit costs that are very high cost, or negative • DSS quality assurance efforts • Audit that costs in DSS agree with general ledger • Extreme high outliers are filtered out when DSS national data extracts (NDE) are built

45. Which is more accurate? • HERC cost estimates • based on strong assumptions • reflect relative resource use in non-VA settings • DSS cost estimates • reflect actual VA experience • have more variance • may be more prone to inappropriate outliers • Both data sets rely on DSS distribution of costs to departments

46. Data validation

47. Which stay has been assigned inappropriate costs?

48. What do you want to know about the stay to know if costs were inappropriately high or low?

49. Type of Care

50. Length of Stay