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53. The Methods used by the Health Economics Resource Center for Estimating VA Outpatient Health Care Costs

A Bhandari, VA HSR&D Health Economics Resource Center; CS Phibbs, VA HSR&D Health Economics Resource Center; PG Barnett, VA HSR&D Health Economics Resource Center

Objectives: The VA does not routinely prepare patient bills; as a result it has been difficult to determine the cost of VA health care. In efforts to answer the question, "What does VA health care cost?" The Health Economics Resource Center (HERC) has developed methods to calculate the costs of VA health care encounters. For outpatient care, the general approach, known as micro-costing, is analogous to preparing an itemized bill. Using this methodology we have created a national level dataset for 1998 that includes costs for every outpatient procedure performed at the VA during that time period. This poster will review the methods used to create these estimates of costs for VA outpatient services as well as applications of this approach.

Methods: The VA records Current Procedural Terminology (CPT) codes, which are the basis of private sector outpatient billing for all outpatient care. Itemized outpatient services information was obtained from the VA National Patient Care Database at the Austin Automation Center. Specifically, utilization data was obtained from the SC (outpatient procedures file) dataset, which contains the CPT codes assigned to each outpatient encounter. Cost estimates for the CPT codes were obtained from the Health Care Financing Administration's (HCFA) Medicare Fee Schedule (MFS), which is based on the Resource Based Relative Value Schedule (RBRVS). The RBRVS is based on economic estimates of the costs of providing the services associated with each CPT code. The utilization data (SC file) was linked with the cost data (MFS file). However, not all VA outpatient procedures are reimbursable via HCFA, as a result we used non-Medicare relative value units (GAP codes), and other methods to find cost when neither source of relative values were directly available.

Results: In 1998, there were 57,629,798 outpatient visits to the VA nationwide. For these visits, there were 96,851,665 documented CPT codes. Of these, 9,098 were unique CPT procedures. When merged with the MFS, 408 CPT codes had no relative value unit. This was due to one of four reasons: (1) Medicare does not pay for the service and thus does not have a RVU for all procedures; (2) the VA code was unspecified; (3) the VA code was out of date; or (4) the VA code was not a valid CPT code. We have developed specific methods to deal with each of these issues.

Conclusions: We have used HCFA methodology to assign cost to VA utilization data. Linking utilization data with Medicare cost data is one way to determine VA outpatient health care costs either on a macro or micro level. However there are many subtleties involved that include utilizing GAP codes, knowledge of facility versus non-facility Medicare payment structures, global bundling packages, and assigning appropriate costs to non-Medicare CPT codes.

Impact: Creation of this national level dataset that includes cost estimates will be made available to all researchers. HERC has devoted considerable resources to ensure data validity of such a large undertaking. This dataset will save health services researchers time, effort, and will ultimately improve the quality of health economics research.