Using the cost distribution report in estimating private sector payments: what adjustments should researchers make?

Nugent G, Grippen G, Parris YC, Mitchell M. Using the cost distribution report in estimating private sector payments: what adjustments should researchers make? Medical care. 2003 Jun 1; 41(6 Suppl):II80-90.

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• SDR 97-001 – Evaluating Cost for Veterans Health Care

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Abstract:

OBJECTIVES: To reapportion Veterans Health Administration (VA) annual expenditures into benefit categories for comparison with estimated payments by private sector providers. METHODS: Total expenditures for six VA medical centers for federal fiscal year 1999 were reapportioned by benefit category using the cost distribution report (CDR). Health benefit categories were based on those of health care insurers. Cost reapportionment was based on CDR data and reviews of source accounting and payroll documents. RESULTS: Actual expenditures for many benefits can be accurately identified and reapportioned using CDR data, but other expenditures were not identifiable in the CDR and required inspection of source documents. Inpatient expenditures amounting to $75,110,094 US dollars and outpatient expenditures amounting to $73,594,284 US dollars were reapportioned into other benefit categories, primarily professional fees. Expenditures for some VA benefits could not be identified because of differences in accounting and clinical practice between the VA and the community. DISCUSSION: Revisions to bring the CDR more in line with private sector payment categories would improve effectiveness for internal VA analyses and external expenditure comparisons. CDR revisions would require changes in recording some clinical workload (eg, rehabilitation and extended care) and classifying residential and domiciliary programs separate from inpatient care. Benefits that were not assigned expenditures for comparison with payments represent a potential liability if the VA were to purchase health care services in the marketplace. Variation among hospitals on expenditures not clearly identified in the CDR was significant and raises questions about the effectiveness of capitated budget methodologies using either the CDR or the decision support system.