HERC’s Average Cost Datasets for VA Inpatient Care FY1998 - FY2008

Wagner TH, Chen S, Yu W, Barnett PG. HERC’s Average Cost Datasets for VA Inpatient Care FY1998 - FY2008. Menlo Park, CA: HERC; 2009 Aug 1. 53 p.

The U.S. Department of Veterans Affairs (VA) provides health care to veterans at more than 120 inpatient facilities. In 1999, the VA funded the Health Economics Resource Center (HERC) to adapt existing cost methodologies and to expand methods to estimate costs of health care encounters. This guidebook describes HERC's method for estimating the cost of VA inpatient stays from fiscal years 1998-2008; Chapter 5 provides details on how to use the data. Inpatient stays can be classified into two categories depending on basis of admission. Acute inpatient stays include short-stay hospitalizations for acute medicine and surgical treatment, and are typically less than 60 days long. Non-acute inpatient stays encompass rehabilitation, blind rehabilitation, spinal cord injury, psychiatric, substance abuse, intermediate medicine, domiciliary, and psychosocial residential rehabilitation stays. For both types of care, we estimate costs assuming that every health care encounter has the average cost of all encounters with the same characteristics. We use length of stay as the determinant of cost in a non-acute hospitalization. This makes the assumption that every day of stay has the same cost and costs are thus directly proportional to length of stay. In contrast, we estimate the cost of acute medical-surgical hospital care by using an econometric cost function. This method relies heavily on non-VA relative value weights used by Medicare to pay hospitals for providing care to Medicare patients. The user's guide to the average cost dataset discusses methods in building the dataset, assumptions underlying the dataset, and how to use the dataset. The user's guild also discusses the data limitations and why these data may not be appropriate for every study.