Cost analysis in the Department of Veterans Affairs: consensus and future directions

In 1997, the Management Decision and Research Center of the Department of Veterans Affairs convened cost experts and health economists in a working meeting. Its goal was to provide consensus guidelines for conducting cost analyses in managed care systems, such as VA, that do not have encounter-level cost data or that do not prepare itemized patient bills. The impetus for the meeting was that too often computer-based cost data were proposed or used in studies that were inappropriate for the question being addressed. There was also a sense that often great effort was being expended by VA health economists "reinventing the wheel" in developing new cost components for each study.

A group of 45 VA and non-VA health economists, health researchers, and policy-makers attended a 2 day working meeting organized around a series of case vignettes to identify areas of consensus, controversy, and gaps in knowledge.

Consensus emerged in the following four areas: (1) Cost Methods. A "hybrid model" was identified as the current standard of cost analysis in VA and entails mixing "micro-costing" primary data collection and "gross-cost" computer-based methods to reflect resource-use variations that are essential to the research question. (2) Cost Infrastructure. VA is developing a new, but unevaluated, costing system that could allow for computer-based cost analyses at much finer levels of detail than is currently possible. (3) Data Quality. Ongoing data validation of existing and developing cost databases is needed, especially concerning interfacility variation. (4) Dissemination. A new cost data center was recommended to provide training, information dissemination, and coordination.

Consensus was reached about the hybrid model as the current paradigm for cost analysis in systems like VA.