Methods to determine private sector payment for VA outpatient services: institutional payments to providers

To describe methods used to estimate hospital institutional (facility) payments for providing Veterans Health Administration (VA) outpatient services.

A series of audits compared the accuracy of outpatient coding at six VA medical centers in federal fiscal year 1999 with private sector standards. Outpatient records were processed through industry standard software to determine validity and remove inappropriate services. Private sector payments were estimated by applying average payment data from Medicare cost reports and Medicare outpatient prospective payment schedules to counts of VA services.

Coding audits found little difference in accuracy between VA and the community. Physician visits generated the most estimated payments and deviated most from Medicare payment experience. Radiology and laboratory services were the next highest expenditure categories for both the VA and Medicare. The proportion of radiology payments in VA data was notably lower and ambulatory surgery notably higher than Medicare's experience. Within major categories, the relative rankings of VA and Medicare services were consistent.

Differences in payment criteria make exact cost comparisons of hospital-based and office-based settings difficult, particularly physician visits. Two VA clinical software applications, radiology and laboratory, provide information not readily convertible to a claims format; these applications need significant changes to be used for these purposes. They understate radiology services and overstate laboratory services compared with private sector standards. In addition, the laboratory application contains inappropriate or unspecified codes that cannot be accurately valued for many reasons.