Results of VA's Medical Care Cost Comparison Studies Are Not Valid

HRD-83-17: Published: Nov 24, 1982. Publicly Released: Dec 27, 1982.

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Robert A. Peterson
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In response to a congressional request, GAO evaluated the methodology which the Veterans Administration (VA) used in its medical care cost comparison study and discussed its usefulness as a valid, accurate indicator of VA versus community hospital costs.

VA did not attempt to estimate how community hospitals' costs would change if a decision were made to treat in these hospitals all veterans in need of acute care, nor were the impacts on residual VA health programs assessed. VA and community hospitals differ both in the patient population served and the health services provided. GAO found that the VA study compares the costs of dissimilar services provided to dissimilar patient populations. GAO also questioned the appropriateness of some of the assumptions and adjustments made by VA when hospital systems cost data were not readily available. In addition, GAO identified errors in VA calculations. The total medical and surgical care costs reported for the VA hospitals in Portland and Vancouver were reasonably accurate. However, GAO could not verify the accuracy of the medical and surgical per diem rates that VA developed for those hospitals. Finally, the factors VA used to distribute costs to various medical activities had not been updated to reflect current conditions, and limited information was available to assess their reasonableness.

Recommendation for Executive Action

  1. Status: Closed - Not Implemented

    Comments: VA contends that despite the study's shortcomings, it is the best analysis available at this time. VA intends to cite the study until better studies are done.

    Recommendation: The VA Administrator should not use the results of the 1982 VA and community hospital cost comparisons to assert that VA can provide medical care to the veteran population less expensively than community hospitals.

    Agency Affected: Veterans Administration


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