VERA 10

1
VERA 10 Other VERA Funding Model Changes

• Presentation by Paul Kearns
• Director, Resource Allocation and Analysis
• VHA Office of Finance
• For
• Ambulatory Care Conference
• June 26, 2003

2
Overview

• FY 2003 Decision
• Composition of Budget
• Classification of Patients
• FY 2003 VERA Model Allocation to VISNs
• Allocation to Facilities
• Future Improvements to VERA

3
Background

• GAO RAND
• Recommended more refined case-mix
• Possible Options
• VERA 10, VERA 47, VA Diagnostic Cost Groups
  (DCGs)
• FY 2003 refinements recommended by
• National Leadership Board (NLB) Finance Committee
• Full NLB
• Under Secretary for Health
• Secretary approved FY 2003 refinements

4
FY 2003 Refinements

• Move from VERA 3 case-mix to VERA 10
• Less complex than VERA 47 VA DCGs
• Does not require additional analysis or extensive
  education
• Recognize impact of top 1 high cost patients
• Implement low cap (5) high cap (12.6) on
  allocation increases over FY 2002
• Provide a disincentive for highest workload
  growth
• Continue to exclude Basic Care Priority 7
  patients
• National Reserve Fund (NRF) set at minimum 200M

5
Rationale

• Improves equity of allocation process
  decisions
• Responsive to GAO RAND recommendations
• Recognizes price cost differences in core
  mission patients
• Requires minimal education for the field
• Eliminates need for supplementals
• Provides disincentive for workload growth

6
Whats New

• Case-Mix Groups
• Changed from 3 groups to 10 groups
• Updated Complex-Basic allocation split to current
  experience versus the unchanged FY95 split under
  VERA 3
• FY 1995 FY 2003 w/o HCA FY 2003 w/HCA
• Basic Care 62 71 67
• Complex Care 38 29 33
• Recognition of the highest cost patients
• Top 1 patients with cost over 70,000
• Increased allocation for amount above 70,000

7
Whats New(Continued)

• Caps (Floor Ceiling) on increase above FY 2002
• Low cap of 5
• High cap of 12.6
• Greater Use of DSS Data in the VERA Model
• In FY 2002 used for computing PRPs only
• In FY 2003 used for
• Computing PRPs
• Establishing the relative weights of the 10
  case-mix groups
• Basis for allocating General Purpose funds to 10
  groups
• Determining High Cost Adjustment
• All costs above 70,000 per patient

8
Whats the Same

• Same Allocation Model
• Allocates Funds Not Reimbursement of Cost
• Same 47 Patient Classification Groups
• Combined into 10 groups versus the old 3 groups
• Same Basic and Complex Care
• 6 Basic groups versus 2 groups
• 4 Complex groups versus 1 group

9
Whats the Same Continued)

• Same Vesting and Non-Vesting in Basic Care
• Same adjustment factors for
• Labor index geographic price adjustment
• Research Education Support
• Equipment Non-Recurring Maintenance (NRM)
• Same exclusion of Priority 7Cs from Basic Care

10
Overview

• FY 2003 Decision
• Composition of Budget
• Classification of Patients
• FY 2003 VERA Model Allocation to VISNs
• Allocation to Facilities
• Future Improvements to VERA

11
Capital requested as 14 month, but Appropriated
as 1 year
Appropriated 23.889B Plus
Revenue 1.630B Total Budget
25.519B
11
12
Medical Care Appropriations

• Two types of funds
• Specific Purpose
• Centralized funding for specific programmatic
  activities
• General Purpose
• Funds distributed at the beginning of the fiscal
  year to the networks based on the VERA model

13
Medical Care Appropriations (Continued)

• Specific Purpose
• FY 2003, Specific Purpose funding 3.364B
• Must meet at least one of the following three
  criteria
• Efficiency. There is a demonstrable savings with
  central management e.g., leverage of buying power
  through national contracts).
• Legal or Programmatic Requirements. There is a
  specific statutory requirement that limits VAs
  ability to decentralize the program or function.
• National Support. The item is judged to be
  essential for the corporate management of VA and
  is something that would be outside of the scope
  of network operations.

14
FY 2003 Budget

• FY 2003 appropriation
• Composition by type
• Appropriated 23.9B
• Revenue 1.6B
• Total 25.5B
• Composition by purpose
• General Purpose (VERA) 20.5B (86)
• Specific Purpose 3.2B (13)
• National Reserve Fund/travel 0.2B
  (1)
• Total Appropriated 23.9B (100)

15
Overview

• FY 2003 Decision
• Composition of Budget
• Classification of Patients
• FY 2003 VERA Model Allocation to VISNs
• Allocation to Facilities
• Future Improvements to VERA

16
Basic Care Complex Care

• Routine health care
• Acute care
• Ancillary Services

• Spinal cord injury
• Stroke
• Transplants

• Long-term/chronic care
• Chronic Mental Illness
• Blind rehabilitation
• Traumatic brain injury

96 of patients Count all patients treated in 3
year period FY99-FY01 as an estimate for FY03
users Prorate patients treated in more than one
Network Group patients into 21 Classes
4 of patients Count all patients treated in 5
year period FY97-FY01 forecast FY03
patients Prorate patients treated in more than
one Network Group patients into 26 Classes
47 classes
17
What are the 47 Patient Classes GroupingsVERA
Classes 1 thru 21 in Basic Care
18
What are the 47 Patient Classes GroupingsVERA
Classes 22 thru 47 in Complex Care
19
How Does VERA 10 Relate to VERA 3
19
20
What is Distribution of Prorated Patient (PRPs)
Workload (3,935,626) by VERA 10 Groups
21
What is the Composition of Each VISNs PRP
Workload by VERA 10 Groups
22
Composition of Each VISNs PRP Workload by VERA
10 Groups
23
Percent Composition of Each VISNs PRP Workload
by VERA 10 Groups
24
Each VISNs Share of PRP Workload by VERA 10
Groups
25
What is the Distribution of High Cost Patients
(29,928) by VERA 10 Groups
26
What is the Composition of High Cost Patients for
Each VISN
27
What is the Patient Gender CompositionFor Each
VERA 10 Group
28
What is the Patient Gender Composition Across
the VERA 10 Groups
29
VERA FY 2004 Distribution of Effort Hospital
Based versus Ambulatory
30
Priority Groups Categories
31
Priority Groups Categories(Continued)
32
FY 2002 Enrollees UsersBy Priority Group
33
FY 2001 Enrollees UsersBy Priority Group
34
FY 2001 FY 2002 Enrollees Users by Priority
Group
35
Overview

• FY 2003 Decision
• Composition of Budget
• Classification of Patients
• FY 2003 VERA Model Allocation to VISNs
• Allocation to Facilities
• Future Improvements to VERA

36
Elements of VERA

• 1. Basic Care Vested Non-Vested 6 price
  groups
• 2. Complex Care 4 price groups
• 3. High Cost Adjustment
• 4. Geographic Price Adjustment

• 5. Research Support
• 6. Education Support
• 7. Equipment
• 8. Non Recurring Maintenance (NRM)
• 9. Low High Caps

37
Componentsof Model
Representative Workload

• Patient care
• (Basic or Complex)
• Research support
• Education support
• Equipment
• Non-RecurringMaintenance (NRM)

Pro-Rated Persons (PRPs) VISN share of Research
Medical Residents PRPs PRPs adjusted by Boeckh
construction index.
38
How Does the VERA 10 Model WorkStep 1 Pull Out
Specific Purpose National Reserve Fund (NRF)
Total VA Healthcare Budget (23.9B)
VERA
Specific Purpose NRF 3.4B
86
14
20.5B
Based on amounts in Presidents Budget for
certain large programs. And for the others, it
is the FY 2002 level with inflation and plus /
minus program changes.
-
39
What are in the Specific Purpose Funds1st Total
Specific Purpose Overview - 3,363,776(000)
59
40
What are in the Specific Purpose Funds
2nd Detail of Other Category - 755,658
(000)
Details on attached slide
Mental Illness Res
Nat'l Ctr for Patient
Misc
Educ Clinical Ctrs
Office of Quality
Safety
51,862
20,772
22,043
6,542
Transplant Indirect
RN Educational
Other Special
Cost Contract Hosp
Assistance
Funded Programs
24,020
10,000
104,311
Office of Patient
Primary Care
Care Svc 87,744
Providers Act
10,000
Office of Research
Develop
NRF
(orig - CARES)
14,792
15,000
Office of Public
Specific Purpose
Health Env Hazard
Travel Equip
23,827
31,585
Business Office
80,107
Office of Policy
Office of Finance
Planning
Office of Facilities
12,507
4,706
Mgt
Office of Employee
11,167
Educ
Office of Information
46,034
178,639
39
41
What are in the Specific Purpose Funds3rd Detail
of Other Special Funded Programs Category -
104,311 (000)
Audit Agency
2,150
Purpose
Overhead
Comp
Overhead Reimb
Reimbursement
4,279
40
42
What are in the Specific Purpose Funds4th Detail
of the Miscellaneous Category - 51,862(000)
43
How Does the VERA 10 Model WorkStep 2 Balance
of General Purpose Funds are Distributed with
VERA 10 Model
Total VA Healthcare Budget (23.9B)
VERA
Specific Purpose NRF 3.4B
86
14
20.5B
-
Objective is to maximize the amount of General
Purpose Funds that are distributed through the
VERA 10 Model.
42
44
How Does the VERA 10 Model WorkStep 3 Pull Out
8 for Research, Education, Equipment, NRM
(from Budget)
Total VA Healthcare Budget (23.9B)
VERA
Specific Purpose NRF 3.4B
86
14
20.5B
-
8
43
Research Education, Equipment NRM
2 Research Support (400M)
2 Education Support (356M)
1,588,547
2 Equipment (578M)
1 Non Recurring Maintenance (255M)
45
How Does the VERA 10 Model WorkStep 4 Pull Out
High Cost Adjustment for Top 1 High Cost
Patients Above 70,000
Total VA Healthcare Budget (23.9B)
VERA
Specific Purpose NRF 3.4B
86
14
20.5B
-
7
High Cost Adjustment for Top 1
1,395,135 (
Basic Care 252,523 18, Complex Care
1,142,612 82)
8
44
Research Education, Equipment NRM
2 Research Support (400M)
2 Education Support (356M)
1,588,547
2 Equipment (578M)
1 Non Recurring Maintenance (255M)
46
How Does the VERA 10 Model Work Step 5 61 to
Basic Care Based on FY01 DSS One-Year Costs for
Six Groups
Total VA Healthcare Budget (23.9B)
VERA
Specific Purpose NRF 3.4B
86
14
20.5B
Budget
Workload
National Price
Basic Care
No. of Patients
(000s)
Budget/No. of Patients
1. Non
-
Reliant
116,547
443,477
263

61
2. Basic Medical
4,169,216
1,727,650
2,413
1,076,150
3. Mental Health
302,092
3,562
2,910,016
4. Heart Lung
781,904
3,722
5. Oncology
889,650
106,711
8,337
6. Multiple Problem
3,317,072
418,053
7,935
(71)
(96)
Total
12,478,652
3,779,887
3,301
7
High Cost Adjustment for Top 1
1,395,135 (
Basic Care 252,523 18, Complex Care
1,142,612 82)
8
45
Research Education, Equipment NRM
2 Research Support (400M)
2 Education Support (356M)
1,588,547
2 Equipment (578M)
1 Non Recurring Maintenance (255M)
47
How Does the VERA 10 Model WorkStep 6 24 to
Complex Care Based on FY01 DSS One-Year Costs for
Four Groups
Total VA Healthcare Budget (23.9B)
VERA
Specific Purpose NRF 3.4B
86
14
20.5B
Budget
Workload
National Price
Basic Care
No. of Patients
(000s)
Budget/No. of Patients
1. Non
-
Reliant
116,547
443,477
263

61
2. Basic Medical
4,169,216
1,727,650
2,413
1,076,150
3. Mental Health
302,092
3,562
2,910,016
4. Heart Lung
781,904
3,722
5. Oncology
889,650
106,711
8,337
6. Multiple Problem
3,317,072
418,053
7,935
(71)
(96)
Total
12,478,652
3,779,887
3,301
Budget
Workload
National Price
Complex Care
24
(000s)
Budget/No. of Patients
No. of Patients
7. Specialized Care
926,779
49,425
18,751
8. Supportive Care
1,703,614
57,207
29,780
9. Chronic Mental Illness
1,037,311
26,296
39,448
10. Critically Ill
1,395,489
22,811
61,177
(29)
(4)
Total
5,063,194
155,739
32,511
7
High Cost Adjustment for Top 1
1,395,135 (
Basic Care 252,523 18, Complex Care
1,142,612 82)
8
46
Research Education, Equipment NRM
2 Research Support (400M)
2 Education Support (356M)
1,588,547
2 Equipment (578M)
1 Non Recurring Maintenance (255M)
48
How Does the VERA 10 Model Work Step 7
Allocate High Cost Adjustment to 10 Groups based
on FY01 DSS Costs
Total VA Healthcare Budget (23.9B)
VERA
Specific Purpose NRF 3.4B
86
14
20.5B
Budget
Workload
National Price
Basic Care
No. of Patients
(000s)
Budget/No. of Patients
1. Non
-
Reliant
116,547
443,477
263

61
2. Basic Medical
4,169,216
1,727,650
2,413
1,076,150
3. Mental Health
302,092
3,562
2,910,016
4. Heart Lung
781,904
3,722
18
5. Oncology
889,650
106,711
8,337
6. Multiple Problem
3,317,072
418,053
7,935
(71)
(96)
Total
12,478,652
3,779,887
3,301
Budget
Workload
National Price
Complex Care
24
(000s)
Budget/No. of Patients
No. of Patients
7. Specialized Care
926,779
49,425
18,751
82
8. Supportive Care
1,703,614
57,207
29,780
9. Chronic Mental Illness
1,037,311
26,296
39,448
10. Critically Ill
1,395,489
22,811
61,177
(29)
(4)
Total
5,063,194
155,739
32,511
7
High Cost Adjustment for Top 1
1,395,135 (
Basic Care 252,523 18, Complex Care
1,142,612 82)
8
47
Research Education, Equipment NRM
2 Research Support (400M)
2 Education Support (356M)
1,588,547
2 Equipment (578M)
1 Non Recurring Maintenance (255M)
49
How Does the VERA 10 Model Work Step 8 Compute
Geographic Price Adjustment using FY01 DSS Labor
Contract Costs
Total VA Healthcare Budget (23.9B)
VERA
Specific Purpose NRF 3.4B
86
14
20.5B
Budget
Workload
National Price
Basic Care
No. of Patients
(000s)
Budget/No. of Patients
1. Non
-
Reliant
116,547
443,477
263

61
2. Basic Medical
4,169,216
1,727,650
2,413
1,076,150
3. Mental Health
302,092
3,562
2,910,016
4. Heart Lung
781,904
3,722
18
5. Oncology
889,650
106,711
8,337
6. Multiple Problem
3,317,072
418,053
7,935
(71)
(96)
Total
12,478,652
3,779,887
3,301
Geographic Price Adjustment
Budget
Workload
National Price
Complex Care
24
(000s)
Budget/No. of Patients
No. of Patients
7. Specialized Care
926,779
49,425
18,751
82
8. Supportive Care
1,703,614
57,207
29,780
9. Chronic Mental Illness
1,037,311
26,296
39,448
10. Critically Ill
1,395,489
22,811
61,177
(29)
(4)
Total
5,063,194
155,739
32,511
7
High Cost Adjustment for Top 1
1,395,135 (
Basic Care 252,523 18, Complex Care
1,142,612 82)
8
48
Research Education, Equipment NRM
2 Research Support (400M)
2 Education Support (356M)
1,588,547
2 Equipment (578M)
1 Non Recurring Maintenance (255M)
50
What is the Allocation by VERA 10 Groups Before
High Cost Adjustment 17.542B
49
51
What is the Allocation by VERA 10 Groups of High
Cost Adjustment 1.395B
52
What is the Composition of High Cost Adjustment
Payments for Each VISN
53
What are the Amounts of Each VISNs Share of the
VERA Allocation 20.5B
54
What is Each VISNs Share of the Total VERA
Allocation 20.526B
53
55
What are Components of Each VISNs Share of the
VERA Allocation 20.526B
54
56
Summary of Allocation Changes FY 02 to FY 03 by
VISN
57
Summary of Allocation ChangesFY 02 to FY 03 by
VISN
58
Detail of Allocation Changes FY 02 to FY 03
59
Overview

• FY 2003 Decision
• Composition of Budget
• Classification of Patients
• FY 2003 VERA Model Allocation to VISNs
• Allocation to Facilities
• Future Improvements to VERA

60
Ten Guiding Principles for Network-to-Facility
Allocations

• Be readily understandable and result in
  predictable allocations
• Support high quality health care delivery in the
  most appropriate setting
• Support integrated patient-centered operations
• Provide incentives to ensure continued delivery
  of appropriate Complex Care
• Support the goal of improving equitable access to
  care and ensure appropriate allocation of
  resources to facilities to meet that goal

61
Ten Guiding Principles for Network-to-Facility
Allocations (Continued)

• Provide adequate support for the VAs research
  and education missions
• Be consistent with eligibility requirements and
  priorities
• Be consistent with the networks strategic plans
  and initiatives
• Promote managerial flexibility, (e.g., minimize
  earmarking funds) and innovation
• Encourage increases in alternative revenue
  collections.

62
Summary of Network-to-Facility Allocation Methods
Used by VISNs
63
Overview

• FY 2003 Decision
• Composition of Budget
• Classification of Patients
• FY 2003 VERA Model Allocation to VISNs
• Allocation to Facilities
• Future Improvements to VERA

64
Process for Identifying Improvements to VERA

• Internally generated by VERA users
• Externally generated by VERA evaluators
• Reviewed and recommended by National Leadership
  Board (NLB) Finance Committee to the NLB
• Approved by Under Secretary for Health and
  Secretary

65
RAND Phase III VERA Study

• FY 2003 Senate Appropriations Committee report
  language
• Directed Phase III RAND VERA study
• Will provide analyses similar to Phase II,
• using the most recent VA data (FY 2001) and
  Medicare data (FY 2000)
• Will provide the results of disaggregating the
  data using selected patient and facility level
  variables
• Will provide further information on case-mix
  options
• Requires VA to provide interim reports in
  February and June 2003
• RAND Phase III Study
• Will provide an important contribution on future
  structure of VERA
• Final Report September 2003