VA health system: interim report

December 21, 2007

CBO just released an interim report on the VA health system. VA's health care program has attracted lots of attention, and as part of CBO's ongoing effort to expand our health-related activities, we are examining the evidence on the VA system -- along with what lessons, if any, it may hold for other parts of the health care system.

In general, VAs experience underscores the potential for improving performance in a large and relatively integrated system through a sustained and comprehensive effort that involves indicators of quality, financial incentives that are aligned with those objectives, and the use of health information technology. It is important to note, though, that the combination of these factors -- a large, relatively integrated system; well-designed incentives; performance measurement; and health information technology -- likely creates much more substantial opportunities for improvement than any of the pieces taken by themselves. The applicability of VA's experience to other parts of the health system, which often have a much different structure than the VA system, is therefore unclear and will be explored in CBO's final report (which will be published next year).

A few highlights of today's interim report:

  • On the quality of care delivered, VA tracks the quality of its medical care primarily through various process and satisfaction indicators (e.g., adherence to clinical guidelines and waiting times for access to services). These measures have generally improved in recent years.
    • CBO was unable, however, to identify directly comparable scores for other health care providers because the composite indexes used at the VA are not used elsewhere. In 2008, VA is planning to adopt more quality measures that are used industrywide, making it easier to compare with other parts of the health system.
  • The published literature includes a number of studies that analyze the quality of VAs health care. Although the studies face various challenges in comparing the VA system to other health care providers, they generally conclude that the VA's performance has improved following the re-engineering of its system during the 1990s -- and that it is now relatively good in adherence to clinical guidelines.
  • The VA has implemented a capitation-based budget system called Veterans Equitable Resource Allocation (VERA).
    • Under that system, networks were initially given a fixed amount per enrolled veteran for basic care patients, and a higher fixed amount per enrollee for complex care patients. VERA has since been modified a number of times to define patient groups in greater detail, but retains its basic structure as a capitated budgeting system.
    • VERA was designed to provide managers with incentives to provide care to patients in the most cost-effective and medically appropriate settings. Because the budget allocated to a facility does not depend on the number of procedures performed, facilities do not have incentives to increase their capacity to produce billable services.
  • For every patient, VA also has an electronic health record in its Veterans Health Information Systems and Technology Architecture (VistA) health information system. VistA is integral to VAs system for providing care and its management of providers and executives. VistA is often cited by VA officials as a key to the departments efforts to achieve high quality ratings and in helping to control medical care costs.
    • VA may be uniquely positioned to take advantage of health ITs potential. Independent providers, who interact with a variety of insurance systems, may have a harder time realizing those benefits given challenges with interoperability, the standardization of formats and records, privacy, ownership and control, and the education of and compliance by providers.
    • An electronic health record is most useful when it contains all relevant medical information about a patient, including treatments or examinations received by outside providers. And even VistA has only a very limited ability to interact directly with or use information from other EHR systems, despite the fact that many VA patients receive a substantial portion of their care outside the departments system.

The interim report was written by Allison Percy, a Principal Analyst in the National Security Division of the Congressional Budget Office. Her areas of expertise include military health care, veterans' medical care, and veterans' disability compensation.Before joining CBO in 2001, Allison was a postdoctoral fellow with the Department of Veterans Affairs in Philadelphia. She received her Ph.D. in health economics from the Wharton School at the University of Pennsylvania in 2000. Her dissertation examined the effect of regulatory reforms on health insurance markets. While in graduate school, she also conducted research on medical savings accounts and pharmaceutical productivity. Before pursuing her doctorate, she worked as a health financing analyst for John Snow, Inc., an international public health consulting firm, under contracts with the U.S. Agency for International Development, the Asian Development Bank, the World Bank, and others.