Does the VA offer good health care value?

Objective: The Veterans Health Administration (VA) has been recognized as a leader in healthcare quality in the United States. However, prior comparisons to the private sector have focused on outpatient ambulatory care metrics. Whether VA offers good value for the dollars it expends on inpatient health care is unknown.

Methods: For 2001-2006, we used publicly available data from the Medical Expenditures Panel Survey (MEPS), the CDC (the Health, US series, which includes VA non-nursing home inpatient and outpatient costs and unique patient numbers), the VA (specifically, notes to consolidated financial statements of non-nursing home medical care expenditures), the Dartmouth Atlas of Health Care, and published articles that compared VA to private sector surgical outcomes to compare measures of inpatient and outpatient VA to private sector care and to derive the costs of VA care and compare them to market costs of care, using MEPS VA data on VA expenditures to represent the market costs at which VA services are available as VA expenditures are imputes by applying private fee-for-service reimbursement rates to VA utilization data.

Results: VA appears to provide low cost care, with mean annual per-capita health care costs being less than $5,000. However, because VA users obtain most of their care in the private sector, the value of care that they receive from the VA is considerably lower: VA's costs of providing care exceeded market costs of care by 33% (95% CI: 19-52%). VA's inpatient costs of care exceeded market costs by 56% (95% CI: 27-105%). While measures of outpatient VA performance exceeded those of fee-for-service Medicare; however, the large differences seen in 2000-2001 comparisons had narrowed considerably by 2006. Our meta-analysis of published risk-adjusted mortality rates for VA's surgical program demonstrated that VA had significantly higher risk-adjusted mortality rates than the private sector: using the private sector instead of VA might result in saving at least 164 lives per year, an absolute expected mortality reduction of 12.7%.

Conclusions: While VA appears to offer relatively good health care value for outpatient services, VA does not offer good health care value for inpatient surgical services. Given the challenges that VA experiences recruiting surgeons, the high costs of providing inpatient services, the inefficiency that VA has demonstrated in providing inpatient care, and poor surgical outcomes, VA should outsource surgical services – and perhaps all inpatient care – to high performance private sector hospitals, instead of providing those services.