# Presentation: 664397

## 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***

## Overview

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

## 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**

## 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**_

## 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**

## What’s 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****** ***

## What’s 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***

## What’s 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****** ***

## What’s 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***

## Overview

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

## Appropriated                   $23.889B

- 11

**Appropriated                   $23.889B**
**Plus Revenue                    $1.630B**
**Total Budget                    $25.519B**

**Capital requested as 14 month, **
** ****but Appropriated as 1 year**

## 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**

## 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 VA’s 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.

## 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%)**

## Overview

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

##     Basic Care             Complex Care 

**Routine health care**** **
**Acute care**** **
**Ancillary Services**

**Spinal cord injury**
**Stroke**
**Transplants**

_**47 classes**_

_**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**_

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

## What are the 47 Patient Classes & GroupingsVERA Classes 1 thru 21 in Basic Care

## What are the 47 Patient Classes & GroupingsVERA Classes 22 thru 47 in Complex Care

## How Does VERA 10 Relate to VERA 3

***How Does VERA 10 Relate to VERA 3***

- 19

## What is Distribution of Prorated Patient (PRPs) Workload (3,935,626) by VERA 10 Groups

## What is the Composition of Each VISN’s PRP Workload by VERA 10 Groups

***What is the ***_***Composition***_*** of Each VISN’s PRP Workload by VERA 10 Groups***

## Composition of Each VISN’s PRP Workload by VERA 10 Groups

## Percent Composition of Each VISN’s PRP Workload by VERA 10 Groups

## Each VISN’s Share of PRP Workload by VERA 10 Groups

## What is the Distribution of High Cost Patients (29,928) by VERA 10 Groups

## What is the Composition of High Cost Patients for Each VISN

## What is the Patient Gender CompositionFor Each VERA 10 Group

## What is the Patient Gender Composition Across the VERA 10 Groups

## VERA FY 2004 Distribution of Effort Hospital Based versus Ambulatory

## Priority Groups & Categories

| Priority Groups | Description
 | In VERA | Not in VERA |
| --- | --- | --- | --- |
| 1 | Service-connected disabilities rated 50% or more disabling | X |  |
| 2 | Service-connected disabilities rated 30% or 40%  disabling | X |  |
| 3 | Former POWs
Discharge for disability incurred in line of duty
Service-connected disabilities rated 10% or 20% disabling
Disabled by treatment or vocational rehabilitation | X |  |
| 4 | Receiving aid and attendance or housebound benefits
Determined by VA to be catastrophically disabled | X |  |

## Priority Groups & Categories(Continued)

| Priority Groups | Description
 | In VERA | Not in VERA |
| --- | --- | --- | --- |
| 5 | Nonservice-connected disabilities and service-connected injuries / illnesses rated 0% disabled with annual income and net worth below established dollar threshold  | X |  |
| 6 | All other eligible veterans not required to make copayments for care, including
WWI & Mexican Border War veterans
Veterans with Disabilities from exposure to toxic substances or radiation associated with Gulf War
Service-connected injuries rate 0% disabled but qualifying for compensation | X
 |  |
| 7A | Veterans who do not fall in any of the above groups whose illness/injury is service-connected but not entitled to compensation | X |  |
| 7C | Veterans whose illness/injury is non-service connected |  | X (only in Complex Care) |

## FY 2002 Enrollees & UsersBy Priority Group

## FY 2001 Enrollees & UsersBy Priority Group

## FY 2001 & FY 2002 Enrollees & Users by Priority Group

## Overview

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

## 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**

## Componentsof Model

*Representative**** ****Workload*

***Patient care******	***
***       ******(Basic or Complex)***
***Research support***
***Education support***
***Equipment***
***Non-Recurring******Maintenance (NRM)******	*****	**

***Pro-Rated Persons (PRPs)***
***VISN share of Research $***
***Medical Residents***
***PRPs***
***PRPs adjusted by Boeckh construction index. ***

## How Does the VERA 10 Model WorkStep 1 – Pull Out Specific Purpose & National Reserve Fund (NRF)

**Total VA Healthcare Budget ($23.9B)**

**Specific Purpose & NRF $3.4B**

**VERA**

**$20.5B**

- -

**86%**

**14%**

***How Does the VERA 10 Model Work******Step 1 – Pull Out Specific Purpose & National Reserve Fund (NRF)***

**Based on amounts in President’s Budget for certain large programs.  And for the others, it is the FY 2002 level with inflation and plus / minus program changes.**

## What are in the Specific Purpose Funds1st Total Specific Purpose Overview - $3,363,776($000)

***What are in the Specific Purpose Funds******1******st****** Total Specific Purpose Overview - ***_***$3,363,776***_***($000)***

**59%**

## What are in the Specific Purpose Funds           2nd Detail of “Other” Category - $755,658    ($000)

**Office of Research & **

**Develop**

**$14,792**

**Office of Public **

**Health & Env Hazard**

**$23,827**

**Business Office**

**$80,107**

**Office of Finance**

**$12,507**

**Office of Facilities **

**Mgt**

**$11,167**

**Office of Information **

**$178,639**

**Office of Patient **

**Care Svc $87,744**

**Mental Illness Res **

**Educ Clinical Ctrs**

**$20,772**

**Transplant Indirect **

**Cost & Contract Hosp **

**$24,020**

**Office of Quality**

**$22,043**

**Nat'l Ctr for Patient **

**Safety **

**$6,542**

**Misc **

**$51,862**

**Office of Employee **

**Educ **

**$46,034**

**Office of Policy & **

**Planning **

**$4,706**

**Specific Purpose **

**Travel & Equip **

**$31,585**

**NRF **

**(orig - CARES) **

**$15,000**

**Primary Care **

**Providers Act **

**$10,000**

**RN Educational **

**Assistance **

**$10,000**

**Other Special **

**Funded Programs **

**$104,311**

**Details on attached slide**

***What are in the Specific Purpose Funds******           ******2******nd****** Detail of “Other” Category - ***_***$755,658 ***_***   ($000)***

- 39

## What are in the Specific Purpose Funds3rd Detail of Other Special Funded Programs Category - $104,311 ($000)

**Audit Agency**

**Comp**

**Reimbursement**

**$2,150**

**Purpose**

**Overhead**

**Overhead Reimb**

**$4,279**

***What are in the Specific Purpose Funds******3******rd****** Detail of Other Special Funded Programs Category - ***_***$104,311***_*** ($000)***

- 40

## What are in the Specific Purpose Funds4th Detail of the “Miscellaneous” Category - $51,862($000)

***What are in the Specific Purpose Funds******4******th****** Detail of the “Miscellaneous” Category - ***_***$51,862***_***($000)***

## How Does the VERA 10 Model WorkStep 2 – Balance of General Purpose Funds are Distributed with VERA 10 Model

**Total VA Healthcare Budget ($23.9B)**

**Specific Purpose & NRF $3.4B**

**VERA**

**$20.5B**

- -

**86%**

**14%**

***How Does the VERA 10 Model Work******Step 2 – Balance of General Purpose Funds are Distributed with VERA 10 Model***

**Objective is to maximize the amount of General Purpose Funds that are distributed through the VERA 10 Model.**

- 42

## How Does the VERA 10 Model WorkStep 3 – Pull Out 8% for Research, Education, Equipment, & NRM (from Budget)

**Total VA Healthcare Budget ($23.9B)**

**Research Education, Equipment & NRM**

**$1,588,547**

**Specific Purpose & NRF $3.4B**

**VERA**

**$20.5B**

- -

**86%**

**14%**

**8%**

**2%  Research Support  ($400M) **

**2% Education Support  ($356M)**

**2% Equipment   ($578M) **

**1% Non Recurring Maintenance ($255M)      **

***How Does the VERA 10 Model Work******Step 3 – Pull Out 8% for Research, Education, Equipment, & NRM (from Budget)***

- 43

## How Does the VERA 10 Model WorkStep 4 – Pull Out High Cost Adjustment for Top 1% High Cost Patients Above $70,000

**Total VA Healthcare Budget ($23.9B)**

**Research Education, Equipment & NRM**

**$1,588,547**

**Specific Purpose & NRF $3.4B**

**VERA**

**$20.5B**

- -

**High Cost Adjustment for Top 1% **

**$1,395,135 (**

**Basic Care $252,523 [18%],  Complex Care $1,142,612 [ 82%])**

**86%**

**14%**

**8%**

**2%  Research Support  ($400M) **

**2% Education Support  ($356M)**

**2% Equipment   ($578M) **

**1% Non Recurring Maintenance ($255M)      **

**7%**

***How Does the VERA 10 Model Work******Step 4 – Pull Out High Cost Adjustment for Top 1% High Cost Patients Above $70,000***

- 44

## 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)**

**Research Education, Equipment & NRM**

**$1,588,547**

**Specific Purpose & NRF $3.4B**

**VERA**

**$20.5B**

**=**

**Basic Care**

- 1.  Non

- -

- Reliant

- $116,547

- 443,477

- $   263

- 2.  Basic Medical

- $4,169,216

- 1,727,650

- $2,413

- 3.  Mental Health

- $1,076,150

- 302,092

- $3,562

- 4.  Heart & Lung

- $2,910,016

- 781,904

- $3,722

- 5.  Oncology

- $889,650

- 106,711

- $8,337

- 6.  Multiple Problem

- $3,317,072

- 418,053

- $7,935

**Total**

**$12,478,652 **

**(71%)**

**3,779,887 **

**(96%)**

**$3,301**

**Budget**

**($000’s)**

**Workload**

- No. of Patients

**National Price**

- Budget/No. of Patients

**High Cost Adjustment for Top 1% **

**$1,395,135** **(**

**Basic Care $252,523 [18%],  Complex Care $1,142,612 [ 82%])**

**86%**

**14%**

**8%**

**61%**

**2%  Research Support  ($400M) **

**2% Education Support  ($356M)**

**2% Equipment   ($578M) **

**1% Non Recurring Maintenance ($255M)      **

**7%**

***How Does the VERA 10 Model Work****** ******Step 5 – 61% to Basic Care Based on ***_***FY01 DSS One-Year Costs***_*** for Six Groups***

- 45

## How Does the VERA 10 Model WorkStep 6 – 24% to Complex Care Based on FY01 DSS One-Year Costs for Four Groups

**Total VA Healthcare Budget ($23.9B)**

**Research Education, Equipment & NRM**

**$1,588,547**

**Complex Care**

- 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

**Total**

**$5,063,194 **

**(29%)**

**155,739  **

**(4%)**

**$32,511**

**Specific Purpose & NRF $3.4B**

**VERA**

**$20.5B**

**=**

**Basic Care**

- 1.  Non

- -

- Reliant

- $116,547

- 443,477

- $   263

- 2.  Basic Medical

- $4,169,216

- 1,727,650

- $2,413

- 3.  Mental Health

- $1,076,150

- 302,092

- $3,562

- 4.  Heart & Lung

- $2,910,016

- 781,904

- $3,722

- 5.  Oncology

- $889,650

- 106,711

- $8,337

- 6.  Multiple Problem

- $3,317,072

- 418,053

- $7,935

**Total**

**$12,478,652 **

**(71%)**

**3,779,887 **

**(96%)**

**$3,301**

**Budget**

**($000’s)**

**Workload**

- No. of Patients

**National Price**

- Budget/No. of Patients

**Budget**

- ($000’s**)**

**Workload**

- No. of Patients

**National Price**

- Budget/No. of Patients

**High Cost Adjustment for Top 1% **

**$1,395,135** **(**

**Basic Care $252,523 [18%],  Complex Care $1,142,612 [ 82%])**

**86%**

**14%**

**24%**

**8%**

**61%**

**2%  Research Support  ($400M) **

**2% Education Support  ($356M)**

**2% Equipment   ($578M) **

**1% Non Recurring Maintenance ($255M)      **

**7%**

***How Does the VERA 10 Model Work******Step 6 – 24% to Complex Care Based on ***_***FY01 DSS One-Year Costs***_*** for Four Groups***

- 46

## 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)**

**Research Education, Equipment & NRM**

**$1,588,547**

**Complex Care**

- 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

**Total**

**$5,063,194 **

**(29%)**

**155,739  **

**(4%)**

**$32,511**

**Specific Purpose & NRF $3.4B**

**VERA**

**$20.5B**

**=**

**Basic Care**

- 1.  Non

- -

- Reliant

- $116,547

- 443,477

- $   263

- 2.  Basic Medical

- $4,169,216

- 1,727,650

- $2,413

- 3.  Mental Health

- $1,076,150

- 302,092

- $3,562

- 4.  Heart & Lung

- $2,910,016

- 781,904

- $3,722

- 5.  Oncology

- $889,650

- 106,711

- $8,337

- 6.  Multiple Problem

- $3,317,072

- 418,053

- $7,935

**Total**

**$12,478,652 **

**(71%)**

**3,779,887 **

**(96%)**

**$3,301**

**Budget**

**($000’s)**

**Workload**

- No. of Patients

**National Price**

- Budget/No. of Patients

**Budget**

- ($000’s**)**

**Workload**

- No. of Patients

**National Price**

- Budget/No. of Patients

**High Cost Adjustment for Top 1% **

**$1,395,135** **(**

**Basic Care $252,523 [18%],  Complex Care $1,142,612 [ 82%])**

**86%**

**14%**

**24%**

**8%**

**61%**

**2%  Research Support  ($400M) **

**2% Education Support  ($356M)**

**2% Equipment   ($578M) **

**1% Non Recurring Maintenance ($255M)      **

**7%**

**82%**

**18%**

***How Does the VERA 10 Model Work****** ******Step 7 – Allocate High Cost Adjustment to 10 Groups based on ***_***FY01 DSS Costs***_*** ***

- 47

## 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)**

**Research Education, Equipment & NRM**

**$1,588,547**

**Complex Care**

- 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

**Total**

**$5,063,194 **

**(29%)**

**155,739  **

**(4%)**

**$32,511**

**Specific Purpose & NRF $3.4B**

**VERA**

**$20.5B**

**=**

**Basic Care**

- 1.  Non

- -

- Reliant

- $116,547

- 443,477

- $   263

- 2.  Basic Medical

- $4,169,216

- 1,727,650

- $2,413

- 3.  Mental Health

- $1,076,150

- 302,092

- $3,562

- 4.  Heart & Lung

- $2,910,016

- 781,904

- $3,722

- 5.  Oncology

- $889,650

- 106,711

- $8,337

- 6.  Multiple Problem

- $3,317,072

- 418,053

- $7,935

**Total**

**$12,478,652 **

**(71%)**

**3,779,887 **

**(96%)**

**$3,301**

**Budget**

**($000’s)**

**Workload**

- No. of Patients

**National Price**

- Budget/No. of Patients

**Budget**

- ($000’s**)**

**Workload**

- No. of Patients

**National Price**

- Budget/No. of Patients

**High Cost Adjustment for Top 1% **

**$1,395,135** **(**

**Basic Care $252,523 [18%],  Complex Care $1,142,612 [ 82%])**

**86%**

**14%**

**24%**

**8%**

**61%**

**2%  Research Support  ($400M) **

**2% Education Support  ($356M)**

**2% Equipment   ($578M) **

**1% Non Recurring Maintenance ($255M)      **

**7%**

**82%**

**18%**

**  ****Geographic Price Adjustment**

***How Does the VERA 10 Model Work****** ******Step 8 – Compute Geographic Price Adjustment using ***_***FY01 DSS Labor & Contract Costs***_*** ***

- 48

## What is the Allocation by VERA 10 Groups Before High Cost Adjustment $17.542B

- 49

## What is the Allocation by VERA 10 Groups of High Cost Adjustment $1.395B

***What is the ***_***Allocation***_*** by VERA 10 Groups of ***_***High Cost Adjustment***_*** $1.395B***

## What is the Composition of High Cost Adjustment Payments for Each VISN

***What is the ***_***Composition ***_***of ***_***High Cost Adjustment***_*** Payments for Each VISN***

## What are the Amounts of Each VISN’s Share of the VERA Allocation $20.5B

## What is Each VISN’s Share of the Total VERA Allocation $20.526B

- 53

## What are Components of Each VISN’s Share of the VERA Allocation $20.526B

***What are Components of Each VISN’s Share of the VERA Allocation $20.526B***

- 54

## Summary of Allocation Changes FY 02 to FY 03 by VISN

## Summary of Allocation ChangesFY 02 to FY 03 by VISN

## Detail of Allocation Changes FY 02 to FY 03

## Overview

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

## 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**

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

**Provide adequate support for the VA’s research and education missions**** **
**Be consistent with eligibility requirements and priorities**** **
**Be consistent with the network’s strategic plans and initiatives**** **
**Promote managerial flexibility, (e.g., minimize “earmarking” funds) and innovation**** **
**Encourage increases in alternative revenue collections.**

## Summary of Network-to-Facility Allocation Methods Used by VISNs

| Allocation Method Used | FY 03 | FY 02 | FY 01 | FY 00 | FY 99 |
| --- | --- | --- | --- | --- | --- |
| 1.  Modified VERA Capitation | 8
 | 7 | 9 | 6 | 9 |
| 2.  Adjust Prior Year’s Base | 7
 | 6 | 5 | 4 | 5 |
| 3.  Combination of Modified
     VERA & Adjust Prior Base | 
1
 | 
3 | 
5 | 
6 | 
4 |
| 4.  Other Approaches  | 5
 | 6 | 3 | 6 | 4 |
| Total Number of VISNs | 21
 | 22 | 22 | 22 | 22 |

## Overview

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

## 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**_

**Notes:**
We had positive reviews on VERA form OMB and GAO, but we wanted to get private sector experts to independently evaluate VERA to determine if we were accomplishing the goals we set and whether the concept and methodologies were sound.

We engaged PricewaterhouseCoopers to perform that evaluation.  These are their major conclusions.

They did make several short-term and long-term recommendation.  Many of those have been incorporated into VERA and some are sill in the process of being considered or implemented.

## 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**_