Using Cost Data from the 

Decision Support System (DSS) 

and HERC Average Costs 

Jean Yoon, Todd Wagner

May 7, 2014
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Outline 

 DSS National Data Extracts – How DSS gets costs – Inpatient data – Outpatient data – Pharmacy data – Advantages of using DSS  HERC Average Costs – Methods for HERC-created files – Inpatient – Outpatient – Annual Summary  Using HERC or DSS  Data resources
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Poll: Is DSS (versus AC data) better for

A. Comparing health care costs of patients receiving two 

different interventions at multiple VAMCs. 

B. Budget impact of total costs for patients enrolled in a 

primary care program in one VAMC. 

C. Prescription drug costs for patients filling VA 

prescriptions.

D. Measure health care costs to compare frequency of 

inpatient admissions of patients between two VAMCs.
DSS National Data Extracts
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How Does DSS Provide 

VHA Cost Data? 

VISTA workload, 

clinical, & financial 

data (FMS, PAID)

National Data Extracts of DSS

Time allocation 

Relative values

DSS VISN Level Production Databases
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DSS Determines Costs of Products

 Products are components of encounter

 Cost assigned to cost center (corresponding 

department)

– Staff labor mapping and financial data 

 Cost of overhead distributed to direct care 

departments 

 Products in each department tabulated

 Relative values assigned to products

 Unit cost of each product determined
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DSS Assigns Cost to Encounters

= Total cost 

of encounter

∑Intermediate X IP Cost 

Product (IP) 
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DSS National Data Extracts

 Inpatient (Treating Specialty, Discharge)

 Outpatient Encounter

 Pharmacy

 Intermediate Product Department

 Account Level Budget Cost Center

 Clinical
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DSS Cost File: 

Inpatient Discharge File

 Care of patients discharged in each fiscal year

 One record per discharge 

 May include cost incurred in prior fiscal years

 Data only in Discharge file:

– Discharge day

– Total days of stay

– Discharge bedsection
Discharge example

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Patient ADMITDAY DISDAY FP LOS DBEDSECT TOT

A 24SEP05 01OCT05 1 7 Gen Acute 

Med

9824.24

A 31OCT05 11NOV05 2 11 Gen Acute 

Med

4673.01

A 04AUG06 21SEP06 12 48 Rehab 81868.77
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DSS Cost File: 

Inpatient Treating Specialty File

 Treating specialty

 One record per treating specialty per month 

– More than one record in a month if more 

than one treating specialty in a month

– All care provided during fiscal year

– Include stays not yet over
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DSS Data Only in 

Treating Specialty File

 Treating specialty

 Census indicator

 Date of entry and exit from treating specialty

– No discharge date

 Treating specialty length of stay

– No total length of stay
DSS Treating Specialty File Example

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Patient TRTIN TRTOUT TR SP TR SP LOS FP TCST_TOT

A 01OCT05 01OCT05 15 1 1 350.01

A 31OCT05 11NOV05 15 1 1 544.24

A 31OCT05 11NOV05 15 10 2 23787.22
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DSS Data in Both Inpatient Files

 Admit day

 Admitting diagnosis related group (DRG)

 Principal diagnosis

 Admitting diagnosis
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DSS Cost Files: Outpatient Files

 One record per patient per day per clinic 

stop

– National Patient Care Database (NPCD) 

events file allows more than 1 record per 

clinic stop per day

– DSS includes care not in NPCD events file, 

e.g., prosthetics

 Primary DX and CPT codes
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DSS Data Only in Outpatient Files

 Date of encounter

 DSS identifier (clinic stop)

– DSS uses “pseudo stop” code for 

prosthetics, pharmacy, etc.

 Flag variables identifying data source

– NPCD, pharmacy, prosthetics, Vast CBOC, 

etc
DSS Outpatient Example 

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Patient VIZDAY CLSTOP OCST_TOT

A 20051018 411 34.10 

A 20051018 108 24.33 

A 20051018 306 25.20 
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DSS Cost Variables in All Files

 Fixed direct

 Fixed indirect

 Variable direct

 Variable supply

 Total 

 Variable labor category 4 & 5
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Additional Cost Variables in 

Inpatient Files

 Separate costs for lab, nursing, 

pharmacy, radiology, surgery, all other

– Variable, fixed direct, fixed indirect, supply 

(where applicable)
DSS Pharmacy 

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 In the DSS Pharmacy Extract file

– For outpatient records, there is one record

 Per prescription or supply per person per day

– For inpatient records, there is one record 

 Per person per day 

 DSS sometimes groups two prescriptions into one 

record if they are for the same NDC and the same 

person on the same day 
DSS Pharmacy Variables

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 Medication: drug name, NDC, formulary indicators, VA drug 

class

 Dispensing: fill date, quantity dispensed, days supplied

 Patient: SCRSSN, date of birth, gender, age

 Ordering provider: provider ID, provider treating specialty 

 Note: Clinical information on related visits/stays can be linked 

to Rx data using SCRSSN. 

 Cost: VA cost including direct labor, indirect costs of the 

pharmacy department, and supplies

 Total VA cost prescription = ACT_COST + DISPCOST 

 Costs can be negative, ex: return to pharmacy
Pharmacy Copayments

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 VA charges some copayments.

– Depends on income, disability percentage

– Rules & eligibility levels change year to year

– Rules available on VA internet

 DSS does not show copayments; they show VA’s expense.

 Medical Care Cost Recovery (MCRR) files could show 

reimbursement from private insurance, if collected
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Cost Outliers in DSS

 Users should look for cost estimates that are 

unexpectedly high given characteristics of 

care 

 Mismatch of cost and utilization can result in 

unit costs that are very high cost, or negative

 DSS quality assurance efforts

– Extremely high outliers are identified when DSS 

national data extracts (NDE) are built
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Advantages of Using DSS 

 DSS costs estimate reflect facility differences in 

productivity, efficiencies, economies of scale, etc

 DSS has pharmacy data

 DSS has community and state nursing home stays.

 DSS is an activity-based method and is the official 

cost managerial accounting system for the entire 

Department of VA
HERC Average Costs Datasets
Top Down, Bottom Up

 HERC data uses 

relative value weights 

to estimate cost per 

encounter (top down)

 DSS data are based on 

an activity based 

costing methodology 

(bottom up)

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Bottom Up

Top Down

National approach

Experience based

Local approach

Activity based
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HERC Method

 Acute medical surgical stays 

– Estimate of what stay would have cost in a 

Medicare hospital, based on a regression model

 Other inpatient care

– Length of stay

 Outpatient care

– Hypothetical Medicare payment based on 

procedure codes assigned to visit
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HERC: Medical/Surgical Stays

 Cost regression estimated using 

Medicare data

– Length of stay

– Days of intensive care

– Diagnosis Related Group (MS-DRG) 

 Stay is assigned to one of DRG groups based 

on diagnosis and procedures

 Medicare relative value weights for DRG
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HERC: Medical/Surgical Stays

 HERC identifies acute medical surgical 

components of stays in the VA Patient 

Treatment File (PTF)

– Consistent with non-VA hospital definition

– Contiguous medical-surgical bed section 

segments
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HERC: Medical/Surgical Stays

 HERC applies regression parameters to 

VA stays to estimate what stay would 

have cost in a Medicare hospital

 Estimates adjusted to reflect actual VA 

expenditures from DSS
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HERC: Other Inpatient Stays

 Costs assumed to be proportional to length of stay

– Rehabilitation

– Blind rehabilitation

– Spinal cord injury

– Psychiatry

– Substance abuse 

– Intermediate medicine

– Domiciliary

– Psychosocial residential rehabilitation

– Long-Term Care
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HERC: Inpatient Discharge Data

 Cost of each VA hospital discharge reported 

in Patient Treatment File (PTF)

– Stays ending in discharge in Fiscal Year

– Excludes stays that began before FY98

 Subtotals of days and costs in 10 

categories:

Medicine and surgery Rehabilitation 

Blind rehabilitation Spinal cord injury

Psychiatry Substance abuse 

Intermediate medicine Domiciliary 

Psych. residential rehab. Nursing home
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HERC: Outpatient costs

 HERC assigns hypothetical payment 

– based on Current Procedure Terminology (CPT) 

and HCPCS codes, up to 20 per visit

– Physician reimbursement rates from Medicare 

and other payers

– Facility reimbursement rates from Medicare

 Adjusted to reflect expenditures in the 

category of outpatient care, defined using 

clinic stop (DSS identifier)
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HERC Cost File: 

Person-Level Annual Cost 

 One person per record

 Total VA cost and costs of five inpatient and 

five outpatient categories, LOS for inpatient 

care 

 Includes DSS outpatient pharmacy

 Stays that cross fiscal years are assigned cost 

in proportion to the days in fiscal year.
DSS or HERC

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Which to Choose

 We are often asked which to use. 

 Criteria

– Is costing method consistent with study goals?

– Precision and Accuracy
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Is costing method consistent with 

study goals? 

 Study to determine cost-effectiveness for U.S. health 

care system

– HERC uses non-VA relative values, HERC costs more like 

costs typical of non-VA health care settings

 Study to determine efficiency of different VA 

providers

– DSS costs estimate reflect differences in productivity, 

efficiencies, economies of scale, etc.

– Strong assumptions make HERC estimates inappropriate 

for this type of study 
Precision and Accuracy

 Precision

– Bottom up approaches, such as DSS can be very precise.

– HERC data are less precise than DSS given costing 

method

– If you use DSS data, you need to control for geographic 

wage differentials

 Accuracy

– Bottom up approaches can lead to rare irregularities

 Recommendation: use both; one as primary and one 

as sensitivity analysis

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Chapko, M. K., Liu, C. F., Perkins, M., Li, Y. F., Fortney, J. C., & Maciejewski, M. L. (2008). 

Equivalence of two healthcare costing methods: bottom-up and top-down. Health Economics. 
Data Resources
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DSS Data Access

 Access to DSS data should be requested through CDW/VINCI 

and National Data Systems (NDS).

 MCA Program Office Web Site (VA Intranet MCAO web site)

 All DSS files were removed from AITC in 2013, but FY2001-

FY2012 DSS SAS ‘legacy’ files are on CDW/VINCI servers.

 DSS NDE SQL data are available in CDW from FY05 to current 

year. 

– Accessed through CDW Raw server ‘VHACDWA06.vha.med.va.gov’ 

 DSS data also available in VHA Managerial Cost Accounting 

(MCA) reports from MCA intranet site.
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HERC Data Access

 Access to HERC data should be requested through 

CDW/VINCI and National Data Systems (NDS).

 All historical files 2001-2012 are available from AITC.

 FY2012 files on CDW/VINCI servers accessible to operations.
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HERC DSS Guidebooks

 Research Guide to Decision Support System National Cost 

Extracts” to incorporate transition to CDW. 

 Guidebooks for HERC's datasets

http://www.herc.research.va.gov/publications/guidebooks.asp 
DSS Pharmacy Resources

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 VIReC’s Pharmacy Prescription Data Guide – VIReC research user guide on DSS and PBM pharmacy prescription 

data 

http://www.virec.research.va.gov

 HERC Technical Report: 

– Comparing Outpatient Cost Data in the DSS National Pharmacy Extract 

and the Pharmacy Benefits Management V3.0 Database 

http://www.herc.research.va.gov/data/dss.asp
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Next Classes

5/14 Introduction to Effectiveness, 

Patient Preferences, and Utilities

Patsi Sinnott 

5/28 Medical Decision Making and 

Decision Analysis

Jeremy 

GoldhaberFiebert