Patricia Sinnott, PT, PhD, MPH, 

Health Economics Resource Center

VA Palo Alto Health Care System

Budget Impact Analysis

A worked example
Objectives

 Review basic concepts of budget impact 

analysis

 Review the BIA for a counseling program

 Discuss policy implications

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Overview

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 Evaluates a scenario rather than a single 

action

 Includes comparison to the status quo

 Includes sensitivity analysis
Overview

 For budgeting/forecasting

 To estimate feasibility/affordability

 Takes the buyer/provider/payer’s 

perspective.

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Overview

 Short horizon – usually 1-3 years at most.

 Long-term modeling is unnecessary. 

 Costs are not discounted

 Savings in far future cannot offset 

initial/start-up or investment costs. 
Overview

 BIA does not measure utility.

 No need to survey patients.

 No calculation of QALYs.
Framework

 Estimates

– The cost of the intervention

– Changes in staffing, schedules and use of 

technology

– Changes in pt. access/throughput/demand 

for healthcare

– Potential Savings

– Cost to operate

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Conceptual Diagram

Source: Mauskopf et al. (2007)
Diagram redux

Current 

Environment

Key Factors Budget impact 

analysis

Impacts New 

Environment

Total 

Population

Incidence and 

prevalence

Incidence and 

prevalence

New Total 

Population

Sick 

population

% diagnosed and % 

treated

Diagnosis and 

treatment

New Sick 

population

Target 

Population

Current treatment 

regimen

New therapy or 

procedure

New Target 

Population

Resource

Utilization

Unit cost Unit costs New Resource

Utilization

Cost of Illness New Cost of 

Illness

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Comparison scenario

 How will the adoption change:

– Demand for care (number of patients seeking care)

– Future need for care, within BIA horizon

– Copayments collected, VERA payments received
Costing the intervention

 Personnel costs

– Clinician time

– Support staff

 Supplies/DME

 IT

– Equipt

– Software

– Maintenance

 Other?

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Labor costs

 Summarize the time

 Value the time

– VA labor estimates 

 http://www.herc.research.va.gov/resources/faq_

c02.asp

– Local salary data

– BLS

– Other?

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Cost Data Sources: Supplies, 

Machines, DME

 National Prosthetics Patient Database (NPPD)

 Your local A&MMS purchasing officer
Healthcare utilization

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Cost Data Sources: Encounters

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 Decision Support System (DSS) National Data 

Extracts (NDEs)

– Inpatient files 

– discharge (one record per stay) 

– bedsection (one record per bedsection segment 

of the stay)

– Outpatient files

–Encounters: one record per person-clinic-day

– Pharmacy: one record per prescription
Cost Data Sources: Encounters

 HERC Average Cost data

– Inpatient files 

– discharge: can be linked to PTF discharge files 

– med/surg discharges and non-med/surg 

discharges: can be linked to PTF bedsection

files

– Outpatient files

– encounters: can be linked to OPC

– pharmacy: none except when delivered in clinic 

(use DSS or PBM pharmacy data)
Cost of the implementation

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Implementation design

 Clinician training

– Support training/admin staff training

 Leadership engagement

 Support personnel

 Technical experts

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Data collection tools

 Diaries

 CPRS

 Recall surveys

 Observations

 Web trends

 Other

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Will these costs change over 

time?

 Intervention

 Implementation

 Utilization

 Ongoing support

 Maintenance

 Spread?

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An example

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Cost of the intervention

 Direct measurement of a counselor’s time 

to provide a one-on-one intervention

 Each patient

 Every visit/phone call/email

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Scivip should be hidden in 

this box
Cost of the intervention

 Total minutes for each subject in 12mo.

 Times average hourly salary for 

counselor in VA ($51.35 - includes 

benefits)

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Cost of the intervention

Participants received an average of 35.5 

hours of counseling (31.4 SD)

Average cost per participant = $1821 

($1614 SD) (35.5 x $51.35/hour)

One participant received 158.3 hours of 

counseling

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Intervention Costs

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Variable Mean Std. Dev. Min Max

Provider Hours 35.5 31.4 1.0 158.3

Provider Cost $1,821 $1,614 $51 $8,127

N=81
The cost of VA utilization

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 VA PTF and NPCD

 Merged with DSS

 Total costs of VA care

 12 months from date of enrollment
VA Healthcare costs

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Cost type Intervention

(95% CI)

Usual Care 

(95%CI) Difference P-value

Inpatient costs $7,370 $12,406 $5,035 0.313

($536-$14,205) ($5,350-$19,461)

VA Outpt ED 

costs $112 $110 $2 0.956

($51-$173) ($47 - $172)

VA Outpt clinic 

costs $8,679 $8,641 $37 0.975

($7,070-$10,288) ($6,980-$10,303)

Total VA 

Utilization 

Costs

$19,774 $24,691 $4,917 0.365

($12,338-$27,209) ($17,014-$32,368)
NB

 Five participants in the usual care group 

reported receiving non-VA counseling 

services

 One of these reported 35.8 hours of 

counseling services.

 Included in the total cost estimation for 

the UC group

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Implementation costs

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 2 FTE coaches/trainer/fidelity monitors

 Counselor time in training and fidelity 

monitoring (est. at 30% time)

– Average Annual salary + benefits = 

$107,219

– Number of FTE counselors in study = 6
Implementation costs

N Salary 

base

Percent 

time

Total 

cost

Cost per 

subject

Counselors 6 $107,219 30 $192,994 $2,383

Trainer/coaches 2 $150,000 100 $300,000 $3,704

Total 

implementation 

cost per 

subject*

$6,087

* N=81

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Total costs

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Cost type Intervention

(95% CI)

Usual Care 

(95%CI) Diff. P-value

Intervention $1821

($1567-$2076)

Total VA 

Utilization $19,774 $24,691 $4,917 0.365

($12,338-$27,209) ($17,014-$32,368)

Implem. 

costs $6,087

Total costs $27,682 $24,691 $2,991 0.581

($20,240 - $35,125) ($17,008-$32,374)
Budget Impact Results

 Non-significant difference in costs

– $2991 (p=0.581) (including counselor time 

and implementation costs)

 Intervention total is more expensive but 

difference is not significant

 Suggests implementation of intervention 

will be cost neutral to VA

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What if........?

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 The difference were significant:
Diagram redux

Current 

Environment

Key Factors Budget impact 

analysis

Impacts New 

Environment

Total 

Population

42,000 No change New Total 

Population

% diagnosed 

and % treated

0 50% (21,000) New Sick 

population

Current 

treatment 

regimen

0 New therapy 

or procedure 

difference =

New Target 

Population

Resource

Utilization

$0 $ 2991. New Resource

Utilization

Cost of Illness 0 $62,811,000 New Cost of 

Illness

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Questions

40
Reading

 Liu CF, Rubenstein LV, Kirchner JE, et al. 

Organizational cost of quality improvement for 

depression care. Health Serv Res. Feb 

2009;44(1):225-244.

 Wagner TH, Engelstad LP, McPhee SJ, Pasick RJ. 

The costs of an outreach intervention for low-income 

women with abnormal Pap smears. Prev Chronic Dis. 

Jan 2007;4(1):A11.

 Wagner TH, Goldstein MK. Behavioral interventions 

and cost-effectiveness analysis. Prev Med. Dec 

2004;39(6):1208-1214.

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Reading (con’t)

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 Fortney JC, Maciejewski ML, Tripathi SP, Deen TL, 

Pyne JM. A budget impact analysis of telemedicinebased collaborative care for depression. Med Care. 

Sep 2011;49(9):872-880.

 Mauskopf JA, Sullivan SD, Annemans L, et al. 

Principles of good practice for budget impact 

analysis: report of the ISPOR Task Force on good 

research practices--budget impact analysis. Value 

Health. Sep-Oct 2007;10(5):336-347.