Revenue Based Budgeting at VA Northern California Health Care System: A Model for Financially Aligning Organizational Incentives and Operations
Abstract
The idea of using anything other than historical cost for annual budgeting within the VA health care system is fairly new. In 1996 the Veterans Equitable Resource Allocation (VERA) model began to disperse the annual congressional appropriation based upon numbers of veterans seen within each of the integrated service networks (VISNs). The reimbursement mechanism for each network changed from a retrospective fee-for-service system to a retrospective capitated model. Changes in sharing agreement regulations, TRICARE, and Medical Care Cost Recovery (MCCR) also provided each network with the ability to generate revenue from sources outside the traditional VA appropriation. These changes created new incentives for top VHA managers to increase the number of veterans using the health care system, to increase alternative sources of revenue, to manage care, and to become as efficient as possible. In the Sierra-Pacific integrated service network (VISN 21), facility budgets are created in a similar fashion to the national VERA model. Facilities are given a budget each year based upon the number of unique patients treated from within a defined geographic patient service area (PSA). This gives hospital directors the same incentives as the chief executive officers of any managed care capitated system (to increase the number of patients, and to reduce the cost per patient). Unfortunately, if internal departmental budgets are based upon historical cost rather than revenue, organizational conflict arises. In order for organizational incentives to align, VA facility or product line managers must be given budgets based upon revenue producing behavior rather than historical cost. The VA Northern California Health Care System (VANCHCS) revenue based budget system accomplishes this goal.
Document Details
- Document Type
- Technical Report
- Publication Date
- Jun 01, 1999
- Accession Number
- ADA420397
Entities
People
- David R. Stockwell
Organizations
- Academy of Health Sciences