SD6 - The Implementation of a Methodology to Identify the Efficient Providers of Health Care in Virginia

  • Published: 1995
  • Author: Virginia Health Services Cost Review Council
  • Enabling Authority: Senate Joint Resolution 118 (Regular Session, 1992)

Executive Summary:
During 1991, the Virginia Health Services Cost Review Council's (VHSCRC) then current methodology came under criticism. That methodology reviewed the aggregate charges of facilities to determine if they were reasonably related to aggregate costs.

At its 1992 Session, the General Assembly enacted Senate Bill 518, which in part contained a requirement for a new methodology to measure efficiency and productivity in health care institutions reporting to the VHSCRC.

The Two Clause in SB 518 directed the VHSCRC to submit a preliminary report by December 1, 1993 and a final report by no later than October 1, 1994. These reports were to address the effectiveness of the efficiency and productivity measurements in controlling health care costs.

The VHSCRC adopted a methodology to measure efficiency and productivity in December 1992, and emergency regulations were issued effective January 1, 1993. The 1993 report issued in response to SB 518 documented the success of the VHSCRC in developing the methodology to measure efficiency and productivity and in conducting early implementation. This 1994 document provides a further progress report on implementation of the methodology.

In its 1993 SB 518 report, the VHSCRC presented a plan for evaluating the effectiveness of the efficiency and productivity methodology. Essentially, this VHSCRC plan calls for computing the annual rates of growth in Virginia's health institution costs before and after implementation of the methodology to measure efficiency and productivity. These rates of cost growth can be compared with one another, and with similar rates in other states and in the nation as a whole.

When the VHSCRC released its 1993 SB 518 report, it anticipated that the first efficiency and productivity information would be released in the summer of 1993. The release date was delayed until late fall of 1994 in an effort to ensure the integrity of the data and develop useful means of displaying and explaining the findings. Because 1993 was the first year in which hospitals had to provide such information as hospital-wide acuity (case-mix index), it was particularly important to take the time necessary to ensure the data's accuracy.

The first information on the early response to publication of the efficiency and productivity measures will be available in the fall of 1994. Fall 1994 findings, however, will reflect only providers' reactions to publication, not detailed data analysis.

Moreover, as the 1993 SB 518 report indicated, several years of post-implementation data will be needed for reliable judgment of the methodology's effectiveness to be made. Consequently, the VHSCRC recommends that the methodology be judged at three- and five-year intervals. If approved, this means that reports will be submitted to the Governor, the Joint Commission on Health Care, the General Assembly, and the Virginia Health Planning Board in 1997 and again in 1999.

It is important to bear in mind that this methodology is in an early stage of development; its unique approach to cost containment is being developed under contract with the Williamson Institute of the Department of Health Administration at the Medical College of Virginia. More sophisticated measures of efficiency drawn from the patient-level database will next be incorporated. Measures of quality as well, will be included. Each of these enhancements to provide more information to the market place should strengthen the methodology.