Technical Report 39: Understanding the impact of COVID-19 on hospitalization costs in DoD and VA
Suggested CitationDismuke-Greer CE, Richard P. Understanding the impact of COVID-19 on hospitalization costs in DoD and VA. Technical Report 39. Health Economics Resource Center, VA Palo Alto Health Care System, U.S. Department of Veterans Affairs. March 2022.
For a list of VA acronyms, please visit the VA acronym checker on the VA intranet at http://vaww.va.gov/Acronyms/fulllist.cfm.
1. Introduction
The American Hospital Association (AHA, 2020) found that US hospital systems lost over $50.7 billion per month over the course of the four-month period from March 1, 2020 to June 30, 2020 due to COVID-19 hospitalizations. This is due to factors such as cancelled services, additional costs associated with purchasing personal protective equipment, and additional labor costs.
Among the civilian population, total hospitalization costs for unvaccinated patients in August 2021 was $3.7 billion (Amin & Cox, 2021), and the average cost of hospitalization for an uninsured, or out-of-network patient was $73,3306 (Phillips, 2021). Costs per hospitalized patient vary depending on age, with a median of $14,366 when only costs during the course of the infection are included (Phillips, 2021).
Here, we aim to compare costs in the Department of Veterans Affairs (VA) and Department of Defense (DoD) using COVID-19 hospitalizations as the driving example. Comparisons of DoD and VA costs can help clinicians and policy makers arrive at more informed decisions related to the delivery of care and optimal allocation of resources in DoD and VA healthcare facilities.
2. Methods
We compare COVID-19 inpatient hospitalization costs in VA and DoD during FY 2020. We include only direct care hospitalizations (i.e., hospitalizations in Military Treatment Facilities and VA hospitals); Tricare and VA purchased care hospitalizations were not included. We identified DoD hospitalizations using the DaVINCI SIDR file. We used HERC’s MCA Discharge Data for FY20 to identify VA costs.
We identified hospitalizations with a primary diagnosis of U071-COVID-19 which was approved for use by CDC in FY2020 in DoD and VA databases. Although this excludes patients who were hospitalized with COVI9-19 as secondary diagnosis, our goal was to create a consistent comparison between the databases.
We tried to match cost between DoD and VA as closely as possible. We used the totcost variable from hdisch20 from VINCI. No total cost variable exists in DaVINCI. Therefore, we summed the following cost components to identify total costs:
FCANCLAB+FCANCRAD+FCCLNSAL+FCICU+FCOTHANC+FCOTHSAL+FCSUPPRT+FCSURG = Total Cost.
We obtained the following VA and DOD common variables: diagnosis related group (MSDRG) fiscal month, age and sex, and length of stay. We also created a variable for both DoD and VA databases, cost per day per hospitalization, which equals the total cost of hospitalization divided by the length of stay of hospitalization.
We first conducted analyses in VA and DoD databases separately. We examined hospitalizations in FY 2020 for DoD and VA by mean and median age, percentage age <50 vs age≥50, percentage male vs female, and percentage for the most frequent MSDRG, MSDRG 177 (Respiratory infections and inflammations with MCC) vs other DRGs. We adjusted for MSDRG, as MSDRG assignment takes into account the patient’s demographic and clinical characteristics to create a case-mix measure of required hospital resources to treat the patient. (Fetter, et al., 1980) We tested for differences in medians, due to non-normal distribution of the data of total cost per hospitalization, length of stay and cost per day per hospitalization by age group and gender. We conducted all analyses for the entire database and then separately for hospitalizations with MSDRG 177 (Respiratory infections and inflammations with MCC) only.
We used Generalized Linear Models with Gamma distribution to estimate total cost per hospitalization, all hospitalizations and MSDRG 177 only. We adjusted for age group, sex, length of stay and fiscal month in all models. We adjusted for MSDRG 177 in the all-hospitalizations sample.
We used Generalized Linear Models with Poisson distribution to estimate length of stay models. We adjusted for age, sex, fiscal month and MSDRG 177 in the all-hospitalizations sample.
We used Generalized Linear Models with Gamma distribution to estimate the cost per day models. We adjusted for age, sex, fiscal month and MSDRG 177 in the all-hospitalizations sample.
We report all cost information for the fiscal month and year incurred.
After conducting the analyses in the separate DoD and VA databases, we merged the data based on the common variables. We then estimated models for total cost, length of stay and cost per day. We adjusted DoD hospitalization relative to VA in all models to test for differences in costs and length of stay.
3. Results
I. Separate Systems Analyses
In FY20, there were 7,818 VA hospitalizations and 773 DoD hospitalizations with primary ICD U071. Among VA hospitalizations, the average age was 69, and 7% were female; among DoD hospitalizations, the average age was lower (mean 54) with a larger number of females (15%).
Mean total cost for hospitalizations with primary ICD U071 was $61,268 at VA and $28,396 at DoD (Table 1). Much of this difference is being driven by length of stay, which is approximately double in VA; indeed, cost per day is much closer between the two health systems, although VA is still higher (mean $5,150 at VA and $4,523 at DoD).
| . | DoD (N=773) | VA (N=7,818) |
|---|---|---|
| Total Cost of the Hospitalization | Mean=$28,396 | Mean=$61,268 |
| Median=$13,640 | Median=$31,587 | |
| Length of Stay | Mean=6.53 days | Mean=12.99 days |
| Median=4 days | Median=7 days | |
| Cost per Day | Mean=$4,633 | Mean=$5,155 |
| Median=$4,276 | Median=$4,474 |
Table 2 presents total cost in both health systems by age. Patients age 50 or older experienced significantly greater total costs and length of stay in both health systems, with costs and length of stay being greater in VA compared to DoD. In the analysis stratified by sex, males experienced higher total costs and length of stay in both health systems as compared to females (results not included).
| . | DoD (N=773) | VA (N=7,818) |
|---|---|---|
| Total Cost of Hospitalization, Age<50 | Mean=$20,266 | Mean=$40,333 |
| Median=$11,664* | Median=$19,163* | |
| Total Cost of Hospitalization, Age>=50 | Mean=$33,694 | Mean=$63,539 |
| Median=$15,157* | Median=$33,653* | |
| Length of Stay, Age<50 | Mean=4.57 days | Mean=6.77 days |
| Median=4* days | Median=5* days | |
| Length of Stay, Age>=50 | Mean=7.81 days | Mean=13.66 days |
| Median=5* days | Median=8* days | |
| Cost per Day, Age<50 | Mean=$4,720 | Mean=$5,124 |
| Median=$4,449 | Median=$4,454 | |
| Cost per Day, Age>=50 | Mean=$4,576 | Mean=$5,158 |
| Median=$4,223 | Median=$4,477 |
* P<0.05 on Median Test
We ran separate generalized linear models for VA and DoD (Table 3). We found that length of stay is a large driver of cost in both systems, with the magnitude being greater in VA. Indeed, we found no significant differences in the analysis of cost per day (Table 4). In DoD, we see that MSDRG 177 has a higher total cost compared to other DRGs.
| . | DoD (N=773) | VA (N=7,818) |
|---|---|---|
| Age>=50 | -$83 | $331 |
| Female relative to Male | -$180 | -$270 |
| Length of Stay (Each Additional Day) | $3,822* | $5,178* |
| DRG 177 relative to other DRGs | $879* | -$342 |
* P<0.05 on Median Test
Note: Both models adjusted for fiscal month
| . | DoD (N=773) | VA (N=7,818) |
|---|---|---|
| Age>=50 | -$171 | $33 |
| Female relative to Male | $10 | $0 |
| DRG 177 relative to other DRGs | -$329 | -$21 |
Note: Both models adjusted for fiscal month
In separate Poisson Generalized Linear Models for length of stay (Table 5), results were consistent with Table 3. We found that length of stay is a large driver of cost in both systems, with the magnitude being greater in VA. We also found that females relative to males have significantly lower length of stays in both systems.
| . | DoD (N=773) | VA (N=7,818) |
|---|---|---|
| Age>=50 | 2.99* | 5.09* |
| Female relative to Male | -1* | -2.06* |
| DRG 177 relative to other DRGs | -1.9* | 1.40 |
* P<0.05 on Median Test
Note: Both models adjusted for fiscal month
II. Merged Systems Analyses
In the combined DoD/VA cohort (Table 6), we see similar length of stay effects on total costs: the increase in length of stay increases the total cost by about $5,000 per day.
For length of stay, we see patterns similar to the separate datasets. Patients age >=50 experienced significantly greater length of stay, and females experienced significantly shorter stays. DoD patients experienced significantly shorter stays than VA patients.
| Total Cost | Total Cohort (N=8,951) |
|---|---|
| Age>=50 | $240 |
| Female relative to Male | -$267 |
| Length of Stay | $5,078* |
| DRG 177 relative to other DRGs | -$157 |
| DoD | $329 |
| Length of Stay | |
| Age>=50 | 4.53* |
| Female relative to Male | -1.75* |
| DRG 177 relative to other DRGs | 0.80 |
| DoD | -2.83* |
* P<0.05 on Median Test
Note: Both models adjusted for fiscal month
In the combined analysis of costs per day (Table 8), we find that DoD patients experienced significantly lower costs per day then VA patients.
| Cost Per Day | Total Cohort (N=8,951) |
|---|---|
| Age>=50 | -$11 |
| Female relative to Male | -$10 |
| DRG 177 relative to other DRGs | -$64 |
| DoD | -$520* |
* P<0.05 on Median Test
Note: Both models adjusted for fiscal month
Sub-analysis of MSDRG 177 only
Overall, results of the sub-analyses examining costs for MSDRG 177 only were consistent with the analyses of all COVID-19 inpatient hospitalizations, with a few exceptions.
In the separate VA and DoD analyses, among hospitalizations with MSDRG 177 only, VA patients age >= 50 had significantly higher costs than patients under 50 (median cost for age >= 50: $288, p<0.05).
In the combined dataset analyses, among hospitalizations with MSDRG 177 only, DoD had significantly higher total cost than VA (DoD total cost: $736, p<0.05). However, consistent with the all COVID-19 inpatient hospitalizations analysis, costs per day were lower in DoD than VA (DoD cost per day: -$572, p<0.05).
4. Discussion
We found lower costs associated with treating COVID 19 patients in DoD hospitals compared to VA hospitals in FY 2020. In addition, DoD patients had a significantly shorter length of stay, compared to VA patients. DoD patients spent significantly fewer day in the hospital compared to VA patients, and spent significantly less per days to treat patients.
One plausible explanation for this discrepancy is that labor costs of treating patients in DoD are cheaper compared to the VA. In addition, it is likely that veterans have higher comorbidities than DoD active duty (Cardemil, et al., 2021).
It is notable that we found that DoD had significantly higher total cost in the MSDRG 177 sub-analysis. By definition MSDRGs take into account the patient’s demographic and clinical characteristics to create a case-mix measure of required hospital resources to treat the patient. We stated previously that we do not adjust for comorbidities in the complete cohort as secondary diagnoses were not available in the available data for VA hospitalizations. However, when we restrict to one MSDRG we are by definition taking into account comorbidity case-mix, so it is possible that by doing so we could actually find that total cost could be higher in DoD.
In conclusion, DoD and VA cost data can be merged on matching variables to compare the cost of a condition in hospital databases. Future work should include examining outpatient in DoD and VA military treatment facilities as well as community care private provider costs paid for by DoD via Tricare and VA via the Mission Act.
5. References
Hospitals and Health Systems Face Unprecedented Financial Pressures Due to COVID-19. American Hospital Association, May 2020. Available at https://www.aha.org/guidesreports/2020-05-05-hospitals-and-health-systems-face-unprecedented-financial-pressures-due.
Cardemil CV, Dahl R, Prill MM, Cates J, Brown S, Perea A, Marconi V, Bell L, Rodriguez-Barradas MC, Rivera-Dominguez G, Beenhouwer D, Poteshkina A, Holodniy M, Lucero-Obusan C, Balachandran N, Hall AJ, Kim L, Langley G. COVID-19-Related Hospitalization Rates and Severe Outcomes Among Veterans From 5 Veterans Affairs Medical Centers: Hospital-Based Surveillance Study. JMIR Public Health Surveill. 2021 Jan 22;7(1):e24502.
Amin K, Cox C. Unvaccinated COVID-19 hospitalizations cost billions of dollars. Health Systems Tracker, 2021.
Phillips S. “How much can a COVID-19 hospital stay cost you if you're uninsured?” 2 News Oklahoma. September 2021. Available at https://www.kjrh.com/news/local-news/how-much-can-a-covid-19-hospital-stay-cost-you-if-youre-uninsured.
Fetter RB, Shin Y, Freeman JL, Averill RF, Thompson JD. Case mix definition by diagnosis-related groups. Med Care. 1980 Feb;18(2 Suppl):iii, 1-53.
