G. Decision Support System (DSS)

2. How does the Decision Support System (DSS) estimate cost?

DSS extracts the VA general ledger (Financial Management System) and the VA payroll system (PAID). FMS and PAID keep track of expenditures by Budget Object Code. The codes distinguish the type of expense, identifying specific job categories (e.g, physicians, nurses, etc), or type of supplies or equipment. These systems also track expenditures by the service, using administrative entities such as nursing, laboratory, or medicine. Neither the Budget Object Code nor the service correspond to a particular location where patient care is provided. Data must be entered into DSS to allocate costs to cost centers that are defined by their function.

This allocation of cost is done by the Account Level Budgeter. Costs are assigned to Account Level Budget Cost Centers (ALBCC). These cost centers consist of patient care departments, such primary care clinics, intensive care wards, or psychiatric units, as well as overhead departments, such as administration or environmental services.

Data on employee activities is used to allocate expenses. The payroll expenses of physicians is allocated using individual time reports completed by each physician. Some medical centers use time reports for all employees. At other medical centers, the allocation of the non-physician labor cost is based on periodic reports made by managers. The ALBCC report includes detail on each type of cost, including the Budget Object Code (BOC). This code distinguishes the labor type, e.g., physicians from nurses.

In the next step, costs are distributed to patient care departments, and then to intermediate products. This is carried out in the Department Cost Manager (DCM).

The costs of a few ALB cost centers are not carried from ALBCC to DCM, these are called "dead end accounts." Dead end accounts represent costs that have no corresponding workload. Services provided under contract is an example of a dead end account. Overhead costs are distributed in a "step down" method. The DSS step down restricts the cost of some overhead departments to be distributed to only their corresponding patient care departments.

DCM tracks costs using 6 categories, including 3 categories for employee labor and a category for contract labor. The variable labor (VL) categories include VL2 (nursing), VL4 (contract labor), VL4 (providers including physicians, psychologists, dentists, nurse practitioners, and residents and interns), and VL1 (all other).

DCM also extracts information on the workload produced by each department. This workload information is a count of the number of units of each intermediate product produced by a department.

Relative values are used to distribute costs among intermediate products. Each intermediate product has a set of six relative values, one relative value for each type of cost. Relative values for labor costs are expressed in minutes. For example, for nursing labor, the relative value is the number of minutes of nursing labor that is ordinarily required to make that product.

To find the nursing labor cost in a product, DSS multiplies the expected minutes of nursing labor (the relative value) by the mean cost of nursing labor per relative value unit. This mean cost is found by dividing the department's nursing labor cost by its nursing labor workload. The workload is the sum of the expected minutes of nursing labor required to produce all of intermediate products of the department.

For each product, the cost of each type of expense is found. These are added together to find the total cost of that intermediate product. DSS computes two different intermediate product costs: a budgeted cost based on expected department cost and workload, and a standard cost based on the department's actual cost and workload.

The Clinical Cost Manager (CCM) finds the number of intermediate products used in each healthcare encounter (e.g., in a outpatient visit or hospital stay). It multiplies the number of products used in the encounter by the cost of each product. The cost of all products is added together to find the total cost of the encounter. CCM also makes two cost estimates, a budgeted cost and an actual cost.