Methods of Determining the Cost of Health Care in the Department of Veterans Affairs Medical Centers and Other Nonpriced Settings

Cost is increasingly important in the evaluation of health care. Though charges are often used as a proxy for cost, some health care systems such as the Veterans Administration do little or no billing. This article describes, presents examples of, and evaluates four options for determining the cost of care within the Department of Veterans Affairs: measuring input costs, the Department's cost accounting system, the reimbursement system, and use of charges from a surrogate health care facility. Each approach is evaluated for accuracy, ability to compare the costs of different treatments, and effort required to estimate cost.