BudgetsThe Veterans Health Administration (VHA) Chief Business Office (CBO) is responsible for developing a 10-year Medical Care Collections Fund President’s Budget submission and subsequently distributing the President’s Budget to individual Veteran Integrated Service Networks and Veterans Affairs Medical Centers (VAMC). Historically, collection estimates were established by the Office of Management and Budget based primarily on recent collection growth rates—overlooking important insurance industry trends, macroeconomic variables, and demographic shifts. The resulting budget was then used to establish collections targets for VHA.

To develop a better method for estimating collections, Altarum’s Health Advisory Services (HAS) group collaborated with VHA to develop an integrated forecasting solution. HAS developed a system called the Integrated Collections Forecasting Model (ICFM) to incorporate other budget planning models and develop consistency in budgeting assumptions across the organization. ICFM incorporates VAMC-level data on utilization rates for different patient profiles (age and priority groups), insurance coverage rates, economic conditions, and factors in the complexity of the facility to develop a VAMC-level 10-year collections estimates. ICFM is also used to equitably allocate the President’s Budget to individual VAMCs as part of the annual Veterans Equitable Resource Allocation cycle. ICFM also enables alternative scenario development to assist in shorter response times to requests from stakeholders outside of the CBO.

The development of the integrated forecasting solution provided CBO with a defensible methodology that assists in the development of a 10-year forecast and an equitable distribution to the VAMCs. ICFM was fully implemented for budgeting and distribution purposes in fiscal year (FY) 2012. Historically, the variance between actual collections to budget has been -6.5% to +10%. However, since the implementation of ICFM, this variance has been reduced considerably. The average variance in FY 2012 and FY 2013 was less than 3%, allowing for a more consistent budgeting process.

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