Evaluating the VA Make-or-Buy Decision in Emergency Care

Amid concerns about access or quality at VA facilities, the VA has begun to redirect resources toward financing care for veterans outside of the VA. However, the health and cost outcomes that will result from this “make-or-buy” decision remain a major scientific unknown with large policy implications for how the VA can optimize veteran health. We study the VA make-or-buy decision using two instruments that affect the site of emergency care: differential distance to a VA vs. non-VA emergency department (ED) and the ambulance propensity to transport patients to a VA ED. We find that VA EDs reduce 28-day mortality by 50% or about 5 percentage points and that this effect grows with time. We study whether this effect depends on local VA and non-VA ED characteristics. We also examine whether this effect is driven by a coordination-of-care advantage at the VA, in which new diagnoses and treatments made in an emergency setting are more likely to be followed and coordinated upon when they are made within the VA setting. We also study fee-for-service incentives that are present in non-VA settings but not in the VA by examining as outcomes endogenous diagnoses, treatments, and overall costs.