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The impact of teaching status on average costs in Spanish hospitals

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  • Guillem López-Casasnovas
  • Marc Saez
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    Abstract

    In this paper, the observed systematic differences in costs for teaching hospitals (TH) in Spain are examined. Concern has been voiced regarding the existence of a bias in the financing of TH once prospective budgets are introduced for hospital finance. Claims for adjustment to take into account the 'legitimate' extra costs of teaching on hospital expenditure may be well grounded. Focus is on the estimation of the impact of teaching status on average cost, using a version of a multi-product hospital cost function, taking into account some relevant factors from which to derive the observed differences. It is assumed that the relationship between the explanatory and the dependent variables follows a flexible form for each of the explanatory variables. Also, the underlying covariance structure of the data is modelled. Two qualitatively different sources of variation are assumed: random effects and serial correlation. Random variation refers to both general level variation (through the random intercept) and the variation specifically related to teaching status. It is postulated that the impact of the random effects is dominant over the impact of the serial correlation effects. The model is estimated by restricted maximum likelihood. The results show that costs are 9% higher (15% in the case of median costs) in teaching than in non-teaching hospitals. That is, teaching status legitimately explains no more than half of the observed difference in actual costs. The impact on costs of the teaching factor depends on the number of residents, with an increase of 51.11% per resident for hospitals with fewer than 204 residents (third quartile of the number of residents) and 41.84% for hospitals with more than 204 residents. In addition, the estimated dispersion is higher among teaching hospitals. As a result, due to the considerable observed heterogeneity, results should be interpreted with caution. From a policy making point of view, it is concluded that since a higher relative burden for medical training falls on public hospitals, an explicit adjustment for the extra costs that the teaching factor imposes on hospital finance is needed, before hospital competition for inpatient services takes place. Copyright © 1999 John Wiley & Sons, Ltd.

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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 8 (1999)
    Issue (Month): 7 ()
    Pages: 641-651

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    Handle: RePEc:wly:hlthec:v:8:y:1999:i:7:p:641-651

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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    References

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    1. Hausman, Jerry A., 1983. "Specification and estimation of simultaneous equation models," Handbook of Econometrics, Elsevier, in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 7, pages 391-448 Elsevier.
    2. Grannemann, Thomas W. & Brown, Randall S. & Pauly, Mark V., 1986. "Estimating hospital costs : A multiple-output analysis," Journal of Health Economics, Elsevier, Elsevier, vol. 5(2), pages 107-127, June.
    3. Zuckerman, Stephen & Hadley, Jack & Iezzoni, Lisa, 1994. "Measuring hospital efficiency with frontier cost functions," Journal of Health Economics, Elsevier, Elsevier, vol. 13(3), pages 255-280, October.
    4. Martin Gaynor & Gerard F. Anderson, 1993. "Uncertain Demand, The Structure of Hospital Costs, and the Cost of EmptyHospital Beds," NBER Working Papers 4460, National Bureau of Economic Research, Inc.
    5. Adam Wagstaff & Guillem Lopez, 1996. "Hospital costs in Catalonia: a stochastic frontier analysis," Applied Economics Letters, Taylor & Francis Journals, Taylor & Francis Journals, vol. 3(7), pages 471-474.
    6. Guillem López Casasnovas & Adam Wagstaff, 1988. "La combinación de los factores productivos en el hospital: una aproximación a la función de producción," Investigaciones Economicas, Fundación SEPI, Fundación SEPI, vol. 12(2), pages 305-327, May.
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    Cited by:
    1. Emma Medin & Kjartan Anthun & Unto Häkkinen & Sverre Kittelsen & Miika Linna & Jon Magnussen & Kim Olsen & Clas Rehnberg, 2011. "Cost efficiency of university hospitals in the Nordic countries: a cross-country analysis," The European Journal of Health Economics, Springer, Springer, vol. 12(6), pages 509-519, December.
    2. Oliver Tiemann, 2008. "Variations in hospitalisation costs for acute myocardial infarction - a comparison across Europe," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 17(S1), pages S33-S45.
    3. Brigitte Dormont & Carine Milcent, 2004. "The sources of hospital cost variability," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 13(10), pages 927-939.
    4. Miika Linna & Unto Häkkinen, 2006. "Reimbursing for the costs of teaching and research in finnish hospitals: A stochastic frontier analysis," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 6(1), pages 83-97, March.
    5. Erik Biørn & Terje Hagen & Tor Iversen & Jon Magnussen, 2010. "How different are hospitals’ responses to a financial reform? The impact on efficiency of activity-based financing," Health Care Management Science, Springer, Springer, vol. 13(1), pages 1-16, March.
    6. Biorn, Erik & Hagen, Terje P. & Iversen, Tor & Magnussen, Jon, 2006. "Heterogeneity in Hospitals' Responses to a Financial Reform: A Random Coefficient Analysis of The Impact of Activity-Based Financing on Efficiency," MPRA Paper 8169, University Library of Munich, Germany.
    7. Pirson, Magali & Dramaix, Michele & Leclercq, Pol & Jackson, Terri, 2006. "Analysis of cost outliers within APR-DRGs in a Belgian general hospital: Two complementary approaches," Health Policy, Elsevier, Elsevier, vol. 76(1), pages 13-25, March.
    8. Guillem López & Joan Costa-Font & Ivan Planas, 2004. "Diversity and regional inequalities: Assessing the outcomes of the Spanish 'System of Health Care Services'," Working Papers, Research Center on Health and Economics, Department of Economics and Business, Universitat Pompeu Fabra 745, Department of Economics and Business, Universitat Pompeu Fabra.

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