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Modelling Individual Patient Hospital Expenditure for General Practice Budgets

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Author Info

  • Hugh Gravelle

    (Centre for Health Economics, University of York, UK)

  • Mark Dusheiko

    (Centre for Health Economics, University of York, UK)

  • Steve Martin

    (Department of Economics and Related Studies, University of York)

  • Pete Smith

    (Imperial College, University of London)

  • Nigel Rice

    (Centre for Health Economics, University of York, UK)

  • Jennifer Dixon

    (Nuffield Trust, London)

Abstract

The English NHS has introduced a system of budgets for general practices covering hospital expenditure for the patients on their lists. We model individual expenditure using diagnostic information from previous hospital spells, plus a large set of attributed variables measuring population, general practice, and local hospital characteristics. We show that, despite the large proportion of zero expenditures and the heavy right tail of expenditures, estimating models of untransformed expenditure via OLS yields better predictions at practice level than one or two part models using OLS with transformed expenditure or Generalised Linear Models. We describe a procedure for setting budgets for general practices which reduces the problem of the lags in the available data. We examine the distinction between need and nonneed variables and the incentive implications of allowing past numbers of hospital encounters to determine practice budgets.

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File URL: http://www.york.ac.uk/media/che/documents/papers/researchpapers/CHERP73_Modelling_Individual_Patient_Hospital_Expenditure_for_GP_Budgets.pdf
File Function: First version, 2011
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Bibliographic Info

Paper provided by Centre for Health Economics, University of York in its series Working Papers with number 073cherp.

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Length: 43 pages
Date of creation: Dec 2011
Date of revision:
Handle: RePEc:chy:respap:73cherp

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  1. Joao Santos Silva & Silvana Tenreyro, 2005. "The Log of Gravity," CEP Discussion Papers dp0701, Centre for Economic Performance, LSE.
  2. Mullahy, John, 1998. "Much ado about two: reconsidering retransformation and the two-part model in health econometrics," Journal of Health Economics, Elsevier, vol. 17(3), pages 247-281, June.
  3. Willard G. Manning & John Mullahy, 1999. "Estimating Log Models: To Transform or Not to Transform?," NBER Technical Working Papers 0246, National Bureau of Economic Research, Inc.
  4. Blough, David K. & Madden, Carolyn W. & Hornbrook, Mark C., 1999. "Modeling risk using generalized linear models," Journal of Health Economics, Elsevier, vol. 18(2), pages 153-171, April.
  5. Mark Dusheiko & Hugh Gravelle & Rowena Jacobs, 2004. "The effect of practice budgets on patient waiting times: allowing for selection bias," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 941-958.
  6. Roy Carr-Hill & Geoffrey Hardman & Stephen Martin & Stuart Peacock & Trevor Sheldon & Peter Smith, 1994. "A formula for distributing NHS revenues based on small area use of hospital beds," Working Papers 022cheop, Centre for Health Economics, University of York.
  7. Propper, Carol & Croxson, Bronwyn & Shearer, Arran, 2002. "Waiting times for hospital admissions: the impact of GP fundholding," Journal of Health Economics, Elsevier, vol. 21(2), pages 227-252, March.
  8. Mark Dusheiko & Maria Goddard & Hugh Gravelle & Rowena Jacobs, 2008. "Explaining trends in concentration of healthcare commissioning in the English NHS," Health Economics, John Wiley & Sons, Ltd., vol. 17(8), pages 907-926.
  9. Mark Dusheiko & Hugh Gravelle & Rowena Jacobs & Peter Smith, 2003. "The Effects of Budgets on Doctors Behaviour: Evidence from a Natural Experiment," The Centre for Market and Public Organisation 03/064, Department of Economics, University of Bristol, UK.
  10. Peter C. Smith & Nigel Rice & Roy Carr-Hill, 2001. "Capitation funding in the public sector," Journal of the Royal Statistical Society Series A, Royal Statistical Society, vol. 164(2), pages 217-257.
  11. Manning, Willard G., 1998. "The logged dependent variable, heteroscedasticity, and the retransformation problem," Journal of Health Economics, Elsevier, vol. 17(3), pages 283-295, June.
  12. Buntin, Melinda Beeuwkes & Zaslavsky, Alan M., 2004. "Too much ado about two-part models and transformation?: Comparing methods of modeling Medicare expenditures," Journal of Health Economics, Elsevier, vol. 23(3), pages 525-542, May.
  13. Croxson, B. & Propper, C. & Perkins, A., 2001. "Do doctors respond to financial incentives? UK family doctors and the GP fundholder scheme," Journal of Public Economics, Elsevier, vol. 79(2), pages 375-398, February.
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Cited by:
  1. Samuel L Brilleman & Hugh Gravelle & Sandra Hollinghurst & Sarah Purdy & Chris Salisbury & Frank Windmeijer, 2011. "Keep it Simple? Predicting Primary Health Care Costs with Measures of Morbidity and Multimorbidity," Working Papers 072cherp, Centre for Health Economics, University of York.

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