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Exploring the relationship between costs and quality - Does the joint evaluation of costs and quality alter the ranking of Danish hospital departments?


Author Info

  • Anne, Hvenegaard

    (Danish Institute for Health Services Research)

  • Nielsen Arendt, Jacob

    (University of Southern Denmark - Research Unit for Health Economics)

  • Gyrd-Hansen, Dorte

    (Danish Institute for Health Services Research)

  • Street, Andrew

    (University of York-Centre for Health Economics)


Objective: The purpose is to assess whether the joint evaluation of costs and quality affects the ranking of hospital departments relative to performance based on cost performance alone. Methods: Using patient level data, in which 3,754 patients across six vascular departments are pooled we estimate fixed effect models for costs (linear) and quality (logistic). We consider two quality measures; mortality and wound complications. To assess whether the joint evaluation of costs and quality affects the ranking of departments, we construct joint confidence regions for each pair of departmental effects for costs and quality by using a bootstrap method and rank departments according to their costeffectiveness ratio. Results: The association between cost and quality differs depending on how which quality is measured. Lower costs tend to associate with higher mortality, implying a cost-quality trade-off. In contrast there is no clear association between costs and wound complications among vascular departments. Conclusions: Compared to benchmarking of departments based solely on their costs, we show that the ranking of departments may be altered considerably when quality is taken into account. Consequently, it is important to have a well-rounded view of departmental objectives when undertaking performance evaluation.

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Bibliographic Info

Paper provided by COHERE - Centre of Health Economics Research, University of Southern Denmark in its series COHERE Working Paper with number 2009:6.

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Length: 22 pages
Date of creation: 25 Jun 2010
Date of revision:
Handle: RePEc:hhs:sduhec:2009_006

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Postal: COHERE - Center for Sundhedsøkonomisk Forskning, Institut for Virksomhedsledelse og Økonomi, Syddansk Universitet, Campusvej 55, DK-5230 Odense M, Denmark
Phone: (+45) 6550 3081
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Keywords: Hospital costs; efficiency; quality; cost-effectiveness;

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Cited by:
  1. Heimeshoff, Mareike & Schreyögg, Jonas, 2013. "Estimation of a physician practice cost function," hche Research Papers, Hamburg Center for Health Economics (hche), University of Hamburg 2013/07, Hamburg Center for Health Economics (hche), University of Hamburg.
  2. Nils Gutacker & Chris Bojke & Silvio Daidone & Nancy Devlin & David Parkin & Andrew Street, 2011. "Truly inefficient or providing better quality of care? Analysing the relationship between riskadjusted hospital costs and patients’ health outcomes," Working Papers, Centre for Health Economics, University of York 068cherp, Centre for Health Economics, University of York.


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