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Equivalence of two healthcare costing methods: bottom-up and top-down

  • Michael K. Chapko
  • Chuan-Fen Liu
  • Mark Perkins

    (Health Services Research and Development, VA Puget Sound Health Care System, Seattle, WA, USA)

  • Yu-Fang Li
  • John C. Fortney
  • Matthew L. Maciejewski
Registered author(s):

    This paper compares two quite different approaches to estimating costs: a 'bottom-up' approach, represented by the US Department of Veterans Affairs' (VA) Decision Support System that uses local costs of specific inputs; and a 'top-down' approach, represented by the costing system created by the VA Health Economics Resource Center, which assigns the VA national healthcare budget to specific products using various weighting systems. Total annual costs per patient plus the cost for specific services (e.g. clinic visit, radiograph, laboratory, inpatient admission) were compared using scatterplots, correlations, mean difference, and standard deviation of individual differences. Analysis are based upon 2001 costs for 14 915 patients at 72 facilities. Correlations ranged from 0.24 for the cost of outpatient encounters to 0.77 for the cost of inpatient admissions, and 0.85 for total annual cost. The mean difference between costing methods was $707 ($4168 versus $3461) for total annual cost. The standard deviation of the individual differences was $5934. Overall, the agreement between the two costing systems varied by the specific cost being measured and increased with aggregation. Administrators and researchers conducting cost analyses need to carefully consider the purpose, methods, characteristics, strengths, and weaknesses when selecting a method for assessing cost. Copyright © 2008 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/hec.1422
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    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 18 (2009)
    Issue (Month): 10 ()
    Pages: 1188-1201

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    Handle: RePEc:wly:hlthec:v:18:y:2009:i:10:p:1188-1201
    Contact details of provider: Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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    1. Aggie Paulus, 2002. "ABC: The Pathway to Comparison of the Costs of Integrated Care," Public Money & Management, Chartered Institute of Public Finance and Accountancy, vol. 22(3), pages 25-32, 07.
    2. Cardinaels, Eddy & Roodhooft, Filip & Herck, Gustaaf van, 2004. "Drivers of cost system development in hospitals: results of a survey," Health Policy, Elsevier, vol. 69(2), pages 239-252, August.
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