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A multilevel modelling approach to analysis of patient costs under managed care


  • Kathleen Carey


The growth of the managed care model of health care delivery in the USA has led to broadened interest in the performance of health care providers. This paper uses multilevel modelling to analyse the effects of managed care penetration on patient level costs for a sample of 24 medical centres operated by the Veterans Health Administration (VHA). The appropriateness of a two level approach to this problem over ordinary least squares (OLS) is demonstrated. Results indicate a modicum of difference in institutions' performance after controlling for patient effects. Facilities more heavily penetrated by the managed care model may be more effective at controlling costs of their sicker patients. Copyright © 2000 John Wiley & Sons, Ltd.

Suggested Citation

  • Kathleen Carey, 2000. "A multilevel modelling approach to analysis of patient costs under managed care," Health Economics, John Wiley & Sons, Ltd., vol. 9(5), pages 435-446.
  • Handle: RePEc:wly:hlthec:v:9:y:2000:i:5:p:435-446 DOI: 10.1002/1099-1050(200007)9:5<435::AID-HEC523>3.0.CO;2-Z

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    References listed on IDEAS

    1. Zuckerman, Stephen & Hadley, Jack & Iezzoni, Lisa, 1994. "Measuring hospital efficiency with frontier cost functions," Journal of Health Economics, Elsevier, vol. 13(3), pages 255-280, October.
    2. Andrew M. Jones, 2012. "health econometrics," The New Palgrave Dictionary of Economics, Palgrave Macmillan.
    3. Richard Blundell & Frank Windmeijer, 1997. "Cluster effects and simultaneity in multilevel models," Health Economics, John Wiley & Sons, Ltd., vol. 6(4), pages 439-443.
    4. Vitaliano, Donald F. & Toren, Mark, 1994. "Cost and efficiency in nursing homes: a stochastic frontier approach," Journal of Health Economics, Elsevier, vol. 13(3), pages 281-300, October.
    5. Newhouse, Joseph P., 1994. "Frontier estimation: How useful a tool for health economics?," Journal of Health Economics, Elsevier, vol. 13(3), pages 317-322, October.
    6. Burgess Jr., James F. & Christiansen, Cindy L. & Michalak, Sarah E. & Morris, Carl N., 2000. "Medical profiling: improving standards and risk adjustments using hierarchical models," Journal of Health Economics, Elsevier, vol. 19(3), pages 291-309, May.
    7. Miika Linna, 1998. "Measuring hospital cost efficiency with panel data models," Health Economics, John Wiley & Sons, Ltd., vol. 7(5), pages 415-427.
    8. Dor, Avi, 1994. "Non-minimum cost functions and the stochastic frontier: On applications to health care providers," Journal of Health Economics, Elsevier, vol. 13(3), pages 329-334, October.
    9. Nigel Rice & Andrew Jones, 1997. "Multilevel models and health economics," Health Economics, John Wiley & Sons, Ltd., vol. 6(6), pages 561-575.
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    Cited by:

    1. Kathleen Carey & Theodore Stefos, 2016. "The cost of hospital readmissions: evidence from the VA," Health Care Management Science, Springer, vol. 19(3), pages 241-248, September.
    2. Oliveira, Monica D. & Bevan, Gwyn, 2008. "Modelling hospital costs to produce evidence for policies that promote equity and efficiency," European Journal of Operational Research, Elsevier, vol. 185(3), pages 933-947, March.
    3. Rabe-Hesketh, Sophia & Skrondal, Anders & Pickles, Andrew, 2005. "Maximum likelihood estimation of limited and discrete dependent variable models with nested random effects," Journal of Econometrics, Elsevier, vol. 128(2), pages 301-323, October.
    4. Oliver Tiemann & Jonas Schreyögg, 2012. "Changes in hospital efficiency after privatization," Health Care Management Science, Springer, vol. 15(4), pages 310-326, December.
    5. Antonio Clavero Barranquero & Mª. Luz González Alvarez, 2005. "A survey of econometric models to analyze the demand and utilisation of health care," Hacienda Pública Española, IEF, vol. 173(2), pages 129-162, June.
    6. Bache, Stefan Holst Milton & Kristensen, Troels, 2013. "A simple but efficient approach to the analysis of multilevel data," COHERE Working Paper 2013:6, University of Southern Denmark, COHERE - Centre of Health Economics Research.
    7. Or, Zeynep & Wang, Jia & Jamison, Dean, 2005. "International differences in the impact of doctors on health: a multilevel analysis of OECD countries," Journal of Health Economics, Elsevier, vol. 24(3), pages 531-560, May.

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