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Truly inefficient or providing better quality of care? Analysing the relationship between riskadjusted hospital costs and patients’ health outcomes

Author

Listed:
  • Nils Gutacker

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

  • Chris Bojke

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

  • Silvio Daidone

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

  • Nancy Devlin

    (Office for Health Economics, London, UK)

  • David Parkin

    (NHS South East Cost, Horley, UK)

  • Andrew Street

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

Abstract

Accounting for variation in the quality of care is a major challenge for the assessment of hospital cost performance. Because data on patients’ health improvement are generally not available, existing studies have resorted to inherently incomplete outcome measures such as mortality or re-admission rates. This opens up the possibility that providers of high quality care are falsely deemed inefficient and vice versa. This study makes use of a novel dataset of routinely collected patient-reported outcomes measures (PROMs) to i) assess the degree to which cost variation is associated with variation in patients’ health gain and ii) explore how far judgement about hospital cost performance changes when health outcomes are accounted for. We use multilevel modelling to address the clustering of patients in providers and isolate unexplained cost variation. Our results provide some evidence of a U-shaped relationship between risk-adjusted costs and outcomes for hip replacement surgery. For the other three investigated procedures, the estimated relationship is sensitive to the choice of PROM instrument. We do not observe substantial changes in estimates of cost performance when outcomes are explicitly accounted for.

Suggested Citation

  • 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 068cherp, Centre for Health Economics, University of York.
  • Handle: RePEc:chy:respap:68cherp
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    File URL: http://www.york.ac.uk/media/che/documents/papers/researchpapers/CHERP68_Relationship_between_risk-adjusted_hospital_costs_and_health_outcomes.pdf
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    References listed on IDEAS

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    1. repec:spr:eujhec:v:19:y:2018:i:5:d:10.1007_s10198-017-0915-5 is not listed on IDEAS
    2. Laura Di Giorgio & Massimo Filippini & Giuliano Masiero, 2014. "The relationship between costs and quality in nonprofit nursing homes," IdEP Economic Papers 1402, USI Università della Svizzera italiana.
    3. Adrian Gheorghe & Tracy Roberts & Karla Hemming & Melanie Calvert, 2015. "Evaluating the Generalisability of Trial Results: Introducing a Centre- and Trial-Level Generalisability Index," PharmacoEconomics, Springer, vol. 33(11), pages 1195-1214, November.
    4. repec:sls:ipmsls:v:32:y:2017:10 is not listed on IDEAS
    5. Häkkinen, Unto & Rosenqvist, Gunnar & Peltola, Mikko & Kapiainen, Satu & Rättö, Hanna & Cots, Francesc & Geissler, Alexander & Or, Zeynep & Serdén, Lisbeth & Sund, Reijo, 2014. "Quality, cost, and their trade-off in treating AMI and stroke patients in European hospitals," Health Policy, Elsevier, vol. 117(1), pages 15-27.
    6. Francesco Longo & Luigi Siciliani & Andrew Street, 2015. "Are costs differences between specialist and general hospitals compensated by the prospective payment system?," Discussion Papers 15/30, Department of Economics, University of York.
    7. L. Di Giorgio & M. Filippini & G. Masiero, 2016. "Is higher nursing home quality more costly?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 17(8), pages 1011-1026, November.
    8. repec:eee:hepoli:v:121:y:2017:i:12:p:1225-1232 is not listed on IDEAS
    9. J. Buckell & A. Smith & R. Longo & D. Holland, 2015. "Efficiency, heterogeneity and cost function analysis: empirical evidence from pathology services in the National Health Service in England," Applied Economics, Taylor & Francis Journals, vol. 47(31), pages 3311-3331, July.
    10. John Buckell & Andrew Smith & Roberta Longo & David Holland, 2013. "Health inefficiency and unobservable heterogeneity - empirical evidence from pathology services in the UK National Health Service," Working Papers 1307, Academic Unit of Health Economics, Leeds Institute of Health Sciences, University of Leeds.

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    Keywords

    hospital costs; efficiency; patient outcomes; PROMs; cost-quality relationship;

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