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English Hospitals Can Improve Their Use of Resources: An Analysis of Costs and Length of Stay for Ten Treatments

Listed author(s):
  • James Gaughan

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

  • Anne Mason

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

  • Andrew Street

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

  • Padraic Ward

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

Objectives: We investigate variations in costs and length of stay (LoS) among hospitals for ten clinical treatments to assess: 1. The extent to which resource use is driven by the characteristics of patients and of the type and quality of care they receive; 2. After taking these characteristics into account, the extent to which resource use is related to the hospital in which treatment takes place; 3. If conclusions are robust to whether resource use is described by costs or by LoS. Data: We analysed patient-level data from the Hospital Episode Statistics (HES) data for 2007/8, which contains approximately 16.5 million inpatient records. This dataset was merged with costs derived from the Reference Cost database. We extracted data on three medical ‘conditions’ (acute myocardial infarction (AMI); childbirth; stroke) and seven surgical treatments (appendectomy; breast cancer (mastectomy); coronary artery bypass graft (CABG); cholecystectomy; inguinal hernia; hip replacement; and knee replacement). Methods: For each treatment, we used a two-stage approach to investigate variations in cost and LoS. In stage I, we ran fixed effects models to explore which patient-level factors explain variations. In stage II, we regressed the fixed effects from stage I against an array of hospital characteristics. Results: The number of patients analysed ranged from 18,875 (CABG) to 549,036 (childbirth), and the number of hospitals ranged from 28 (CABG) to 151 (appendectomy, hernia and hip replacement). Across the ten treatments, patient factors explained between 32% (stroke) and 72% (breast cancer and knee replacement) of the observed variation in costs. In the LoS analyses, the corresponding figures were 28% (stroke) and 63% (hip replacement). A higher number of diagnoses were consistently associated with higher cost and longer LoS. A higher number of procedures had a similar effect for 9 of the 10 treatments. The effects of age and gender were mixed, but higher levels of deprivation were associated with longer stays in 8 of the 10 treatments analysed. LoS was significantly longer for patients who were cared for by more than one hospital doctor, regardless of the treatment received. In the seven surgical interventions, wound infection was always associated with longer stays and usually with higher cost. Emergency admissions increased LoS for all conditions except stroke. After accounting for these patient-level factors, substantial variation in costs and LoS among hospitals was evident for all ten treatments. These variations could not be explained by hospital characteristics such as size, teaching status, and the amount of the treatment in question that the hospital performed. We found that average hospital costs or LoS were correlated across similar types of treatments, notably hernia, cholecystectomy and appendectomy and hip and knee replacement. A small number of hospitals had considerably lower average costs or LoS for most treatments; similarly some hospitals had considerably higher average costs or LoS. Conclusion: The findings suggest that all hospitals have scope to make efficiency savings in at least one of the clinical areas considered by this study. A small number of hospitals have higher average costs or LoS across multiple treatments than their counterparts, and this cannot be explained by the characteristics of their patients or the quality of care. These hospitals are likely to struggle financially under Payment by Results (PbR) and need to consider how to improve their use of resources.

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Paper provided by Centre for Health Economics, University of York in its series Working Papers with number 078cherp.

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Length: 71 pages
Date of creation: Jul 2012
Handle: RePEc:chy:respap:78cherp
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  1. Zeynep Or & Thomas Renaud & Josselin Thuilliez & Cora Lebreton, 2012. "Diagnosis Related Groups and variations in resource use for child delivery across 10 European countries," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00719782, HAL.
  2. Silvio Daidone & Francesco D'Amico, 2009. "Technical Efficiency, Specialization and Ownership Form: Evidences from a Pooling of Italian Hospitals," CEIS Research Paper 143, Tor Vergata University, CEIS, revised 30 Sep 2009.
  3. Anne Mason & Zeynep Or & Thomas Renaud & Andrew Street & Josselin Thuilliez & Padraic Ward, 2012. "How well do diagnosis-related groups for appendectomy explain variations in resource use? An analysis of patient-level data from 10 european countries," Université Paris1 Panthéon-Sorbonne (Post-Print and Working Papers) halshs-00719783, HAL.
  4. Halvorsen, Robert & Palmquist, Raymond, 1980. "The Interpretation of Dummy Variables in Semilogarithmic Equations," American Economic Review, American Economic Association, vol. 70(3), pages 474-475, June.
  5. Laudicella, Mauro & Olsen, Kim Rose & Street, Andrew, 2010. "Examining cost variation across hospital departments-a two-stage multi-level approach using patient-level data," Social Science & Medicine, Elsevier, vol. 71(10), pages 1872-1881, November.
  6. Reinhard Busse & Alexander Geissler & Anne Mason & Zeynep Or & David Scheller‐Kreinsen & Andrew Street & Alexander Geissler & David Scheller‐Kreinsen & Wilm Quentin, 2012. "Do Diagnosis‐Related Groups Appropriately Explain Variations In Costs And Length Of Stay Of Hip Replacement? A Comparative Assessment Of Drg Systems Across 10 European Countries," Health Economics, John Wiley & Sons, Ltd., vol. 21, pages 103-115, 08.
  7. Silvio Daidone & Andrew Street, 2011. "Estimating the costs of specialised care," Working Papers 061cherp, Centre for Health Economics, University of York.
  8. Reinhard Busse & Alexander Geissler & Anne Mason & Zeynep Or & David Scheller‐Kreinsen & Andrew Street & James Gaughan & Conrad Kobel & Caroline Linhart & Anne Mason & Andrew Street & Padraic Ward, 2012. "Why Do Patients Having Coronary Artery Bypass Grafts Have Different Costs Or Length Of Stay? An Analysis Across 10 European Countries," Health Economics, John Wiley & Sons, Ltd., vol. 21, pages 77-88, 08.
  9. Cookson, Richard & Laudicella, Mauro, 2011. "Do the poor cost much more? The relationship between small area income deprivation and length of stay for elective hip replacement in the English NHS from 2001 to 2008," Social Science & Medicine, Elsevier, vol. 72(2), pages 173-184, January.
  10. repec:dau:papers:123456789/5426 is not listed on IDEAS
  11. Saskia Drösler & Patrick Romano & Lihan Wei, 2009. "Health Care Quality Indicators Project: Patient Safety Indicators Report 2009," OECD Health Working Papers 47, OECD Publishing.
  12. Kim Rose Olsen & Andrew Street, 2008. "The analysis of efficiency among a small number of organisations: How inferences can be improved by exploiting patient-level data," Health Economics, John Wiley & Sons, Ltd., vol. 17(6), pages 671-681.
  13. Reinhard Busse & Alexander Geissler & Anne Mason & Zeynep Or & David Scheller‐Kreinsen & Andrew Street & Andrew Street & Conrad Kobel & Thomas Renaud & Josselin Thuilliez, 2012. "How Well Do Diagnosis‐Related Groups Explain Variations In Costs Or Length Of Stay Among Patients And Across Hospitals? Methods For Analysing Routine Patient Data," Health Economics, John Wiley & Sons, Ltd., vol. 21, pages 6-18, 08.
  14. Brigitte Dormont & Carine Milcent, 2004. "The sources of hospital cost variability," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 927-939.
  15. Silvio Daidone & Francesco D’Amico, 2009. "Technical efficiency, specialization and ownership form: evidences from a pooling of Italian hospitals," Journal of Productivity Analysis, Springer, vol. 32(3), pages 203-216, December.
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