IDEAS home Printed from https://ideas.repec.org/p/hal/journl/halshs-01990473.html
   My bibliography  Save this paper

The sources of hospital cost variability

Author

Listed:
  • Brigitte Dormont

    (UP9 - Université Paris 9, Dauphine - Université Paris-Dauphine)

  • Carine Milcent

    () (PJSE - Paris-Jourdan Sciences Economiques - ENS Paris - École normale supérieure - Paris - EHESS - École des hautes études en sciences sociales - ENPC - École des Ponts ParisTech - CNRS - Centre National de la Recherche Scientifique)

Abstract

Hospital heterogeneity is a major issue in defining a reimbursement system. If hospitals are heterogeneous, it is difficult to distinguish which part of the differences in costs is due to cost containment efforts and which part cannot be reduced, because it is due to other unobserved sources of hospital heterogeneity. In this paper, we apply an econometric approach to analyse hospital cost variability. We use a nested three-dimensional database (stays-hospitals-years) in order to explore the sources of variation in hospital costs, taking into account unobservable components of hospital cost heterogeneity. The three-dimensional structure of our data makes it possible to identify transitory and permanent components of hospital cost heterogeneity. Econometric estimates are performed on a sample of 7314 stays for acute myocardial infarction (AMI) observed in 36 French public hospitals over the period 1994-1997. Transitory unobservable hospital heterogeneity is far from negligible: its estimated standard error is about 50% of the standard error we estimate for cost variability due to permanent unobservable heterogeneity between hospitals.

Suggested Citation

  • Brigitte Dormont & Carine Milcent, 2004. "The sources of hospital cost variability," Post-Print halshs-01990473, HAL.
  • Handle: RePEc:hal:journl:halshs-01990473
    DOI: 10.1002/hec.935
    Note: View the original document on HAL open archive server: https://halshs.archives-ouvertes.fr/halshs-01990473
    as

    Download full text from publisher

    File URL: https://halshs.archives-ouvertes.fr/halshs-01990473/document
    Download Restriction: no

    Other versions of this item:

    References listed on IDEAS

    as
    1. H. Baltagi, Badi & Heun Song, Seuck & Cheol Jung, Byoung, 2001. "The unbalanced nested error component regression model," Journal of Econometrics, Elsevier, vol. 101(2), pages 357-381, April.
    2. Hadley, Jack & Zuckerman, Stephen, 1994. "The role of efficiency measurement in hospital rate setting," Journal of Health Economics, Elsevier, vol. 13(3), pages 335-340, October.
    3. Ma, Ching-to Albert, 1994. "Health Care Payment Systems: Cost and Quality Incentives," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 93-112, Spring.
    4. 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.
    5. Miika Linna, 1998. "Measuring hospital cost efficiency with panel data models," Health Economics, John Wiley & Sons, Ltd., vol. 7(5), pages 415-427.
    6. David Meltzer & Jeanette Chung & Anirban Basu, 2002. "Does Competition under Medicare Prospective Payment Selectively Reduce Expenditures on High-Cost Patients?," RAND Journal of Economics, The RAND Corporation, vol. 33(3), pages 447-468, Autumn.
    7. James F. Burgess, Jr. & Paul W. Wilson, 1996. "Hospital Ownership and Technical Inefficiency," Management Science, INFORMS, vol. 42(1), pages 110-123, January.
    8. Ching-to Albert Ma, 1998. "Health-Care Payment Systems: Cost and Quality Incentives-Reply," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 7(1), pages 139-142, March.
    9. Chalkley, Martin & Malcomson, James M., 2000. "Government purchasing of health services," Handbook of Health Economics,in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 15, pages 847-890 Elsevier.
    10. Michael D. Rosko, 2001. "Cost efficiency of US hospitals: a stochastic frontier approach," Health Economics, John Wiley & Sons, Ltd., vol. 10(6), pages 539-551.
    11. Mark McClellan, 1997. "Hospital Reimbursement Incentives: An Empirical Analysis," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 6(1), pages 91-128, March.
    12. Andrei Shleifer, 1985. "A Theory of Yardstick Competition," RAND Journal of Economics, The RAND Corporation, vol. 16(3), pages 319-327, Autumn.
    13. Baltagi, Badi H., 1981. "Simultaneous equations with error components," Journal of Econometrics, Elsevier, vol. 17(2), pages 189-200, November.
    14. Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-374, October.
    15. Mundlak, Yair, 1978. "On the Pooling of Time Series and Cross Section Data," Econometrica, Econometric Society, vol. 46(1), pages 69-85, January.
    16. Pope, Gregory C., 1990. "Using hospital-specific costs to improve the fairness of prospective reimbursement," Journal of Health Economics, Elsevier, vol. 9(3), pages 237-251, November.
    17. 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.
    18. Goodall, Colin, 1990. "A simple objective method for determining a percent standard in mixed reimbursement systems," Journal of Health Economics, Elsevier, vol. 9(3), pages 253-271, November.
    19. Guillem López-Casasnovas & Marc Saez, 1999. "The impact of teaching status on average costs in Spanish hospitals," Health Economics, John Wiley & Sons, Ltd., vol. 8(7), pages 641-651.
    20. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
    21. Antweiler, Werner, 2001. "Nested random effects estimation in unbalanced panel data," Journal of Econometrics, Elsevier, vol. 101(2), pages 295-313, April.
    22. Joseph P. Newhouse, 1996. "Reimbursing Health Plans and Health Providers: Efficiency in Production versus Selection," Journal of Economic Literature, American Economic Association, vol. 34(3), pages 1236-1263, September.
    23. McClellan, Mark & Newhouse, Joseph P., 1997. "The marginal cost-effectiveness of medical technology: A panel instrumental-variables approach," Journal of Econometrics, Elsevier, vol. 77(1), pages 39-64, March.
    24. Adam Wagstaff & Guillem Lopez, 1996. "Hospital costs in Catalonia: a stochastic frontier analysis," Applied Economics Letters, Taylor & Francis Journals, vol. 3(7), pages 471-474.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Nils Gutacker & Chris Bojke & Silvio Daidone & Nancy J. Devlin & David Parkin & Andrew Street, 2013. "Truly Inefficient Or Providing Better Quality Of Care? Analysing The Relationship Between Risk‐Adjusted Hospital Costs And Patients' Health Outcomes," Health Economics, John Wiley & Sons, Ltd., vol. 22(8), pages 931-947, August.
    2. Daidone, Silvio & Street, Andrew, 2013. "How much should be paid for specialised treatment?," Social Science & Medicine, Elsevier, vol. 84(C), pages 110-118.
    3. repec:eee:socmed:v:183:y:2017:i:c:p:116-125 is not listed on IDEAS
    4. Oliver Tiemann, 2008. "Variations in hospitalisation costs for acute myocardial infarction - a comparison across Europe," Health Economics, John Wiley & Sons, Ltd., vol. 17(S1), pages 33-45.
    5. Siok Tan & Leona Hakkaart-van Roijen & B. Ineveld & W. Redekop, 2013. "Explaining length of stay variation of episodes of care in the Netherlands," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(6), pages 919-927, December.
    6. Martine Bellanger & Laurent Tardif, 2006. "Accounting and reimbursement schemes for inpatient care in France," Health Care Management Science, Springer, vol. 9(3), pages 295-305, August.
    7. James Gaughan & Anne Mason & Andrew Street & Padraic Ward, 2012. "English Hospitals Can Improve Their Use of Resources: An Analysis of Costs and Length of Stay for Ten Treatments," Working Papers 078cherp, Centre for Health Economics, University of York.
    8. Pi-Fem Hsu, 2014. "Does a global budget superimposed on fee-for-service payments mitigate hospitals’ medical claims in Taiwan?," International Journal of Health Economics and Management, Springer, vol. 14(4), pages 369-384, December.
    9. Thanassoulis, Emmanuel & Silva Portela, Maria & Graveney, Mike, 2016. "Identifying the scope for savings at inpatient episode level: An illustration applying DEA to chronic obstructive pulmonary disease," European Journal of Operational Research, Elsevier, vol. 255(2), pages 570-582.

    More about this item

    Keywords

    JEL classification: C23; H51; panel data; I18 Keywords hospital costs; moral hazard; unobservable hospital heterogeneity;

    JEL classification:

    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • H51 - Public Economics - - National Government Expenditures and Related Policies - - - Government Expenditures and Health
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hal:journl:halshs-01990473. See general information about how to correct material in RePEc.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (CCSD). General contact details of provider: https://hal.archives-ouvertes.fr/ .

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service hosted by the Research Division of the Federal Reserve Bank of St. Louis . RePEc uses bibliographic data supplied by the respective publishers.