Truly Inefficient or Providing Better Quality of Care? Analysing the Relationship between Risk-Adjusted Hospital Costs and Patients’ Health Outcomes

CHE Research Paper No. 68

23 Pages Posted: 10 Dec 2011

See all articles by Nils Gutacker

Nils Gutacker

University of York - Centre for Health Economics

Chris Bojke

Tower House

Silvio Daidone

United Nations - Food and Agriculture Organization (FAO)

Nancy Devlin

Office of Health Economics

David Parkin

National Health Service South East Coast

Andrew Street

London School of Economics & Political Science (LSE) - London School of Economics

Date Written: October 1, 2011

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.

Keywords: hospital costs, efficiency, patient outcomes, PROMs, cost-quality relationship

Suggested Citation

Gutacker, Nils and Bojke, Chris and Daidone, Silvio and Devlin, Nancy and Parkin, David and Street, Andrew, Truly Inefficient or Providing Better Quality of Care? Analysing the Relationship between Risk-Adjusted Hospital Costs and Patients’ Health Outcomes (October 1, 2011). CHE Research Paper No. 68, Available at SSRN: https://ssrn.com/abstract=1970382 or http://dx.doi.org/10.2139/ssrn.1970382

Nils Gutacker (Contact Author)

University of York - Centre for Health Economics ( email )

York YO10 5DD
United Kingdom

Chris Bojke

Tower House ( email )

Suite 8
Fishergate
York, YO10 4UA
United Kingdom
+44 (0)1904 567300 (Phone)

HOME PAGE: http://www.pharmerit.com/home/location.pag.html

Silvio Daidone

United Nations - Food and Agriculture Organization (FAO) ( email )

Viale delle Terme di Caracalla
Rome, Lazio 00153
Italy

Nancy Devlin

Office of Health Economics ( email )

105 Victoria Street
London, SW1E 6QT
United Kingdom
0044 2077478858 (Phone)

David Parkin

National Health Service South East Coast ( email )

United Kingdom

Andrew Street

London School of Economics & Political Science (LSE) - London School of Economics ( email )

United Kingdom

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