How should hospital reimbursement be refined to supportconcentration of complex care services?

The English National Health Service is promoting concentration of the treatment of patients with relatively rare and complex conditions into a limited number of specialist centres. If these patients are more costly to treat, the prospective payment system based on Healthcare Resource Groups (HRGs) may need refinement because these centres will be financially disadvantaged. To assess the funding implications of this concentration policy, we estimate the cost differentials associated with caring for patients that receive complex care and examine the extent to which complex care services are concentrated across hospitals and HRGs. We estimate random effects models using patient-level activity and cost data for all patients admitted to English hospitals during the 2013/14 financial year and construct measures of the concentration of complex services. Payments for complex care services need to be adjusted if they have large cost differentials and if provision is concentrated within a few hospitals. Payments can be adjusted either by refining HRGs or making top-up payments to HRG prices. HRG refinement is preferred to top-payments the greater the concentration of services among HRGs

Do patients registered with CAM-trained GPs really use fewer health care resources and live longer? A response to Kooreman and Baars. Eur J Health Econ (2012). 13:469–776

Comment on Kooreman, P., Baars, E.W.: Patients whose GP knows complementary medicine tend to have lower costs and live longer. Eur. J. Health Econ.13(6), 769–776 (2012). doi:10.​1007/​s10198-011-0330-

Determinants of hospital costs and performance variation : Methods, models and variables for the EuroDRG project

Empirical studies of variation in hospital costs fall into two camps: those based on analysis of the costs of individual patients and those – the vast majority – that analyse costs reported at the hospital level. In this review, we consider how patient-level and hospital-level data are related and outline approaches to analyzing them. The second part of the review considers general specification choices and methods of efficiency analysis. Moreover, we specify a model to be used in the empirical analyses of the EuroDRG project

Estimating the costs of specialised care

In most sectors of the economy, specialisation is associated with lower costs. Yet some specialised hospitals claim to require more generous funding than general hospitals. This claim is based on the assertion that their patients are different, and that these differences outweigh the cost advantages of specialisation. Unless the basis for this claim can be established, the financial incentives introduced by Payment by Results to encourage cost reducing behaviour will be diluted. We estimate various multiple regressions in order, firstly, to establish the extent to which the receipt of specialised care is associated with higher treatment costs and, secondly, to evaluate hospital performance in controlling costs. We explore how robust the results are to a range of analytical choices by conducting various sensitivity analyses. We use the Hospital Episode Statistics and Reference Cost databases to analyse the characteristics and costs of all patients treated in the NHS during 2008/9. Patients are identified as having received specialised care on the basis of specific diagnostic and procedure codes recorded in their medical record. These codes are agreed by clinicians and form the Specialised Services National Definition Sets. We estimate multiple regression models to assess the extent to which receipt of specialised care increases the cost of treatment. We test the robustness of results to choices about how costs are calculated, how the regression models are specified and how patients are identified as having received specialised care. In addition we assess each hospital’s relative efficiency in controlling costs, after allowing for differences in factor prices and a wide range of patient characteristics. We find that, after allowing for the hospital in which treatment is provided, costs are higher than for other patients allocated to the same Healthcare Resource Group (HRG) if a patient receives one of the following types of specialised service: cancer (18% higher cost), spinal (28%), neurosciences (23%), cystic fibrosis (38%), infectious disease (21%), children (20%), rheumatology (13%), vascular diseases (21%), colorectal (21%) and orthopaedic (21%). The implication for Payment by Results is that ‘top-up’ payments for patients with these markers might be made over and above the tariff associated with the HRG to which they are allocated. We recommend that the size of additional top-up amounts to the percentage increase in costs as reported above, these estimates being derived from our preferred model specification. However, different values could be adopted, justified on other grounds. These grounds may include: Transitional arrangements, notably for children’s services, where the recommended value of 20% is substantially lower than the current 78% top-up; Materiality, where an additional top-up would have limited financial consequence for those types of specialised services that are delivered to only a small number of patients; Sensitivity to model specification. The other model specifications generally imply lower top-up values than those recommended above, with the exception of a model that fails to allow for each hospital’s influence on costs

Multidimensional performance assessment using dominance criteria

Public sector organisations pursue multiple objectives and serve a number of stakeholders. But stakeholders are rarely explicit about the valuations they attach to different objectives, nor are these valuations likely to be identical. This complicates the assessment of their performance because no single set of weights can be legitimately chosen by regulators to aggregate outputs into unidimensional composite scores. We propose the use of dominance criteria in a multidimensional performance assessment framework to identify best practice and poor performance under relatively weak assumptions about stakeholders’ preferences. We estimate multivariate multilevel models to study providers of hip replacement surgery in the English NHS with respect to their performance in terms of length of stay, readmission rates, post-operative patient-reported health status and waiting time. We find substantial correlation between objectives and demonstrate that ignoring the correlation can lead to incorrect assessments of performance

Multidimensional performance assessment using dominance criteria

Public sector organisations pursue multiple objectives and serve a number of stakeholders. But stakeholders are rarely explicit about the valuations they attach to different objectives, nor are these valuations likely to be identical. This complicates the assessment of their performance because no single set of weights can be legitimately chosen by regulators to aggregate outputs into unidimensional composite scores. We propose the use of dominance criteria in a multidimensional performance assessment framework to identify best practice and poor performance under relatively weak assumptions about stakeholders’ preferences. We estimate multivariate multilevel models to study providers of hip replacement surgery in the English NHS with respect to their performance in terms of length of stay, readmission rates, post-operative patient-reported health status and waiting time. We find substantial correlation between objectives and demonstrate that ignoring the correlation can lead to incorrect assessments of performance

Price adjustment in the hospital sector

Prospective payment systems are currently used in many OECD countries, where hospitals are paid a fixed price for each patient treated. We develop a theoretical model to analyse the properties of the optimal fixed prices to be paid to hospitals when no lump-sum transfers are allowed and when the price can differ across providers to reflect observable exogenous differences in costs (for example land, building and staff costs). We find that: a) when the marginal benefit from treatment is decreasing and the cost function is the (commonly used) power function, the optimal price adjustment for hospitals with higher costs is positive but partial; if the marginal benefit from treatment is constant, then the price is identical across providers; b) if the cost function is exponential, then the price adjustment is positive even when the marginal benefit from treatment is constant; c) the optimal price is lower when lump-sum transfers are not allowed, compared to when they are allowed; d) higher inequality aversion of the purchaser is associated with an increase in the price for the high-cost providers and a reduction in the price of the low-cost providers

How much should be paid for Prescribed Specialised Services?

Overview: Current policy in the English National Health Service (NHS) promotes concentration of the specialised treatment of relatively rare and complex conditions into a limited number of specialist centres. However if a more complex patient case-mix leads to specialised treatments being systematically more costly than non-specialised treatment, then the national tariff payment system based on Healthcare Resource Groups (HRGs) may punitively penalise centres that perform this activit