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Health care spending as determinants of health outcomes.

This paper revisits the relationship between health care spending and health outcomes. While previous researchers found it difficult to establish such a relationship based on international comparisons, the results based on rather homogenous province-specific Canadian data show that lower health care spending is associated with a statistically significant increase in infant mortality and a decrease in life expectancy in Canada. This relationship is independent of various economic, socio-demographic, nutritional and lifestyle factors, as well as provincial specificity or time trend. It is based on annual data collected from the ten Canadian provinces over 15 years.

Canada↗

The impact of teaching status on average costs in Spanish hospitals.

In this paper, the observed systematic differences in costs for teaching hospitals (TH) in Spain are examined. Concern has been voiced regarding the existence of a bias in the financing of TH once prospective budgets are introduced for hospital finance. Claims for adjustment to take into account the 'legitimate' extra costs of teaching on hospital expenditure may be well grounded. Focus is on the estimation of the impact of teaching status on average cost, using a version of a multi-product hospital cost function, taking into account some relevant factors from which to derive the observed differences. It is assumed that the relationship between the explanatory and the dependent variables follows a flexible form for each of the explanatory variables. Also, the underlying covariance structure of the data is modelled. Two qualitatively different sources of variation are assumed: random effects and serial correlation. Random variation refers to both general level variation (through the random intercept) and the variation specifically related to teaching status. It is postulated that the impact of the random effects is dominant over the impact of the serial correlation effects. The model is estimated by restricted maximum likelihood. The results show that costs are 9% higher (15% in the case of median costs) in teaching than in non-teaching hospitals. That is, teaching status legitimately explains no more than half of the observed difference in actual costs. The impact on costs of the teaching factor depends on the number of residents, with an increase of 51.11% per resident for hospitals with fewer than 204 residents (third quartile of the number of residents) and 41.84% for hospitals with more than 204 residents. In addition, the estimated dispersion is higher among teaching hospitals. As a result, due to the considerable observed heterogeneity, results should be interpreted with caution. From a policy making point of view, it is concluded that since a higher relative burden for medical training falls on public hospitals, an explicit adjustment for the extra costs that the teaching factor imposes on hospital finance is needed, before hospital competition for inpatient services takes place.

Education, Medical, Graduate↗

Policy analysis of the use of hepatitis B, Haemophilus influenzae type b-, Streptococcus pneumoniae-conjugate and rotavirus vaccines in national immunization schedules.

After the development of national vaccine programmes to deliver six vaccines to infants, new vaccine adoption has been limited. Analysis of the health and economic implications of new vaccination options can help national policy-makers. Country specific quantitative policy analyses were conducted to estimate the impact of vaccination against hepatitis B (HB), Haemophilus influenzae type b (Hib), Streptococcus pneumoniae (SP) and rotavirus. Disease burden, programme costs and the potential reduction of disease from vaccination was assessed for each vaccine. Without vaccination, these four vaccine preventable diseases contribute up to 4.1 million deaths in each successive birth cohort. Routine scheduled use of HB and Hib vaccines could prevent up to 1.7 million deaths; SP and rotavirus vaccines, an additional 1.4 million deaths, annually. The global cost per life-year saved ranged from $29 to $150 with great variation by income and economic groups. With a few exceptions for a few countries, these vaccines would cost a fraction of average per-capita gross domestic product to save a life-year. The addition of HB and Hib vaccines, should be considered for integration in all national immunization programmes. SP and rotavirus vaccines, with the given assumptions, would also be cost-effective. Proactive analysis of the economic and epidemiologic impact of these vaccines can hasten their introduction into national vaccination schedules.

Bacterial Vaccines↗

The impact of clean indoor-air laws and cigarette smuggling on demand for cigarettes: an empirical model.

This study examines the impact of clean indoor-air laws and smuggling activities on states' per capita cigarette consumption and revenues by using a static demand model. The analysis was based on data for 50 states and the District of Columbia (DC) of the United Sates over the period 1970-1995. The estimated price elasticities of demand for cigarettes ranged from -0.48 to -0.62, indicating that a 10% increase in price would reduce consumption per capita by 4.8% to 6.2%. Anti-smoking laws had a significant negative impact on per capita consumption. In 1995, consumption was reduced by 4.7 packs per capita among states with anti-smoking laws, or 1.1 billion fewer packs of cigarettes consumed. Both short-distance smuggling between neighbouring states and long-distance smuggling from Kentucky, North Carolina and Virginia existed and were significant. Smuggling activities from military bases and Indian reservations, however, were not significant. On average, 6% of states' tax revenues were lost due to smuggling activities in 1995. Results also showed that short-distance smuggling was less important than long-distance smuggling as a source of the revenue loss.

Air Pollution, Indoor↗

Centre-specific or average unit costs in multi-centre studies? Some theory and simulation.

Costing issues are increasingly being addressed in multi-centre studies. In this paper, two methods for collecting costing information are compared within a simulated clinical trial setting. One method estimates average treatment costs by applying unit costs averaged across treatment centres to centre-specific volumes of resource use. The second uses centre-specific information for both the unit costs and the resource volumes, and then averages across centres. Using a pre-specified production relation between the different volumes of resource use, and simulating changes in unit costs, it is shown that these two methods result in statistically different estimates of average treatment costs. This finding holds, regardless of the degree of substitutability between the resource volumes, except when considerable uncertainty surrounds treatment centre responses to relative changes in unit costs. The findings suggest that a more cautious approach should be adopted in the collection, calculation and interpretation of treatment costs in multi-centre studies.

Computer Simulation↗

The effect of capitation on GPs' referral decisions.

In the Norwegian capitation trial, the payment system for general practitioners (GPs) has been changed; a practice allowance component has been replaced by a capitation component and the fee-per-item component constitutes a smaller part of a GPs practice income than previously. From the theoretical modelling of GPs' referral decisions, we predict that the replacement of the practice allowance by a capitation component will increase the rate of referrals to specialists. This hypothesis is supported by an exploratory empirical study with data from a sample of GPs participating in the experiment.

Aged↗

Can cost shifting continue in a price competitive environment?

Both Medicare and Medicaid are reducing payments to hospitals, and there is widespread concern that hospitals may respond by increasing prices to privately insured patients. Theoretical models of hospital behaviour have ambiguous predictions as to whether, and under what circumstances, hospitals will shift costs to private payers. This paper extends previous theoretical models and then tests empirically using data from California for the 1983-1991 period, a time of increasingly intense price competition. Hospitals did increase their prices to private payers in response to reductions in Medicare rates; they had far smaller and generally insignificant responses to changes in Medicaid reimbursement. Hospital ownership and the competitiveness of the hospital market both affected this behaviour, but there was no significant change over time. The results suggest the need to broaden our models of hospital behaviour to 'embed' them in their local markets.

California↗

Power and sample assessments for tests of hypotheses on cost-effectiveness ratios.

We address the issue of statistical power and sample size for cost-effectiveness studies. Tests of hypotheses on the cost-effectiveness ratio (CER) are constructed from the net cost and incremental effectiveness measures. When the difference in effectiveness is known, we derive formulae for statistical power and sample size assessments for one- and two-sided tests of hypotheses of the CER. We also construct a test of the joint hypothesis of cost-effectiveness and effectiveness and derive an expression connecting power and sample size. Our methods account for the correlation between cost and effectiveness and lead to smaller sample size requirements than comparative methods that ignore the correlation. The implications of our formulae for cost-effectiveness studies are illustrated through numerical examples. When compared with trials designed to demonstrate effectiveness alone, our results indicate that a trial appropriately powered to demonstrate cost-effectiveness might require sample sizes many times greater.

Confidence Intervals↗

Development of WHO guidelines on generalized cost-effectiveness analysis.

The growing use of cost-effectiveness analysis (CEA) to evaluate specific interventions is dominated by studies of prospective new interventions compared with current practice. This type of analysis does not explicitly take a sectoral perspective in which the costs and effectiveness of all possible interventions are compared, in order to select the mix that maximizes health for a given set of resource constraints. WHO guidelines on generalized CEA propose the application of CEA to a wide range of interventions to provide general information on the relative costs and health benefits of different interventions in the absence of various highly local decision constraints. This general approach will contribute to judgements on whether interventions are highly cost-effective, highly cost-ineffective, or something in between. Generalized CEAs require the evaluation of a set of interventions with respect to the counterfactual of the null set of the related interventions, i.e. the natural history of disease. Such general perceptions of relative cost-effectiveness, which do not pertain to any specific decision-maker, can be a useful reference point for evaluating the directions for enhancing allocative efficiency in a variety of settings. The proposed framework allows the identification of current allocative inefficiencies as well as opportunities presented by new interventions.

Cost-Benefit Analysis↗

Economic and demographic consequences of AIDS in Namibia: rapid assessment of the costs.

Recent announcements by the Government of Namibia to provide financial support to people living with AIDS (and their family members) have received considerable media attention. However, given the fact that government budgets are already stretched, and the need for resources to devote the prevention efforts remains, there is an urgent need to assign some values to the support the government is considering within the context of an explosive epidemic. It is against this background that this study attempts to provide a rapid assessment of the economic costs of HIV/AIDS in Namibia over the next 5 years of the First National Development Plan. The estimates include the direct and indirect costs. The direct costs are costs to the economy for inpatient and outpatient medical services, as well as the costs of support payments to people living with AIDS, their families and children orphaned by AIDS. Government and donor expenditure on national prevention and control efforts are also included. The study concludes that no sector of the Namibian economy will escape the impact of AIDS. The epidemic will definitely tax hospital, public health, private and community resources, and these substantial burdens underscore the need for coordinated long-term planning.

Acquired Immunodeficiency Syndrome↗

State health reform: effects on labor markets and economic activity.

Individual states are actively weighing health care reform proposals and their potential impacts on many levels, including states' own economies. This article considers the effects on state economies of two instruments of health reform: employer mandates and cost containment. The literature suggests that an employer mandate will reduce employees' wages in the long run. In the short run, however, to compensate for the costs associated with mandated health care insurance for their employees, firms may raise their prices to consumers, reduce the number of employees, or allow a drop in profit margins. By increasing health care spending and the number of insured persons, mandates would also increase states' levels of economic activity. Though cost containment may dampen the stimulative effects of expanded coverage, resources not spent on health care as a result of effective cost containment might be redistributed to other sectors in a state's economy.

Cost Control↗

The cost-effectiveness of fluorodeoxyglucose 18-F positron emission tomography in the N0 neck.

BACKGROUND: Although surgery and radiation are effective treatments of regional lymphatics for classification N0 head and neck squamous cell carcinoma (HNSCC) patients, both have morbidities that could be avoided in approximately 70% of patients without lymph node disease with better diagnostic information. 18-F fluoro-2-deoxyglucose positron emission tomography (FDG-PET) has shown promise in detecting subclinical lymph node disease, but its cost and availability have limited its use. Here, we sought to determine whether the use of FDG-PET was cost-effective as part of a treatment strategy for classification N0 HNSCC patients. METHODS: The cost-effectiveness of proceeding from classification of N0 by computed tomography to a PET scan was estimated using standard methods of economic evaluation. Costs were for a large, Midwestern university medical center. Probabilities were computed from a review of the literature. Utilities were obtained by a time-tradeoff method, and life expectancy was estimated using the Surveillance, Epidemiology, and End Results database. Outcomes measures were cost per year of life saved and cost per quality-adjusted life-year. RESULTS: Modified radical neck dissection was associated with the lowest morbidity (utility [u] = 0.93), and radical neck dissection plus radiation was associated with the highest (u = 0.68). Life expectancy was estimated to be 5.9 and 11.5 years for patients with and without lymph node disease, respectively. The incremental cost-effectiveness ratio for the PET strategy was $8718 per year of life saved, or $2505 per quality-adjusted life-year. CONCLUSIONS: A diagnostic and treatment strategy that proceeds from classification of N0 to a PET scan is cost-effective. Prospective studies that evaluate this strategy are important to assure that these simulation results are realized in clinical practice.

Adult↗

Economic analysis of two models of low-risk maternity care: a freestanding birth center compared to traditional care.

Costs were compared for two models of maternity care for low-risk pregnant women: a freestanding birth center (FSBC) and a medical model of care (MC). Sixty-nine subjects were enrolled in the FSBC group and 77 in the MC. In the FSBC group, prenatal costs were higher (mean difference $751, p </=.001) and childbirth care was less expensive ($1472, p </=.01). When costs for the entire maternity care episode were summed, there were no differences between groups ($6087 vs. $6803). Sensitivity analysis demonstrated that the FSBC could be more cost-effective than MC if it increased its volume.

Adult↗

Preference measurement using conjoint methods: an empirical investigation of reliability.

The application of conjoint measurement to the field of health economics is relatively new, although there is growing interest and there have been a number of studies undertaken recently. Wider acceptance of the technique requires methodological issues concerning both reliability and validity to be addressed. This paper reports an empirical investigation of the test-retest reliability of the discrete choice conjoint measurement approach in health care. This investigation of conjoint reliability was framed using the clinical context of investigation and treatment of knee injuries. A high level of reliability at both the input data and results levels was demonstrated.

Adolescent↗

The cost-effectiveness of evidence-based guidelines and practice for screening and prevention of tuberculosis.

INTRODUCTION: The potential cost-effectiveness of screening depends on the risk of tuberculosis (TB) in the population being screened and the rate at which the screening outcome (prevention) is achieved. AIMS: To compare the cost-effectiveness of contact screening for TB for: (1) contact screening as it actually occurred in Victoria in 1991 (Model 1); (2) the process which should have occurred had the 1991 contact screening guidelines been followed (Model 2); (3) a hypothetical evidence-based model (Model 3). METHODS: Three models were constructed according to the aims. The cost-effectiveness of contact screening is presented as costs to government per unit outcome (in the form of cases prevented, cases found and contacts traced) for each model. Assumptions about disease behaviour were consistent between models. A sensitivity analysis was performed to examine the effect of the assumptions made in Model 3 about rates of referral and treatment of infected contacts, and about the efficacy of isoniazid (INH) in preventing TB. RESULTS: The total cost of Model 1 was greater than that of the other Models. Model 1 is the least cost-effective, costing $309 065 per case prevented, and Model 3 is the most cost-effective, costing $32 210 per case prevented. The cost of Model 2 was $58 742 per case prevented. The incremental cost-effectiveness of Model 3 compared to Model 2 is $107 per additional contact screened, and $3881 per additional case prevented. Case finding is not as cost-effective as best-practice case prevention, ranging from $231 799 per case found in Model 1 to $205 596 per case found in Model 2. The sensitivity analysis shows that the cost-effectiveness of Model 3 decreases with lower referral rates, lower rates of preventive therapy, and lower efficacy of INH. However, even allowing for reduced programme parameters, Model 3 is most cost-effective. DISCUSSION: Costing policy options is an important component of programme delivery, but needs to be considered in the context of the product being purchased, e.g. the prevention of disease, or case finding. Case finding as a product of contact screening is expensive in all three models. Prevention of TB, on the other hand, can be cost-effective, as shown in Model 3. It was least cost-effective in Model 1, largely because prevention was not considered a priority, and few infected contacts actually received preventive therapy. Clear programme aims, adherence to guidelines and high rates of preventive therapy are essential in order to achieve cost-effectiveness.

Antitubercular Agents↗

A multilevel modelling approach to analysis of patient costs under managed care.

The growth of the managed care model of health care delivery in the USA has led to broadened interest in the performance of health care providers. This paper uses multilevel modelling to analyse the effects of managed care penetration on patient level costs for a sample of 24 medical centres operated by the Veterans Health Administration (VHA). The appropriateness of a two level approach to this problem over ordinary least squares (OLS) is demonstrated. Results indicate a modicum of difference in institutions' performance after controlling for patient effects. Facilities more heavily penetrated by the managed care model may be more effective at controlling costs of their sicker patients.

Cost Sharing↗

Competition and dental services.

Dental services for adults are different from all other Norwegian health services in that they are provided by private producers (dentists) who have full freedom to establish a practice. They have had this freedom since the end of World War II. A further liberalization of the market for dental services occurred in November 1995, when the so-called normal tariff was repealed. The system changed from a fixed fee system to a deregulated fee system. In principle, the market for dental services for adults operates as a free competitive market, in which dentists must compete for a market share. The aim of this study was to study the short-term effects of competition. A comprehensive set of data on fees, practice characteristics, treatment profiles and factors that dentists take into account when determining fees was analysed. The main finding was that competition has a weak effect. No support was found for the theory that the level of fees is the result of monopolistic competition or monopoly. The results also provided some evidence against the inducement hypothesis. At this stage, it is interesting to notice that dentists do not seem to exploit the power they have to control the market. One explanation, which is consistent with the more recent literature, is that physicians' behaviour to a large extent is influenced by professional norms and caring concerns about their patients. Financial incentives are important, but these incentives are constrained by norms other than self-interest. The interpretation of the results should also take into account that the deregulation has operated for a short time and that dentists and patients may not yet have adjusted to changes in the characteristics of the market.

Adult↗

Estimates of use and costs of behavioural health care: a comparison of standard and finite mixture models.

Estimates of health care demand are known to depend on the empirical specification used in the analysis. In this paper, an innovative specification, the finite mixture model (FMM), is employed to estimate the utilization of and expenditures on behavioural health care. Unlike standard specifications, the FMM has the ability to distinguish between distinct classes of users of behavioural health care (e.g. the 'worried well' and the severely mentally ill). This new model is tested against standard empirical specifications using data from the National Medical Expenditure Survey. Using common risk stratifiers, estimates of utilization and costs are generated with each specification. It is found that the FMM provides a much better fit of both expenditure and utilization data than standard specifications, particularly among high intensity users that standard models have been unable to represent adequately. Furthermore, the results provide preliminary evidence that there are (at least) two distinct groups of users of behavioural health care. The empirical advantages of the FMM translate into superior estimates of mean costs and utilization that have widespread application in rate-setting exercises.

Adolescent↗