Using exogenous organizational and regional hospital attributes to explain differences in case‐mix adjusted hospital costs

Michael M. Havranek, Josef Ondrej, Philippe K. Widmer, Stella Bollmann, Simon Spika and Stefan Boes

Health Economics, 2023, vol. 32, issue 8, 1733-1748

Abstract: Diagnosis‐related group (DRG) hospital reimbursement systems differentiate cases into cost‐homogenous groups based on patient characteristics. However, exogenous organizational and regional factors can influence hospital costs beyond case‐mix differences. Therefore, most countries using DRG systems incorporate adjustments for such factors into their reimbursement structure. This study investigates structural hospital attributes that explain differences in average case‐mix adjusted hospital costs in Switzerland. Using rich patient and hospital‐level data containing 4 million cases from 120 hospitals across 3 years, we show that a regression model using only five variables (number of discharges, ratio of emergency/ambulance admissions, rate of DRGs to patients, expected loss potential based on DRG mix, and location in large agglomeration) can explain more than half of the variance in average case‐mix adjusted hospital costs, capture all cost variations across commonly differentiated hospital types (e.g., academic teaching hospitals, children's hospitals, birth centers, etc.), and is robust in cross‐validations across several years (despite differing hospital samples). Based on our findings, we propose a simple practical approach to differentiate legitimate from inefficiency‐related or unexplainable cost differences across hospitals and discuss the potential of such an approach as a transparent way to incorporate structural hospital differences into cost benchmarking and payment schemes.

Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
https://doi.org/10.1002/hec.4686

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wly:hlthec:v:32:y:2023:i:8:p:1733-1748

Access Statistics for this article

Health Economics is currently edited by Alan Maynard, John Hutton and Andrew Jones

More articles in Health Economics from John Wiley & Sons, Ltd.
Bibliographic data for series maintained by Wiley Content Delivery ().