Principles involved in costing

Spending more, doing more, or both? An alternative method for quantifying utilization during hospitalizations

BACKGROUND

Because relative value unit (RVU)-based costs vary across hospitals, it is difficult to use them to compare hospital utilization.

OBJECTIVE

To compare estimates of hospital utilization using RVU-based costs and standardized costs.

DESIGN

Retrospective cohort.

SETTING AND PATIENTS

Years 2009 to 2010 heart failure hospitalizations in a large, detailed hospital billing database that contains an itemized log of costs incurred during hospitalization.

INTERVENTION

We assigned every item in the database with a standardized cost that was consistent for that item across all hospitals.

MEASUREMENTS

Standardized costs of hospitalization versus RVU-based costs of hospitalization.

RESULTS

We identified 234 hospitals with 165,647 heart failure hospitalizations. We observed variation in the RVU-based cost for a uniform "basket of goods" (10th percentile cost $1,552; 90th percentile cost of $3,967). The interquartile ratio (Q75/Q25) of the RVU-based costs of a hospitalization was 1.35 but fell to 1.26 after costs were standardized, suggesting that the use of standardized costs can reduce the "noise" due to differences in overhead and other fixed costs. Forty-six (20%) hospitals had reported costs of hospitalizations exceeding standardized costs (indicating that reported costs inflated apparent utilization); 42 hospitals (17%) had reported costs that were less than standardized costs (indicating that reported costs underestimated utilization).

CONCLUSIONS

Standardized costs are a novel method for comparing utilization across hospitals and reduce variation observed with RVU-based costs. They have the potential to help hospitals understand how they use resources compared to their peers and will facilitate research comparing the effectiveness of higher and lower utilization.

Cost-effectiveness in Preventive Cardiology

Cardiovascular disease remains a serious medical problem, which can be associated with death and disability on one hand, and considerable resource utilization on the other. The primary driver for choice of therapy must remain clinical efficacy. Once efficacy is established, cost-effectiveness analysis has an important role. Resources are limited, and responsible choices must be made. The methods involved in cost-effectiveness analysis are complicated and data for the analysis are generally not fully optimal. Nonetheless, cost-effectiveness analysis offers the best method for helping society make rational medical decisions. Effective interventions, when reasonably priced, for the prevention of cardiovascular disease have generally proven to be cost-effective.