Hospital Length of Stay and Cost: A Multilevel Modeling Analysis

Despite concern over compromised medical care resulting from a recent decline in the length of hospitalizations, little attention has been given to the extent to which this strategy has led to cost savings for hospitals. This article examines this issue using a multilevel modeling methodology that examines patient costs as they relate to both patient and hospital level characteristics. The analysis reveals an estimated elasticity of patient length of stay of 0.755 and of 0.326 for hospital level average length of stay. It appears from these results that the strategy of reducing the lengths of hospitalizations has saved considerably on hospital costs.