Activity-based cost management in health care--another fad?

By providing improved information for strategic planning purposes activity-based cost management (ABM) systems can help hospitals and other health care providers improve the quality and efficiency of the care they provide control costs and manage their resources better. The NHS is starting to evaluate the ABM approach. Describes a research project in one specialist hospital in Sheffield UK which found that conventional approaches to costing can be inaccurate by as much as 100 per cent; conventional approaches will consistently undercost complex, specialist, infrequent episodes of care and overcost straightforward frequent episodes; and the resulting information from ABM about costs and processes significantly improves the decision-making capabilities of managers particularly in relation to ?what if? situations.     

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.     

Pharmaceutical cost control in Canada: does it work?

Governments in Canada have instituted mechanisms intended to control drug prices. These include the establishment of a semi-judicial body by the federal government to control factory-gate prices and of various measures at the provincial level, such as formulary management, use of generics, reference-based pricing, price freezes, and limits on markups. To a large extent, these measures have been effective in price control. Total drug spending in the country continues to rise, however; clearly, mechanisms other than price controls will need to be developed if drug spending is to be better managed.     

A cost–effectiveness analysis of Japanese encephalitis vaccine in Cambodia

This study aimed to evaluate the cost and effectiveness of introducing a live, attenuated vaccine (SA 14-14-2) against Japanese encephalitis (JE) into the immunization program. The study demonstrated that SA 14-14-2 immunization is cost–effective in controlling JE in Cambodia compared to no vaccination. Averting one disability-adjusted life year, from a societal perspective, through the introduction of SA 14-14-2 through routine immunization, or a combination of routine immunization plus a campaign targeting children 1–5 or 1–10 years of age, costs US$22, US$34 and US$53, respectively. Sensitivity analyses confirmed that there was a high probability of SA 14-14-2 immunization being cost–effective under conditions of uncertainty.     

Peri-operative pulse oximetry in low-income countries: a cost–effectiveness analysis

Objective

To evaluate the cost–effectiveness of pulse oximetry – compared with no peri-operative monitoring – during surgery in low-income countries.

Methods

We considered the use of tabletop and portable, hand-held pulse oximeters among patients of any age undergoing major surgery in low-income countries. From earlier studies we obtained baseline mortality and the effectiveness of pulse oximeters to reduce mortality. We considered the direct costs of purchasing and maintaining pulse oximeters as well as the cost of supplementary oxygen used to treat hypoxic episodes identified by oximetry. Health benefits were measured in disability-adjusted life-years (DALYs) averted and benefits and costs were both discounted at 3% per year. We used recommended cost–effectiveness thresholds – both absolute and relative to gross domestic product (GDP) per capita – to assess if pulse oximetry is a cost–effective health intervention. To test the robustness of our results we performed sensitivity analyses.

Findings

In 2013 prices, tabletop and hand-held oximeters were found to have annual costs of 310 and 95 United States dollars (US$), respectively. Assuming the two types of oximeter have identical effectiveness, a single oximeter used for 22 procedures per week averted 0.83 DALYs per annum. The tabletop and hand-held oximeters cost US$ 374 and US$ 115 per DALY averted, respectively. For any country with a GDP per capita above US$ 677 the hand-held oximeter was found to be cost–effective if it prevented just 1.7% of anaesthetic-related deaths or 0.3% of peri-operative mortality.

Conclusion

Pulse oximetry is a cost–effective intervention for low-income settings.     

What does it cost to feed aged care residents in Australia?

Aim

Funding cuts to the aged care industry impact catering budgets and aged care staffing levels, which may in turn affect the nutritional status of aged care residents. This paper reports average food expenditure and trends in Australian residential aged care facilities (RACFs).

Methods

This is a retrospective study collecting RACFs’ economic outlay data through a quarterly online survey conducted over the 2015 and 2016 financial years.

Results

Data were compiled from 817 RACFs, representing 64 256 residential beds and 23 million bed‐days Australia‐wide. The average total spend in Australian Dollars (AUD) on catering consumables (including cutlery/crockery, supplements, paper goods) was $8.00 per resident per day (prpd) and $6.08 prpd when looking at the raw food and ingredients budget alone. Additional data from over half the RACFs (n = 456, 56%) indicate a 5% decrease in food cost ($0.31 prpd) in the last year, particularly in fresh produce, with a simultaneous 128% ($0.50 prpd) increase in cost for supplements and food replacements. Current figures are comparatively less than aged care food budgets internationally (US, UK and Canada), less than community‐dwelling older adults ($17.25 prpd) and 136% less than Australian corrective services ($8.25 prpd).

Conclusions

The current spend on food in RACFs has decreased compared with previous years, reflecting an increasing reliance on supplements, and is significantly less than current community food spend.     

Measuring cost efficiency in the Nordic Hospitals—a cross-sectional comparison of public hospitals in 2002

The aim of this study was to compare the performance of hospital care in four Nordic countries: Norway, Finland, Sweden and Denmark. Using national discharge registries and cost data from hospitals, cost efficiency in the production of somatic hospital care was calculated for public hospitals. Data were collected using harmonised definitions of inputs and outputs for 184 hospitals and data envelopment analysis was used to calculate Farrell efficiency estimates for the year 2002. Results suggest that there were marked differences in the average hospital efficiency between Nordic countries. In 2002, average efficiency was markedly higher in Finland compared to Norway and Sweden. This study found differences in cost efficiency that cannot be explained by input prices or differences in coding practices. More analysis is needed to reveal the causes of large efficiency disparities between Nordic hospitals.     

Association between illness progression measures and total cost in Alzheimer’s disease

Objective

To compare the associations between dependence and clinical measures of cognition, function and behaviour and total care cost using data from a longitudinal study in Alzheimer’s disease (AD).

Design

Longitudinal, observational study.

Setting

Community-dwelling subjects.

Participants

Male and female subjects between 50 and 85 years of age with mild to moderate AD.

Intervention

None.

Measurements

Subject dependence was assessed using the Dependence Scale (DS), cognition (ADAS-Cog, MMSE), function (DAD), behaviour (NPI) and resource utilization with the Resource Utilization in Dementia Questionnaire.

Results

The repeated measures models confirmed a significant association between the DS and total care cost indicating an increase in cost with increasing dependence. A 1-unit increase in DS score was associated with a 28.60% increase in total care cost. Model 2 indicated that a one point change in MMSE, DAD and NPI is associated with 5.29%, 2.32% and 1.71% increase in total cost, respectively. Model 3 indicated that a one point change in ADAS-Cog, DAD and NPI is associated with a 1.74%, 2.42%and 1.62% increase in total cost, respectively.

Conclusion

Strategies which prevent deterioration in clinical measures or delay dependence should result in total cost savings. The quantitative relationships observed should assist in the economic assessment of interventions which effect cognition, function, behaviour and dependence.     

Short-term cost and health consequences of duodenal levodopa infusion in advanced Parkinson’s disease in Sweden

Background

Levodopa is the cornerstone treatment for Parkinson’s disease, but the short half-life of levodopa limits its usefulness in late stages of the disease. Duodenal levodopa infusion (DLI) allows more stable plasma levels and better motor symptom control.

Objective

To explore the costs and health benefits of replacing conventional oral polypharmacy with DLI in patients with advanced Parkinson’s disease, from a Swedish healthcare payer perspective.

Methods

Based on a clinical, randomized, crossover study with 24 patients (DIREQT), a decision analytic model predicted 2-year drug costs and QALYs for conventional oral therapy and for DLI. Health-related quality of life (HR-QOL) was recorded using a 15-dimensional (15D) utility instrument at baseline and during the two 3-week trial periods, and then at eight follow-up visits during the subsequent 6 months. Use of medication was based on data from DIREQT and previous studies. Unit costs were based on market prices (drugs) and customary charges in Sweden. All costs were expressed in Swedish kronor (SEK), year 2004 values (€1.00 ≈ SEK9.17, $US1.00 = SEK7.47). Future costs and outcomes were discounted at 3%. One-way and probabilistic sensitivity analyses were conducted.

Results

The mean utility scores were 0.77 for DLI and 0.72 for conventional therapy (p = 0.02). A considerable variation in the scores was observed during the study. The expected per-patient 2-year cost of DLI was SEK562000 while it was SEK172 000 for conventional therapy. The mean number of QALYs was 1.48 and 1.42, respectively, representing an incremental cost of SEK6.1 million per QALY for DLI (all values discounted at 3%). Using other assumptions in sensitivity analyses, the cost per QALY could be as low as SEK456000.

Conclusion

This analysis can be considered exploratory only; it is based on very limited data. Nevertheless, our findings suggest that DLI results in a significant improvement in HR-QOL. However, the cost per QALY is likely to be higher than customary cost-effectiveness thresholds. Whether these benefits justify the additional costs depends on how the health benefits are measured and how these benefits are valued by society.     

Vaccine preventable diseases surveillance in Nepal: How much does it cost?

Assessing the cost of vaccine preventable diseases (VPD) surveillance is becoming more important in the context of the Global Polio Eradication Initiative (GPEI) funding transition, since GPEI support to polio surveillance helped the incremental building of VPD surveillance systems in many countries, including low income countries such as Nepal. However, there is limited knowledge on the cost of conducting VPD surveillance, especially the national cost for surveillance of multiple vaccine-preventable diseases. The current study sought to calculate the economic and financial costs of Nepal’s comprehensive VPD surveillance systems from July 2016 to July 2017. At thecentral level, all surveillance units were included in the sample. At sub-national level, a purposive sampling strategy was used to select a representative sample from locations involved in conducting surveillance. The sub-national sample costs were extrapolated to the nationwide VPD surveillance system. Nepal’s total annual economic cost of VPD surveillance was USD 4.81 million or USD 0.18 per capita, while the total financial cost was USD 4.38 million or USD 0.16 per capita. Government expenditures accounted for 56% of the total economic cost, and World Health Organization accounting for 44%. The biggest cost driver was personnel accounting for 51% of the total economic cost. WHO supported trained surveillance personnel through donor funding, mainly from Global Polio Eradication Initiative. As a polio transition priority country, Nepal will need to make strategic choices to fully self-finance or seek full donor support or a mixed-financing model as polio program funding diminishes.     

The promise of affordable implants: is cost recovery possible in Kenya?

Background

Contraceptive implants are one of the most effective methods of family planning but remain underutilized due to their relatively high upfront cost. The increasing availability of a low-cost implant may reduce financial barriers and increase uptake of implants. The commodity cost of Sino-implant (II) is approximately 60% less than two other widely available implants, and a direct service delivery cost of approximately US$12 makes it one of the most cost-effective methods available. This study was conducted to assess whether implant clients in Kenya are paying as much or more than the direct service delivery cost of Sino-implant (II).

Study Design

A study was conducted in 22 facilities throughout Kenya, including public (n=8), private for-profit (n=6) and private not-for-profit facilities (n=8). Interviews were conducted with a convenience sample of 293 current and returning implant clients after at least 6 months of product use.

Results

The median price for implant insertion paid by clients in the public, private for-profit and private not-for-profit sectors was US$1.30, US$13.30 and US$20.00, respectively.

Conclusion

Patient fees in both private sectors allow for 100% recovery of the direct cost of providing Sino-implant (II). Currently in Kenya, all sectors can receive donated commodities free of charge; Sino-implant (II) has the potential to reduce reliance on donor-supplied implants and thereby improve contraceptive security.     

Quality/cost initiative of PPACA: an evolution in healthcare delivery?

The Patient Protection and Accountable Care Act (PPACA), signed into law by President Obama on March 23, 2010, contains provisions designed to materially change the manner in which hospitals and physicians deliver care to Medicare and Medicaid patients and the way they are compensated for such care. The purpose is to vastly improve the quality of healthcare, while at the same time lowering healthcare costs. This quality/cost initiative is a concept that will spell the future for healthcare reform. This article broadly describes the provisions of PPACA, along with the demonstration and pilot programs created as a result of PPACA, which are all designed to further the quality/cost initiative. It also provides some of the author's predictions as to what the future holds for physicians and hospitals given the government's focus on the quality/cost initiative.     

Human and animal rabies prevention and control cost in Bhutan, 2001–2008: The cost–benefit of dog rabies elimination

The objective of this study was to estimate the cost of various interventions and to quantify the economic impacts of rabies in Bhutan. Cost–benefit of dog rabies elimination versus human post exposure treatment cost was also assessed. The average direct medical cost of human post-exposure treatment (using rabies vaccine only) was estimated to be Nu. 1615 (US$ 35.65) per 5-dose Essen regimen per patient. The cost would increase to Nu. 2497 (US$ 55.13) and Nu. 19,633 (US$ 433.41) per patient when one dose of either equine rabies immunoglobulin (ERIG) or human rabies immunoglobulin (HRIG) is administered, respectively. The societal cost (direct medical and indirect patient expenses) per patient was estimated to be Nu. 2019 (US$ 45), Nu. 2901 (US$ 64) and Nu. 20,037 (US$ 442) using vaccine only, vaccine with ERIG and vaccine with HRIG, respectively. The average cost per dog vaccination and sterilization were estimated to be Nu. 75 (US$ 1.66) and Nu. 288 (US$ 6.36), respectively. The total direct cost of rabies and various interventions between 2001 and 2008 was estimated to be Nu. 46.95 million (US$ 1.03 million). The direct cost for intensified human PET was estimated to be Nu. 5.85 million (US$ 0.11 million) per year with a cumulated estimated costs of Nu. 35.10 million (US$ 0.70 million) while the cost of mass dog vaccination with at least 70% coverage is estimated to be approximately Nu. 10.31 million (US$ 0.21 million) at the end of 6 years. The combined cost of mass dog vaccination and human PET was estimated to be greater than the cost of human PET alone during the first 2 years of the campaign, and then would be lower than human PET cost alone after the 5th year of the campaign. The total cumulated cost of the combined strategy was estimated to be Nu. 34.14 million (US$ 0.73 million) and would be lower than the cumulated cost of human PET alone (Nu. 35.10 million, US$ 0.77 million) at the end of 6 years. Rabies represents a substantial economic impact to the Bhutanese society. Well-planned and implemented mass dog vaccination would result in elimination of rabies reservoirs in the domestic dog population and would eliminate human rabies cases. It would also reduce the recurrent expenditure on human post-exposure treatment.     

Accreditation at what cost?

Analyses the implications of the management of labour for an organization undertaking an accreditation exercise. Considers the King's Fund Organizational Audit (KFOA) accreditation scheme, which is concerned with process and facilities, and assesses the quality of the hospital environment in which the health care product is supplied. Concludes that, given the current enthusiasm for finding best practice in health care and the ever-increasing number of cost-effectiveness analyses of therapeutic interventions, it seems somewhat contradictory that interventions which cover the whole environment in which health care interventions are performed are not treated in the same way.     

Impact of five years of rotavirus vaccination in Finland – And the associated cost savings in secondary healthcare

IntroductionThis study aimed to estimate the impact of the national rotavirus (RV) vaccination programme, starting 2009, on the total hospital-treated acute gastroenteritis (AGE) and severe RV disease burden in Finland during the first five years of the programme. This study also evaluated the costs saved in secondary healthcare by the RV vaccination programme.MethodsThe RV related outcome definitions were based on ICD10 diagnostic codes recorded in the Care Register for Health Care. Incidences of hospitalised and hospital outpatient cases of AGE (A00-A09, R11) and RVGE (A08.0) were compared prior (1999–2005) and after (2010–2014) the start of the programme among children less than five years of age.ResultsThe reduction in disease burden in 2014, when all children under five years of age have been eligible for RV vaccination, was 92.9% (95%CI: 91.0%–94.5%) in hospitalised RVGE and 68.5% (66.6%–70.3%) in the total hospitalised AGE among children less than five years of age. For the corresponding hospital outpatient cases, there was a reduction of 91.4% (82.4%–96.6%) in the RVGE incidence, but an increase of 6.3% (2.7%–9.9%) in the AGE incidence. The RV vaccination programme prevented 2206 secondary healthcare AGE cases costing €4.5 million annually. As the RV immunisation costs were €2.3 million, the total net savings just in secondary healthcare costs were €2.2 million, i.e. €33 per vaccinated child.DiscussionThe RV vaccination programme clearly controlled the severe, hospital-treated forms of RVGE. The total disease burden is a more valuable end point than mere specifically diagnosed cases as laboratory confirmation practises usually change after vaccine introduction. The RV vaccination programme annually pays for itself at least two times over.