Scandinavian Working Papers in Economics

DaCHE discussion papers,
University of Southern Denmark, Dache - Danish Centre for Health Economics

No 2009:6: Exploring the relationship between costs and quality - Does the joint evaluation of costs and quality alter the ranking of Danish hospital departments?

Hvenegaard Anne (), Jacob Nielsen Arendt (), Dorte Gyrd-Hansen () and Andrew Street
Additional contact information
Hvenegaard Anne: Danish Institute for Health Services Research
Jacob Nielsen Arendt: University of Southern Denmark - Research Unit for Health Economics
Dorte Gyrd-Hansen: Danish Institute for Health Services Research
Andrew Street: University of York-Centre for Health Economics

Abstract: Objective: The purpose is to assess whether the joint evaluation of costs and quality affects the ranking of hospital departments relative to performance based on cost performance alone. Methods: Using patient level data, in which 3,754 patients across six vascular departments are pooled we estimate fixed effect models for costs (linear) and quality (logistic). We consider two quality measures; mortality and wound complications. To assess whether the joint evaluation of costs and quality affects the ranking of departments, we construct joint confidence regions for each pair of departmental effects for costs and quality by using a bootstrap method and rank departments according to their costeffectiveness ratio. Results: The association between cost and quality differs depending on how which quality is measured. Lower costs tend to associate with higher mortality, implying a cost-quality trade-off. In contrast there is no clear association between costs and wound complications among vascular departments. Conclusions: Compared to benchmarking of departments based solely on their costs, we show that the ranking of departments may be altered considerably when quality is taken into account. Consequently, it is important to have a well-rounded view of departmental objectives when undertaking performance evaluation.

Keywords: Hospital costs; efficiency; quality; cost-effectiveness

JEL-codes: I11

22 pages, June 25, 2010

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