JOURNAL ARTICLE

Exploring the relationship between costs and quality: does the joint evaluation of costs and quality alter the ranking of Danish hospital departments?

Anne Hvenegaard, Jacob Nielsen Arendt, Andrew Street, Dorte Gyrd-Hansen
European Journal of Health Economics: HEPAC: Health Economics in Prevention and Care 2011, 12 (6): 541-51
20680654

OBJECTIVE: The purpose is to evaluate the relationship between costs and quality and to assess whether the joint evaluation of costs and quality affects the ranking of hospital departments relative to comparison based on costs alone.

METHODS: Using patient level data for 3,754 patients in six vascular departments, 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 using a bootstrap method and rank departments according to their cost-effectiveness ratio. The findings are used to evaluate a theory of a U-shaped cost/quality relationship.

RESULTS: The association between cost and quality differs depending on how quality is measured. Lower costs are associated 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. The results for mortality may lend some support to the theory of a U-shaped cost/quality relationship. However, the results for wound complications do not support the theory of a U-shaped cost/quality relationship.

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