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

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Abstract

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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Notes

  1. We use a Gaussian kernel and experiment with different bandwidths. The plots shown have bandwidths of one standard deviation for costs and quality. Similar results are obtained with half or twice the size of these bandwidths.

  2. The remaining two departments were excluded because they did not provide complete cost data.

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Acknowledgments

We acknowledge the Danish Vascular Registry and the National Board of Health for provision of data. Thanks to all the participating Vascular Departments and in particular consultant and chairman of the Danish Vascular Registry Leif Panduro for help with the provision and interpretation of data.

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Authors and Affiliations

  1. Danish Institute for Health Services Research, 27-29 Dampfaergevej, 2100, Copenhagen, Denmark

    Anne Hvenegaard & Dorte Gyrd-Hansen

  2. University of Southern Denmark, Odense, Denmark

    Anne Hvenegaard & Dorte Gyrd-Hansen

  3. Institute for Public Health—Health Economic Unit, University of Southern Denmark, Odense, Denmark

    Jacob Nielsen Arendt

  4. Centre for Health Economics, University of York, York, UK

    Andrew Street

Authors
  1. Anne Hvenegaard
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  2. Jacob Nielsen Arendt
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  3. Andrew Street
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  4. Dorte Gyrd-Hansen
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Correspondence to Anne Hvenegaard.

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Hvenegaard, A., Arendt, J.N., Street, A. et al. Exploring the relationship between costs and quality: Does the joint evaluation of costs and quality alter the ranking of Danish hospital departments?. Eur J Health Econ 12, 541–551 (2011). https://doi.org/10.1007/s10198-010-0268-9

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  • DOI: https://doi.org/10.1007/s10198-010-0268-9

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