Spending more, doing more, or both? An alternative method for quantifying utilization during hospitalizations.

Area of Science:

• Health Services Research
• Health Economics
• Hospital Administration

Background:

• Relative value unit (RVU)-based costs vary significantly across hospitals, hindering accurate comparisons of hospital utilization.
• Existing cost metrics present challenges for evaluating and comparing healthcare resource allocation effectively.

Purpose of the Study:

• To compare hospital utilization estimates derived from relative value unit (RVU)-based costs versus standardized costs.
• To assess the impact of using standardized costs on reducing variability in reported hospital expenditures.

Main Methods:

• Retrospective cohort study analyzing heart failure hospitalizations from 2009-2010.
• Utilized a detailed hospital billing database with itemized costs, assigning a consistent standardized cost to each item across all facilities.
• Compared standardized hospitalization costs against traditional RVU-based costs.

Main Results:

• Analysis included 234 hospitals and 165,647 heart failure hospitalizations.
• Significant variation was observed in RVU-based costs for a uniform set of services (basket of goods).
• Standardized costs reduced the interquartile ratio of hospitalization costs from 1.35 to 1.26, indicating a decrease in cost "noise" from fixed overhead differences. Twenty percent of hospitals reported costs exceeding standardized costs, and 17% reported costs below standardized costs.

Conclusions:

• Standardized costs provide a novel and more consistent method for comparing hospital utilization across different institutions.
• This approach effectively reduces the variation in costs associated with hospital overhead and fixed expenses.
• Standardized costs can empower hospitals to benchmark their resource utilization against peers and facilitate research on the relationship between utilization and patient outcomes.