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The cost effects of protocol systems. The marginal cost-average cost dichotomy
1Program in Health Policy and Management, Graduate School of Public Administration, New York University, NY 10003.
Insights
Protocol systems can improve patient care quality and efficiency. However, this study found pediatric protocol systems offer substantial average cost savings but minimal marginal cost reduction, challenging assumptions about their cost-saving potential.
Area of Science:
- Health Economics
- Pediatric Healthcare Management
- Clinical Protocol Analysis
Background:
- Protocol systems are proposed to enhance patient care quality, efficiency, and cost-effectiveness.
- Previous cost analyses often relied on average costs, potentially overestimating savings.
Purpose of the Study:
- To analyze the cost effects of a pediatric protocol system.
- To differentiate between average and marginal cost impacts of protocol adherence.
Main Methods:
- Comparative cost analysis of protocol-adherent versus non-adherent pediatric care.
- Examination of ancillary department costs and their variability.
- Assessment of labor resource reallocation and equipment reconfiguration.
Main Results:
- Protocol-adherent care demonstrated substantial savings when measured against average costs.
- A minimal decrease in the marginal cost of care was observed.
- Ancillary department costs remained largely fixed, unaffected by protocol-driven volume changes.
Conclusions:
- Pediatric protocol systems can achieve significant average cost reductions.
- The marginal cost savings from protocol adherence are limited.
- While valuable for care appropriateness, protocol systems' cost-reduction capabilities may be overestimated.
Abstract:
Protocol systems are a mechanism that some have contended will maintain high quality of patient care and will result in improved delivery of care, more efficient management of care, and in lower costs. Cost savings reported from protocol care generally are based on average costs. This article reports on an analysis of the cost effects of a pediatric protocol system. The impact of the system on both average and marginal costs was considered. The study results indicated that care adhering to the protocols, when compared to nonadherent care, resulted in a substantial savings measured against average costs. However, only a very small decrease in the marginal cost of care occurred. Ancillary department costs were found to be fixed in most cases and not subject to variation without substantial changes in the volume of services ordered. None of the volume changes attributable to the protocols were sufficiently large to result in the reallocation of labor resources or the reconfiguration of departmental equipment. Although protocol systems still may be of great value in generating more appropriate care, their ability to reduce costs is apparently less than was supposed.
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