Skip to main content

Variations in Healthcare Spending and Quality Among Institutions

  • Living reference work entry
  • First Online:
Medical Practice Variations

Part of the book series: Health Services Research ((HEALTHSR))

Abstract

Unwarranted institutional variations in healthcare spending and quality may indicate discrepancies in the quantity of services provided, management efficiency, and staff capability at the hospital level. Because not all variations are unwarranted, analyses must take into account differences in the needs and preferences of the patient groups served. Variations can be influenced by factors such as payment systems, hospital ownership, management methods, resource availability, teaching status, and practice patterns. Although institutional variations may be intertwined with variations at the regional level, some measures of care, such as nosocomial infection rates or indicators of hospital management efficiency, are more meaningful when quantified at the hospital level. The accurate identification of unwarranted variations that stem from causes at the institutional level would also help to identify the stakeholders and decision makers who have the relevant authority and jurisdiction to address the problems. In this chapter, the empirical evidence of institutional variations in healthcare spending, medical practice patterns, and outcomes are introduced. Common methodologies used for measuring variations and the possible determinants of these variations are addressed, and the methods to reduce unwarranted variations are examined.

This is a preview of subscription content, log in via an institution to check access.

Access this chapter

Institutional subscriptions

References

  • AHRQ Quality Indicator Measure Development, Implementation, Maintenance and Retirement. Quality indicator development. Agency for Healthcare Research and Quality; 2011. http://www.qualityindicators.ahrq.gov/modules/Default.aspx. Accessed 29 June 2014.

  • Barnato AE, Chang C-H, Farrell MH, et al. Is survival better at hospitals with higher “end-of-life” treatment intensity? Med Care. 2010;48:125–32.

    Article  PubMed Central  PubMed  Google Scholar 

  • Bednarek FJ, Weisberger S, Richardson DK, et al. Variations in blood transfusions among newborn intensive care units. J Pediatr. 1998;133:601–7.

    Article  CAS  PubMed  Google Scholar 

  • Birkmeyer JD, Siewers AE, Finlayson EVA, et al. Hospital volume and surgical mortality in the united states. N Engl J Med. 2002;346:1128–37.

    Article  PubMed  Google Scholar 

  • Bodenheimer T, Fernandez A. High and rising health care costs. Part 4: can costs be controlled while preserving quality? Ann Intern Med. 2005;143:26–31.

    Article  PubMed  Google Scholar 

  • Brooke BS, Dominici F, Pronovost PJ, et al. Variations in surgical outcomes associated with hospital compliance with safety practices. Surgery. 2012;151:651–9.

    Article  PubMed Central  PubMed  Google Scholar 

  • Bulger EM, Nathens AB, Rivara FP, et al. Management of severe head injury: institutional variations in care and effect on outcome. Crit Care Med. 2002;30:1870–6.

    Article  PubMed  Google Scholar 

  • Busse R. Do diagnosis-related groups explain variations in hospital costs and length of stay? – Analyses from the EURODRG project for 10 episodes of care across 10 European countries. Health Econ. 2012;21:1–5.

    Article  PubMed  Google Scholar 

  • Campbell SM, Braspenning J, Hutchinson A, et al. Improving the quality of health care: research methods used in developing and applying quality indicators in primary care. Br Med J. 2003;326:816–9.

    Article  CAS  Google Scholar 

  • Chen Z, Sandercock P, Xie J, et al. Hospital management of acute ischemic stroke in china. J Stroke Cerebrovasc Dis. 1997;6:361–7.

    Article  CAS  PubMed  Google Scholar 

  • Chen J, Radford MJ, Wang Y, et al. Performance of the “100 top hospitals”: what does the report card report? Health Aff. 1999;18:53–68.

    Article  CAS  Google Scholar 

  • Chen LM, Jha AK, Guterman S, et al. Hospital cost of care, quality of care, and readmission rates: penny wise and pound foolish? Arch Intern Med. 2010;170:340–6.

    Article  PubMed  Google Scholar 

  • Cleary PD, Greenfield S, Mulley AG, et al. Variations in length of stay and outcomes for six medical and surgical conditions in massachusetts and california. JAMA. 1991;266:73–9.

    Article  CAS  PubMed  Google Scholar 

  • D’Agostino Jr RB. Propensity scores in cardiovascular research. Circulation. 2007;115:2340–3.

    Article  PubMed  Google Scholar 

  • Delnoij DMJ, Westert GP. Assessing the validity of quality indicators: keep the context in mind! Eur J Public Health. 2012;22:452–3.

    Article  PubMed  Google Scholar 

  • Donabedian A. The definition of quality and approaches to its assessment, Explorations in quality assessment and monitoring, vol. I. Ann Arbor: Health Administration Press; 1980. p. 8–11.

    Google Scholar 

  • Donabedian A. The quality of care. How can it be assessed? JAMA. 1988;260:1743–8.

    Article  CAS  PubMed  Google Scholar 

  • Donabedian A. Evaluating the quality of medical care. Milbank Q. 2005;83:691–729.

    Article  PubMed Central  PubMed  Google Scholar 

  • Dranove D. Health care markets, regulators, and certifiers. In: Pauly MV, Mcguire TG, Barros PP, editors. Handbook of health economics. Amsterdam: Elsevier; 2011. p. 639–90.

    Google Scholar 

  • Fisher E, Skinner J. Comment on Silber et al.: aggressive treatment styles and surgical outcomes. Health Serv Res. 2010;45:1893–902.

    Article  PubMed Central  PubMed  Google Scholar 

  • Fisher ES, Wennberg DE, Stukel TA, et al. The implications of regional variations in Medicare spending. Part 1: the content, quality, and accessibility of care. Ann Intern Med. 2003a;138(4):273–87.

    Article  PubMed  Google Scholar 

  • Fisher ES, Wennberg DE, Stukel TA, et al. The implications of regional variations in Medicare spending. Part 2: health outcomes and satisfaction with care. Ann Intern Med. 2003b;138:288–98.

    Article  PubMed  Google Scholar 

  • Fisher ES, Wennberg DE, Stukel TA, et al. Variations in the longitudinal efficiency of academic medical centers. Health Aff (Millwood). 2004;Suppl Web Exclusive:VAR19-32.

    Google Scholar 

  • Fletcher A, Gore S, Jones D, et al. Quality of life measures in health care. II: design, analysis, and interpretation. Br Med J. 1992;305:1145–8.

    Article  CAS  Google Scholar 

  • Gaynor M, Town RJ. Competition in health care markets. In: Pauly MV, Mcguire TG, Barros PP, editors. Handbook of health economics. Amsterdam: Elsevier; 2011. p. 499–637.

    Google Scholar 

  • Gellad WF, Good CB, Lowe JC, et al. Variation in prescription use and spending for lipid-lowering and diabetes medications in the veterans affairs healthcare system. Am J Manag Care. 2010;16:741–50.

    PubMed Central  PubMed  Google Scholar 

  • Gilbert K, Gleason PP, Singer DE, et al. Variations in antimicrobial use and cost in more than 2,000 patients with community-acquired pneumonia. Am J Med. 1998;104:17–27.

    Article  CAS  PubMed  Google Scholar 

  • Green J, Wintfeld N. Report cards on cardiac surgeons: assessing New York state’s approach. N Engl J Med. 1995;332:1229–32.

    Article  CAS  PubMed  Google Scholar 

  • Grieve R, Nixon R, Thompson SG, et al. Using multilevel models for assessing the variability of multinational resource use and cost data. Health Econ. 2005;14:185–96.

    Article  PubMed  Google Scholar 

  • Halm EA, Lee C, Chassin MR. Is volume related to outcome in health care? A systematic review and methodologic critique of the literature. Ann Intern Med. 2002;137:511–20.

    Article  PubMed  Google Scholar 

  • Hasley PB, Lave JR, Kapoor WN. The necessary and the unnecessary transfusion: a critical review of reported appropriateness rates and criteria for red cell transfusions. Transfusion. 1994;34:110–5.

    Article  CAS  PubMed  Google Scholar 

  • Henderson JW, editor. Confounding factor – SALT. In: Health economics and policy. 2nd ed. Ohio: South-Western Publishing Co.; 2002. p. 299–332.

    Google Scholar 

  • Hollingsworth B. The measurement of efficiency and productivity of health care delivery. Health Econ. 2008;17:1107–28.

    Article  PubMed  Google Scholar 

  • Hussey PS, Wertheimer S, Mehrotra A. The association between health care quality and cost: a systematic review. Ann Intern Med. 2013;158(1):27–34.

    Article  PubMed  Google Scholar 

  • Hvenegaard A, Arendt JN, 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. 2011;12:541–51.

    Article  PubMed  Google Scholar 

  • Iezzoni L, editor. Risk adjustment for measuring health care outcomes. 3rd ed. Chicago: Health Administration Press; 2003. p. 33–70.

    Google Scholar 

  • IOM (Institute of Medicine). Variation in health care spending: target decision making, not geography. Washington, DC: The National Academies Press; 2013.

    Google Scholar 

  • Iscoe NA, Goel V, Wu K, et al. Variation in breast cancer surgery in ontario. CMAJ. 1994;150:345–52.

    PubMed Central  CAS  PubMed  Google Scholar 

  • Ishizaki T, Imanaka Y, Hirose M, et al. A first look at variations in use of breast conserving surgery at five teaching hospitals in Japan. International J Qual Health Care. 2002;14:411–8.

    Article  Google Scholar 

  • Jha AK, Orav EJ, Dobson A, et al. Measuring efficiency: the association of hospital costs and quality of care. Health Aff. 2009;28:897–906.

    Article  Google Scholar 

  • Kaestner R, Silber JH. Evidence on the efficacy of inpatient spending on Medicare patients. Milbank Q. 2010;88:560–94.

    Article  PubMed Central  PubMed  Google Scholar 

  • Krakauer H, Bailey RC, Cooper H, et al. The systematic assessment of variations in medical practices and their outcomes. Public Health Rep. 1995;110:2–12.

    PubMed Central  CAS  PubMed  Google Scholar 

  • Kuwabara K, Imanaka Y, Matsuda S, et al. Profiling of resource use variation among six diseases treated at 82 Japanese special functioning hospitals, based on administrative data. Health Policy. 2006;78:306–18.

    Article  PubMed  Google Scholar 

  • Lameire N, Joffe P, Wiedemann M. Healthcare systems – an international review: an overview. Nephrol Dial Transplant. 1999;14:3–9.

    Article  PubMed  Google Scholar 

  • Luft HS, Bunker JP, Enthoven AC. Should operations be regionalized? The empirical relation between surgical volume and mortality. N Engl J Med. 1979;301:1364–9.

    Article  CAS  PubMed  Google Scholar 

  • Mant J. Process versus outcome indicators in the assessment of quality of health care. International J Qual Health Care. 2001;13:475–80.

    Article  CAS  Google Scholar 

  • McGlynn EA, Asch SM. Developing a clinical performance measure. Am J Prev Med. 1998;14:14–21.

    Article  CAS  PubMed  Google Scholar 

  • McPherson K. International differences in medical care practices. In: Health care systems in transition, OECD social policy studies, vol. 7. Paris: OECD; 1990. p. 17–28.

    Google Scholar 

  • Miller EA, Woosley J, Martin CF, et al. Hospital-to-hospital variation in lymph node detection after colorectal resection. Cancer. 2004;101:1065–71.

    Article  PubMed  Google Scholar 

  • Mohammed MA, Mant J, Bentham L, et al. Comparing processes of stroke care in high- and low-mortality hospitals in the west midlands, UK. International J Qual Health Care. 2005;17:31–6.

    Article  Google Scholar 

  • Morgan M, Beech R. Variations in lengths of stay and rates of day case surgery: implications for the efficiency of surgical management. J Epidemiol Community Health. 1990;44:90–105.

    Article  PubMed Central  CAS  PubMed  Google Scholar 

  • Morishima T, Lee J, Otsubo T, et al. Association of healthcare expenditures with aggressive versus palliative care for cancer patients at the end of life: a cross-sectional study using claims data in Japan. International J Qual Health Care. 2014;26:79–86.

    Article  Google Scholar 

  • Mulley Jr A. Medical decision making and practice variation. In: Andersen T, Mooney G, editors. The challenges of medical practice variations. London: Macmillan Press; 1990. p. 59–75.

    Google Scholar 

  • Mulley AG. Improving productivity in the NHS: reducing practice variation thorough better decision making is key. Br Med J. 2010;341:c3965.

    Article  Google Scholar 

  • Newhouse J. Accounting for teaching hospitals’ higher costs and what to do about them. Health Aff. 2003;22:126–9.

    Article  Google Scholar 

  • Newhouse J, McClellan M. Econometrics in outcomes research: the use of instrumental variables. Annu Rev Public Health. 1998;19:17–34.

    Article  CAS  PubMed  Google Scholar 

  • OECD. Average length of stay in hospitals. In: Health at a Glance. 6th ed. Paris: OECD Publishing; 2011. doi:10.1787/health_glance-2011-en. Accessed 29 June 2014.

    Google Scholar 

  • Ong MK, Mangione CM, Romano PS, et al. Looking forward, looking back: assessing variations in hospital resource use and outcomes for elderly patients with heart failure. Circ Cardiovasc Qual Outcomes. 2009;2:548–57.

    Article  PubMed Central  PubMed  Google Scholar 

  • Otsubo T, Imanaka Y, Lee J, et al. Evaluation of resource allocation and supply – demand balance in clinical practice with high-cost technologies. J Eval Clin Pract. 2011;17:1114–21.

    Article  PubMed  Google Scholar 

  • Paris V, Devaux M, Wei L. Health care delivery. In: Health systems institutional characteristics: a survey of 29 organisation for economic co-operation and development (OECD) countries. OECD Publishing; 2010. doi:10.1787/5kmfxfq9qbnr-en. Accessed 29 June 2014.

    Google Scholar 

  • Posnett J. Are bigger hospitals better? In: McKee M, Judith H, editors. Hospitals in a changing Europe. Philadelphia: Open University Press; 2002. p. 100–18.

    Google Scholar 

  • Rao SV, Jollis JG, Harrington RA, et al. Relationship of blood transfusion and clinical outcomes in patients with acute coronary syndromes. JAMA. 2004;292:1555–62.

    Article  CAS  PubMed  Google Scholar 

  • Reschovsky JD, Hadley J, Saiontz-Martinez CB, et al. Following the money: factors associated with the cost of treating high-cost Medicare beneficiaries. Health Serv Res. 2011;46:997–1021.

    Article  PubMed Central  PubMed  Google Scholar 

  • Ringer SA, Richardson DK, Sacher RA, et al. Variations in transfusion practice in neonatal intensive care. Pediatrics. 1998;101:194–200.

    Article  CAS  PubMed  Google Scholar 

  • Romley JA, Jena AB, Goldman DP. Hospital spending and inpatient mortality: evidence from California. Ann Intern Med. 2011;154:160–7.

    Article  PubMed Central  PubMed  Google Scholar 

  • Schouten JA, Hulscher ME, Kullberg B, et al. Understanding variation in quality of antibiotic use for community-acquired pneumonia: effect of patient, professional and hospital factors. J Antimicrob Chemother. 2005;56:575–82.

    Article  CAS  PubMed  Google Scholar 

  • Schreyögg J, Stargardt T. The trade-off between costs and outcomes: the case of acute myocardial infarction. Health Serv Res. 2010;45:1585–601.

    Article  PubMed Central  PubMed  Google Scholar 

  • Sekimoto M, Imanaka Y, Evans E, et al. Practice variation in perioperative antibiotic use in Japan. International J Qual Health Care. 2004;16:367–73.

    Article  Google Scholar 

  • Sekimoto M, Kakutani C, Inoue I, et al. Management patterns and healthcare costs for hospitalized patients with cerebral infarction. Health Policy. 2008;88:100–9.

    Article  PubMed  Google Scholar 

  • Sekimoto M, Imanaka Y, Shirai T, et al. Risk-adjusted assessment of incidence and quantity of blood use in acute-care hospitals in Japan: an analysis using administrative data. Vox Sang. 2010;98:538–46.

    Article  CAS  PubMed  Google Scholar 

  • Shahian DM, Normand S-T. Comparison of “risk-adjusted” hospital outcomes. Circulation. 2008;117:1955–63.

    Article  PubMed  Google Scholar 

  • Silber JH, Kaestner R, Even-Shoshan O, et al. Aggressive treatment style and surgical outcomes. Health Serv Res. 2010;45:1872–92.

    Article  PubMed Central  PubMed  Google Scholar 

  • Skinner J. Causes and consequences of regional variations in health care. In: Pauly M, Mcguire T, Barros P, editors. Handbook of health economics, vol. 2. Waltham: Elsevier; 2012. p. 45–93.

    Google Scholar 

  • Slack R, Bucknall CE. Readmission rates are associated with differences in the process of care in acute asthma. Qual Saf Health Care. 1997;6:194–8.

    Article  CAS  Google Scholar 

  • Spertus JA, Radford MJ, Every NR, et al. Challenges and opportunities in quantifying the quality of care for acute myocardial infarction: summary from the acute myocardial infarction working group of the American Heart Association/American college of cardiology first scientific forum on quality of care and outcomes research in cardiovascular disease and stroke. Circulation. 2003;107:1681–91.

    Article  PubMed  Google Scholar 

  • Steinhubl SR, Kastrati A, Berger PB. Variation in the definitions of bleeding in clinical trials of patients with acute coronary syndromes and undergoing percutaneous coronary interventions and its impact on the apparent safety of antithrombotic drugs. Am Heart J. 2007;154:3–11.

    Article  CAS  PubMed  Google Scholar 

  • Street A, Scheller-Kreinsen D, Geissler A, et al. Determinants of hospital costs and performance variation. In: Methods, models and variables for the EuroDRG project. 2010. http://opus.kobv.de/tuberlin/volltexte/2010/2661/pdf/10_05_10_WPplaintext_MiG_Band3_mg.pdf. Accessed 29 June 2014.

  • Street A, Kobel C, Renaud T, et al. How well do diagnosis-related groups explain variations in costs or length of stay among patients and across hospitals? Methods for analysing routine patient data. Health Econ. 2012;21:6–18.

    Article  PubMed  Google Scholar 

  • Stukel TA, Fisher ES, Alter DA, et al. Association of hospital spending intensity with mortality and readmission rates in Ontario hospitals. JAMA. 2012;307:1037–45.

    Article  PubMed Central  CAS  PubMed  Google Scholar 

  • Tiemann O, Schreyögg J, Busse R. Hospital ownership and efficiency: a review of studies with particular focus on Germany. Health Policy. 2012;104:163–71.

    Article  PubMed  Google Scholar 

  • Van Herck P, De Smedt D, Annemans L, et al. Systematic review: effects, design choices, and context of pay-for-performance in health care. BMC Health Serv Res. 2010;10:247–59.

    Article  PubMed Central  PubMed  Google Scholar 

  • Van Steenbergen LN, Rutten HJT, Creemers GJ, et al. Large age and hospital-dependent variation in administration of adjuvant chemotherapy for stage III colon cancer in southern Netherlands. Ann Oncol. 2009;21:1273–8.

    Article  PubMed  Google Scholar 

  • Vladeck BC, Goodwin EJ, Myers LP, et al. Consumers and hospital use: the HCFA “death list”. Health Aff. 1988;7:122–5.

    Article  CAS  Google Scholar 

  • Wennberg JE. Unwarranted variations in healthcare delivery: implications for academic medical centres. Br Med J. 2002;325:961–4.

    Article  Google Scholar 

  • Wennberg JE, editor. In health care, geography is destiny. In: Tracking Medicine: a researcher’s quest to understand health care. 1st ed. New York: Oxford University Press; 2010. p. 3–13

    Google Scholar 

  • Wennberg JE, Fisher ES, Skinner JS. Geography and the debate over Medicare reform. Health Affairs. 2002; Suppl Web Exclusives:W96–114

    Google Scholar 

  • Wennberg JE, Fisher ES, Stukel TA, et al. Use of Medicare claims data to monitor provider-specific performance among patients with severe chronic illness. Health Aff (Millwood). 2004;Suppl Web Exclusive:VAR5-18.

    Google Scholar 

  • White C. Health status and hospital prices key to regional variation in private health care spending. National Institute for Health Care Reform Research Brief; 2012. http://www.nihcr.org/Spending_Variation.html. Accessed 29 June 2014.

  • Yasaitis L, Fisher ES, Skinner JS, et al. Hospital quality and intensity of spending: is there an association? Health Aff. 2009;28:w566–72.

    Article  Google Scholar 

  • Yew YD. Risk adjustment: towards achieving meaningful comparison of health outcomes in the real world. Ann Acad Med Singapore. 2009;38:552–8.

    Google Scholar 

Download references

Author information

Authors and Affiliations

Authors

Corresponding author

Correspondence to Tetsuya Otsubo .

Editor information

Editors and Affiliations

Rights and permissions

Reprints and permissions

Copyright information

© 2015 Springer Science+Business Media New York

About this entry

Cite this entry

Otsubo, T., Imanaka, Y., Morishima, T., Sasaki, N., Park, S., Lee, J. (2015). Variations in Healthcare Spending and Quality Among Institutions. In: Johnson, A., Stukel, T. (eds) Medical Practice Variations. Health Services Research. Springer, Boston, MA. https://doi.org/10.1007/978-1-4899-7573-7_89-3

Download citation

  • DOI: https://doi.org/10.1007/978-1-4899-7573-7_89-3

  • Received:

  • Accepted:

  • Published:

  • Publisher Name: Springer, Boston, MA

  • Online ISBN: 978-1-4899-7573-7

  • eBook Packages: Springer Reference MedicineReference Module Medicine

Publish with us

Policies and ethics