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The impact of teaching status on average costs in Spanish hospitals

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  • Guillem López‐Casasnovas
  • Marc Saez

Abstract

In this paper, the observed systematic differences in costs for teaching hospitals (TH) in Spain are examined. Concern has been voiced regarding the existence of a bias in the financing of TH once prospective budgets are introduced for hospital finance. Claims for adjustment to take into account the ‘legitimate’ extra costs of teaching on hospital expenditure may be well grounded. Focus is on the estimation of the impact of teaching status on average cost, using a version of a multi‐product hospital cost function, taking into account some relevant factors from which to derive the observed differences. It is assumed that the relationship between the explanatory and the dependent variables follows a flexible form for each of the explanatory variables. Also, the underlying covariance structure of the data is modelled. Two qualitatively different sources of variation are assumed: random effects and serial correlation. Random variation refers to both general level variation (through the random intercept) and the variation specifically related to teaching status. It is postulated that the impact of the random effects is dominant over the impact of the serial correlation effects. The model is estimated by restricted maximum likelihood. The results show that costs are 9% higher (15% in the case of median costs) in teaching than in non‐teaching hospitals. That is, teaching status legitimately explains no more than half of the observed difference in actual costs. The impact on costs of the teaching factor depends on the number of residents, with an increase of 51.11% per resident for hospitals with fewer than 204 residents (third quartile of the number of residents) and 41.84% for hospitals with more than 204 residents. In addition, the estimated dispersion is higher among teaching hospitals. As a result, due to the considerable observed heterogeneity, results should be interpreted with caution. From a policy making point of view, it is concluded that since a higher relative burden for medical training falls on public hospitals, an explicit adjustment for the extra costs that the teaching factor imposes on hospital finance is needed, before hospital competition for inpatient services takes place. Copyright © 1999 John Wiley & Sons, Ltd.

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  • Guillem López‐Casasnovas & Marc Saez, 1999. "The impact of teaching status on average costs in Spanish hospitals," Health Economics, John Wiley & Sons, Ltd., vol. 8(7), pages 641-651, November.
    • Handle: RePEc:wly:hlthec:v:8:y:1999:i:7:p:641-651
    DOI: 10.1002/(SICI)1099-1050(199911)8:7<641::AID-HEC475>3.0.CO;2-L
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    Cited by:

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    3. Laia Bosque‐Mercader & Neus Carrilero & Anna García‐Altés & Guillem López‐Casasnovas & Luigi Siciliani, 2023. "Socioeconomic inequalities in waiting times for planned and cancer surgery: Evidence from Spain," Health Economics, John Wiley & Sons, Ltd., vol. 32(5), pages 1181-1201, May.
    4. Brigitte Dormont & Carine Milcent, 2005. "How to Regulate Heterogeneous Hospitals?," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(3), pages 591-621, September.
    5. Biorn, Erik & Hagen, Terje P. & Iversen, Tor & Magnussen, Jon, 2006. "Heterogeneity in Hospitals' Responses to a Financial Reform: A Random Coefficient Analysis of The Impact of Activity-Based Financing on Efficiency," MPRA Paper 8169, University Library of Munich, Germany.
    6. Cots, Francesc & Mercade, Lluc & Castells, Xavier & Salvador, Xavier, 2004. "Relationship between hospital structural level and length of stay outliers: Implications for hospital payment systems," Health Policy, Elsevier, vol. 68(2), pages 159-168, May.
    7. Brigitte Dormont & Carine Milcent, 2004. "The sources of hospital cost variability," Health Economics, John Wiley & Sons, Ltd., vol. 13(10), pages 927-939, October.
    8. Emma Medin & Kjartan Anthun & Unto Häkkinen & Sverre Kittelsen & Miika Linna & Jon Magnussen & Kim Olsen & Clas Rehnberg, 2011. "Cost efficiency of university hospitals in the Nordic countries: a cross-country analysis," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 12(6), pages 509-519, December.
    9. Guillem López & Joan Costa-Font & Ivan Planas, 2004. "Diversity and regional inequalities: Assessing the outcomes of the Spanish 'System of Health Care Services'," Working Papers, Research Center on Health and Economics 745, Department of Economics and Business, Universitat Pompeu Fabra.
    10. Oliver Tiemann, 2008. "Variations in hospitalisation costs for acute myocardial infarction – a comparison across Europe," Health Economics, John Wiley & Sons, Ltd., vol. 17(S1), pages 33-45, January.
    11. Erik Biørn & Terje Hagen & Tor Iversen & Jon Magnussen, 2010. "How different are hospitals’ responses to a financial reform? The impact on efficiency of activity-based financing," Health Care Management Science, Springer, vol. 13(1), pages 1-16, March.
    12. Pirson, Magali & Dramaix, Michele & Leclercq, Pol & Jackson, Terri, 2006. "Analysis of cost outliers within APR-DRGs in a Belgian general hospital: Two complementary approaches," Health Policy, Elsevier, vol. 76(1), pages 13-25, March.
    13. Maria J. Perez-Villadóniga & Ana Rodriguez-Alvarez & David Roibas, 2022. "The contribution of resident physicians to hospital productivity," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 23(2), pages 301-312, March.
    14. Miika Linna & Unto Häkkinen, 2006. "Reimbursing for the costs of teaching and research in finnish hospitals: A stochastic frontier analysis," International Journal of Health Economics and Management, Springer, vol. 6(1), pages 83-97, March.

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