Elsevier

Health Policy

Volume 67, Issue 3, March 2004, Pages 293-307
Health Policy

Comparing systems for costing hospital treatments: The case of stable angina pectoris

https://doi.org/10.1016/j.healthpol.2003.07.004Get rights and content

Abstract

This paper demonstrates the basic properties in the systems most commonly considered for costing treatments in the Danish hospitals. The differences between the traditional charge system, the DRG system and the ABC system are analysed, and difficulties encountered in comparing these systems are discussed.

A sample of patients diagnosed with stable angina pectoris (SAP) at Odense University Hospital was used to compare the three systems when costing an entire treatment path, costing single hospitalisations and studying the effects of length of stay. Furthermore, it is illustrated that the main idea behind each system is reflected in how the systems over- or underestimate costs. Implications when managing the hospitals, particularly reimbursement, are discussed.

Introduction

For the last decade the Danish healthcare system has been considering different reimbursement systems for the public hospitals. The rising interest stems from the problems encountered in the traditional approbation system, especially capacity shortages leading to waiting lists and budget deficits. Likewise, the increased specialisation of hospitals has necessitated additional internal transfers of funds among the hospitals and among different counties. A necessary condition for determining reimbursements and transfer prices is that the hospitals are able to determine the costs of providing treatment to a patient. Thus, the question of how to estimate costs at the patient level arises. The aim of this paper is to demonstrate the basic properties in the systems most commonly considered. For this purpose we use cost estimates for a special diagnosis, i.e. stable angina pectoris (SAP), to study the differences of the cost estimates provided by the traditional charge system, the DRG estimate and a more detailed activity-based costing (ABC) estimate. Likewise, we discuss difficulties encountered in comparing these estimates, their advantages and disadvantages when used as the basis for reimbursement.

Section snippets

Methods

As mentioned in the introduction, this paper compares ABC cost, charges and DRGs. Even though the latter two can equally well be considered pricing systems, as that is the main objective for their development, we nevertheless choose to refer mainly to their element of cost estimation. In fact, in both systems the price is a reflection of a cost estimate. Hence, throughout the paper we refer to all three systems as cost systems.

To compare ABC cost estimates, hospital charges and DRGs it is

Data

The data used to determine the costs of treating patients with SAP were collected from Odense University Hospital (OUH).

At OUH patients with SAP are treated in two departments: the Department of Cardiology and Cardiovascular Research Unit (department B) and the Department of Thoracic Surgery (department T), depending on the severity of the disease.

A detailed treatment path description was used as the basis for determining treatment activities. The activities included have been limited to those

Comparison of SAP treatment cost

In the result section three themes are discussed. First we compare the total SAP treatment cost found by using the ABC system with hospital charges and DRGs, respectively. Secondly, the estimates of the different cost systems are compared with respect to single hospitalisations for the different treatment branches. And thirdly, we investigate whether differences occur due to length of stay.

Comparison based on totals

The mean(s) and median(s) treatment cost for the sample of patients estimated for the ABC system as well

Validation

Before the different cost systems are compared, it is necessary to validate the ABC estimates since these were based on an empirical study performed by the authors and hence did not originate in a customised and routinely running accounting system like the DRGs and the charges.

When using ABC, one is in effect assuming that the cost function is separable into a number of activities, that each activity has a homogeneous use of resources in the production of its ‘output’ and that the cost of one

Comparison of OUH cost systems

When charges are determined, costs are divided equally among a large number of heterogeneous objects. This is apparent when comparing ABC estimates with the hospital’s current charges. Fig. 4a and b showed the ABC costs, OUH charges and DRGs for the PCI and the CABG procedures, whereas Fig. 4c illustrated these different estimates for patients receiving anti-ischaemic medical treatment. Fig. 4a–c confirm that for short hospitalisations the ABC method estimates a patient cost that is relatively

Conclusion

The paper illustrates that the ideas behind different cost systems used in the hospitals are reflected in the way they over- or underestimate costs of a given treatment. Among the properties distinguishing the systems from one another are the aggregation level in costing, the way cost categories are treated, whether or not the estimates are organisationally customised, how patients are categorised and what it costs to establish and maintain the different cost systems. As demonstrated, in

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