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Cost-effectiveness analysis is well established for pharmaceuticals and medical technologies but not for evaluating variations in clinical practice. This paper describes a novel methodology--risk adjusted cost-effectiveness (RAC-E)--that facilitates the comparative evaluation of applied clinical practice processes. In this application, risk adjustment is undertaken with a multivariate matching algorithm that balances the baseline characteristics of patients attending different settings (e.g., hospitals). Linked, routinely collected data are used to analyse patient-level costs and outcomes over a 2-year period, as well as to extrapolate costs and survival over patient lifetimes. The study reports the relative cost-effectiveness of alternative forms of clinical practice, including a full representation of the statistical uncertainty around the mean estimates. The methodology is illustrated by a case study that evaluates the relative cost-effectiveness of services for patients presenting with acute chest pain across the four main public hospitals in South Australia. The evaluation finds that services provided at two hospitals were dominated, and of the remaining services, the more effective hospital gained life years at a low mean additional cost and had an 80% probability of being the most cost-effective hospital at realistic cost-effectiveness thresholds. Potential determinants of the estimated variation in costs and effects were identified, although more detailed analyses to identify specific areas of variation in clinical practice are required to inform improvements at the less cost-effective institutions.

BackgroundMethods for the cost-effectiveness analysis of health technologies are now well established, but such methods may also have a useful role in the context of evaluating the effects of variation in applied clinical practice. This study illustrates a general methodology for the comparative analysis of applied clinical practice at alternative institutions – risk adjusted cost-effectiveness (RAC-E) analysis – with an application that compares acute hospital services for stroke patients admitted to the main public hospitals in South Australia.MethodsUsing linked, routinely collected data on all South Australian hospital separations from July 2001 to June 2008, an analysis of the RAC-E of services provided at four metropolitan hospitals was undertaken using a decision analytic framework. Observed (plus extrapolated) and expected lifetime costs and survival were compared across patient populations, from which the relative cost-effectiveness of services provided at the different hospitals was estimated.ResultsUnadjusted results showed that at one hospital patients incurred fewer costs and gained more life years than at the other hospitals (i.e. it was the dominant hospital). After risk adjustment, the cost minimizing hospital incurred the lowest costs, but with fewer life-years gained than one other hospital. The mean incremental cost per life-year gained of services provided at the most effective hospital was under $20,000, with an associated 65% probability of being cost-effective at a $50,000 per life year monetary threshold.ConclusionsRAC-E analyses can be used to identify important variation in the costs and outcomes associated with clinical practice at alternative institutions. Such data provides an impetus for further investigation to identify specific areas of variation, which may then inform the dissemination of best practice service delivery and organisation.

Objective. Proposed Australian healthcare reforms describe a move towards partial Commonwealth funding of public hospitals, whereby hospitals will be paid an 'efficient price' for each separation, incorporating both the costs and benefits of services. This paper describes a potential approach to setting the efficient price using risk adjusted costeffectiveness (RAC-E) analysis.Methods. RAC-E analysis uses a decision analytic framework to estimate lifetime costs and survival for individual patients, which are standardised by comparing observed and expected values. Analysis of standardised costs and effects at different hospitals identifies efficient hospitals, from which efficient prices can be defined.Results. A RAC-E analysis of services for stroke patients at the four main public hospitals in South Australia demonstrates the need to account for costs and benefits in identifying efficient hospitals. The hospital with the best patient outcomes incurred additional costs relative to less effective hospitals. If an investment of AU$14 760 to gain an additional life year in stroke patients is deemed to be a cost-effective use of resources, then the most effective hospital is also the most efficient hospital.Conclusions. The applied RAC-E analysis demonstrates a framework for comparing the economic efficiency of care provided at different hospitals, which provides a basis for defining the efficient price and appropriate funding incentives to achieve better patient outcomes. What is known about the topic?The efficient price is a recently introduced concept used in the context of the recent healthcare reforms produced by the Australian government. The stated objective in setting nationally efficient prices for public hospital services is to 'strike an appropriate balance between reasonable access, clinical safety, efficiency and fiscal considerations'. There has been no explicit discussion to date about specific processes for estimating the efficient price. What does this paper add? This paper introduces risk adjusted cost-effectiveness (RAC-E) analysis as a framework for identifying hospitals that achieve the best balance between costs and outcomes in the provision of services for specific diagnostic groups, and hence provides the basis for estimating efficient prices.Journal compilation Ó AHHA

Discussion We found that even in an area which has achieved high screening coverage, few people were re-screened. However, positive cases are more likely to be retested than negatives. This detailed county level analysis will provide information to policy makers to develop a long-term, sustainable and effective screening strategy.