Substituting inpatient for outpatient care: what is the impact on hospital costs and efficiency?

Abstract

Substitution of inpatient for outpatient care is seen as a means to increase patient throughput and control costs. The purpose of this study was to assess the impact of increased outpatient care on hospital costs and efficiency using Finnish specialty-level data from years 2003-2006 to which we applied stochastic frontier analysis. The results reveal that outpatient services have a smaller impact on total costs than inpatient services. At the same time, increased outpatient activity appears to have an adverse effect on estimated cost efficiency. This counterintuitive finding is probably due to the low weight given to outpatient activities by the Diagnosis Related Groups (DRG) system. A common weighting for inpatient and outpatient services is required in order to assess accurately the impact of outpatient care on efficiency.

Measuring Efficiency of the New Zealand District Health Boards: An Empirical Research Using Two‐Stage Data Envelopment Analysis

“…While we assumed that efficiency increases when DHBs provide more services than planned, the regression result suggests that only an increase in outpatient volume to the plan is statistically and positively associated with efficiency. Inpatients have relatively greater impacts on costs than do outpatients (Vitikainen et al ., ) since they consume a premium of resources, and thus, an increase in the volume of inpatient services might generate greater uncertainty for management and therefore might have deleterious implications for efficiency. On the other hand, DHBs might still be able to control their expenses within the budget or mitigate the magnitude of overspending when they treated more outpatients than planned.…”

Assessing physician productivity following Norwegian hospital reform: A panel and data envelopment analysis

“…The substantial change from hospitalization to outpatient treatment makes it difficult to fully assess the development of a complex issue such as physician productivity. This shift in the care level is a factor that may affect our estimates of both the patient mix and the personnel mix, and it is well known that the lower weight assigned to outpatient activities by the DRG system may underestimate real efficiency (Vitikainen, Linna, & Street, 2010).…”

Hospital productivity bias when not adjusting for cost heterogeneity: The case of Spain

“…Previous literature has also accounted for the effects of hospital complexity (for example, see [12–17]) and the degree of specialisation (for example, see [18–19]). The idea that hospitals attending more complex cases are likely to present higher costs is widely accepted, with a measure of the hospital case-mix being an extensively used proxy to control for hospital complexity.…”

“…Thus, Daidone and D’Amico [18], who computed a specialisation index in the Major Diagnosis Category (MDC) based on the Gini Index, found a decreasing impact of specialisation on hospital costs in a sample of Italian hospitals. However, Vitikainen, Linna and Street [19], using the share of the largest MDC in terms of costs of overall production as proxy for the degree of specialisation, found no significant influence on hospital costs.…”