Estimating the Costs of Specialised Care

Abstract

If specialisation is supposed to reduce costs why is reimbursement often more generous for specialist than non-specialist hospitals? Specialist hospitals claim that gains from specialism are offset because they attract patients with more complex care requirements. We assess the foundation for this claim. For 2008/9 we match Hospital Episode Statistics to Reference Cost data and to the Specialised Services National Definition Sets which identifies specialised care during patients’ hospital stay. Our sample consists of 12million patients in 163 hospitals. We estimate multiple regression models to explain why costs vary among patients, focussing on markers of specialised care as explanatory factors. We test the robustness of results to choices about how costs are calculated, how the regression models are specified and how receipt of specialised care is determined. We find that costs are higher than for other patients allocated to the same Healthcare Resource Group (HRG) if a patient has one of the following types of specialised service: cancer (13-18%), spinal (28-31%), neurosciences (23-24%), cystic fibrosis (26-38%), children’s (15-20%), rheumatology (13-25%), colorectal (18-21%) and orthopaedic (20-21%). No other types of specialised care are shown to lead to significantly higher costs. The implication for payment policy is that patients with these markers might be paid an additional top-up over and above the tariff associated with the HRG to which they are allocated.