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

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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.

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Notes

  1. More information on the Benchmarking project and data collection can be found from http://info.stakes.fi/benchmarking/EN/benchmarking.htm

  2. Information on wages can be found from the website of Statistics Finland: http://www.tilastokeskus.fi/index_en.html

  3. ‘Pure’ outpatient groups belong to the 700-, 800- and 900-series in the FullDRG grouper. The grouper is available at http://norddrg.kuntaliitto.fi/index_keski.html.

  4. We tried the truncated normal specification, but the non significant test statistics (μ) indicated that the half-normal was appropriate.

  5. A more flexible translog functional form could not be used as the sample size cannot support that many explanatory variables.

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Acknowledgments

The authors thank the Yrjö Jahnsson Foundation in Finland for financial support. We are grateful for comments from Professor Peter C. Smith, participants in HESG/NHESG in Aberdeen, as well as participants in the York Seminars in Health Econometrics. We would also like to thank the journal’s referees for their constructive comments. Any errors are our own.

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Correspondence to Kirsi Vitikainen.

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Vitikainen, K., Linna, M. & Street, A. Substituting inpatient for outpatient care: what is the impact on hospital costs and efficiency?. Eur J Health Econ 11, 395–404 (2010). https://doi.org/10.1007/s10198-009-0211-0

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  • DOI: https://doi.org/10.1007/s10198-009-0211-0

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