Essays on the economics of medical practice variations

Abstract: This thesis consists of an overview and five essays. The purpose of the thesis is to show how economics can contribute to a better understanding of medical practice variations – why they exist, their consequences, and the extent to which they can – and should – be influenced.The first essay, Econometric analysis of variation in cesarean section rates – a cross-sectional study of 59 obstetrical departments in Sweden, is an attempt to identify the causes of variation in cesarean section rates, and to discuss their economic consequences. The econometric model applied explains 27 percent of the variation. We conclude that the unexplained variation in cesarean section rates indicates inefficiency, mainly due to over-utilisation. Estimates of the economic consequences indicate an additional cost for "unnecessary" cesarean sections of 13-16 million SEK per year. The welfare loss to society due to undesired variation is tentatively estimated to be about twice as high.In the second essay, Estimating the effect of cesarean section rate on health outcome – evidence from Swedish hospital data, we test the null hypothesis of a zero effect of cesarean section rate on health outcome, against the alternative of a positive effect. We could not reject the null hypothesis of a zero effect, i.e., we did not find any significant positive relationship between cesarean section rate and health outcome, in terms of perinatal mortality or rate of asphyxia.In the third essay, Benchmarking in obstetric care – a comparative study based on data envelopment analysis (DEA), we apply the DEA method to compare technical efficiency (productivity) of inpatient obstetric care in Swedish hospitals in 1994 and 1995. The results indicate an average potential for enhanced productivity of at least 6-7 percent each year. Most hospitals show decreasing productivity 1994-1995, partly due to inability to adjust production capacity and costs to a decreasing demand.The last two essays apply a new method – Quality Satisfaction Performance (QSP) – for incorporating patient perspectives into the management of health care, i.e., as a basis for quality improvement. Change-oriented patient questionnaires – testing a new method at three departments of ophthalmology, is a pilot study. The results show consistently high patient satisfaction indices. Satisfaction varies somewhat among the different patient segments and departments. We conclude that decisions on improvements must be preceded by thorough assessment of costs as well as effects associated with the various changes.The last essay, Patient satisfaction and priority setting – an economic approach, aims at analysing if and how priorities according to the QSP approach are influenced when an economic perspective is explicitly included. This is accomplished by a cost-effectiveness analysis of certain proposed changes/improvements, and a cost-benefit analysis based upon the patients` willingness-to-pay for these changes. Our results show that the ranking between various improvements is strongly influenced when an economic dimension is included. We conclude that even a methodologically appropriate measurement of patient satisfaction may lead to cost-ineffective priority setting, unless economic consequences are explicitly considered.