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Geographical clusters in health expenditures are well documented and accounting for spatial interactions may contribute to properly identify the factors affecting the use of health services the most. As for hospital care, spillovers may derive from strategic behaviour of hospitals and from patients’ preferences that may induce mobility across jurisdictions, as well as from geographically-concentrated risk factors, knowledge transfer and interactions between different layers of care. Our paper focuses on a largely overlooked potential source of spillovers in hospital expenditure: the heterogeneity of primary care providers’ behaviour. To do so, we analyse expenditures associated to avoidable hospitalisations separately from expenditures for highly complex treatments, as the former are most likely affected by General Practitioners, while the latter are not. We use administrative data for Italy’s Region Emilia Romagna between 2007 and 2010. Since neighbouring districts may belong to different Local Health Authorities (LHAs), we employ a spatial contiguity matrix that allows to investigate the effects of geographical and institutional proximity and use it to estimate Spatial Autoregressive and Spatial Durbin Models.

Background: This study aims to contribute to the ongoing policy and scholarly debate on physician-hospital integration (INT) and health care cost by providing evidence for the role of physician boards in mitigating hospital expenditure associated with INT. Methods: We conducted our study of the relationship between INT, physician boards, and hospital expenditure using data on hospitals in California. We obtained data from the Centers for Medicare and Medicaid Services, American Hospital Association, and California Office of Statewide Health Planning and Development from 2002 to 2006. A hospital fixed-effect ordinary least square (OLS) regression analysis was used. Results: Hospital expenditure was higher in a hospital with an integrated arrangement (e.g., a hospital that adopted an integrated salary model) than under other independent arrangements between physicians and hospitals, and the proportion of physician members on hospital boards negatively moderated the effect of integration on hospital expenditure. Conclusions: Physician boards may provide a context that affords benefits that can reduce hospital expenditures under INT. This finding highlights the importance to having a supportive organizational design when implementing INT.

Pay-for-Performance programs offering additional payments to GPs can be used not only to improve the quality of care but also for cost containment purposes. In this paper, we analyse the impact of removing financial incentives in primary care that were aimed at containing hospital expenditure in the Italian region of Emilia-Romagna during the period 2002–2004. Our analysis draws on regional databanks linking GPs' characteristics to those of their patients (including all sources of public payments made to GPs), together with information on the utilisation of hospital services. The dataset includes 2,936,834 patients, 3229 GPs and 39 districts belonging to 11 Local Health Authorities. We employ a difference-in-difference specification to assess changes in expenditures for avoidable and total hospital admissions. We identify the treatment group with GPs operating in districts where the program is withdrawn during the observation period (“Leavers”). Their performance is compared to that of two separate control groups, namely: GPs working in districts that grant incentives for the entire period (“Stayers”) and those working in districts that never introduced measures for the containment of hospitalisations (“Non Participants”). The comparison between treatment and control groups shows that removing incentives does not result in a worse performance by Leavers compared to both control groups. This supports the policy of removing incentives, as such entail extra payments to GPs which, however, do not seem capable of significantly influencing their behaviour in the desired way. Our findings complement previous evidence from the same institutional context showing that only those programs that aim to improve disease management for specific conditions – rather than to simply contain expenditure – have proven successful in reducing avoidable admissions for the target population.

Objective: This is the second of three reports on the follow-up review of mental health care at Helen Joseph Hospital (HJH). Objectives for the review were to provide realistic estimates of cost for unit activities and to establish a quality assurance cycle that may facilitate cost centre management. Method: The study described and used activity-based costing (ABC) as an approach to analyse the recurrent cost of acute in-patient care for the financial year 2007-08. Fixed (e.g. goods and services, staff salaries) and variable recurrent costs (including laboratory’, ‘pharmacy’) were calculated. Cost per day, per user and per diagnostic group was calculated. Results: While the unit accounted for 4.6% of the hospital’s total clinical activity (patient days), the cost of R8.12 million incurred represented only 2.4% of the total hospital expenditure (R341.36 million). Fixed costs constituted 90% of the total cost. For the total number of 520 users that stayed on average 15.4 days, the average cost was R1,023.00 per day and R15748.00 per user. Users with schizophrenia accounted for the most (35%) of the cost, while the care of users with dementia was the most expensive (R23,360.68 per user). Costing of the application of World Health Organization norms for acute care staffing for the unit, projected an average increase of 103% in recurrent costs (R5.1 million), with the bulk (a 267% increase) for nursing. Conclusion: In the absence of other guidelines, aligning clinical activity with the proportion of the hospital’s total budget may be an approach to determine what amount should be afforded to acute mental health in-patient care activities in a general regional hospital such as HJH. Despite the potential benefits of ABC, its continued application will require time, infrastructure and staff investment to establish the capacity to maintain routine annual cost analyses for different cost centres. Key words: Cost analysis; Activity-based costing; Acute mental health care; Recurrent cost; Fixed and variable cost; Cost centre management; Hospital expenditure