What is a hospital bed day worth? A contingent valuation study of hospital Chief Executive Officers

BMC Health Services Research, Feb 2017

Background Decreasing hospital length of stay, and so freeing up hospital beds, represents an important cost saving which is often used in economic evaluations. The savings need to be accurately quantified in order to make optimal health care resource allocation decisions. Traditionally the accounting cost of a bed is used. We argue instead that the economic cost of a bed day is the better value for making resource decisions, and we describe our valuation method and estimations for costing this important resource. Methods We performed a contingent valuation using 37 Australian Chief Executive Officers’ (CEOs) willingness to pay (WTP) to release bed days in their hospitals, both generally and using specific cases. We provide a succinct thematic analysis from qualitative interviews post survey completion, which provide insight into the decision making process. Results On average CEOs are willing to pay a marginal rate of $216 for a ward bed day and $436 for an Intensive Care Unit (ICU) bed day, with estimates of uncertainty being greater for ICU beds. These estimates are significantly lower (four times for ward beds and seven times for ICU beds) than the traditional accounting costs often used. Key themes to emerge from the interviews include the importance of national funding and targets, and their associated incentive structures, as well as the aversion to discuss bed days as an economic resource. Conclusions This study highlights the importance for valuing bed days as an economic resource to inform cost effectiveness models and thus improve hospital decision making and resource allocation. Significantly under or over valuing the resource is very likely to result in sub-optimal decision making. We discuss the importance of recognising the opportunity costs of this resource and highlight areas for future research.

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What is a hospital bed day worth? A contingent valuation study of hospital Chief Executive Officers

Page et al. BMC Health Services Research What is a hospital bed day worth? A contingent valuation study of hospital Chief Executive Officers Katie Page 0 Adrain G. Barnett 0 Nicholas Graves 0 0 Institute of Health and Biomedical Innovation, Queensland University of Technology , 60 Musk Avenue, Kelvin Grove, Qld 4059 , Australia Background: Decreasing hospital length of stay, and so freeing up hospital beds, represents an important cost saving which is often used in economic evaluations. The savings need to be accurately quantified in order to make optimal health care resource allocation decisions. Traditionally the accounting cost of a bed is used. We argue instead that the economic cost of a bed day is the better value for making resource decisions, and we describe our valuation method and estimations for costing this important resource. Methods: We performed a contingent valuation using 37 Australian Chief Executive Officers' (CEOs) willingness to pay (WTP) to release bed days in their hospitals, both generally and using specific cases. We provide a succinct thematic analysis from qualitative interviews post survey completion, which provide insight into the decision making process. Results: On average CEOs are willing to pay a marginal rate of $216 for a ward bed day and $436 for an Intensive Care Unit (ICU) bed day, with estimates of uncertainty being greater for ICU beds. These estimates are significantly lower (four times for ward beds and seven times for ICU beds) than the traditional accounting costs often used. Key themes to emerge from the interviews include the importance of national funding and targets, and their associated incentive structures, as well as the aversion to discuss bed days as an economic resource. Conclusions: This study highlights the importance for valuing bed days as an economic resource to inform cost effectiveness models and thus improve hospital decision making and resource allocation. Significantly under or over valuing the resource is very likely to result in sub-optimal decision making. We discuss the importance of recognising the opportunity costs of this resource and highlight areas for future research. Bed days; Valuation; Willingness-to-pay; Cost effectiveness - Background An effective and efficient hospital-based program will simultaneously both improve patient outcomes and decrease hospital length of stay. Decreasing length of stay and freeing up, or releasing of hospital beds, represents a cost saving. However, the magnitude of this cost saving is difficult to quantify and is likely to depend on many factors. Hospital beds can have two types of value: (1) how much they cost the hospital to run – the accounting cost (referred to as the hotel cost by the WHO [1]), and (2) the value they have in terms of achieving desired outcomes – the economic (or opportunity) cost. Previous cost-effectiveness analyses most often use the accounting cost of some variant of it [2]. This is predominantly because it is an easier value to calculate and to understand, especially by hospital administrators. The question that arises is to what extent this is the “right” value to be adopting? Arguably, the second value, the economic cost, is the real value we “should” be interested in. This is because the majority of bed costs are fixed and sunk costs, and therefore the “true” value of releasing a hospital bed is better captured by the extent to which it allows one to achieve other outcomes that the hospital desires, such as treat another patient, reduce waiting lists, and ultimately meet economic targets. An © The Author(s). 2017 Open Access This article is distributed under the terms of the Creative Commons Attribution 4.0 International License (http://creativecommons.org/licenses/by/4.0/), which permits unrestricted use, distribution, and reproduction in any medium, provided you give appropriate credit to the original author(s) and the source, provide a link to the Creative Commons license, and indicate if changes were made. The Creative Commons Public Domain Dedication waiver (http://creativecommons.org/publicdomain/zero/1.0/) applies to the data made available in this article, unless otherwise stated. accounting value fails to represent economic opportunity costs, rather accounting conventions are used to recover historical expenditures. WTP may be closer to the economic opportunity cost, and that opportunity cost is a basis for decision making, the efficiency of which is the subject of welfare economics. The true economic value of a bed day is probably lower than the full financial accounting cost. The question is, how much lower? Previous cost-effectiveness research [3] has shown that the dollar value placed on a hospital bed, average cost versus just consumables, is important. Sensitivity analysis around the bed day value demonstrated that it had a significant impact on the overall decisions derived from the cost effectiveness model. Bed day values often drive the cost saving (...truncated)


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Katie Page, Adrain Barnett, Nicholas Graves. What is a hospital bed day worth? A contingent valuation study of hospital Chief Executive Officers, BMC Health Services Research, 2017, pp. 137, 17, DOI: 10.1186/s12913-017-2079-5