Spending more, doing more, or both? An alternative method for quantifying utilization during hospitalizations

BACKGROUND: Because relative value unit (RVU)-based costs vary across hospitals, it is difficult to use them to compare hospital utilization. OBJECTIVE: To compare estimates of hospital utilization using RVU-based costs and standardized costs. DESIGN: Retrospective cohort. SETTING AND PATIENTS: Years 2009 to 2010 heart failure hospitalizations in a large, detailed hospital billing database that contains an itemized log of costs incurred during hospitalization. INTERVENTION: We assigned every item in the database with a standardized cost that was consistent for that item across all hospitals. MEASUREMENTS: Standardized costs of hospitalization versus RVU-based costs of hospitalization. RESULTS: We identified 234 hospitals with 165,647 heart failure hospitalizations. We observed variation in the RVU-based cost for a uniform "basket of goods" (10th percentile cost $1,552; 90th percentile cost of $3,967). The interquartile ratio (Q75/Q25) of the RVU-based costs of a hospitalization was 1.35 but fell to 1.26 after costs were standardized, suggesting that the use of standardized costs can reduce the "noise" due to differences in overhead and other fixed costs. Forty-six (20%) hospitals had reported costs of hospitalizations exceeding standardized costs (indicating that reported costs inflated apparent utilization); 42 hospitals (17%) had reported costs that were less than standardized costs (indicating that reported costs underestimated utilization). CONCLUSIONS: Standardized costs are a novel method for comparing utilization across hospitals and reduce variation observed with RVU-based costs. They have the potential to help hospitals understand how they use resources compared to their peers and will facilitate research comparing the effectiveness of higher and lower utilization.