Regional Variation in Standardized Costs of Care at Children’s Hospitals

In the Journal of Hospital Medicine, Evan Fieldston and colleagues investigated regional cost variation for three inpatient pediatric conditions, assessed the potential drivers of variation, and estimated the cost savings that could result from reducing variation. With some areas of the country spending close to three times more on health care than others, regional variation in health care spending has been a focus of national attention.

The authors analyzed hospitalizations for asthma, diabetic ketoacidosis (DKA), and acute gastroenteritis (AGE) at 46 children’s hospitals across seven geographic regions using the Pediatric Health Information System (PHIS) database. The authors used standardized costs to compare utilization patterns across hospitals and adjusted for several patient-level demographic and illness-severity factors and found that variation remained both between and within regions. Adjusted total standardized costs were 120 percent higher for asthma, 46 percent higher for DKA, and 150 percent higher for AGE in the highest cost region compared to the lowest cost region. Drivers of variation were encounter-level variables including length of stay and intensive care unit utilization. For this cohort, annual savings from reducing variation would be $69.1 million at the interregional level and $25.2 million at the intraregional level. Future studies should examine how variation is avoidable and policies should be pursued that adjust care models to eliminate unwarranted variation and reduce costs.