Measuring the Relationship between Hospital Costs and Quality of Care: An Example of Acute Myocardial Infarction in Edmonton, Alberta, Canada

Abstract

This study explores the relationship between hospital costs and quality of care for Acute Myocardial Infarction (AMI) in the Edmonton area hospitals. The importance of this relationship is realized when policy makers face decisions about cost minimization and quality maximization during times of health care budget constraints. This study uses regression modelling with increasing specifications as well as various robustness checks to ensure the accuracy of the results. The Model specifications include demographics, AMI risk adjustments, Hospital fixed effects, and year fixed effects. Semi-parametric regression removes the assumption of linearity to determine the true relationship between hospital cost and AMI quality. Higher AMI quality is associated with a 39% increase in hospital costs after adjustments and controls. The semi-parametric regression shows a fairly linear relationship between cost and AMI quality. This study suggests that Canadian policy and decision makers should take caution during budget cuts and implementing cost containment programs. The results suggest that reducing AMI budgets may have a negative effect on the quality of AMI care patients receive in Edmonton, Alberta. The linear relationship suggests that the return on the quality of AMI is consistent for each dollar invested with no economies of scale.