Accounting for the relationship between per diem cost and LOS when estimating hospitalization costs

BACKGROUND: Hospitalization costs in clinical trials are typically derived by multiplying the length of stay (LOS) by an average per-diem (PD) cost from external sources. This assumes that PD costs are independent of LOS. Resource utilization in early days of the stay is usually more intense, however, and thus, the PD cost for a short hospitalization may be higher than for longer stays. The shape of this relationship is unlikely to be linear, as PD costs would be expected to gradually plateau. This paper describes how to model the relationship between PD cost and LOS using flexible statistical modelling techniques. METHODS: An example based on a clinical study of clevidipine for the treatment of peri-operative hypertension during hospitalizations for cardiac surgery is used to illustrate how inferences about cost-savings associated with good blood pressure (BP) control during the stay can be affected by the approach used to derive hospitalization costs. Data on the cost and LOS of hospitalizations for coronary artery bypass grafting (CABG) from the Massachusetts Acute Hospital Case Mix Database (the MA Case Mix Database) were analyzed to link LOS to PD cost, factoring in complications that may have occurred during the hospitalization or post-discharge. The shape of the relationship between LOS and PD costs in the MA Case Mix was explored graphically in a regression framework. A series of statistical models including those based on simple logarithmic transformation of LOS to more flexible models using LOcally wEighted Scatterplot Smoothing (LOESS) techniques were considered. A final model was selected, using simplicity and parsimony as guiding principles in addition traditional fit statistics (like Akaike’s Information Criterion, or AIC). This mapping was applied in ECLIPSE to predict an LOS-specific PD cost, and then a total cost of hospitalization. These were then compared for patients who had good vs. poor peri-operative blood-pressure control. RESULTS: The MA Case Mix dataset included data from over 10,000 patients. Visual inspection of PD vs. LOS revealed a non-linear relationship. A logarithmic model and a series of LOESS and piecewise-linear models with varying connection points were tested. The logarithmic model was ultimately favoured for its fit and simplicity. Using this mapping in the ECLIPSE trials, we found that good peri-operative BP control was associated with a cost savings of $5,366 when costs were derived using the mapping, compared with savings of $7,666 obtained using the traditional approach of calculating the cost. CONCLUSIONS: PD costs vary systematically with LOS, with short stays being associated with high PD costs that drop gradually and level off. The shape of the relationship may differ in other settings. It is important to assess this and model the observed pattern, as this may have an impact on conclusions based on derived hospitalization costs.