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Bringing Responsibility for Small Area Variations in Hospitalization Rates Back to the Hospital: The Propensity to Hospitalize Index and a Test of the Roemer's Law

Shwartz, Michael PhD*,†; Peköz, Erol A. PhD; Labonte, Alan DBA*; Heineke, Janelle DBA; Restuccia, Joseph D. PH*,†

doi: 10.1097/MLR.0b013e3182353907
Original Articles

Objective: To assign responsibility for variations in small area hospitalization rates to specific hospitals and to evaluate the Roemer's Law in a way that does not artificially induce correlation between bed supply and utilization.

Data Sources/Study Setting: We used data on hospitalizations and outpatient treatment for 15 medical conditions of nonmanaged care Part B eligible Medicare enrollees of 65 years and older in Massachusetts in 2000.

Study Design: We used a Bayesian model to estimate each hospital's pool of potential patients and the fraction of the pool hospitalized (its propensity to hospitalize, PTH). To evaluate the Roemer's Law, we calculated the correlation between hospitals' PTH and beds per potential patient. Patient severity was measured using All Patient Refined Diagnosis Related Groups.

Results: We show that our approach does not artificially induce a correlation between beds and utilization whereas the traditional approach does. Nevertheless, our approach indicates a strong relationship between PTH and beds (r=0.56). Eighteen (of 66) hospitals had a high PTH that differed significantly from 16 hospitals with a low PTH. Average patient severity in the high PTH hospitals was lower than in the low PTH hospitals. Although the difference was not statistically significant (P=0.12), there was a medium effect size (0.58).

Discussion: Variation across hospitals in the PTH index, the strong relationship between beds and the PTH, and the lack of relationship between severity and the PTH suggest the importance of policies that limit bed growth of high PTH hospitals and create incentives for high PTH hospitals to reduce hospitalizations.

*Center for Organization, Leadership and Management Research, VA Boston Healthcare System

Boston University School of Management, Boston, MA

Supported in part by the Agency for Healthcare Research and Quality.

The authors declare no conflict of interest.

Reprints: Michael Shwartz, PhD, Center for Organization, Leadership and Management Research, VA Boston Healthcare System and Boston University School of Management, 595 Commonwealth Avenue, Boston, MA 02215. Email: mshwartz@bu.edu.

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© 2011 Lippincott Williams & Wilkins, Inc.