Estimating the opportunity costs of bed-days

Frank G. Sandmann*, Julie Robotham, Sarah R. Deeny, W. John Edmunds, Mark Jit

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

11 Citations (Scopus)

Abstract

Opportunity costs of bed-days are fundamental to understanding the value of healthcare systems. They greatly influence burden of disease estimations and economic evaluations involving stays in healthcare facilities. However, different estimation techniques employ assumptions that differ crucially in whether to consider the value of the second-best alternative use forgone, of any available alternative use, or the value of the actually chosen alternative. Informed by economic theory, this paper provides a taxonomic framework of methodologies for estimating the opportunity costs of resources. This taxonomy is then applied to bed-days by classifying existing approaches accordingly. We highlight differences in valuation between approaches and the perspective adopted, and we use our framework to appraise the assumptions and biases underlying the standard approaches that have been widely adopted mostly unquestioned in the past, such as the conventional use of reference costs and administrative accounting data. Drawing on these findings, we present a novel approach for estimating the opportunity costs of bed-days in terms of health forgone for the second-best patient, but expressed monetarily. This alternative approach effectively re-connects to the concept of choice and explicitly considers net benefits. It is broadly applicable across settings and for other resources besides bed-days.

Original languageEnglish
Pages (from-to)592-605
Number of pages14
JournalHealth Economics (United Kingdom)
Volume27
Issue number3
DOIs
Publication statusPublished - Mar 2018

Bibliographical note

Funding Information:
This study originates from FGS's doctoral research that is jointly supported by the London School of Hygiene and Tropical Medicine (LSHTM) and Public Health England (PHE). A poster focusing on hospital beds and hospital‐acquired infection was presented at the Health Economists' Study Group (HESG) Winter 2016 Conference in Manchester, UK. MJ was supported by the National Institute for Health Research Health Protection Research Unit (NIHR HPRU) in Immunisation at LSHTM in partnership with PHE (grant reference code HPRU‐2012‐10096). The views expressed are those of the authors and not necessarily those of the National Health Service (NHS), the NIHR, the Department of Health, or PHE. The funders had no role in study design; in the collection, analysis, and interpretation of data; in the writing of the report; and in the decision to submit the article for publication.

Publisher Copyright:
© 2017 The Authors Health Economics published by John Wiley & Sons Ltd.

Copyright:
Copyright 2019 Elsevier B.V., All rights reserved.

Keywords

  • economic evaluation
  • healthcare costs
  • length of stay
  • net benefit
  • opportunity costs

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