Consequences of regional variation in health-care use - geography as an instrument
The escalating use of medical technologies is widely regarded as the main driver of increasing health care costs. Moreover, it is a major explanatory factor for the enormous regional variation in health care costs. However, evidence on the cost-effectiveness of widely used technologies is scarce.
The “gold standard” of treatment evaluation is the randomised controlled trial (RCT) because unobserved factors directly correlated with health outcomes may lead to biased results from non-randomised observational studies. However, RCTs are not able to generalise to populations and settings different from those in the study; they are often infeasible or unethical, and they are not well suited to assess marginal technology effects for policy guidance. Moreover, RCTs are often not able to collect long-term cost data, preventing the direct analysis of cost-effectiveness.
As a consequence, observational data has been used to study the outcome effects of alternative medical treatments and are frequently used to estimate cost effects. One strand of literature uses geography as an instrument to estimate the (cost-) effectiveness of treatments in observational studies. The idea is that geographical factors (such as the distance to treatment facilities) introduce substantial variation in the treatment variable without directly effecting the outcome of interest. For Germany, there is no study to date that uses geography as an instrument to assess the cost-effectiveness of selected clinical treatments.
In this project, we analyse consequences of regional variation in health-care use and employ geography as an instrument to identify the effects of regional variation. In an application, we aim to estimate the marginal costs and outcomes of intensive cardiac procedures in Germany. Our study complements existing studies by 1) using detailed administrative data, 2) applying comprehensive robustness checks with alternative instruments, and 3) providing new evidence on the incremental cost-effectiveness for Germany.
The results of an incremental cost-effectiveness analysis will be relevant for guiding policies on the diffusion of these medical technologies. They are relevant for decisions about measures that would have the effect of increasing or decreasing the provision of these medical technologies somewhat by changing reimbursement or regulation. Such decisions may have special relevance for regions with declining population, as these regions may be particularly affected by resource reallocation and centralisation.