An Analysis of the Costs of Ambulatory and Inpatient Care

VIVETTE A. ANCONA-BERK, PHD, AND THOMAS C. CHALMERS, MD

Abstract: Savings resulting from the substitution of ambulatory for inpatient care have been widely reported. This study examined the hypothesis that these savings may result from a reduction of services provided to the ambulatory patient and/or from an incomplete evaluation of these services, when the market value of relatives' support services is not included. Cataract extraction was chosen as an example. Sixty-two medical records of patients admitted to Mount Sinai for cataract extraction in the first six months of 1980 were reviewed, and the cost of their stay was estimated. This cost was then compared to five simulations of home care costs. The

simulations differed among themselves primarily as to the experience and training of the person providing nursing services-from an RN to an untrained relative. The quantity and type of service provided to inpatients were assumed to be provided to ambulatory patients in all five simulations. The results of the comparison of hospital costs to home costs were that, in the case of post-cataract extraction, home care is less costly than hospital care either if fewer services are provided to home patients or if the cost of some services assumed by relatives is not calculated. (Am J Public Health 1986; 76:1102-1104.)

Introduction The underlying assumption behind the institution of diagnostic-related groups (DRGs) and other cost-containment measures is that the substitution of ambulatory care for impatient care will prove less costly to society. A review of the literature published in 1981 showed that appropriate and complete data were not yet gathered, and that many questions remained.' Our survey of the literature also revealed that several different therapeutic and diagnostic procedures are being advocated as candidates for ambulatory treatment with at least as good a clinical outcome as inpatient care. "Of these procedures, cataract extraction was chosen as an example of a procedure for which length of stay in hospital was at issue. The purpose of this paper is to investigate under

what circumstances savings may be generated from shortening or eliminating hospital stays by substituting ambulatory care. Specifically the following questions are addressed: * To what extent do the lower costs of ambulatory care reflect a smaller quantity of services? * To what extent do the lower costs result from a shift of services from the health industry to the family? The study was based on the premise that all cataract patients presently having their cataracts removed as inpatients could be treated as outpatients if the services provided in the hospital were provided at home.
Methods
Data Sources

To ascertain the cost and content of a day in the hospital, the medical records of 62 patients who underwent cataract extraction at Mount Sinai Hospital in the first six months of 1980 were reviewed. Although cataract patients often suffer from chronic medical conditions, the patients in this study had all been living at home and were hospitalized, on this occasion, solely for cataract extractions. It was therefore assumed that they could safely return home after surgery. The list of services that were provided to the patients was made based on the assumption that the records were
From the Clinical Trials Unit and the Departments of Medicine and Community Medicine, Mount Sinai School of Medicine of CUNY. Address

reprint requests to V. A. Ancona Berk, PhD, Mount Sinai Medical Center, One Gustave L. Levy Place, New York, NY 10029. This paper, submitted to the Joumal December 9, 1985, was revised and accepted for publication April 28, 1986. Editor's Note: See also related editorial p 1086 this issue.
X 1986 American Journal of Public Health 0090-0036/86$1.50

complete and accurate, i.e., that no physician offered his services without so noting in the medical record, and that no nursing task was undertaken without it being so noted either as compliance with an order given by a physician or as initiated by the nurse. It was also assumed that the period of time between entrance into the pre-operative process and return to the hospital room after the operation would have been similarly spent whether the patient was being treated on an ambulatory or an inpatient basis. Therefore, services provided during that time period were not considered in the analysis. Other exclusions were made for the same reason; drugs and costs of tests were excluded on the assumption that the patient, whether ambulatory or inpatient, would have received them. During the first six months of 1980, 212 patients entered Mount Sinai Hospital to undergo cataract extraction. Medical records of all these patients were requested simultaneously from the Record Room but were received sporadically. An arbitrary date was chosen beyond which any charts received would be excluded from the study. The charts received before the cut-offdate do not differ from those received later. There was no indication, for example, that the charts received after the cut-off date were unavailable previous to that date because the patients involved had other current medical events after the surgery which tied up their records. Sixtytwo patient records were analyzed. The mean stay of these 62 patients was 4.29 days, while that of the total set (212 patients) was 4.32 days. Nationwide, the mean length of stay for all patients was estimated at 3.6 days, with a relative standard error of 4.7 per cent.2 Patients in the hospital for cataract surgery are seen by resident physicians, (ophthalmic) surgeons, assistant surgeons, internists, cardiologists, and endocrinologists. The tasks performed were classified as follows: * obtaining medical history and performance of physical examination, required by hospital policy upon admission; * prescribing medication, tests, or other services; * visiting patient post-operatively to change dressing; * visiting patient to investigate complications; * providing follow-up visits to check patient's status; * providing instructions to patient and/or family. Any of these tasks could have been performed by any one of the physicians previously mentioned, except for the initial dressing of the operated eye which was usually performed by surgeons or assistant surgeons; a follow-up
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COSTS OF AMBULATORY AND INPATIENT CARE

visit by an internist is not equivalent to that of a surgeon as they perform different tasks. An informal survey of physicians other than those involved in this study was conducted to obtain an estimate of the average time required to perform these tasks. Given the average amount of time required by the different specialists to perform these tasks, an estimate was derived as to the cost. For ophthalmologists, internists, and anesthesiologists, estimates of yearly earnings, number of hours of direct patient care worked per week, and number of weeks worked per year were obtained. From these data, an estimate of the cost of the different tasks outlined above was derived. For resident physicians and nursing staff, the cost oftime was estimated from the number of hours worked and the amount of money which they were paid during the first six months of 1980. Since some of the resident's time is used for learning, their cash pay may be an understatement of the value of their time. However, no adjustments were made as residents provided only 14 per cent of all physician visits. Cost per unit time was derived from these data. We used the medical record as the source for the number of tasks performed each day by nurses. These include: * checking vital signs, i.e., temperature, pulse rate, blood pressure, respiration rate; * oral medications given; * medication given by injection; * medication given intravenously; * eye drops given; * medical history of patients as told to nurse; * instructions for self-care and/or planning for posthospital phase; * obtaining electrocardiogram or cardiac monitor; * blood tests; * other tests; * catheterization; * eye compresses; * change of eye patch; * helping patient to bathroom; * helping patient with meals; * helping patient with personal care; * helping patient walk; * escorting patient to another part of hospital for tests or care. A study by MacDonnell, et al., Ion time spent by nurses performing various tasks clearly differentiates between what she calls "technical nursing" and "basic nursing". Technical nurses perform all those tasks listed above except the last five, which are considered basic nursing. Estimates by MacDonnell were used in this study to determine how much time a nurse spent on each task. This was supplemented by interviews with the nursing staff. The cost of a day in the hospital (as provided by the Financial Division of Mount Sinai Hospital) is equal to the "hotel" costs at Mount Sinai Hospital plus the cost of services such as nursing care and medical care. "Hotel" costs are expected to average out over all patients on a given floor. However health care services are provided only when needed and therefore were calculated for each patient. Many services provided in the hospital may be provided at home. Blue Cross/Blue Shield of Greater New York, as Medicare Part B carrier, computes the prevailing charge for a physician house call. Since the variation in time required to perform various tasks as outlined above is small relative to the transportation time, the prevailing charge was presumed
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TABLE 1-Per Cent Distribution of Relatives at Home of 34 Patients

Relative Wife Husband Son Daughter Sister Mother Housekeeper/maid
Per Cent 30 27 11 19 8 3 3

to be the actual cost for all house calls, irrespective of the task performed. The same reasoning applied to the cost of nursing services at home, as determined both by the Visiting Nurse Association and by a private agency. The level of training of both physicians and nurses influenced the unit cost of time which was also taken into account. Maintenance cost at home was estimated for each patient. Mean income for each census tract was classified as high, low, or average. Estimates for living expenses at these levels (except for housing) were obtained and assigned to each patient depending on the classification of his/her census tract's mean income. In certain of our models, some degree of home care would be provided by relatives (Table 1) The cost of their time was calculated for each patient's relatives on the basis of the average earnings by age and sex in the patient's home census district.
The Models

Five simulations of home care costs were compared to hospital costs. All five models included: resident physician visits, other physician visits, maintenance cost or "hotel" costs, and ambulance (see Table 2). Model 1 also included complete technical nursing by registered nurse and basic nursing on a predetermined schedule. Model 2 included the above except that constant basic nursing was provided by a health care attendant on a stand-by basis. In Model 3, the standy-by basic nursing was provided by a relative. In Model 4 and 5, registered nurses provided only the most technical of nursing services, while all other nursing tasks were performed by a paid employee in the case of Model 4 or by a relative in the case of Model 5. Results Table 3 gives mean values of home care models and hospital costs. These are for the care of cataract extraction patients, excluding the operative time. Hospital post-operTABLE 2-Home Care Simulation Models
Home Care Models

Variables

1
+ + + +

2
+ + +

3
+ + +

4
+ + +

5
+ + +
+ + +

Resident Physician Visits Other Physician Visit Complete Technical Nursing by RN Minimal Technical Nursing by RN Basic Nursing as Needed Constant Basic Nursing by Health Attendant Constant Basic Nursing by Relative Maintenance, "Hotel" Cost Ambulance

+ +
+
+ + + + + +

+ +

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ANCONA-BERK ANF CHALMERS

TABLE 3-Mean Vail} s of Models of Home Care and Hospital Costs (in dollars)
Home Care Models*
1 2 3

4 712 2471 403 356 62

Hospital Cost
643 2612 322 365 62

Mean Maximum Minimum Standard Deviation Sample Size

731 3259 339 473 62

878 3633 433 518 62

925 3221 406 545 34

769 2684 364 453 34

*The mean difference (paired) between the cost of hospital care and the five home care models ranged from $69 (95%CI$41,$97) to $335 (95%CI$205,$457).

ative care is less expensive than home care when the cost of all services provided at home are valued. Home care Models 3 and 5 simulate the costs of home care for patients who had relatives living with them. In these simulations, basic nursing was performed by the relatives. In our sample, 34 patients did not live alone. When the hospital and home care costs of these patients are compared, home care is less costly only when the value of services provided by the relatives is not included. In Table 4, the estimated cost of home care assigns a value of zero to the services of relatives. These estimates are compared to the hospital cost of the same 34 patients who had relatives living with them. Home care is less costly than hospital care, when the relatives' time is assigned a value of zero, especially in the case of Mo. el 5. Discussion These results demonstrate that the "savings" achieved by shortening or eliminating hospital stays may be attributable to two factors: either fewer services will be provided for the home patient in order to keep costs down, or the burden of some of these services will be shifted to relatives. Although either or both of these results may be desirable, neither has
TABLE 4-Comparison between Hospital and Home Care Costs (in dollars) Where Costs of Relatives' Nursing Services Are Not Included
Home Care Model*

been given much attention. The "savings" to be derived from shortening or eliminating hospital stays are usually considered to be cost-free. Our results show that this may not be so. As with other comparisons of this nature, it is difficult to say whether too many services are being provided unnecessarily in the hospital and whether, therefore, efficiency will be best served by reducing these services, or whether quality of care will be reduced as services are reduced. The answers to these questions can only be provided by a randomized control trial. Factors other than cost may play a role. It may be that home care has a better outcome than hospital care as a result of reduced infections, for example. Also, for some elderly patients, hospitalization may accelerate mental and/or physical deterioration to the point where long-term institutional care is needed. However, a randomized control trial comparing the clinical outcome of post-cataract extraction care at home with that in the hospital would have to be quite large because complications of cataract surgery are relatively rare. For example, a sample size of 1,026 would be needed to detect a rise in complications to 10 per cent in the at-home group if complications expected in the hospital group were 5 per cent. In our sample, most patients received more than two physician visits a day. One wonders whether these visits were cost-effective in the sense that each visit provided the patient with benefits commensurate with its cost. Patients at home are not likely to receive two or more physician visits a day. In one randomized control trial, post-operative physician visits were limited to one home visit,4 while in another four visits were provided in the immediate post-operative care.5 This study leaves open the question of whether all services provided in the hospital are necessary or whether similar outcomes would be obtained if fewer services were provided in the hospital. Finally, it should be clearly understood that part of the savings from substitution of ambulatory for inpatient care are derived from a shifting of the cost of services from the health care industry to the family.
This research was supported in part by grant LM 03116 from the National Library of Medicine.

ACKNOWLEDGMENT

REFERENCES
I. Berk AA, Chalmers TC: Cost efficacy of the substitution of ambulatory for inpatient care. N EngI J Med 1981; 304:393-397. 2. National Center for Health Statistics, McCarthy E: Inpatient Utilization of Short-Stay Hospitals by Diagnosis, United States 1980. Vital and Health Statistics, Series 13, No. 74. DHHS Pub. No. (PHS) 83-1734. Washington, DC: Govt Printing Office, September 1983; 29. 3. MacDonnell JAK, Brown U, Johannson B: Timing studies of nursing care in relation to categories of hospital patients. Winnipeg, Manitoba: Deer Lodge Hospital, 1973. 4. Ingram RM, Banerjee D, Traynar MS, Thompson RK: Day care cataract surgery. Trans Ophthalmol Soc UK 1980; 100:205-209. 5. Galin MA, Boniuk V, Obstbaum S, Glasser M: Out-patient cataract surgery. Trans Ophthalmol Soc UK 1975; 95:42-45.

Hospital Cost Mean Standard Deviation Sample Size"

595
241 34

585 261 34

429 173 34

$-166 (95%CI$-110,$-232). aOnly those cases in which relatives lived in the patient's home are included in this comparison.

'Th'q mean difference (paired) between the cost of Home Care Model 3 (with the time of relatives being assigned a value of zero) and hospital costs for the same patients is $-9 (95%Cl$-49,$+31). The same comparison for Home Care Model 5 leads to a difference of

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