Throughout the world, governments and societies have become increasingly concerned with the costs of healthcare. Healthcare costs in the United States have substantially outpaced those in other countries (1). Within the United States, some of the cost increases are attributable to a larger and aging population and to inflation, but questions have arisen as to whether increased intensity of service and higher administrative costs are major contributing factors. Because it is relatively simple to isolate hospital costs from the other costs of healthcare, much of the effort to contain healthcare costs has focused on hospital, as opposed to outpatient, care. The departmental organization of hospitals has prompted the focus of attention regarding costs to the different cost centers, or departments, that provide services rather than on the overall costs of the patients' diseases. The objective of this study was to determine the typical costs of managing different diseases and to identify the component sources of these costs. Since 1989, the University HealthSystems Consortium (UHC) [1] has collected all-payor hospital discharge data from many of its academic medical center members. This resource, the UHC Clinical Data Base, contains information on length of stay (LOS), costs, and clinical outcomes such as inpatient mortality and complications rates. Cost estimates of inpatient care are available for every discharge, and this information can be aggregated on multiple levels, including diagnosis-related groups (DRGs). For each hospital, the total costs have been broken down by component sources. The database enables each hospital within the UHC to benchmark its costs for individual services for a given disease against those of its peers. Such an approach allows an institution to identify component costs for a specific service that deviate markedly from those in comparable institutions, thus enabling focused efforts to eliminate inappropriate resource utilization or to create efficiency. The database provides the background information to enable a hospital to make rational decisions as to whether it should embark on new programs or close or modify existing programs. The UHC database provides information on both the median and mean costs for any component service. In the absence of more detailed information on the variability within the service, we have compared mean costs, which are greatly influenced by unusual situations, with the more typical median costs to provide a measure of the heterogeneity of these costs.
