Profiling hospital utilization in a mixed public–private system

ABSTRACT

While there is an extensive body of literature on the demand for hospital services, little is known about the interaction between public and private hospitals in a mixed system. In this article, we (1) apply latent class analysis to identify distinct subgroups of patients who use the hospital market differently, (2) characterize each patient type by their personal characteristics and (3) link the patient type to future hospital admissions. We apply our analysis to individual-level longitudinal patient data from Australia, focusing on three popular procedures that are performed in both public and private hospitals. We find 4–5 patient types. The most common types use either a public or a private hospital almost exclusively and absorb a moderate level of hospital resources. The severe types represent 13–17% of patients. The type which uses both sectors makes up 10–20% and tends to have private health insurance coverage. The patient types are predictive of prospective utilizations as we find that patients tend to be admitted to the sector they have used in the past. By revealing how patients use coexisting public and private hospitals, our results have direct implications on health resource financing and allocations.

KEYWORDS:

• Hospital utilization
• public and private hospital
• market segmentation
• latent class analysis

JEL CLASSIFICATION:

• I11
• I18

Acknowledgements

We are grateful for comments from the participants of The 2015 CEPAR Summer Workshop in the Economics of Health and Ageing where we presented an earlier version of this article. This research is funded by ARC (Australian Research Council) project grants DP110100729 and DE140100719. It uses data from the 45 and Up Study, which is managed by the Sax Institute in collaboration with major partner Cancer Council New South Wales, and partners the Heart Foundation (NSW Division); NSW Ministry of Health; beyondblue; Ageing, Disability and Home Care, NSW Family and Community Services; ARC Blood Service; and Uniting Care Ageing. We thank the many thousands of people participating in the 45 and Up Study. The 45 and Up Study has the approval of the University of NSW Health Research Ethics Committee; this project has ethics approval from the NSW Population and Health Services Research Ethics Committee.

Disclosure statement

No potential conflict of interest was reported by the authors.

Notes

¹ For nervous system, only 3% of patients returned for nervous system problems; for respiratory system, 4% returned for respiratory problems and for circulatory system, 5% returned for circulatory problems.

Additional information

Funding

This work was supported by the ARC; [DP110100729 and DE140100719].