Assessing the impact of drug use on hospital costs.
OBJECTIVE
To assess whether outpatient prescription drug utilization produces offsets in the cost of hospitalization for Medicare beneficiaries.


METHODS
The study analyzed a sample (N=3,101) of community-dwelling fee-for-service U.S. Medicare beneficiaries drawn from the 1999 and 2000 Medicare Current Beneficiary Surveys.


METHODS
Using a two-part model specification, we regressed any hospital admission (part 1: probit) and hospital spending by those with one or more admissions (part 2: nonlinear least squares regression) on drug use in a standard model with strong covariate controls and a residual inclusion instrumental variable (IV) model using an exogenous measure of drug coverage as the instrument.


RESULTS
The covariate control model predicted that each additional prescription drug used (mean=30) raised hospital spending by $16 (p<.001). The residual inclusion IV model prediction was that each additional prescription fill reduced hospital spending by $104 (p<.001).


CONCLUSIONS
The findings indicate that drug use is associated with cost offsets in hospitalization among Medicare beneficiaries, once omitted variable bias is corrected using an IV technique appropriate for nonlinear applications.
Stuart
Bruce C
BC
Peter Lamy Center on Drug Therapy and Aging, University of Maryland Baltimore, 220 Arch Street, Room 01-212, Baltimore, MD 21201, USA. bstuart@rx.umaryland.edu
Doshi
Jalpa A
JA
Terza
Joseph V
JV
D000368:Aged; D000369:Aged, 80 and over; D011307:Drug Prescriptions / Q000191:economics*; D005260:Female; D017721:Hospital Costs / Q000706:statistics & numerical data*; D006801:Humans; D019458:Insurance Coverage / Q000191:economics*; D008297:Male; D006278:Medicare / Q000191:economics*; D015233:Models, Statistical; D020379:Risk Adjustment; D014481:United States
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