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Impact of socioeconomic factors on in-patient length of stay and their consequences in per case hospital payment systems

Objectives: The number of countries adopting per case hospital payment systems has been continuously increasing in recent years. Nonetheless, debates persist regarding their consequences for equity of access to services. This concern relates to the failure of diagnostic classifications properly to take into account patients’ care requirements, raising the threat of case selection (‘cream skimming’). We examine the heterogeneity of costs within diagnostic categories related to socioeconomic (SE) factors using length of stay (LOS) as a proxy measure of care needs and costs. We evaluate its consequences in terms of fairness in resource allocation between hospitals. Methods: We employ data on all discharges in 2002-03 from a sample of 60 Belgian hospitals (617,275 observations), measuring the association between LOS and SE factors using generalized linear models. We design a resource allocation formula based on the Belgian financing scheme, where non-medical activity is paid based on a normative number of in-patient days, and measure financial penalties and rewards according to whether payment is adjusted for the SE characteristics of patients or not. Results: Both patients’ SE status and hospitals’ area SE profile have a significant impact on LOS, which persists after controlling for detailed diagnostic and hospital characteristics. Hospitals treating low income patients are financially penalized as a result. Conclusion: SE factors are a predictor of in-patient LOS and should be taken into account in per case resource allocation among hospitals.