Use of elective surgery in public hospitals: modeling access-cost quality trade-offs in a spatial framework

The overall objective of the paper is to model and econometrically analyze the impact of access costs (travel time to hospital) and quality of health care on the utilization of elective health services in public hospitals. We argue that patients might face a trade-off between better perceived quality of care and access costs. The extant literature has not yet developed a common framework which explicitly incorporates the quality and access trade-off. The first aim of this paper is to help fill this gap. We propose a stylized model where GPs and Specialists act as gatekeepers, waiting times act as a rationing device; and perception of quality and access costs contributes to the choice of hospital for treatment. A secondary objective of the paper is to explore econometric approaches to simultaneously deal with access cost quality tradeoff and its effect on patient flows across regions. The geographic access costs lead to interaction between regions which is termed as spatial dependence. This is econometrically tested by applying spatial regression techniques focussing on spatial panel models recently proposed but not yet been widely applied to health economics. The results show that spatial effects especially the geographic neighborhood effects significantly affect the hospital utilization rates at a regional level. Travel time is found to have significant and negative effect on hospital utilization for some Diagnostic categories. The effect of quality of care (measured by the rate of adverse events) is negative and significant for one category of separations. However the effect is quantitatively small. We do not find any evidence of trade-off between quality and travel time for all category of separations. Policy implications are discussed.