Placental examination has been controversial for many years. Differing views are held about the rationale and economic impact of such examination. On one hand, advocates argue that placental examinations are essential for clinical and medicolegal concerns. Others argue that these procedures waste resources and that inadequate empirical evidence exists to indicate whether they are cost-effective. They believe that placental examinations should be performed only on the basis of well-defined criteria. Clinical benefits of placental evaluation are twofold. First, information from this evaluation can improve management of subsequent pregnancies through diagnosis of pathology. Second, placental evaluation provides for assessing the risk of long-term neurological developmental conditions of the newborn. Several physicians at East Bank Regional Hospital began to perform routine placental cultures on all women at delivery. The hospital’s Medical Care Review Committee has become concerned about overuse and associated increases in costs. The committee felt that the practice of routine placental cultures might be establishing different standards of care among the hospital medical staff. The underlying concern of the committee was the cost-effectiveness of this practice. In fact, the committee strongly suggested that the practice be discontinued. Before responding to the committee’s recommendation, the group of physicians using the clinical protocol of routine placental cultures commissioned a formal costeffectiveness analysis. The physicians in question had begun to perform routine placental cultures in 1999. Data were collected in two separate time periods: five years before 1999 (1994–1998) and five years since beginning the routine culture practice (1999–2003). The unit of analysis was each delivery, and the underlying study hypothesis was that fewer readmissions would be one outcome of performing routine placental cultures. If this hypothesis is supported, an associated study question will be what the cost is per unit health benefit (that is, decreased readmissions). In other words, is the cost of routine placental cultures worth the expense of resources? Currently, the hospital charge for performing placental culture is $36.00. This charge has resulted from an annual increase of 9%, so the average charge since 1999 is $30.55. Medicaid has paid between 70% (in 1994) and 47.6% (in 2003) of these charges. According to information from the hospital’s chief financial officer, the Medicaid payment has averaged 60% for the study period. This figure indicates that the average payment from Medicaid has been $18.33 per culture. During the period from 1994 to 1998, the physicians in question did not perform routine placental cultures on all deliveries, and their patients experienced 25 readmissions in 1,070 deliveries, a rate of 23.36 readmissions per 1,000 deliveries. These readmissions resulted in total charges of $84,355.00, with an average charge of $3,374.20 (standard deviation of $1,862.74). Beginning in 1999, the physicians in question began the practice of performing placental cultures on all deliveries. During this period, their patients experienced 10 readmissions in 2,605 deliveries, a rate of 3.83 readmissions per 1,000 deliveries. These readmissions resulted in total charges of $26,825.00, with an average charge of $2,682.50 (standard deviation of $1,212.69). The 2,605 cultures cost $79,582.75. Assuming that 100% of the cultures are charged to Medicaid, this would result in a payment of $47,749.65. Total charges associated with readmissions and cultures during 1999–2003 were $74,574.65.
a. What is the difference between the rate of readmission among the physicians in question from 1994 to 1998 and the readmission rate from 1999 to 2003?
b. What is the marginal cost-effectiveness ratio to determine the cost per health benefit associated with the additional charge of the placental cultures?
