An Episode‐Based Framework for Analyzing Health Care Expenditures: An Application of Reward Renewal Models

Abstract

Objective. To illustrate an episode-based framework for analyzing health care expenditures based on reward renewal models, a stochastic process used in engineering for describing processes that cycle on and off with ''rewards'' (or costs) occurring at the end of each cycle. Data Sources/Study Setting. Data used in the illustration were collected as part of an evaluation of a national initiative to improve mental health services for children and youth. Participants were enrolled in a longitudinal study at a demonstration site and in a comparison community between 1997 and 1999. The illustration involves analyses of mental health expenditures at the two sites and of the dynamics of service use behind those expenditures. Data Collection/Extraction Methods. Services data were derived from management information systems as well as patient records at inpatient facilities in the two communities. These data cover services received between 1997 and 2003. The analysis focuses on the year following study entry. Principal Findings. Between-site differences in expenditures reflect complex between-site differences in the timing of service use. In particular, children at the demonstration stayed in treatment longer but were less likely to return for treatment later. In contrast, children at the comparison site experienced substantially less continuity of care. Costs per day of treatment within an episode were comparable at the two sites. Conclusions. Reward renewal models offer a promising means for integrating research on service episodes and the dynamics of service use with that on health care expenditures. (Druss and Rosenheck 1997;Druss et al. 2002;Busch, Leslie, and Rosenheck 2004). Treatment guidelines also refer to timing issues. For example, the American Academy of Pediatrics recommends treatment plans for children with attention problems so that they receive timely medication management and monitoring (Bauchner 2000;Herrerias, Perrin, and Stein 2001;Stein and Perrin 2003;Leslie et al. 2004;Rushton, Fant, and Clark 2004). KeyThe issue of timing is central to analysis of treatment episodes--''a series of temporally contiguous health care services related to treatment of a given spell of illness or provided in response to a specific request by the patient or other relevant entity'' (Hornbrook, Hurtado, and Johnson 1985). Researchers have long been interested in the dynamics of treatment episodes. This research involves their length and the factors that influence their beginning and end (e.g., Foster 1998;Goldman et al. 1998).In contrast, analyses of costs or expenditures 1 often focus on a fixed time period, such as a calendar or fiscal year. start and stop as well as the magnitude of expenditures while in treatment. All three may be shaped by different forces. Whether an individual begins treatment may depend on system-level factors, such as the availability of services. How long he or she remains in treatment may depend on other characteristics, such as transportation. Expenditures per day while in treatment may depen...