The effect of health care expenditure on patient outcomes: Evidence from English neonatal care

The relationship between health care expenditure and health outcomes has been the subject of recent academic inquiry in order to inform cost-effectiveness thresholds for health technology assessment agencies. Previous studies in public health systems have relied upon data aggregated at the national or regional level; however, there remains debate about whether the supply side effect of changes to expenditure are identifiable using data at this level of aggregation. We use detailed patient data derived from electronic neonatal records across England along with routinely available cost data to estimate the effect of changes to patient expenditure on clinical health outcomes in a well-defined patient population. A panel of 32 neonatal intensive care units for the period 2009-2013 was constructed. Accounting for the potential endogeneity of expenditure a 100 pound increase in the cost per intensive care cot day (sample average cost: 1,127) pound is estimated to reduce the risk of mortality of 0.38 percentage points (sample average mortality: 11.0%) in neonatal intensive care. This translates into a cost per life saved in neonatal intensive care of approximately 420,000 pound.