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Regression analysis of health care charges with heteroscedasticity

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We examine the effects of a prospective drug utilization review and patients' characteristics on total in-patient and out-patient health care charges. Our analysis of charges is complicated by the fact that the total health care charges are skewed. A log-transformation of these charges can normalize their distribution but may not stabilize their variance. To handle these problems, we propose a linear regression model with a non-constant variance (heteroscedasticity). Using results from a fitted linear regression model for log-transformed charges, we also discuss interpreting the regression coefficients in the original scale and estimating the total health care charges to individual patients. Employing these methods, we analyse total health care charges for drug utilization review patients with hypertension and identify patients' factors that are related to their total health care charges.

Keywords: Health care charges; Health care costs; Heteroscedasticity; Hypertension; Log-normal data; Skewed data

Document Type: Original Article


Affiliations: 1: Indiana University School of Medicine, Indianapolis, USA, 2: Hines Veterans Administration Hospital, Hines, and Northwestern University, Chicago, USA, 3: Indiana University School of Medicine, Indianapolis, and Richard L. Roudebush Veterans Administration Medical Center, Indianapolis, USA

Publication date: January 1, 2001


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