A hybrid cost function for outpatient nonmethadone substance abuse treatment facilities

Abstract

A substantial literature provides estimates of the average cost of an episode of substance abuse treatment (e.g., see Anderson, Bowland, Cartwright, & Bassin, 1998; McGeary, French, Sacks, McKendrick, & De Leon, 2000), and various methods of estimating these costs have been used in benefit-cost analyses (see Cartwright, 2000, for a review). However, little work has been done to examine the cost structure of the substance abuse treatment industry. Extant work has focused on the association between cost and a measure of size based on point-prevalence client counts of residential treatment programs, a small and declining segment of the industry (Harwood, Kallinis, & Liu, 2001), or client counts and revenue in a convenience sample of outpatient substance abuse treatment facilities (Mark et al., 2000). Neither study employed economic methods commonly used to study cost structures in other health care industries. This chapter expands our understanding of the substance abuse treatment industry by using methods informed by economic theory to examine the cost structure of a national sample of substance abuse rehabilitation facilities that offer outpatient nonmethadone treatment. In 1999, such facilities accounted for approximately 82 percent of all substance abuse treatment facilities nationwide (Office of Applied Studies [OAS], 2001).