Examining variation in treatment costs

Abstract

Objectives. To estimate a hybrid cost function of the relationship between total annual cost for outpatient methadone treatment and output (annual patient days and selected services), input prices (wages and building space costs), and selected program and patient case-mix characteristics.

Data Sources. Data are from a multistate study of 159 methadone treatment programs that participated in the Center for Substance Abuse Treatment's Evaluation of the Methadone/LAAM Treatment Program Accreditation Project between 1998 and 2000.

Study Design. Using least squares regression for weighted data, we estimate the relationship between total annual costs and selected output measures, wages, building space costs, and selected program and patient case-mix characteristics.

Principal Findings. Findings indicate that total annual cost is positively associated with program's annual patient days, with a 10 percent increase in patient days associated with an 8.2 percent increase in total cost. Total annual cost also increases with counselor wages (p

Conclusions. This study provides important new insights into the determinants of methadone treatment costs. Our findings concur with economic theory in that total annual cost is positively related to counselor wages. However, among our factor inputs, counselor wages are the only significant driver of these costs. Furthermore, our findings suggest that methadone programs may realize economies of scale; however, other important factors, such as patient access, should be considered.