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Background  Methods for the cost-effectiveness analysis of health technologies are now well established, but such methods may also have a useful role in the context of evaluating the effects of variation in applied clinical practice. This study illustrates a general methodology for the comparative analysis of applied clinical practice at alternative institutions – risk adjusted cost-effectiveness (RAC-E) analysis – with an application that compares acute hospital services for stroke patients admitted to the main public hospitals in South Australia.    Methods  Using linked, routinely collected data on all South Australian hospital separations from July 2001 to June 2008, an analysis of the RAC-E of services provided at four metropolitan hospitals was undertaken using a decision analytic framework. Observed (plus extrapolated) and expected lifetime costs and survival were compared across patient populations, from which the relative cost-effectiveness of services provided at the different hospitals was estimated.    Results  Unadjusted results showed that at one hospital patients incurred fewer costs and gained more life years than at the other hospitals (i.e. it was the dominant hospital). After risk adjustment, the cost minimizing hospital incurred the lowest costs, but with fewer life-years gained than one other hospital. The mean incremental cost per life-year gained of services provided at the most effective hospital was under $20,000, with an associated 65% probability of being cost-effective at a $50,000 per life year monetary threshold.    Conclusions  RAC-E analyses can be used to identify important variation in the costs and outcomes associated with clinical practice at alternative institutions. Such data provides an impetus for further investigation to identify specific areas of variation, which may then inform the dissemination of best practice service delivery and organisation.

Evaluating the effects of variation in clinical practice: a risk adjusted cost-effectiveness (RAC-E) analysis of acute stroke services