1076 — Why Cost-Offset Studies Do Not Convince Medical Centers to Provide Substance Use Disorder Treatment

Humphreys K (Palo Alto VA and Stanford), Wagner TH (Palo Alto VA and Stanford), Gage M (Palo Alto VA and Stanford)

Objectives:
Addiction treatment services have received declining financial support over the past decade, concurrent with growing evidence that substance use disorder (SUD) treatment more than pays for itself through cost-offsets in other areas (e.g., health care, crime). This paper tries to explain this puzzling discrepancy by analyzing data from the Department of Veterans Affairs.

Methods:
If treatment pays for itself, then one would expect medical centers that increase their supply of SUD treatment would see savings (i.e., cost-offsets) in other departments (i.e., psychiatry and general medical care). For fiscal years 1998 to 2006, we calculated the supply of SUD treatment using costs from DSS. We then tracked all patients with a substance use disorder diagnosis, excluding patients with only nicotine dependence. For these SUD patients, we identified the amount of SUD, psychiatric, and general medical/surgical care they received (inpatient and outpatient). We then conducted multivariate time series analyses to determine if the supply of SUD was associated with cost-offsets in other departments. We searched for both contemporaneous and lagged cost-offsets. Our regression models controlled for hospital size, wage rates, patient composition, and included fixed effects for medical centers and time. Sensitivity analyses were conducted to ensure results were consistent for small, medium, and large VA medical centers.

Results:
The results show that a $10,000 reduction in SUD treatment would save the medical center an additional $2,900 because fewer SUD patients would be treated and SUD patients would use less health care.

Implications:
Health care systems may not be strongly influenced to provide SUD treatment by research showing “cost-offsets” because they bear the cost while the offsets accrue to others (e.g., the criminal justice system).

Impacts:
This research might de-mystify for SUD treatment advocates why some health care system leaders do not accept the proposition that increasing spending money on treatment saves money. They do not accept it because it generally is not true for them even though it may very well be true if all public and private costs are accounted for.