Methods for comparison of cost data

Xiao Hua Zhou, Catherine A. Melfi, Siu L. Hui

Research output: Contribution to journalArticlepeer-review

86 Scopus citations


Background: Researchers are increasingly interested in examining costs of care, and large administrative and clinical databases have made relevant data readily available. Because a few patients incur high costs relative to most patients the distribution of cost data is often skewed. How robust are the usual methods of cost analysis against the skewed distribution of cost data? Objective: To determine the methods commonly used for comparing cost data, describe their limitations, and provide an alternate method of analysis. Design: Review of statistical methods used in studies of medical costs published in medical journals between January 1991 and January 1996. Description of a Z-score method for testing the equality of mean costs appropriate between two log-normal samples; and reanalysis of published two- sample comparison results done by using the Z-score method. Results: For two- sample comparisons, three methods were commonly used: the Student t-test on untransformed costs, the Wilcoxon test on untransformed costs, and the Student t-test on log-transformed costs. The t-test on untransformed costs ignores the skewness in cost data, the Wilcoxon test ignores unequal variances, and the t-test on log-transformed costs tests the wrong null hypothesis unless variances in the log-scale are equal. Eleven articles included two-sample tests and had enough information to allow reanalysis of the data using the Z-score method. These articles described a total of 23 Wilcoxon tests and 24 t-tests on untransformed costs. Most results did not change on reanalysis, but six results changed enough to alter conclusions. Specifically reanalysis of data for which one Wilcoxon test had shown statistically significant results showed nonsignificant results; reanalysis of data for which two Wilcoxon tests had shown nonsignificant results showed statistically significant results. In articles that used t-tests on untransformed costs, two statistically significant results became nonsignificant on reanalysis and one nonsignificant result became statistically significant on reanalysis. Conclusions: The methods commonly used to compare costs of two groups have limitations. Some limitations may change some conclusions, and the direction of the change cannot be predicted. The Z-score method is designed to adjust for skewness in cost data and is appropriate for comparing means of log-normally distributed cost data.

Original languageEnglish (US)
Pages (from-to)752-756
Number of pages5
JournalAnnals of internal medicine
Issue number8 II SUPPL.
StatePublished - Jan 1 1997

ASJC Scopus subject areas

  • Internal Medicine

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