Max Rady College of Medicine

Concept: Small Area Analysis (SAA)

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Concept Description

Last Updated: 2003-03-06


    Small area analysis (SAA) is a technique that uses large administrative databases to obtain population-based measures of utilization and resource allocation. SAA can provide the following kinds of statistics:
    For years, the per capita costs of hospitalization for the residents of Boston have been about twice as great as the costs for the residents of New Haven. In the early 1970s the chances that a child would reach age 15 with tonsils in place was over 90% in Middlebury, Vermont but less than 40% in Morrisville. ( Wennberg JE (1990))
    SAA is useful for studying the effects of differing practice styles on health care utilization rates (see Rates of Utilization concept for more information). When rates of utilization among neighboring communities are compared, variation NOT related to demand (and/or errors in the data) can be explained by the way physicians make diagnoses or recommend treatments.

    Overall rates of hospitalization or surgery for a population can be attributed to four factors:

    1. illness rates
    2. decisions of individual patients to contact physicians
    3. diagnostic decisions of physicians
    4. treatment or prescription decisions of physicians

    SAA can reveal the effects of differing clinical decision making (factor4) on hospital utilization, while accounting for changes in factors 1,2 and 3.

Small Area Techniques

    Small Area Analysis (SAA) can be viewed in three steps: (1) defining the areas for comparisons, (2) estimating resource allocation for those areas and (3) measuring utilization.

    1. Defining Geographic Boundaries - One can measure the delivery of care within a specific city or group of neighbourhoods. In this case, the geographic boundary is very obvious. On the other hand, one may be interested in the distribution of care throughout a region, with relation to the area of major source of care. In this case, boundaries would be defined by grouping particular postal codes together and each group would be an area of interest.

    2. Resource Allocation - Once the geographic areas are defined, an estimate of the amount of resources allocated to the resident population must be made. The types of estimates that can be used are the number of hospital beds, employees, admissions or expenditures per capita.

    3. Utilization Rates - These are calculated for specific areas on a crude and age-adjusted basis, usually using the indirect method of standardization. Rates represent events, not persons, as patients receiving the same service more than once are counted each time.

Small Area Variation Phenomenon

    The classic description of the small area variation phenomenon is Glover's (1938) account of differences in the tonsillectomy rate among British school children:
    "... revealed striking contrasts in areas apparently somewhat similarly circumstanced. Thus, in that year (1931) the operation rate in Margate was eight times that in Ramsgate; that of Enfield was six times that of Wood Green and four times that of Finchley; that of Bath five times that of Bristol; ..."
    There can be variations in the probabilities of having an operation as well as variations in per capita expenditures and resource allocations among communities.

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  • Diehr P, Cain KC, Dreuter W, Rosenkranz S. Can small-area analysis detect variation in surgery rates? The power of small-area variation analysis. Medical Care 1992;30(6):484-502. [Abstract] (View)
  • Fisher ES, Wennberg JE, Stukel TA, Sharp SM. Hospital readmission rates for cohorts of Medicare beneficiaries in Boston and New Haven. New England Journal of Medicine 1994;331(15):989-995. [Abstract] (View)
  • McMahon LF, Wolfe RA, Griffith JR, Cuthbertson D. Socioeconomic influence on small area hospital utilization. Med Care 1993;31(5 Suppl):YS29-YS36. [Abstract] (View)
  • Roos NP, Roos LL. "Small area variations, practice style, and quality of care." In: Wenzel RP; (ed). Assessing Quality Health Care: Perspectives for Clinicians. Baltimore, MD: Williams & Wilkins; 1992. 223-238.(View)
  • Roos NP, Mustard CA. Variation in health and health care use by socioeconomic status in Winnipeg, Canada: does the system work well? Yes and no. Milbank Q 1997;75(1):89-111. [Abstract] (View)
  • Wennberg JE. On the appropriateness of small-area analysis for cost containment. Health Aff (Millwood) 1996;15(4):164-167. [Abstract] (View)
  • Wennberg JE. "Small area analysis and the medical care outcome problem." In: Sechrest L, et. al. (eds). Conference Proceedings. Research Methodology: Strengthening Causal Interpretations of Nonexperimental Data. DHHS Publication No. (PHS) 90-3454. Rockville, MD: U.S. Department of Health and Human Services, AHCPR; 1990. 177-206.(View)

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Manitoba Centre for Health Policy
Community Health Sciences, Max Rady College of Medicine,
Rady Faculty of Health Sciences,
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