The marginal benefits of healthcare spending in the Netherlands: Estimating cost‐effectiveness thresholds using a translog production function

New technologies may displace existing, higher‐value care under a fixed bud-get. Countries aim to curtail adoption of low‐value technologies, for example,by installing cost‐effectiveness thresholds. Our objective is to estimate theopportunity cost of hospital care to identify a threshold value for the Nether-lands. To this aim, we combine claims data, mortality data and quality of lifequestionnaires from 2012 to 2014 for 11,000 patient groups to obtain quality‐adjusted life‐year (QALY) outcomes and spending. Using a fixed effectstranslog model, we estimate that a 1% increase in hospital spending on averageincreases QALY outcomes by 0.2%. This implies a threshold of€73,600 perQALY, with 95% confidence intervals ranging from€53,000 to€94,000 perQALY. The results stipulate that new technologies with incremental cost effec-tiveness ratios exceeding the Dutch upper reference value of€80,000 mayindeed displace more valuable care.