Hierarchical causal variance decomposition for institution and provider comparisons in healthcare

Disease-specific quality indicators (QIs) are used to compare institutions and health care providers in terms processes or outcomes relevant to treatment of a particular condition. In the context of surgical cancer treatments, the performance variations can be due to hospital and/or surgeon level differences, creating a hierarchical clustering. We consider how the observed variation in care received at patient level can be decomposed into that causally explained by the hospital performance, surgeon performance within hospital, patient case-mix, and unexplained (residual) variation. For this purpose, we derive a four-way variance decomposition, with particular attention to the causal interpretation of the components. For estimation, we use inputs from a mixed-effect model with nested random hospital/surgeon-specific effects, and a multinomial logistic model for the hospital/surgeon-specific patient populations. We investigate the performance of our methods in a simulation study.