do mergers really reduce costs evidence from hospitals in this paper we compare potential and realized cost savings from hospital mergers our approach isolates changes in realized cost savings due to different output mixes from systematic changes due to time and also provides a measure of the potential cost savings due to scale economies our findings suggest that economies of scale are present for merging hospitals and they realize these cost savings immediately following a merger however we also show that over time cost savings from the merger decrease and the proportion of hospitals experiencing positive cost savings declines

cost efficiency and electricity market structure a case study of oecd countries the oecd electricity sector has witnessed significant institutional restructuring over the past three decades as a consequence many power generation utilities now act as unregulated companies that technically compete to sell power on an open market this paper analyses the performance in term of cost efficiency for electricity generation in oecd power sector while accounting for the impact of electricity market structures we employ the short run cost function in which capital stock is treated as a quasi fixed factor input empirical models are developed for the cost function as a translog form and analysed using panel data of 25 countries during the period 1980 to 2009 we show that it is necessary to model latent country specific heterogeneity in addition to time varying inefficiency the estimated economies of scale are adjusted to take account of the importance of the quasi fixed capital input in determining cost behaviour and long run constant returns to scale are verified for the oecd generation sector the research findings suggest there is a significant impact of electricity market regulatory indicators on cost in particular public ownership and vertical integration are found to have significant and sizable increasing impacts on cost thereby indicating policy lessons on the desirable ways to implement structural electricity generation reforms

multiproduct short run hospital cost functions empirical evidence and policy implications from cross section data economists and policymakers have been interested in hospital costs and the structure of hospital technologies for several decades now early interest was focused on the possibility of scale economies which implied increased efficiency for larger hospitals 6 8 12 13 18 20 while more recent interest has been stimulated by the inflationary spiral of hospital costs 1 15 17 22 as hospital costs have risen important policy questions concerning the impact on costs of the hospitals diagnostic case mix the hospitals admitting physicians the hospitals size and the hospitals efficiency have emerged and researchers have attempted to deal with these issues within the context of increasingly complex econometric models 1 2 5 24 27 however in attempting to analyze these important policy issues researchers have been forced to make two major types of compromises on the one hand appropriate data are often not available for estimating a well specified cost function e g information on admitting physicians and diagnostic case mix are often missing so that problems of specification error often plague the econometric results conversely in using imaginative ways to deal with data problems e g weighting in patient and out patient care to form a single index of hospital services 1 27 or estimating separate cost functions for each department in the hospital 2 researchers sometimes place unrealistic and unnecessary constraints on their econometric models the purpose of this study is to analyze the impact of several of the primary hospital characteristics mentioned above on the short run costs of hospitals within a theoretically consistent framework in the following discussion we also develop the theoretical

duopolistic vertical restraints abstract in an industry where competition exists at the wholesale level vertical restraints are not necessarily desirable from the standpoint of the manufacturers when vertical restraints are employed it is never in the form of retail price maintenance but rather in the form of franchise fee pricing when the products produced by the manufacturers are only slightly differentiated the producers may benefit from the double marginalization that arises with linear pricing such double marginalization results in higher retail prices which relieve competitive pressures

hospital technology in a nonmarket health care system 1 introduction the theoretical framework relating to the production of health services by hospitals is similar to that of any other firm economists are concerned with much the same issues in the measurement of output in the health sector as in other spheres of production foremost among these is the shape of the production function that underlies the transformation of inputs into outputs since it determines the optimal size and structure of the production unit in this case hospitals based on a 12 year panel of all short term hospitals in quebec covering 1981 through 1992 this research examines the health care production process the approach is new in that it examines hospitals in a noncompetitive socialized framework and relies on a very complete hospital sector data set to avoid biases often present in previous work all quasi fixed inputs physicians equipment and buildings all variable inputs labor drugs food for inpatients supplies energy and an aggregate of other inputs and all outputs inpatient care outpatient care food and laundry services sold to the public laboratory services to outpatients or under contract and teaching are included in the estimation determining the optimality of the hospital industry structure in quebec is important for at least two reasons first hospital investment decisions in quebec are centralized planners can determine the optimal hospital structure only if they have knowledge of the hospital production process second the absence of a competitive market precludes the usual adjustments driven by competitive pressures from taking place diseconomies of scope or scale highly unlikely in a competitive market might be present large and persistent in a nonmarket structure in quebec hospitals are most often private not for profit institutions however the quebec government that controls the national health insurance system is their only payer except for very small revenues from hospital private foundations or uninsured services such as cosmetic surgery some laboratory tests etc these private payments to hospitals represent negligible amounts as a result the system operates very much as if hospitals were in fact public entities collective bargaining occurs with the government reimbursement rates are determined by the government and major investment or merger decisions equipment purchase or new construction are approved by the government the present analysis provides a framework to gather information valuable to planners in any publicly funded system as they restructure hospital health services delivery in quebec the government could also better respond to changes in relative input prices through changes in relative input use review of its reliance on private laboratory analysis services or toughening of its medical school admissions policies in the early 1990s and without the benefit of an analysis such as this one the quebec government froze health care spending closed a number of hospitals changed hospitals role from short term care to long term care and decentralized its structure through regional boards regies regionales some of the unintended consequences included crowding in hospitals a near breakdown of emergency care during the first months of each year since and few if any gains in efficiency our analysis provides an exploration of the structure of hospital production in a nonmarket environment in anticipation of unavoidable restructuring of the industry in the years to come it also suggests a management tool for planners to direct the industry toward greater economic performance through changes in hospitals relative budgets changes in the scope of services offered or mergers between establishments this article examines the optimality of size diversification capitalization levels and technological change as well as the flexibility in the choice of inputs and outputs it identifies the hospital and delivery structure characteristics associated with greater performance

resale price maintenance and collusion the article revisits the conventional wisdom according to which vertical restrictions on retail prices help upstream firms to collude we analyze the scope for collusion with and without resale price maintenance rpm when retailers observe local shocks on demand or retail costs in the absence of rpm retail prices react to retailers information and deviations from collusive behavior are thus difficult to detect by eliminating retail price flexibility rpm facilitates the detection of deviations but reduces profits and thus increases the short run gains from a deviation overall rpm can facilitate collusion and reduce total welfare when firms adopt it

the effects of regulation and competition in the nhs internal market the case of general practice fundholder prices the 1989 reforms of the uk national health service introduced competition in supply within a tightly regulated framework the paper examines whether this competition affects the prices posted by sellers of medical services we argue that despite regulation market forces may have an impact on price we test this using the posted prices for one of the two types of buyer general practice fundholders we find the regulatory rules are not observed and some evidence of the impact of market forces on price

the structure of costs and production in new zealand public hospitals and application of the transcendental logarithmic vaiable cost funcation new zealand s public hospitals provide free secondary health care to the public through taxation funding since these hospitals vary by both size and range of services provided the possibility of more porductive resource use is of explicit interest a translog variable cost function is estimated for new zealand public hospitals using 1987 cross section data an analysis of sthe function reveals the marginal costs short run and long run economies of scale and input factor substitution possibilities results suggest that a transfer of both patients with less severe conditions and staff from teachin hospitals to say country hospitals will result in a short run decareased total cost to the system the long run economies of scale estimates suggest that efficiency gains could result from downsizing large hospitals merging smaller hospitals and increasing patient turnover partial elasticites of demand indicate the asymmetric nature of factor substitution and the effect of specific inputs such as nurses

the role of exclusive territories in producers competition reprinted in cartels stephen salant ed the international library of critical writings in economics edward elgar reference collections

coexistence of strategic vertical separation and integration abstract this paper gives conditions under which vertical separation is chosen by some upstream firms while vertical integration is chosen by others in the equilibrium of a symmetric model a vertically separating firm trades off fixed contracting costs against the strategic benefit of writing a two part tariff exclusive dealing contract with its retailer coexistence emerges when more than two vertical cournot oligopolists supply close substitutes when vertical integration and separation coexist welfare could be improved by reducing the number of vertically separating firms the scope for coexistence diminishes when assumptions on contract observability and commitment are relaxed

market structure and prices the responses of hospitals in the uk national health service to competition abstract the internal market reforms to the uk national health service nhs are a model adopted in many health care systems they introduce competition in supply little is known about the impact of these reforms this paper examines the pricing responses of nhs suppliers to competition the incentives of the reformed system are analysed these indicate that prices should differ between buyers and markets these hypotheses are tested using data on spot market transactions between hospitals and health care buyers the results indicate considerable price variability but offer broad support for the hypotheses

stochastic demand production responses and hospital costs this paper considers the production responses to demand uncertainty within the hospital sector it is noted that such responses have an impact on hospital cost structures an empirical model is specified estimation is undertaken on a sample of uk hospitals over the period 1993 1995 differentiating between hospital output which arises from uncertain demand emergency treatment and output considered to be predictable elective treatment the model estimates that the cost of an elective admission is approximately 45 of the cost of an emergency admission demand uncertainty imposes a direct cost equivalent to around 5 of the total cost of emergency admission

on the estimation of returns to scale using variable cost functions abstract this paper compares two methods of estimating returns to scale based on variable cost functions it shows specifically how the methods differ and indicates why it is important to select an appropriate method when drawing inferences about policy

returns to scale from variable and total cost functions abstract estimates of the returns to scale from a variable cost function evaluated at the actual and optimal capital stocks and a total cost function are presented the estimates generally differ depending in part upon the output at which they are evaluated

returns to education a further international update and implications this paper updates evidence on the returns to investment in education by adding estimates for new countries and refining existing estimates to bring the total number of country cases to over 60 the new cross country evidence confirms and reinforces earlier patterns namely that returns are highest for primary education the general curricula the education of women and countries with the lowest per capita income the findings have important implications for directing future investment in education which for efficiency and equity purposes should concentrate on these priority areas

vertical control and price versus nonprice competition this paper considers a manufacturer distributing a product through retailers who compete in price and service which reduces the time it takes to purchase a good the mix of these instruments that maximizes collective profit is determined by the tastes of consumers on the product margin whereas decentralized retailers consider as well the tastes of consumers on the interretailer margins given search or travel costs consumers with low time costs are overrepresented on the interretailer margins in considering customers on the wrong margin retailers are therefore biased toward price competition this distortion that can be corrected with vertical restraints

exploring hospital production relationships with flexible functional forms this paper estimates a multiproduct variable cost function using data on a sample of california hospitals the results provide useful insights into the advantages and disadvantages of flexible functional forms for cost analysis the translog function appears to provide reasonable estimates of marginal costs when evaluated at or near the approximation point of the function the estimated function performs less satisfactorily however when evaluated outside this range the paper s results do not provide strong evidence of either ray scale economies or of weak cost complementarities there is some evidence however that the degree of scale economies may be underestimated

outmigration of u s immigrants a methodology is devised for the empirical analysis of the determinants of outmigration of immigrants in a population empirical studies in this area have been hindered by a lack of longitudinal data on the characteristics of the immigrants this problem is tackled by making use of cross sectional data at two points in time it is applied to the study of male immigrants in the united states it is found that education is positively related to the rate of outmigration for immigrants from canada asia and the pooled sample of immigrants this finding suggests that the cross sectional estimates of the growth in earnings of immigrants in the united states are underestimated for these groups of immigrants

economies of scale and scope in the provision of diagnostic techniques and therapeutic services in portuguese hospitals this article analyses the provision of auxiliary clinical services that are typically carried out within the hospital we estimate a flexible cost function for three of the most important cost wise diagnostic techniques and therapeutic services in portuguese hospitals clinical pathology medical imaging and physical medicine and rehabilitation our objective in carrying out this estimation is the evaluation of economies of scale and scope in the provision of these services for all services we find evidence of economies of scale and some evidence of economies of scope we also find evidence of diminishing returns to management whereby larger hospitals appear to have surpassed their optimal size these results have important policy implications and can be related to the ongoing discussion of where and how should hospitals provide these services

the market for elective surgery joint estimation of supply and demand this paper develops models of the demand for and supply of elective non emergency surgery using a panel of quarterly data for 200 english hospitals over the period 1995 2002 unusually distinct measures of supply outpatients seen and inpatient admissions and demand outpatient referrals and decisions to admit are available for each observation these offer the opportunity to estimate separate empirical models of supply and demand using ordinary least squares ols regression methods however the strong correlation between the residuals of these models suggests some merit in the deployment of seemingly unrelated regression sur methods although both static and dynamic sur estimations leave the results largely qualitatively unchanged sur estimation can have a considerable quantitative effect relative to the ols results for example sur estimation generates a lower elasticity of inpatient demand with respect to waiting time than that obtained via ols the results offer an important justification for more careful econometric modelling of hospital behaviour than has traditionally been employed in the health economics literature

vertical restraints and producers competition this paper examines the rationale for vertical restraints it shows that there are important circumstances under which these restrictions have significant anti competitive effects the paper focuses on the consequences of exclusive territorial arrangements among the retailers of two products which are imperfect substitutes such arrangements are shown to increase consumer prices under plausible conditions the increase in consumer prices is sufficiently large to more than offset the deleterious effects from double marginalization resulting from reduced competition among retailers the imposition of exclusivity provisions is may be part of a nash equilibrium among producers these results hold whether there are or are not franchise fees this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item this abstract was borrowed from another version of this item

the price ain t right hospital prices and health spending on the privately insured we use insurance claims data for 27 6 percent of individuals with private employer sponsored insurance in the us between 2007 and 2011 to examine the variation in health spending and in hospitals transaction prices we document the variation in hospital prices within and across geographic areas examine how hospital prices influence the variation in health spending on the privately insured and analyze the factors associated with hospital price variation four key findings emerge first health care spending per privately insured beneficiary varies by a factor of three across the 306 hospital referral regions hrrs in the us moreover the correlation between total spending per privately insured beneficiary and total spending per medicare beneficiary across hrrs is only 0 14 second variation in providers transaction prices across hrrs is the primary driver of spending variation for the privately insured whereas variation in the quantity of care provided across hrrs is the primary driver of medicare spending variation consequently extrapolating lessons on health spending from medicare to the privately insured must be done with caution third we document large dispersion in overall inpatient hospital prices and in prices for seven relatively homogenous procedures for example hospital prices for lower limb mris vary by a factor of twelve across the nation and on average two fold within hrrs finally hospital prices are positively associated with indicators of hospital market power even after conditioning on many demand and cost factors hospital prices in monopoly markets are 15 3 percent higher than those in markets with four or more hospitals

are combination gas and electric utilities multiproduct natural monopolies gas and electric services are provided in some locations by a single firm in others by two firms the loss of competition inherent in single firm provision can be justified by the presence of both economies of scope and product specific economies of scale for each output in multiproduct production the estimation of a multiproduct hybrid translog cost function shows no evidence of such economies at the mean combination utility output vector copyright 1987 by mit press

resale price maintenance and restrictions on dominant firm and industry wide adoption abstract we consider a model in which firms use resale price maintenance rpm to dampen competition we find that even though the motive for using rpm is thus anti competitive market forces may limit the overall adverse impact on consumers indeed we find that when there are a large number of firms in the market consumer welfare under a laissez faire policy might be as high or almost as high as it would be under an alternative policy in which rpm is banned government interventions that put an upper limit on the extent of industry wide adoption of rpm can have adverse welfare effects in the model we further show that proposed guidelines in the united states and europe may come close to minimizing welfare

cost and access among non profit hospitals in jurisdictions with and without public hospitals the tax exempt status of america s from non profit hospitals is frequently challenged by policy makers interest groups argue that the provision of charitable services within these institutions does not offset the windfall accrued in the form of property and corporate tax exemption conversely non profit hospitals dispute this claim citing their historical and contemporary role as the centrepiece of the provision of charitable hospital services those who agree with this position frequently challenge the relative efficacy in sustaining publicly funded institutions thereby arguing that access to essential hospital services including charitable services will not be adversely jeopardized if public hospitals were closed in specific jurisdictions and services contracted out to the non profit sector this study estimates levels of access and costs among non profit hospitals in jurisdictions with and without the presence of a public hospital

hospital costs and excess bed capacity a statistical analysis this paper develops and estimates a cost model for u s hospitals analyzing the cost of excess bed capacity a new estimate is worth making for at least two reasons recent changes in the economic environment of hospitals have caused their utilization rates to fall sharply making previous estimates inaccurate second we employ econometric techniques not previously applied to this problem with estimation based on all short term community hospitals from 1979 89 our results based on conservative estimates of the average optimal occupancy rate indicate an annual cost of excess bed capacity of 17 2 billion in 1989 24 1 billion in 1991 and over 25 billion in 1993 copyright 1996 by mit press

economies of scale and scope as an explanation of merger and output diversification activities in the health maintenance organization industry this paper tests for the existence and magnitude of economies of scale and scope as possible explanations for the recent observed trends in increasing health maintenance organization hmo scale through merger and acquisition and scope through greater participation in public enrollee markets using firm level data from a sample of california hmos for the time period 1986 1992 the results suggest that economies of scale provide a strong justification for mergers only in the case of relatively small hmos i e those with fewer than 115 000 enrollees and economies of scope do not explain the increasing hmo enrollment of public enrollees

allocative inefficiency and its cost the case of spanish public hospitals in this paper we present a new empirical model based on an input distance function from which estimates of allocative inefficiency and its cost can be obtained the model avoids the greene problem which refers to the difficulty in practice of using a cost system to separate economic inefficiency into its technical and allocative components we also develop a procedure to calculate the cost of allocative inefficiency using a panel of spanish public hospitals to apply our methodology we find evidence of systematic allocative inefficiency in the employment of variable inputs since inputs are generally poor substitutes the cost of this allocative inefficiency is high

multi product costs and standby capacity derived from queuing theory the case of belgian hospitals empirical hospital cost function studies can be divided into two categories studies estimating traditional multi product cost functions and studies including demand uncertainty assuming that hospitals provide standby capacity to cope with uncertain demand and stressing that the relationship between the uncertain demand excess capacity and costs should be investigated most studies include the inverse of the occupancy rate in a relatively basic cost function the first contribution of this paper is to incorporate an indicator of reserve capacity into a genuine multi product cost function the second contribution is to propose an alternative indicator to proxy the reserve margin the often used occupancy rate has an important shortcoming the same occupancy rate can hide different turnaway probabilities and waiting times obscuring the true degree of reservation quality since turnaway probabilities and waiting times are typical queuing theory indicators an indicator for average waiting time derived

analysis of hospital production an output index approach in this study a new model of hospital costs is developed and estimated utilizing an output index this theoretically appropriate output index is constructed to accurately reflect the differentiated nature of hospital care by employing both patient and diagnosis characteristics in its construction using this output index we estimate a long run translog cost function with a dataset of 321 california hospitals for the year 2003 we find evidence of economies of scope across specialties within primary care and evidence of scope diseconomies within secondary and tertiary care point estimates of scale economies using the output index indicate that minimum efficient scale is reached at a larger level than when using less refined output measurement techniques that have often been used in similar studies our estimates indicate the importance of accounting for specialty specific scope economies when analyzing the production properties of firms producing differentiated products

scale and scope efficiencies through hospital consolidations the hospital sector in the province of ontario has recently completed a large scale restructuring marked by wide ranging hospital closures mergers and program transfers given a generally inconclusive economics literature regulators used an accounting as opposed to an economic approach when predicting gains to consolidations this paper uses an economic cost function to examine economies of scale and scope in the years preceding restructuring where there was little doubt that economies were possible issues relating to output aggregation functional form and scale and scope testing are addressed and an equilibrium cost function is derived from an estimated short run function to measure the cost concepts of interest using index and direct approaches we examine a variety of potential reconfigurations and conclude that there were indeed large scale unexploited gains to strategic consolidation in the hospital sector furthermore these gains may not have been detected using standard approaches in the literature

input substitution economies of scale and productivity growth in the us upholstered furniture industry cost factor demand and productivity growth are considered in the upholstered furniture industry over 1958 87 factors are divided into labour capital and materials it is found that all inputs are substitutes in production although substitution elasticities are small factor demand is price inelastic for all inputs the industry operates around minimum average cost productivity growth is small but significant the results indicate that labour will continue to be important in the industry however regional comparative advantage is not related to labour alone the results suggest that policies to attract or retain the industry must consider the low degree of factor substitution

imperfect information specificity of schooling and rate of return migration abstract international migration is a dynamic process having moved into a country of destination a migrant may after a while decide to return to his country of origin the aggregate rate of return migration among a group of migrants is studied imperfect imformation leading to unrealized expectation of the migrants and changes in rates of return to schooling across countries over time are modelled as factors contributing towards return migration schooling is decomposed into schooling acquired before migration and after migration to take account of its specificity to the country in which it is acquired

uncertain demand the structure of hospital costs and the cost of empty hospital beds abstract in this paper we reformulate the theory of cost and production to take account of uncertain demand facing a firm in the reformulated theory the duality between cost and production no longer obtains and demand distribution parameters enter the cost function as well as the traditional outputs and input prices we then estimate a short run cost function for a hospital facing uncertain demand using data from a national sample of over 5000 hospitals for the years 1983 1987 the traditional cost model is strongly rejected in favor of the reformulated model this model is used to calculate the cost of empty hospital beds controlling for the effect of uncertain demand on the structure of hospital costs the cost of an empty hospital bed is calculated as 36 443 in 1987 dollars we estimate that a one percent decrease in the number of hospital beds would decrease hospital costs by slightly over one third of one percent increasing the occupancy rate from the average 1992 level 65 percent back to the average 1980 level 76 percent is estimated to save the average hospital over 2 million or 9 5 percent of costs

assimilation changes in cohort quality and the earnings of immigrants this paper reexamines the empirical basis for two facts that seem to be found in most cross section studies of immigrant earnings 1 the earnings of immigrants grow rapidly as they assimilate into the united states and 2 this rapid growth leads to many immigrants overtaking the earnings of the natives within 10 15 years after immigration using the 1970 and 1980 u s censuses this paper studies the earnings growth experienced by specific immigrant cohorts during the period 1970 80 it is found that within cohort growth is significantly smaller than the growth predicted by cross section regressions for most immigrant groups this differential is consistent with the hypothesis that there has been a secular decline in the quality of immigrants admitted to the united states

hospital cost containment and length of stay an econometric analysis 1 introduction concern in the united states over the rising share of national resources consumed by health care costs has become widespread in recent years hospitals accounting for approximately 40 of this expense have been a primary focus of cost control strategy as both government and private insurers have pressured them to absorb an increasing portion of the financial risks associated with their treatment decisions a predominant response to these pressures has been reduction in the number of days that patients remain hospitalized perceptions of compromised medical care quality following this practice and others have prompted policy makers to consider stricter regulation of the conduct of health care providers and insurance organizations the length of hospitalization issue has become prominent with the general public and for some procedures has been widely criticized for being extreme maternity and newborn care for example became a heavy target for insurers who in many cases were limiting reimbursement for stays to only 24 hours this case became very controversial eventually rising to high political ground and resulting in recent congressional action requiring insurers to cover 48 hours of hospitalization for these patients the u s congress as well as numerous state legislatures currently face a number of articles of proposed legislation that directly or indirectly regulate the length of hospitalizations these include measures that give physicians more authority over treatment decisions that make health plans legally liable for their actions and that establish appeals procedures for treatment not deemed medically necessary or appropriate by health plans while controversy surrounding length of stay reductions have focused on the quality of service being delivered by the health care system attention given to the economics of this strategy is limited it is unclear to what extent length of stay reductions are responsible for decreasing hospital costs presumably the inpatient days that are now being eliminated are the least costly ones a provocative stance has been taken by reinhardt 1996 who argues that the strategy of length of stay reduction in the united states is single minded and unproductive he hypothesizes that the hospital is not the expensive setting that is commonly perceived researchers have tracked carefully the trends in hospital lengths of stay and have explored the effects of various reimbursement strategies on hospital utilization previous studies have also addressed the potential tradeoff between length of stay and quality of care if quality has not diminished then longer hospitalizations may have been largely superfluous this is a clinical issue little empirical effort however has been aimed at determining what costs are actually saved by these measures this paper aims to provide evidence on this point rather than asking what health interests might be foregone as a result of shorter hospitalizations the inquiry here is what economic benefits are being gained this research takes a hospital cost function approach to measuring the cost savings achieved by u s hospitals through reduction in length of hospital stays the remainder is organized as follows section 2 provides background to the problem and the next section describes an econometric model for addressing it section 4 presents the data and describes the functional form section 5 discusses empirical results and section 6 provides discussion the final section concludes 2 background and institutional framework broad attempts at controlling hospital expenditures began in the 1980s the most notable single event was the step taken in 1983 by medicare the government program of health care funding for the elderly and hospitals largest third party payer medicare adopted the prospective payment system pps that altered the basis of reimbursement from reasonable cost to prices based on historical costs for specific diagnoses across hospitals

scale and scope economies for drug abuse treatment costs evidence for washington state drug abuse treatment has been pervasive in the us in the recent years and the associated direct treatment costs approached 18 billion in 2001 however there have been few published studies on scale economies and none on scope economies for drug abuse treatment costs we estimate a restricted cost function for 17 hospitals in washington state that provided inpatient and or outpatient drug abuse treatment during the years 1997 2004 we find significant evidence of scale economies for hospitals that provide only outpatient drug abuse treatment services the marginal costs of outpatient services are even smaller for hospitals that produce both outpatient and inpatient drug abuse treatment services further these joint production hospitals exhibit diseconomies of scope or specialization economies these results all imply that recent trends towards additional outpatient treatment services will enhance cost efficiency

hospital performance in a noncompetitive environment in this article we perform a quantitative analysis of the performance of hospital services in a nonmarket environment based on a very complete data set evaluating efficiency in a nonmarket system is important since the absence of market mechanisms could yield large inefficiencies in fact we show that hospital performance varies greatly across institutions specifically our results suggest that hospitals with high levels of quasi fixed factors are less efficient than other institutions in general hospitals performed very differently even after controlling for differences in services hospital and patient characteristics all in all increased efficiencies could lead to potential savings for the quebec government in the hundreds of millions of dollars

nonparametric analysis of returns to scale in the us hospital industry this paper presents new estimates of scale economies for us hospitals we show that the common translog specification of hospital costs is a misspecification and employ nonparametric local linear estimation with both continuous and discrete covariates a bootstrap method is used to provide inferences regarding ray scale economies and expansion path scale economies for a large sample of hospitals covering 1984 1996 we find evidence of changes in the structure of hospital costs over the sample period as well as evidence of locally optimal hospital sizes copyright 2004 john wiley sons ltd

physician opportunity costs in physician practice cost functions abstract estimation of cost functions for physician firms is problematic because many physicians are self employed and the marginal opportunity cost of physician labor is not observed in this paper we show how to recover marginal costs and conventional measures of economies of scale from cost functions that condition on the amount of physician labor input in addition we introduce the new concepts of marginal nonphysician input costs and behavioral economies of scale which reflect the structure of costs when physician labor input moves along a utility maximizing expansion path our results could be useful in the design of resource based physician fee schedules

an economic theory of vertical restraints vertical restraints imposed by manufacturers on the prices locations and sales of retail firms represent a puzzling departure from the simple price mediated exchange of conventional markets in this article we analyze the theoretical basis for these restraints in a setting where retailers inform consumers and are imperfectly competitive and where a manufacturer has some monopoly power we identify three potential externalities affecting retailers decisions these externalities lead to the failure of simple uniform price contracts to coordinate the incentives of retailers with the objective of maximizing combined manufacturer and retailer profits we identify the packages of vertical restraints that are minimally sufficient under various conditions to neutralize the externalities and to achieve the joint profit maximum

the competition effects of industry wide vertical price fixing in bilateral oligopoly this paper examines the competition and welfare effects of vertical price fixing through industry wide resale price maintenance rpm arrangements such as those benefiting from exemption from a general prohibition against rpm a bilateral oligopoly framework is employed incorporating differentiation between manufacturer products and between retailer services transactions between the stages involve prices being determined through bargaining we do not find rpm to be universally undesirable however where retailer power is strong the social effects of rpm are likely to be adverse since the practice can assist in coordinating final price levels and prevent socially desirable countervailing power arising

omitted variable bias and hospital costs this research examines the impact of omitted variables on the accuracy of parametric hospital cost function estimations based on quebec hospital level data we assess the effect of omitted variables resulting from incomplete data on technology and performance measurement and on tests of the cost minimizing behavior of the institution our results show that important characteristics of hospital technology such as returns to scale are extremely sensitive to omitted variable bias similarly estimates of hospital performance are poor indicators of actual performance when data are incomplete

early labour market experiences of second generation immigrants in sweden this article investigates second generation immigrant s early labour market performances in sweden to study their labour market success we estimate dynamic transition rate models cox type proportional hazards in a competing risk framework using register based panel data set our results reveal that parental resources affect not only second generation immigrants continuing education but also their later labour market success the study verifies that finding a job is difficult for second generation immigrants and the significant unobserved heterogeneity parameter estimate may indicate discrimination as a whole second generation immigrants have worse labour market performances compared to their native born counterparts

payment source and the cost of hospital care evidence from a multiproduct cost function with multiple payers abstract this study investigates the capacity of hospitals to vary the intensity of their services based on patients expected sources of payment while the concept of price discrimination by hospitals based on payer generosity cost shifting has been discussed extensively the notion that hospitals can adjust payer specific marginal costs to reflect differences in reimbursement policies has not been studied in depth to examine this issue this analysis employs a multiproduct cost function with hospital outputs defined as admissions by payment source controlling for the distribution and severity of illness casemix for each payer marginal costs of casemix adjusted discharges are obtained and compared for medicare medicaid private payers and a residual category that includes uncompensated care we find that indeed payer specific marginal costs generally reflect payer generosity

a multiple output multiple input model of the hospital industry in north carolina 1983 a multiple output multiple input model of the hospital industry in north carolina applied economics vol 15 no 3 pp 341 352

a two stage translog marginal cost pricing approach for floridian hospital outputs since the passage of the affordable care act aca of 2010 issues still remain regarding the mandated purchase of insurance to ensure more universal coverage one such issue is the pricing of these insurance packages and whether or not the reimbursements will cover necessary services therefore policy concerns exist that increasing the number of insured individuals may not curtail costs conversely providers may not wish to treat patients covered by excessively frugal plans such as medicaid hence the trade offs between access and cost control in this article we present findings from a cost function and a productivity approach to determine the marginal cost of providing inpatient hospital care for hospitals operating in florida during 2005 using these methodological approaches we are able to use the marginal rate of transformation to determine the relative marginal costs while controlling for hospital technical and allocative inefficiency our work differs from earlier articles as we avoid the greene problem for cross sectional models through a two step approach by including both reimbursement rates under conditions of hospital efficiency we can ascertain payment schemes that should at least in theory cover necessary costs for patient care without leading to excessive input usage

frontier estimation how useful a tool for health economics the journal is pleased to publish in this issue three papers that apply frontier estimation techniques to hospitals and nursing homes together with an exchange over the usefulness of those techniques in the health care context the papers represent the current state of the art with respect to applications of frontier estimation in health care because of the growing popularity of the technique no doubt in part from its availability in standard software packages it seems useful to take this opportunity to appraise its usefulness one might begin by asking usefulness for what assuming one could define a frontier with certainty how would one use such knowledge a straightforward application in health care appears to be to reimbursement because both data envelopment analysis dea and stochastic frontier estimation specify the least cost mix of inputs for a given output both methods can in principle be used to determine whether a given firm hospital or nursing home is efficient and if the answer to that question is no the magnitude of any inefficiency it is not a large step from that information to the notion that a regulator should reduce the firm s budget by the amount of the measured inefficiency indeed vitaliano and toren mention the boren amendment s requirement that the medicaid program reimburse hospitals and nursing homes at the cost incurred by an efficiently operated

the specification of a hospital cost function a comment on the recent literature in the empirical estimation of hospital cost functions two radically different types of specifications have been chosen to date ad hoc forms and flexible functional forms based on neoclassical production theory this paper discusses the respective strengths and weaknesses of both approaches and emphasizes the apparently unreconcilable conflict between the goals of maintaining functional flexibility and keeping the number of variables manageable if at the same time patient heterogeneity is to be adequately reflected in the case mix variables a new specification is proposed which strikes a compromise between these goals and the underlying assumptions are discussed critically

a firm specific analysis of economies of density in the u s railroad industry an understanding of the nature of costs of production is important in every regulated industry both for policy makers and firms policy makers may be interested in whether there are economies of scale in production and in whether there are technological aspects of an industry that will pose difficult problems if an industry is regulated regulators and firms may be interested in costs for ratemaking purposes and in decisions about the effects of introducing new services or discontinuing existing services historically most cost studies in regulated industries have used data drawn from a cross section of firms or from a combination of cross section and time

substitution possibilities for unpriced natural resources restricted cost functions for the canadian metal mining industry a bstract the effects of resource depletion on economic growth depend critically on the elasticities of substitution between non renewable natural resources and reproducible inputs estimation of the elasticities of substitution for natural resources has been hindered by the absence of data on their prices which results from the prevalence of vertical integration in natural resource industries in this paper we use the theory of restricted cost functions to develop a general procedure for estimating substitution possibilities for unpriced inputs estimation of the model with data for the canadian metal mining industry indicates that the elasticities of substitution for the natural resource metallic ore are equal to unity

entry deterrence by non horizontal merger we study when and how pure non horizontal mergers whether cross product or vertical can deter new entry organizational mergers implicitly commit firms to more aggressive price competition because heightened competition deters entry mergers can occur in equilibrium even when absent entry considerations they do not we show that in order to prevent a flood of entrants mergers arise even when a marginal merger costs incumbent firms more than does a marginal entrant

voluntary and proprietary hospital behavioural response to socio economic stimuli this paper contributes to the literature on the economic aspects of hospital behaviour in the united states in these substantive ways 1 a theoretical basis for incorporating socio economic variables in the form of indices into our analysis of hospital behaviour is presented 2 it is found that hospitals of the same ownership type exhibit different economic behaviour when located in different socio economic environments in fact our results indicate that the prevailing assumption of structural homogeneity among differing ownership types is incorrect 3 findings further suggest that the relative affluence of an urban area is a better determinant of the impact of factor price variation among hospitals than the extent of urbanization alone finally the cost function specified here has broad implications for future empirical studies of hospital behaviour it is found that the flexible form quadratic approximation estimated generally gives theoretically consistent results