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Measuring performance in the presence of stochastic demand for hospital services: an analysis of Belgian general care hospitals

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  • Mike Smet

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Abstract

Since demand for hospital services is subject to substantial variability, the relationship between uncertain demand, excess capacity, hospital costs and performance should be investigated thoroughly. In this paper a waiting time indicator to proxy hospital standby capacity is incorporated into a multi-product translog cost function for Belgian general care hospitals. The indicator is derived from queuing theory and improves on the conventionally used (inverse of the) occupancy rate. The multi-product stochastic frontier specification allows calculation of cost elasticities and marginal cost of seven hospital departments, as well as the degree of economies of scale and scope and enables identification of differences in efficiency. Copyright Springer Science+Business Media, LLC 2007

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File URL: http://hdl.handle.net/10.1007/s11123-006-0021-7
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Bibliographic Info

Article provided by Springer in its journal Journal of Productivity Analysis.

Volume (Year): 27 (2007)
Issue (Month): 1 (February)
Pages: 13-29

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Handle: RePEc:kap:jproda:v:27:y:2007:i:1:p:13-29

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Web page: http://www.springerlink.com/link.asp?id=100296

Related research

Keywords: Hospital costs; Stochastic demand; Efficiency; Productivity; Stochastic frontier analysis; Econometrics; Queuing theory; Multi-product cost function; C01; C13; C21; D24; H51; l11; l12;

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References

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  1. Gaynor, Martin & Anderson, Gerard F., 1995. "Uncertain demand, the structure of hospital costs, and the cost of empty hospital beds," Journal of Health Economics, Elsevier, vol. 14(3), pages 291-317, August.
  2. Mulligan, James G., 1985. "The stochastic determinants of hospital-bed supply," Journal of Health Economics, Elsevier, vol. 4(2), pages 177-181, June.
  3. Hughes, David & McGuire, Alistair, 2003. "Stochastic demand, production responses and hospital costs," Journal of Health Economics, Elsevier, vol. 22(6), pages 999-1010, November.
  4. Dawson, Diane & Goddard, Maria & Street, Andrew, 2001. "Improving performance in public hospitals: a role for comparative costs?," Health Policy, Elsevier, vol. 57(3), pages 235-248, September.
  5. Andrew Street & Rowena Jacobs, 2002. "Relative performance evaluation of the English acute hospital sector," Applied Economics, Taylor & Francis Journals, vol. 34(9), pages 1109-1119.
  6. Keeler, Theodore E & Ying, John S, 1996. "Hospital Costs and Excess Bed Capacity: A Statistical Analysis," The Review of Economics and Statistics, MIT Press, vol. 78(3), pages 470-81, August.
  7. Smet, Mike, 2002. "Cost characteristics of hospitals," Social Science & Medicine, Elsevier, vol. 55(6), pages 895-906, September.
  8. Caves, Douglas W & Christensen, Laurits R & Tretheway, Michael W, 1980. "Flexible Cost Functions for Multiproduct Firms," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 477-81, August.
  9. Daniel Bilodeau & Pierre-Yves Crémieux & Pierre Ouellette, 2000. "Hospital Cost Function In A Non-Market Health Care System," The Review of Economics and Statistics, MIT Press, vol. 82(3), pages 489-498, August.
  10. Grannemann, Thomas W. & Brown, Randall S. & Pauly, Mark V., 1986. "Estimating hospital costs : A multiple-output analysis," Journal of Health Economics, Elsevier, vol. 5(2), pages 107-127, June.
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Cited by:
  1. Alvaro Almeida & Joana Cima, 2013. "Demand Uncertainty and Hospital Costs: an Application to Portuguese NHS Hospitals," FEP Working Papers 499, Universidade do Porto, Faculdade de Economia do Porto.
  2. Brandon Pope & Andrew Johnson, 2013. "Returns to scope: a metric for production synergies demonstrated for hospital production," Journal of Productivity Analysis, Springer, vol. 40(2), pages 239-250, October.
  3. Kim-Huong Nguyen & Tim Coelli, 2009. "Quantifying the effects of modelling choices on hospital efficiency measures: A meta-regression analysis," CEPA Working Papers Series WP072009, School of Economics, University of Queensland, Australia.

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