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Hospital Costs and Excess Bed Capacity: A Statistical Analysis

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  • Keeler, Theodore E
  • Ying, John S

Abstract

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.

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Bibliographic Info

Article provided by MIT Press in its journal Review of Economics & Statistics.

Volume (Year): 78 (1996)
Issue (Month): 3 (August)
Pages: 470-81

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Handle: RePEc:tpr:restat:v:78:y:1996:i:3:p:470-81

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Cited by:
  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, Elsevier, vol. 14(3), pages 291-317, August.
  2. John Schneider, 2003. "Changes in the Effects of Mandatory Rate Regulation On Growth in Hospital Operating Costs, 1980–1996," Review of Industrial Organization, Springer, Springer, vol. 22(4), pages 297-312, June.
  3. Capps, Cory & Dranove, David & Lindrooth, Richard C., 2010. "Hospital closure and economic efficiency," Journal of Health Economics, Elsevier, Elsevier, vol. 29(1), pages 87-109, January.
  4. Laurie J. Bates & Rexford E. Santerre, 2005. "Do Agglomeration Economies Exist in the Hospital Services Industry," Eastern Economic Journal, Eastern Economic Association, Eastern Economic Association, vol. 31(4), pages 617-628, Fall.
  5. Baker, Laurence C. & Phibbs, Ciaran S. & Guarino, Cassandra & Supina, Dylan & Reynolds, James L., 2004. "Within-year variation in hospital utilization and its implications for hospital costs," Journal of Health Economics, Elsevier, Elsevier, vol. 23(1), pages 191-211, January.
  6. Mobley, Lee R., 2003. "Estimating hospital market pricing: an equilibrium approach using spatial econometrics," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 33(4), pages 489-516, July.
  7. Fabbri Daniele, 2000. "Riforma sanitaria e produzione ospedaliera," Politica economica, Società editrice il Mulino, Società editrice il Mulino, issue 1, pages 131.
  8. Rexford E. Santerre & John A. Vernon, 2005. "Hospital Ownership Mix Efficiency in the US: An Exploratory Study," NBER Working Papers 11192, National Bureau of Economic Research, Inc.
  9. Jon Magnussen & Lee Rivers Mobley, 1999. "The Impact of Market Environment on Excess Capacity and the Cost of an Empty Hospital Bed," International Journal of the Economics of Business, Taylor & Francis Journals, Taylor & Francis Journals, vol. 6(3), pages 383-398.
  10. Luigi Siciliani & Anderson Stanciole & Rowena Jacobs, 2008. "Do waiting times reduce hospital costs?," Discussion Papers, Department of Economics, University of York 08/02, Department of Economics, University of York.
  11. Laurie Bates & Rexford Santerre, 2008. "Do health insurers possess monopsony power in the hospital services industry?," International Journal of Health Care Finance and Economics, Springer, Springer, vol. 8(1), pages 1-11, March.
  12. Mike Smet, 2007. "Measuring performance in the presence of stochastic demand for hospital services: an analysis of Belgian general care hospitals," Journal of Productivity Analysis, Springer, Springer, vol. 27(1), pages 13-29, February.
  13. James Thornton, 1998. "Do physicians employ aides efficiently?: Some new evidence on solo practitioners," Journal of Economics and Finance, Springer, Springer, vol. 22(2), pages 85-96, June.
  14. Rexford E. Santerre & John A. Vernon, 2006. "The consumer welfare implications of the hospital ownership mix in the US: an exploratory study," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 15(11), pages 1187-1199.
  15. Gary Ferrier & Hervé Leleu & Vivian Valdmanis, 2009. "Hospital capacity in large urban areas: is there enough in times of need?," Journal of Productivity Analysis, Springer, Springer, vol. 32(2), pages 103-117, October.
  16. Albert Okunade, 2001. "Cost-Output Relation, Technological Progress, and Clinical Activity Mix of US Hospital Pharmacies," Journal of Productivity Analysis, Springer, Springer, vol. 16(2), pages 167-193, September.
  17. Ludwig Kuntz & Stefan Scholtes & Antonio Vera, 2007. "Incorporating efficiency in hospital-capacity planning in Germany," The European Journal of Health Economics, Springer, Springer, vol. 8(3), pages 213-223, September.
  18. Lindrooth, Richard C. & Lo Sasso, Anthony T. & Bazzoli, Gloria J., 2003. "The effect of urban hospital closure on markets," Journal of Health Economics, Elsevier, Elsevier, vol. 22(5), pages 691-712, September.
  19. Ana Rodr�guez-�lvarez & C. A. Knox Lovell, 2004. "Excess capacity and expense preference behaviour in National Health Systems: an application to the Spanish public hospitals," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 13(2), pages 157-169.
  20. Cohen, Jeffrey P. & Morrison Paul, Catherine, 2008. "Agglomeration and Cost Economies for Washington State Hospital Services," Regional Science and Urban Economics, Elsevier, Elsevier, vol. 38(6), pages 553-564, November.
  21. Preyra, Colin & Pink, George, 2006. "Scale and scope efficiencies through hospital consolidations," Journal of Health Economics, Elsevier, Elsevier, vol. 25(6), pages 1049-1068, November.
  22. Hughes, David & McGuire, Alistair, 2003. "Stochastic demand, production responses and hospital costs," Journal of Health Economics, Elsevier, Elsevier, vol. 22(6), pages 999-1010, November.

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