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Scale and scope economies in nursing homes: A quantile regression approach

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  • Eric W. Christensen

    (CNA Corporation, Alexandria, VA, USA)

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    Abstract

    Nursing homes vary widely between facilities with very few beds and facilities with several hundred beds. Previous studies, which estimate nursing home scale and scope economies, do not account for this heterogeneity and implicitly assume that all nursing homes face the same cost structure. To account for heterogeneity, this paper uses quantile regression to estimate cost functions for skilled and intermediate care nursing homes. The results show that the parameters of nursing home cost functions vary significantly by output mix and across the cost distribution. Estimates show that product-specific scale economies systematically increase across the cost distribution for both skilled and intermediate care facilities, with diseconomies of scale in the lower deciles and no significant scale economies in the higher deciles. As for ray scale economies, estimates show economies of scale in the lower deciles and diseconomies of scale or no significant scale economies at higher deciles. The estimates also show that scope economies exist in the lower cost deciles and that no scope economies exist in the higher cost deciles. Additionally, the degree of scope economies monotonically decreases across the deciles. Copyright © 2003 John Wiley & Sons, Ltd.

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    File URL: http://hdl.handle.net/10.1002/hec.828
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    Bibliographic Info

    Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

    Volume (Year): 13 (2004)
    Issue (Month): 4 ()
    Pages: 363-377

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    Handle: RePEc:wly:hlthec:v:13:y:2004:i:4:p:363-377

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    Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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    1. Cohen, Joel W. & Spector, William D., 1996. "The effect of Medicaid reimbursement on quality of care in nursing homes," Journal of Health Economics, Elsevier, Elsevier, vol. 15(1), pages 23-48, February.
    2. Niccie L. McKay, 1988. "An Econometric Analysis of Costs and Scale Economies in the Nursing Home Industry," Journal of Human Resources, University of Wisconsin Press, vol. 23(1), pages 57-75.
    3. Panzar, John C & Willig, Robert D, 1977. "Economies of Scale in Multi-Output Production," The Quarterly Journal of Economics, MIT Press, MIT Press, vol. 91(3), pages 481-93, August.
    4. Koenker, Roger W & Bassett, Gilbert, Jr, 1978. "Regression Quantiles," Econometrica, Econometric Society, Econometric Society, vol. 46(1), pages 33-50, January.
    5. Koenker, Roger & Bassett, Gilbert, Jr, 1982. "Robust Tests for Heteroscedasticity Based on Regression Quantiles," Econometrica, Econometric Society, Econometric Society, vol. 50(1), pages 43-61, January.
    6. Vassilis H. Aletras, 1999. "A comparison of hospital scale effects in short-run and long-run cost functions," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 8(6), pages 521-530.
    7. Dor, Avi, 1989. "The costs of Medicare patients in nursing homes in the United States : A multiple output analysis," Journal of Health Economics, Elsevier, Elsevier, vol. 8(3), pages 253-270, December.
    8. Yu, Wei & Bradford, Garnett L., 1995. "Rural-Urban Differences In Nursing Home Access, Quality And Cost," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, Southern Agricultural Economics Association, vol. 27(02), December.
    9. Gertler, Paul J & Waldman, Donald M, 1992. "Quality-Adjusted Cost Functions and Policy Evaluation in the Nursing Home Industry," Journal of Political Economy, University of Chicago Press, University of Chicago Press, vol. 100(6), pages 1232-56, December.
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    Cited by:
    1. Eila Kankaanpää & Ismo Linnosmaa & Hannu Valtonen, 2011. "Public health care providers and market competition: the case of Finnish occupational health services," The European Journal of Health Economics, Springer, Springer, vol. 12(1), pages 3-16, February.
    2. Janelle Seymour & Paul McNamee & Anthony Scott & Michela Tinelli, 2010. "Shedding new light onto the ceiling and floor? A quantile regression approach to compare EQ-5D and SF-6D responses," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 19(6), pages 683-696.

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