Advanced Search
MyIDEAS: Login to save this paper or follow this series

Economies of scope in Norwegian hospital production - A DEA analysis

Contents:

Author Info

  • Kittelsen, Sverre A.C.

    ()
    (The Ragnar Frisch Centre for Economic Research)

  • Magnussen, Jon

    (SINTEF Unimed, Health Services Research)

Abstract

From 2002 the Norwegian hospital sector is to be transferred from county to state ownership, organised through regional semiautonomous companies. A major motivation for the reform is to allow for more specialised hospital production. If there are economies or diseconomies of scope, the production of hospital services in a region could become more efficient by exploiting any cost savings that may stem from an optimal division of service production between units. While the theory of economics of scope is well developed, applications have chiefly been concerned with testing for natural monopoly, and few studies of hospital production have been concerned with scope. This paper estimates a multiple output cost function from data on Norwegian hospitals using the non-parametric Data Envelopment Analysis (DEA) method. The cost function is specified with total running costs as the only input, but with seven different outputs to focus on the properties of the output transformation frontier. To overcome the methodological assumption of convexity inherent in DEA, the sample is split into relative specialised and differentiated hospitals, before comparing costs. This partitioning is achieved through grouping as specialised the first and fifth quintiles of the hospitals ranked by the share of the relevant output, since in fact no hospital is fully specialised by producing only one output, or nothing of an output. Exploring scope economies of the best practice cost frontier along three different dimensions, strong economies are found for surgical and medical services, intermediate for inpatient and outpatient production, while elective and emergency care cases have only week economies of scope, which may not be statistically significant. Results for the output mix of individual observations, reveal both economies and diseconomies in the last of these three dimensions. Contrary to these results, average efficiencies are found to be lower for differentiated than specialised hospitals, in all of the dimensions mentioned, although the differences are not very large. Since the DEA method measures hospitals with the largest production of each output as efficient by default, the results for average efficiency may be due to the methods employed.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://www.hero.uio.no/publicat/2003/HERO2003_8.pdf
Download Restriction: no

Bibliographic Info

Paper provided by Oslo University, Health Economics Research Programme in its series HERO On line Working Paper Series with number 2003:8.

as in new window
Length: 30 pages
Date of creation: 21 Jun 2009
Date of revision:
Handle: RePEc:hhs:oslohe:2003_008

Contact details of provider:
Postal: HERO / Institute of Health Management and Health Economics P.O. Box 1089 Blindern, N-0317 Oslo, Norway
Phone: 2307 5309
Fax: 2307 5310
Email:
Web page: http://www.hero.uio.no/eng.html
More information through EDIRC

Related research

Keywords: Hospital performance; DEA; Economies of Scope;

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
  2. Diego Prior & Magda Solà, 2000. "Technical efficiency and economies of diversification in health care," Health Care Management Science, Springer, vol. 3(4), pages 299-307, September.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. Gary Ferrier & Hervé Leleu & James Moises & Vivian Valdmanis, 2013. "The Focus Efficiency of U.S. Hospitals," Atlantic Economic Journal, International Atlantic Economic Society, vol. 41(3), pages 241-263, September.
  2. Kirsi Vitikainen & Miika Linna & Andrew Street, 2010. "Substituting inpatient for outpatient care: what is the impact on hospital costs and efficiency?," The European Journal of Health Economics, Springer, vol. 11(4), pages 395-404, August.
  3. Christian Growitsch & Heike Wetzel, 2006. "Economies of Scope in European Railways: An Efficiency Analysis," IWH Discussion Papers 5, Halle Institute for Economic Research.
  4. Arocena, Pablo, 2008. "Cost and quality gains from diversification and vertical integration in the electricity industry: A DEA approach," Energy Economics, Elsevier, vol. 30(1), pages 39-58, January.
  5. Simões, Pedro & Cunha Marques, Rui, 2009. "Performance and Congestion Analysis of the Portuguese Hospital Services," MPRA Paper 16940, University Library of Munich, Germany.
  6. Gary D. Ferrier & Hervé Leleu & James Moises & Vivian Valdmanis, 2009. "The Size and Service Offering Efficiencies of U.S. Hospitals," Working Papers 2009-ECO-09, IESEG School of Management.
  7. Pablo Arocena, 2005. "The measurement of scope, scale and diversification economies: How (in)efficient is electricity restructuring and unbundling?," Working Papers 2005/1, Institut d'Economia de Barcelona (IEB).

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:hhs:oslohe:2003_008. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Anbjørg Kolaas).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.