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Factors determining the response of hospitals to demand uncertainty

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  • Rodríguez-Álvarez, Ana
  • Roibás, David
  • Wall, Alan

Abstract

A feature of hospitals is that they face uncertain demand for the services they offer. To cover fluctuations in demand they need to maintain reserve capacity in the form of beds, equipment, personnel etc in order to minimize the probability of excess queuing or turning away patients, creating a trade-off between reserve capacity and economic costs. Using a simple theoretical framework we show how the reserve capacity established can depend on institutional characteristics that can affect the objective of the hospital. In particular, we show that private and public hospitals can provide different levels of reserve capacity. In an empirical application using a panel data set of Spanish hospitals over the period 1996-2006 we model reserve capacity using a distance frontier approach. Our results show that private hospitals do not generally contract as much reserve capacity in response to demand uncertainty, although for some services they contract more capacity than public hospitals.

Suggested Citation

  • Rodríguez-Álvarez, Ana & Roibás, David & Wall, Alan, 2009. "Factors determining the response of hospitals to demand uncertainty," Efficiency Series Papers 2009/04, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    • Handle: RePEc:oeg:wpaper:2009/04
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    File URL: https://www.unioviedo.es/oeg/ESP/esp_2009_04.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    Hospitals; demand uncertainty; technical efficiency; distance function;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I10 - Health, Education, and Welfare - - Health - - - General

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