Restructuring hospital industry to control public health care expenditure: The role of input substitutability
In this paper we investigate the economic rationality of the bed downsizing process, characterising the hospital industry worldwide in the last decades, as a measure to control public health care expenditure. Considering a sample of Italian hospitals, we provide fresh evidence on the factor substitutability in the production of hospital services. Differently from other studies, based on North-American data and limited to pre-determined cost function models, we estimate a general specification (the Generalised Composite), and test it against traditional nested models (e.g. the Translog). For all the specifications we derive Allen, Morishima and Shadow elasticities of substitution between input pairs, obtaining a fairly consistent picture across all models and elasticity concepts. In particular, our results highlight a very limited degree of substitutability between factors in the production of hospital services, especially between beds and medical staff. These findings suggest that a restructuring policy of the hospital industry, which is confined to reducing the number of beds without involving workforce management, could not be a viable strategy for controlling public health care expenditure.
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.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- Canta Chiara & Piacenza Massimiliano & Turati Gilberto, 2006. "Reforms of the National Health Service and dynamics of hospital efficiency in Piedmont," Politica economica, Società editrice il Mulino, issue 2, pages 157-192.
- Pulley, Lawrence B & Braunstein, Yale M, 1992. "A Composite Cost Function for Multiproduct Firms with an Application to Economies of Scope in Banking," The Review of Economics and Statistics, MIT Press, vol. 74(2), pages 221-230, May.
- Daniel Bilodeau & Pierre-Yves Crémieux & Pierre Ouellette, 2002. "Hospital Technology in a Nonmarket Health Care System," Southern Economic Journal, Southern Economic Association, vol. 68(3), pages 511-529, January.
- Jensen, Gail A & Morrisey, Michael A, 1986. "The Role of Physicians in Hospital Production," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 432-442, August.
- Gian Paolo Barbetta & Gilberto Turati & Angelo M. Zago, 2007.
"Behavioral differences between public and private not-for-profit hospitals in the Italian national health service,"
John Wiley & Sons, Ltd., vol. 16(1), pages 75-96.
- Gian Paolo Barbetta & Gilberto Turati & Angelo Zago, 2004. "Behavioral Differences Between Public and Private Not-For-Profit Hospitals in the Italian National Health Service," Working Papers 12/2004, University of Verona, Department of Economics.
- Piacenza, Massimiliano & Vannoni, Davide, 2004. "Choosing among alternative cost function specifications: an application to Italian multi-utilities," Economics Letters, Elsevier, vol. 82(3), pages 415-422, March.
- Mehdi Farsi & Massimo Filippini, 2008. "Effects of ownership, subsidization and teaching activities on hospital costs in Switzerland," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 335-350.
- Medhi Farsi & Massimo Filippini, 2006. "Effects of ownership, subsidization and teaching activities on hospital costs in Switzerland," Quaderni della facoltà di Scienze economiche dell'Università di Lugano 0606, USI Università della Svizzera italiana.
- 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.
- Kumbhakar, Subal C. & Tsionas, Efthymios G., 2005. "Measuring technical and allocative inefficiency in the translog cost system: a Bayesian approach," Journal of Econometrics, Elsevier, vol. 126(2), pages 355-384, June.
- McElroy, Marjorie B., 1977. "Goodness of fit for seemingly unrelated regressions : Glahn's R2y.x and Hooper's r2," Journal of Econometrics, Elsevier, vol. 6(3), pages 381-387, November.
- Massimiliano Piacenza & Davide Vannoni, 2009. "Vertical And Horizontal Economies In The Electric Utility Industry: An Integrated Approach," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 80(3), pages 431-450, 09.
- George France & Francesco Taroni & Andrea Donatini, 2005. "The Italian health-care system," Health Economics, John Wiley & Sons, Ltd., vol. 14(S1), pages 187-202.
- Albert A. Okunade, 2003. "Are Factor Substitutions in HMO Industry Operations Cost Saving?," Southern Economic Journal, Southern Economic Association, vol. 69(4), pages 800-821, April.
- Vassilis H. Aletras, 1999. "A comparison of hospital scale effects in short-run and long-run cost functions," Health Economics, John Wiley & Sons, Ltd., vol. 8(6), pages 521-530.
- Caves, Douglas W & Christensen, Laurits R & Swanson, Joseph A, 1981. "Productivity Growth, Scale Economies, and Capacity Utilization in U.S. Railroads, 1955-74," American Economic Review, American Economic Association, vol. 71(5), pages 994-1002, December.
- Bordignon, Massimo & Turati, Gilberto, 2009. "Bailing out expectations and public health expenditure," Journal of Health Economics, Elsevier, vol. 28(2), pages 305-321, March.
- Giovanni Fraquelli & Massimiliano Piacenza & Davide Vannoni, 2005. "Cost Savings From Generation and Distribution with an Application to Italian Electric Utilities," Journal of Regulatory Economics, Springer, vol. 28(3), pages 289-308, November.
- Kroneman, Madelon & Siegers, Jacques J., 2004. "The effect of hospital bed reduction on the use of beds: A comparative study of 10 European countries," Social Science & Medicine, Elsevier, vol. 59(8), pages 1731-1740, October.
- Preyra, Colin & Pink, George, 2006. "Scale and scope efficiencies through hospital consolidations," Journal of Health Economics, Elsevier, vol. 25(6), pages 1049-1068, November.
- Cremieux, Pierre-Yves & Ouellette, Pierre, 2001. "Omitted variable bias and hospital costs," Journal of Health Economics, Elsevier, vol. 20(2), pages 271-282, March.
- Silverman, Elaine & Skinner, Jonathan, 2004. "Medicare upcoding and hospital ownership," Journal of Health Economics, Elsevier, vol. 23(2), pages 369-389, March.
- Gerald Granderson & C. A. Knox Lovell, 1998. "The Impact of Regulation on Input Substitution and Operating Cost," Southern Economic Journal, Southern Economic Association, vol. 65(1), pages 83-97, July.
- Smet, Mike, 2002. "Cost characteristics of hospitals," Social Science & Medicine, Elsevier, vol. 55(6), pages 895-906, September.
- Carol Propper, 2001. "Expenditure on healthcare in the UK: a review of the issues," Fiscal Studies, Institute for Fiscal Studies, vol. 22(2), pages 151-183, June. Full references (including those not matched with items on IDEAS)