The Impact of Market Environment on Excess Capacity and the Cost of an Empty Hospital Bed
The health economics literature contains contradictory empirical findings regarding the cost of an empty hospital bed. Recent empirical studies which account for the endogeneity of reserve capacity produce high estimates of these costs, while earlier studies and industry experts maintain that empty beds are cheap. This paper provides evidence which helps to reconcile the controversy. The cost of excess bed capacity will depend upon staffing levels of different types of labor in the hospital. We provide a relationship between capacity utilization, productive efficiency, and the cost of empty beds, and then compare the utilization of bed capacity in four very different market environments. These are the highly regulated, public Norwegian hospitals, who face very little competitive pressure, and the unregulated, private California hospitals, divided into three groups with variation in ownership and competitive environment. We find considerable variation in input utilization and excess capacity, with different implications for the cost of empty beds across the hospital groups and their respective market environments. Our findings suggest that the cost of an empty bed varies with market conditions, hence the seemingly contradictory findings in the literature are to be expected. Our findings also suggest an interesting area of future research: the impact of managed care on reserve capacity in hospitals.
Volume (Year): 6 (1999)
Issue (Month): 3 ()
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- Keeler, Theodore E & Ying, John S, 1996.
"Hospital Costs and Excess Bed Capacity: A Statistical Analysis,"
The Review of Economics and Statistics,
MIT Press, vol. 78(3), pages 470-481, August.
- Keeler, Theodore E. & Ying, John S., 1993. "Hospital Costs and Excess Bed Capacity: A Statistical Analysis," Department of Economics, Working Paper Series qt7cb0d9zc, Department of Economics, Institute for Business and Economic Research, UC Berkeley.
- 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, vol. 14(3), pages 291-317, August.
- Martin Gaynor & Gerard F. Anderson, 1993. "Uncertain Demand, The Structure of Hospital Costs, and the Cost of EmptyHospital Beds," NBER Working Papers 4460, National Bureau of Economic Research, Inc.
- Iversen, Tor, 1993. "A theory of hospital waiting lists," Journal of Health Economics, Elsevier, vol. 12(1), pages 55-71, April.
- 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.
- Roger Feldman & Felix Lobo, 1997. "Global Budgets and Excess Demand for Hospital Care," Health Economics, John Wiley & Sons, Ltd., vol. 6(2), pages 187-196. Full references (including those not matched with items on IDEAS)
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