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A two-stage translog marginal cost pricing approach for Floridian hospital outputs

Author

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  • Jean-Philippe Boussemart

    (UFR MIME - UFR de Mathématiques, Informatique, Management, Economie - Université de Lille, Sciences Humaines et Sociales, IESEG - School of Management, LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Herve Leleu

    () (Economy - UCL - Université catholique de Lille, LEM - Lille économie management - UMR 9221 - UA - Université d'Artois - UCL - Université catholique de Lille - Université de Lille - CNRS - Centre National de la Recherche Scientifique)

  • Vivian Valdmanis

Abstract

Since the passage of the Affordable Care Act (ACA) of 2010, issues still remain regarding the mandated purchase of insurance to ensure more universal coverage. One such issue is the pricing of these insurance packages and whether or not the reimbursements will cover necessary services. Therefore, policy concerns exist that increasing the number of insured individuals may not curtail costs. Conversely, providers may not wish to treat patients covered by excessively frugal plans such as Medicaid; hence the trade-offs between access and cost control. In this article, we present findings from a cost function and a productivity approach to determine the marginal cost of providing inpatient hospital care for hospitals operating in Florida during 2005. Using these methodological approaches, we are able to use the marginal rate of transformation to determine the relative marginal costs while controlling for hospital technical and allocative inefficiency. Our work differs from earlier articles as we avoid the Greene problem for cross-sectional models through a two-step approach. By including both reimbursement rates under conditions of hospital efficiency, we can ascertain payment schemes that should, at least in theory, cover necessary costs for patient care without leading to excessive input usage.

Suggested Citation

  • Jean-Philippe Boussemart & Herve Leleu & Vivian Valdmanis, 2015. "A two-stage translog marginal cost pricing approach for Floridian hospital outputs," Post-Print hal-01526024, HAL.
  • Handle: RePEc:hal:journl:hal-01526024
    DOI: 10.1080/00036846.2015.1023948
    Note: View the original document on HAL open archive server: https://hal.archives-ouvertes.fr/hal-01526024
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    1. Ferrier, Gary D. & Johnson, Andrew L. & Layer, Kevin & Sickles, Robin C., 2018. "Direction Selection in Stochastic Directional Distance Functions," Working Papers 18-010, Rice University, Department of Economics.

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