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Hospital Costs and Excess Bed Capacity: A Statistical Analysis

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  • Theodore E. Keeler and John S. Ying.

Abstract

The present paper develops and estimates a cost model for U.S. hospitals which enables us to analyze the cost of excess bed capacity. A new estimate is worth making for at least two reasons. First, recent changes in the economic environment in which hospitals operate has caused their utilization rates in the U.S. to fall sharply over the past decade, making previous estimates inaccurate. Second, the present paper employs econometric techniques of cost estimation not previously applied to this problem, with estimation based on all U.S. short-term community hospitals from 1979 through 1989. Our results, based on conservative estimates of the average optimal occupancy rate, indicate an annual cost of excess bed capacity (in current dollars) of $13.2 billion in 1989, $18.4 billion in 1991, and over $20 billion in 1993.

Suggested Citation

  • Theodore E. Keeler and John S. Ying., 1993. "Hospital Costs and Excess Bed Capacity: A Statistical Analysis," Economics Working Papers 93-209, University of California at Berkeley.
    • Handle: RePEc:ucb:calbwp:93-209
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    Cited by:

    1. 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.

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