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The costs of new organisational and financial freedom: The case of English NHS trusts

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  • Marini G
  • Miraldo M

Abstract

In this paper we estimate hospital costs and evaluate economies of scale and scope using a generalised multiproduct cost function and a sample of English NHS trusts with different types of ownership, namely Foundation Trusts and non Foundation Trusts. Evaluating the behaviour of different types of hospitals separately might be particularly helpful for the design, and future developments, of the optimal provider reimbursement tariff. Also it might shed some light on the ability of different types of hospitals to profit from the existence of economies of scale and scope. Results show that, even though these two group of providers do not exhibit differences regarding economies of scale, Foundation Trusts exhibit global diseconomies of scope while non Foundation Trusts exhibit global scope economies.

Suggested Citation

  • Marini G & Miraldo M, 2009. "The costs of new organisational and financial freedom: The case of English NHS trusts," Health, Econometrics and Data Group (HEDG) Working Papers 09/26, HEDG, c/o Department of Economics, University of York.
  • Handle: RePEc:yor:hectdg:09/26
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    References listed on IDEAS

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    1. Fournier, Gary M & Mitchell, Jean M, 1992. "Hospital Costs and Competition for Services: A Multiproduct Analysis," The Review of Economics and Statistics, MIT Press, vol. 74(4), pages 627-634, November.
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    3. Caves, Douglas W & Christensen, Laurits R & Tretheway, Michael W, 1980. "Flexible Cost Functions for Multiproduct Firms," The Review of Economics and Statistics, MIT Press, vol. 62(3), pages 477-481, August.
    4. Giovanni Fraquelli & Massimiliano Piacenza & Davide Vannoni, 2004. "Scope and scale economies in multi-utilities: evidence from gas, water and electricity combinations," Applied Economics, Taylor & Francis Journals, vol. 36(18), pages 2045-2057.
    5. Vitaliano, Donald F., 1987. "On the estimation of hospital cost functions," Journal of Health Economics, Elsevier, vol. 6(4), pages 305-318, December.
    6. Hughes, David & McGuire, Alistair, 2003. "Stochastic demand, production responses and hospital costs," Journal of Health Economics, Elsevier, vol. 22(6), pages 999-1010, November.
    7. 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.
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    11. Smet, Mike, 2002. "Cost characteristics of hospitals," Social Science & Medicine, Elsevier, vol. 55(6), pages 895-906, September.
    12. Vita, Michael G., 1990. "Exploring hospital production relationships with flexible functional forms," Journal of Health Economics, Elsevier, vol. 9(1), pages 1-21, June.
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    More about this item

    Keywords

    Economies of Scale; Economies of Scope; Foundation Trusts; Payment by Results;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes

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