The econometric analysis of hospital costs with an application to scale and scope efficiencies in Ontario hospitals

grantor: University of TorontoThis dissertation applies the economic theory of production to the problem of estimating economies of scale and scope for multi product hospitals. Chapter 1 surveys the history of cost function analysis undertaken by economists and Chapter 2 develops the requisite economic theory of production for the multi product firm, including the notion of sustainability of hospital configurations. Chapters 3 through 10 discuss the implications of functional form, output aggregation and measurement teaching, unobservable factor prices, managerial inefficiency and the fixity of inputs for cost function estimation. In Chapter 11, the theory developed in the previous chapters is applied to the task of estimating economies of scale and scope for Ontario hospitals over the period 1994/95 to 1995/1996. A leading finding is extreme sensitivity of scale and scope conclusions to equilibrium assumptions concerning the capital stock. Marginal costs within all output categories are computed, and it is suggested that the resulting differences in marginal costs between primary and tertiary weighted cases have implications for the present system of hospital funding in Ontario. Strong evidence is found in favour of unexploited economies of scale and scope in hospital production Over the entire range of the data. Generic scale and scope measures are compared with product specific scale and scope measures in order to provide additional detail of the production structure of hospital outputs. Detailed examples of sustainability calculations are presented which show that, in terms of cost efficiency, the present configuration of hospitals is not sustainable. In order to summarize results into a form directly relevant for policy analysis, we predict the expected cost implications of various mergers between peer group hospitals in equilibrium, along with their associated standard errors, and find strong probabilities of large gains to hospital mergers and consolidations. The final chapter discusses findings in the dissertation, itemizes the shortcomings and provisos of the analysis, and suggests extensions to this assay.Ph.D

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A mixture model approach to updating payment weights with an application to ICD-10 implementation

Case mix, Cost weights, DRG,