Assessing Economies of Scale in Public Hospitals

Under a new national agreement, public hospitals in Australia will be funded on activities. This article seeks to determine whether economies of scale exist in public hospitals and, if so, to develop a possible funding adjustment for the differences. Scatter diagrams, data transformation and a multi...

Full description

Saved in:
Bibliographic Details
Published in:Economic papers (Economic Society of Australia) 2011-09, Vol.30 (3), p.341-347
Main Authors: Zhao, Yuejen, Foley, Margaret, Eagar, Kathy
Format: Article
Language:English
Subjects:
activity based funding
Activity Based Funding (ABF)
Australia
Australia: Economic policy
Australian Health Care Agreements
Casemix funding
diagnosis related groups
Diagnosis related groups (DRGs)
Econometrics
Economic models
Economies of scale
F12
H51
Health administration
Health care
Health economics
Health policy
Hospital costs
Hospitals
Multilevel model
public hospitals
Citations: Items that cite this one
Online Access:Get full text
Tags: Add Tag
No Tags, Be the first to tag this record!
Description
Summary:Under a new national agreement, public hospitals in Australia will be funded on activities. This article seeks to determine whether economies of scale exist in public hospitals and, if so, to develop a possible funding adjustment for the differences. Scatter diagrams, data transformation and a multilevel model were used to describe the phenomenon. Ray scale elasticity was used to assess the overall economies of scale. The results demonstrate the existence of substantial scale economies in public hospitals and a clear negative log‐linear association between average cost and activity. A 10‐fold increase in hospitalisations may result in a 10 per cent decrease in average costs.
ISSN:0812-0439
1759-3441
DOI:10.1111/j.1759-3441.2011.00123.x