Restructuring hospital industry to control public health care expenditure: The role of input substitutability

Abstract

Abstract. In this paper we investigate the economic rationality of the bed downsizing process, characterising the hospital industry worldwide in the last decades, as a measure to control public health care expenditure. Considering a sample of Italian hospitals, we provide fresh evidence on the factor substitutability in the production of hospital services. Differently from other studies, based on North-American data and confined to pre-determined cost function models, we estimate a general specification (the Generalised Composite), and test it against traditional nested models (e.g., the translog). For all the specifications we derive Allen, Morishima and Shadow elasticities of substitution between input pairs, obtaining a fairly consistent picture across all models and elasticity concepts. In particular, our results highlight a very limited degree of substitutability between factors in the production of hospital services, especially between beds and medical staff.These findings suggest that a restructuring policy of the hospital industry, which is confined to limiting the number of beds without involving workforce management, could not be a viable strategy for controlling public health care expenditure.

Economies of scale and scope in the Danish hospital sector prior to radical restructuring plans

“…From 1980 to 2007, the number of somatic hospitals decreased from 117 to 35. This trend has been enhanced by the ongoing reforms process.…”

“…Nevertheless, the use of beds per hospital as proxy for fixed cost can be highly questionable. This is due to an international and Danish trend toward bed downsizing, which does not automatically result in lower fixed hospital costs [35]. Bed downsizing implies, increased occupancy rates, lower inpatient admission rates and, in particular, rising ambulatory surgery and outpatient care [36,37].…”

Structural and managerial cost differences in nonprofit nursing homes

“…policies have shown their limitation as a viable strategy for controlling public health expenditure, at least in the hospital sector (Piacenza et al, 2010). Financial pressure on health care budgets is increasing, and little evidence is available on the performance of di¤erent types of NFP NHs.…”

“…In the last decade, di¤erent restructuring policies have been implemented to control public health expenditures, such as bed downsizing in hospitals (Piacenza et al, 2010). In the provision of nursing home services, a focus of restructuring policies has been the transformation of public NHs into private nonpro…t (NFP) NHs.…”

The Localization of Pharmaceutical Clinical Research in Europe

“…[10][11][12][13] This technique has been applied in many contexts to study relevant problems in the field of Operational Research, e.g., bank and credit risk applications, 14,15 container ports, 16 in the insurance industry, 17 and, obviously, in the field of medical care. [18][19][20][21][22][23][24] The output-oriented model was used, applying variable returns to scale (VRS). [25][26][27] Moreover, a bootstrap procedure was applied to the DEA approach to correct score values and their confidence intervals, refined by the bias; the 2-stage approach was also used.…”