Economies of scale and optimal size of hospitals: Empirical results for Danish public hospitals

Research output: Working paperResearch

211 Downloads (Pure)

Abstract

Context and aim: The Danish hospital sector is facing a significant rebuilding programme, driven by a

: The Danish hospital sector is facing a significant rebuilding programme, driven by a

political desire to concentrate activity in fewer and larger hospitals. Our aim is to analyse whether the

current configuration of Danish hospitals is subject to scale economies that may justify such plans and to

estimate an optimal hospital size.

Methods: We estimate cost functions using panel data on total costs, DRG-weighted casemix, and number

: We estimate cost functions using panel data on total costs, DRG-weighted casemix, and number

of beds for three years from 2004-2006. A short-run cost function is used to derive estimates of long-run

scale economies by applying the envelope condition.

Results: We identify moderate to significant long-run economies of scale when applying two alternative

We identify moderate to significant long-run economies of scale when applying two alternative

translog cost functions. However, using a quadratic functional form we identify constant economies of

scale for the medium-sized sub-groups and decreasing economies of scale for the largest sub-groups. The

optimal number of beds per hospital is estimated to be 275 beds per site. Sensitivity analysis to partial

changes in model parameters yields a joint 95% confidence interval in the range 130 - 585 beds per site.

Conclusions: The results indicate that it may be appropriate to consolidate the production of small

: The results indicate that it may be appropriate to consolidate the production of small

hospitals (<230 beds) on fewer and larger units.

Original languageEnglish
PublisherSyddansk Universitet
Pages1
Number of pages30
Publication statusPublished - 2008

Keywords

  • Economies of scale
  • Hospital
  • Optimal size
  • Cost function

Fingerprint Dive into the research topics of 'Economies of scale and optimal size of hospitals: Empirical results for Danish public hospitals'. Together they form a unique fingerprint.

Cite this