Advertisement

Variable Cost Frontiers and Efficiency: An Investigation of Labor Costs in Hospitals

  • Patricia Byrnes
  • Vivian Valdmanis
Part of the Lecture Notes in Economics and Mathematical Systems book series (LNE, volume 332)

Abstract

Health economists recognize that the rising cost of hospital services is due, at least in part, to features of the industry which create costly resource misallocation that decreases productivity. Organizational structure, lack of competition in the market for health care in some areas, imperfections in factor markets, and government regulation have all been hypothesized to effect the cost minimizing performance of hospitals. A growing body of empirical research which seeks to investigate cost inefficiencies in the health care industry and these predications of the effect of industry structure on performance has resulted. Most of this work has followed one modeling approach: (1) measuring either total cost or technical efficiency with aggregate measures of non- physician labor (2) without examining the technical and allocative components of cost inefficiency (3) and using statistical techniques to estimate a parametric cost or production frontier. In this study additional empirical evidence on inefficiency of hospitals is provided using a different modeling approach.

Keywords

Data Envelopment Analysis Technical Efficiency Variable Cost Production Frontier Allocative Efficiency 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. [1]
    American Hospital Association Hospital Statistics Chicago, IL. (1987)Google Scholar
  2. [2]
    Banker, R. D., R. Conrad and R. Strauss, “A Comparative Application of Data Envelopment Analysis and Translog Methods: An Illustrative Study of Hospital Production.” Management Science 32 (1986)30–44.CrossRefGoogle Scholar
  3. [3]
    Booton, L. D. and J. Lane, “Hospital Market Structure and the Return to Nursing Education.” Journal of Human Resources 20 (1984): 184–196.CrossRefGoogle Scholar
  4. [4]
    Byrnes, P. “Ownership and Efficiency in the Water Supply Industry: An Application of the Nonparametric Programming Approach to Efficiency Measurement.” Ph.D. Dissertation, Southern Illinois University, Carbondale, IL., (1985)Google Scholar
  5. [5]
    Cowing, T. and A. Holtman “The Multiproduct Short-Run Hospital Cost Function: Empirical Evidence and Policy Implications From Cross-Section Data.” Southern Economic Journal 49 (1983): 637–53.CrossRefGoogle Scholar
  6. [6]
    Eakin, B. K. and T. J. Kniesner “Estimating a Non-Minimum Cost Function for Hospitals.” Southern Economic Journal 54 (1988): 583–597.CrossRefGoogle Scholar
  7. [7]
    Färe R. “Efficiency and the Production Function.” Zeitschrift fur Nationalokonomie 35 (1975): 317–24.CrossRefGoogle Scholar
  8. [8]
    Färe R., S. Grosskopf and C.A.K. Lovell The Measurement of Efficiency of Production. Boston: Kluwer Nijhoff, 1985.Google Scholar
  9. [9]
    Farrell, M.J. “The Measurement of Productive Efficiency.” The Journal of the Royal Statistical Society 120, Series A, Part 3. (1957): 253–281.CrossRefGoogle Scholar
  10. [10]
    Friedman, B. and M. Pauly “Cost Functions for a Service Firm with Variable Quality and Stochastic Demand: The Case of Hospitals.” Review of Economics and Statistics 63 (1981): 620–624.CrossRefGoogle Scholar
  11. [11]
    Grosskopf, S. and V. Valdmanis “Measuring Hospital Performance: A Non-parametric Approach.” Journal of Health Economics 6 (1987): 89–107.CrossRefGoogle Scholar
  12. [12]
    Kopp, R.C. “Measurement of Productive Efficiency: A Reconsideration.” The Quarterly Journal of Economics 96 (1981): 477–503.CrossRefGoogle Scholar
  13. [13]
    Leibenstein H. “Allocative Efficiency Versus X-Efficiency.” American Economic Review 56 (1966): 392–415.Google Scholar
  14. [14]
    Leibenstein H., “On the Basic Proposition of X-Efficiency Theory.” American Economic Review 68 (1978): 328–332.Google Scholar
  15. [15]
    Pauly, M. and P. Wilson “Hospital Output Forecasts and the Costs of Empty Hospital Beds.” Health Services Research 21 (1986): 403–428Google Scholar
  16. [16]
    Register, C.A. and E.R. Burning “Profit Incentives and Technical Efficiency in the Production of Hospital Care.” Southern Economic Journal 53 (1987): 899–914.CrossRefGoogle Scholar
  17. [17]
    Sloan, F. and B. Steinwald Insurance, Regulation and Hospital Costs. Lexington, MA: Lexington Books, 1980.Google Scholar

Copyright information

© Springer-Verlag New York, Inc. 1989

Authors and Affiliations

  • Patricia Byrnes
    • 1
  • Vivian Valdmanis
    • 2
  1. 1.Center for Naval AnalysesAlexandriaUSA
  2. 2.School of Public HealthTulane UniversityNew OrleansUSA

Personalised recommendations