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Emergency department visits: the cost of trauma centers

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Abstract

Crowded emergency departments (EDs) have become a serious problem in the current U.S. healthcare system. Patient wait times and periods of ED diversion have increased, raising concerns about the timeliness, efficiency, and quality of ED treatment. This study addresses the question of whether there are economies of scale (EOS) in ED care, and the extent to which such economies vary across different types of EDs. A hospital cost function approach is taken to evaluate average and marginal costs of EDs designated as trauma centers. Data comes from acute care hospitals in Texas for the period 1998–2004. Cost functions corresponding to four different levels of ED trauma care are estimated using a translog panel data model with hospital fixed effects. The marginal costs (in 2004 dollars) of each trauma center level are: $53 (Level I), $177 (Level II), $119 (Level III), and $258 (Level IV). Average cost per ED visit for trauma centers exceeds marginal cost at all Levels, indicating the presence of EOS. The results support a possible expansion of ED size policy in order to improve the cost efficiency of ED services.

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Notes

  1. These allocations are drawn from Sheet A on the Medicare Cost Report.

  2. We applied a number of constraints on the parameters in order to preserve linear homogeneity in input prices. B = 1; L = 0; ∑ i D = 0.

  3. A Hausman test comparing the fixed effects and the random effects panel models generated a chi-squared statistic of 195.4. We therefore rejected the null hypothesis of consistent estimates associated with the random effects estimator (P < 0.001). We also tested for heteroskedasticity using the White test. The chi-squared statistic of 0.979 (P > .0.05) indicates that we can accept the hypothesis that there is no significant heteroskedasticity in the model.

  4. AC was calculated using the predicted values of log ED cost. The retransformation of predicted values to unlogged form were adjusted using the smearing estimator of Duan (1983) [9]: \({\text{ED}}\;{\text{Cost}} = {\operatorname{Exp} {\left( {{\text{predicted}}\;{\text{value}}\;{\text{of}}\;\log \;{\text{ED}}\;{\text{Cost}}} \right)} \times 1} \mathord{\left/ {\vphantom {{\operatorname{Exp} {\left( {{\text{predicted}}\;{\text{value}}\;{\text{of}}\;\log \;{\text{ED}}\;{\text{Cost}}} \right)} \times 1} {{\text{n}} \times {\sum {Exp\;{\left( {{\text{residuals}}} \right)}} }}}} \right. \kern-\nulldelimiterspace} {{\text{n}} \times {\sum {Exp\;{\left( {{\text{residuals}}} \right)}} }}\)

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Authors and Affiliations

  1. Severance Hospital, Seoul, South Korea

    Kyung Hye Kim

  2. VA Center for Health Quality, Outcomes and Economic Research, 200 Springs Road, Bedford, MA, 01730, USA

    Kathleen Carey

  3. Boston University School of Public Health, Boston, MA, USA

    Kathleen Carey & James F. Burgess Jr.

  4. VA Center for Organization, Leadership and Management Research, Boston, MA, USA

    James F. Burgess Jr.

Authors
  1. Kyung Hye Kim
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  2. Kathleen Carey
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  3. James F. Burgess Jr.
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Correspondence to Kathleen Carey.

Appendix

Appendix

Table 5 Estimated cost function parameters
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Kim, K.H., Carey, K. & Burgess, J.F. Emergency department visits: the cost of trauma centers. Health Care Manag Sci 12, 243–251 (2009). https://doi.org/10.1007/s10729-008-9088-1

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