title: Economies of scale and scope in the Danish hospital sector prior to radical restructuring plans.
abstract: OBJECTIVE
  The Danish hospital sector faces a significant rebuilding program driven by recent regional reform and guidelines for acute admission hospitals. Within the next 5-10 years, the number of public hospitals offering acute admission will be reduced from 35 to approximately 20 larger hospitals. As the administrative data may be biased during the middle of a restructuring process our objective was to analyze whether the configuration of Danish public hospitals was subject to economies of scale and scope prior to the restructuring plans.
  
  
  METHODS
  We estimated a quadratic cost function using panel data on the total costs for somatic treatment, casemix adjusted DRG-production values, and other cost drivers for the three years before the 2007 reforms. A short-run cost function was used to derive estimates of a long-run cost function by applying the envelope condition. Next, we estimated economies of scale and scope.
  
  
  RESULTS
  We identified moderate-to-significant economies of scale and scope. This indicates that the Danish hospital sector was characterized by unexploited gains from consolidation.
  
  
  CONCLUSIONS
  Our results suggest that the proposed plans have the potential to result in hospitals that are more efficient. However, post-restructuring studies elsewhere show that the strategy of horizontal integration has failed.
authors.affiliation: Institute of Public Health, Department of Health Economics, Faculty of Health Sciences, University of Southern Denmark, Denmark. trkristensen@health.sdu.dk
authors.forename: Troels
authors.initials: T
authors.lastname: Kristensen
authors.forename: Kim Rose
authors.initials: KR
authors.lastname: Olsen
authors.forename: Jannie
authors.initials: J
authors.lastname: Kilsmark
authors.forename: Jørgen T
authors.initials: JT
authors.lastname: Lauridsen
authors.forename: Kjeld Møller
authors.initials: KM
authors.lastname: Pedersen
mesh_terms: D002202:Capital Financing / Q000191:economics / Q000458:organization & administration; D003718:Denmark; D004469:Economics, Hospital / Q000458:organization & administration; D018166:Health Care Reform / Q000191:economics / Q000458:organization & administration; D006276:Health Facility Size / Q000191:economics / Q000458:organization & administration; D006739:Hospital Administration / Q000191:economics*; D017721:Hospital Costs / Q000458:organization & administration; D006801:Humans