Concentrating Emergency Rooms: Penny-Wise and Pound-Foolish? An Empirical Research on Scale Economies and Chain Economies in Emergency Rooms in Dutch Hospitals.
In this paper, we address the issue of whether it is economically advantageous to concentrate emergency rooms (ERs) in large hospitals. Besides identifying economies of scale of ERs, we also focus on chain economies. The latter term refers to the effects on a hospital's costs of ER patients who also need follow-up inpatient or outpatient hospital care. We show that, for each service examined, product-specific economies of scale prevail indicating that it would be beneficial for hospitals to increase ER services. However, this seems to be inconsistent with the overall diseconomies of scale for the hospital as a whole. This intuitively contradictory result is indicated as the economies of scale paradox. This scale paradox also explains why, in general, hospitals are too large. There are internal (departmental) pressures to expand certain services, such as ER, in order to benefit from the product-specific economies of scale. However, the financial burden of this expansion is borne by the hospital as a whole. The policy implications of the results are that concentrating ERs seems to be advantageous from a product-specific perspective, but is far less advantageous from the hospital perspective. © 2016 The Authors. Health Economics Published by John Wiley & Sons, Ltd.
Delft University of Technology, Delft, The Netherlands.|Erasmus University, Rotterdam, The Netherlands.
Jos L T
JLT
Blank
Delft University of Technology, Delft, The Netherlands.
Bart L
BL
van Hulst
Western Michigan University, Grand Rapids, MI, USA.
Vivian G
VG
Valdmanis
D003362:Cost-Benefit Analysis; D004636:Emergency Service, Hospital / Q000191:economics*; D006761:Hospitals / Q000706:statistics & numerical data* / Q000600:supply & distribution; D006801:Humans; D018803:Models, Economic; D009426:Netherlands
chain economies; cost function; emergency rooms; hospitals; scale economies
J Health Econ. 1986 Jun;5(2):107-27
10287222
Med Care Res Rev. 2011 Feb;68(1 Suppl):36S-54S
20448253
Health Econ. 2017 Nov;26(11):1353-1365
27686779
N Engl J Med. 1996 Mar 7;334(10):642-6
8592529
Med Care. 2006 Sep;44(9):835-41
16932135
Ann Emerg Med. 2005 May;45(5):483-90
15855942
Health Care Manag Sci. 2009 Sep;12(3):243-51
19739358
J Med Syst. 2011 Oct;35(5):991-9
20703757
Health Econ. 2009 Jun;18(6):665-79
18702093
Ann Emerg Med. 1991 Jan;20(1):1-7
1898628