Factor substitution in hospitals
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Date
2012-09-27
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Abstract
The substitutability of inputs to health production in hospitals has recently become
an issue in Germany. New regulations concerning the renumeration of
hospitals set incentives to reduce patients’ length of stay and, in turn, to operate
less care-intensive. Based on data at the individual hospital level from
Germany, covering the years 2006 to 2008, we test whether substitutability of
inputs and its change over time exhibits heterogeneity across different types of
ownership. If found in the data, this may point at differently owned hospitals
adapting differently to the new regulations. In order to avoid relying on input
prices as regressors, which exhibit only very limited variation across hospitals,
we pursue a price-free empirical approach by calculating technical elasticities
of substitution from the multiplier representation of data envelopment analysis.
The empirical analysis yields pronounces ownership-specific heterogeneity
in the technical elasticity of substitution between physicians and nurses indicating
that non-profit hospitals operate particularly ‘physician-intensive’. Yet,
this pattern is stable over the considered period.
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Keywords
data envelopment analysis, hospitals, input-substitution, technical elasticity of substitution