Volume 9, Number 1 (Winter) 1974
Baron, David P. 1974. "A Study of Hospital Cost Inflation." Journal of Human Resources 9(1):33-49.
The objective of this study is the estimation of the amount of hospital cost inflation associated with increases in factor prices, technological and case-mix change, and growth in hospital demand. The estimates indicate that the majority of the increase in average costs for the sampled hospitals was associated with factor price increases, while changes in technology and/or case mix also resulted in significant cost increases. These increases were offset to a relatively minor extent by the cost effects of increases in hospital output. To the extent that improvements in the quality of care are reflected by the observed increases in full-time equivalent employees per bed, the costs due to changes in technology and/or case mix may reflect the cost of quality improvements.
The author is Associate Professor of Managerial Economics and Decision Sciences, Northwestern University. The author wishes to thank Mark Pauly and Robert Masson for their comments on an earlier draft of this paper and Lauro Lazo for his assistance with the empirical work. This research was supported by the Health Services Research Center of Northwestern University and the Hospital Educational and Research Trust of the American Hospital Association.
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