Michael Freeman

 

Faculty Candidate Michael Freeman  [Cambridge] 
Title Economies of Scale and Scope in Hospitals:  An Empirical Study of Volume Spillovers
Date & Time Friday, January 27, 2017
Place UCLA Anderson School of Management 
Room D313

 

Abstract
General hospitals across the world are becoming larger (i.e. admitting more patients each year) and more complex (i.e. offering wider portfolios of services to higher acuity patients with more diverse care needs). Although prior work has shown that increased volume is positively associated with patient outcomes, it is less clear how volume affects costs in these complex organizations. This paper investigates this relationship using panel data for 14 service lines comprising both elective and emergency admissions across 130 hospitals in England over a period of nine years. Although we find significant economies of scale for both elective and emergency admissions, we also find evidence of negative spillovers across the two admission types, with increased elective volume at a hospital being associated with an increase in the cost of emergency care. Furthermore, for emergency admissions we find evidence of positive spillovers across service lines -- increased emergency activity in one service line is associated with lower costs of emergency care in other service lines. By contrast, we find no evidence of such spillovers across service lines for elective admissions. Our findings have implications for individual hospitals and for the organization of regional hospital systems. Specifically, at the hospital level our findings suggest that growth strategies that target elective patients may have unintended negative productivity implications for emergency services. At the regional level, our findings offer support for the reorganization of regional hospital systems toward general hospitals that focus on the provision of emergency care across a full range of services, complemented by high-volume clinics that focus on elective services in a single service line.

Michael Freeman