Production functions for general hospitals

Abstract

After a description of the production structure of the hospital sector in the Netherlands the outputs and the inputs are defined: outputs as weighted admissions, weighted patient days and inter- mediate production and inputs as the number of beds, the number of specialists, the facility-index (a scale index of the composition of the infrastructure of the hospital), drugs (in monetary terms) and the number of staff (subdivided into nurses, paramedical staff and so on). We have estimated three types of models: Cobb-Douglas, CES and the more general translog specification and the characteristics of these are compared. Using data for 110 general acute hospitals, the Cobb-Douglas and translog specifications are estimated by ordinary least squares method; the CES-specification by several methods (OLS and non-linear methods). We conclude that the more general translog specification fits the data better than the Cobb-Douglas or the CES specification. The results are interpreted in terms of the output elasticities, the elasticities of substitution and the scale effects. Thereafter, following Feldstein, we construct indices of productivity, of cost and of input efficiency.