Rate Of Increase In Costs Research Articles

Hospital Behavior Under Competition and Cost-Containment Policies

Previous studies of hospital competition have found that greater competition leads to higher hospital costs. We describe herein the change in behavior of California's hospitals since the introduction of competitive and cost-containment programs. To examine the impact of California's pro-competition policies on hospital performance, we grouped the state's short-term hospitals according to the level of competition within their markets. From 1983 through 1985, total inpatient costs (inflation adjusted) increased by less than 1% in hospitals in low-competition markets compared with a decrease of 11.29% in hospitals located in highly competitive markets. After controlling for the effects of the Medicare prospective payment system program, the rate of increase in cost per discharge in hospitals in highly competitive markets was 3.53% lower than the rate of increase in hospitals in low-competition markets during the period from 1983 through 1985. We conclude that these pro-competition policies are having dramatic and potentially far-reaching effects on the nature of hospital competition, leading to increased competition based on price.

Optimization of Split Between Windrow and Wagon Curing of Peanuts

ABSTRACT CURRENT peanut production practices involve a two-stage drying or curing procedure in which peanuts are dug from the ground, placed in windrows in the field for partial drying, and then combined and dried artificially in bins or wagons until a moisture content suitable for marketing is achieved. As energy costs have increased during recent years, interest has grown in reducing energy consumption in the production of all agricultural commodities. One technique for reducing energy consumption in peanut curing is to increase field drying and reduce the artificial drying in wagons. Because the sun provides the energy used in field or windrow drying, total drying costs would be reduced by increasing the amount of windrow drying. However, as the peanuts are left in the field for longer periods of time they may be subject to higher field losses which could more than offset the savings in energy costs. The optimum time for combining occurs when the rate of increase in costs from field losses is equal to the rate of decrease in costs for wagon drying. In order to predict when the optimum time for combining of peanuts occurs, it is necessary that we be able to predit: (a) the drying which will take place in the windrow under various conditions, (b) the field losses to be experienced under different weather conditions, and (c) the costs for drying in wagons under different weather conditions. Vedak (1974), Vedak and Young (1976), Young (1977), and Steele and Wright (1977) have developed computer simulation procedures for predicting the drying of peanuts in the windrow under various weather conditions. Vedak (1974), Vedak and Young (1976), Chhinnan and Young (1978), and Troeger and Butler (1979) have described simulation procedures for predicting the drying rates of peanuts in wagons or bins. No reports were found in the literature of studies in which field losses were related to condition of peanuts and weather conditions. The objectives of this study were to develop procedures for predicting field losses, to link the field loss predictions with computer programs for simulating windrow and wagon drying, and to determine the optimum split between windrow and wagon drying based on weather data for specific periods.

Investment Evaluation Under Conditions Of Inflation

In today's inflationary economic climate it is important to reconsider carefully investment measures that worked well in the past - they may not work as well today. Explicit inclusion of inflation effects can change the rankings of a set of investments. Proper consideration of inflation also can change investment objectives, and old guidelines should be re-examined. Introduction It seems as if death and taxes are adding a third member - inflation - to their club. Double-digit cost increases have been with us for the first time in many years. Moreover, most economic forecasts predict further increases for the next 5 to 10 years, although at a more moderate rate. Current and future government spending plans add plausibility to this scenario of future cost plans add plausibility to this scenario of future cost increases. This is an economic climate quite different from that of the 1950's and 1960's. Consequently, it is important to reconsider carefully the investment measures that worked well during that period. Are they measures for all seasons or is something new needed? In some cases the answer is clear. For example, future annual cost increases of 10 percent can ruin projects that were selected because they percent can ruin projects that were selected because they exceeded an old discounted cash flow (DCF) return standard of 6 or 8 percent. Clearly, in such cases, the return standard needs some modification. There are good reasons for changing to a return standard that is approximately the sum of the desired real rate of return and the anticipated future annual rate of cost increase. This means discounting at rates on the order of 12 to 16 percent instead of 8 to 10 percent. percent instead of 8 to 10 percent.The problem with most current investment measures is that they measure in terms of money. This would be fine if the buying power of money stayed constant. While such constancy was a fair approximation for the 1950's and 1960's, it is a bad approximation now. In an inflationary climate, the value of a given quantity of money gradually declines. Money in a mattress is worth less each year. Long-payout projects with small percentage returns may not earn enough to repay the money used to start the project, when measured in terms of purchasing power. power.The erosion of buying power can be explicitly accounted for by measuring investment performance in terms of buying power. For example, a measure based on present value of buying power explicitly considers both present value of buying power explicitly considers both the time value and the purchasing value of money. Such a measure sets a low value on money received in the distant future because of the opportunities foregone while waiting for the money and because the future money will not buy as much as it would if available today. With both time value and buying power acting to cheapen future money, the future value is knocked down more than if only the effect of time value were present. In other words, the presence of inflation leads to an increase in the discount rate used to determine present value. Some would argue that changes in investment standards to account for buying power are not valuable because one cannot accurately predict the future decline in buying power and also because the new standards would not change the preference ranking of investments. The first objection is really more of a lament common to all facets of investment analysis and selection. To make any choice at all, some attempt at soothsaying seems required, or at least desirable. (In fact, some forecast is implied in any investment analysis.) JPT P. 1183

Machine Tool Industry: Review and Outlook

FOLLOWING a three-year capital expenditures boom (from 1964 to 1966) which saw plant and equipment outlays grow at better than 15% per annum and which saw the annual order rate for machine tools double to record peace-time levels, the machine tool industry once again demonstrated its inherently cyclical nature. Although capital expenditures were at record levels in 1967, the rate of gain slowed to 1.7% from 16.7% in 1966 and machine tool orders dropped dramatically. Machine tool orders began showing lower year to year comparisons during the last two months of 1966. These poor monthly comparisons continued throughout 1967 and, for the full year, new orders of $1.13 billion were more than 30% below 1966 levels. Despite the severe slump in new orders, 1967 shipments of metalcutting machine tools increased for the seventh consecutive year. Aided by the substantial backlogs on hand at year end, total metalcutting shipments of $1.35 billion represented a $131 million, or 11%, increase over 1966. As a result of the industry's effort to reduce lead times, and in spite of the poor order pattern, shipments almost consistently exceeded net new bookings. Consequently, the backlog for metalcutting machine tools dropped from $1.31 billion to $1.09 billion at year end 1967. First quarter 1968 results showed a continuation of this pattern as shipments of $358 million exceeded orders by about 40%. In fact, the $140 million of metalcutting machine tool shipments for March 1968 represented the highest monthly total in 25 years. The industry's backlog has now declined to $970 million. In terms of overall production, this backlog represents less than nine months production, as compared to slightly over twelve months in late 1966. After showing rapid gains in earnings since the early sixties, industry profits advanced more moderately during 1967. A sample of seven of the larger, listed machine tool builders, which account for between 40 and 50 percent of industry shipments, showed a 7.8% increase in net income in 1967. (Table I) During the previous six-year period, 1961-1966, net income of these firms had increased at a compound annual rate in excess of 30%. Reflecting both a slowdown in the rate of growth in sales, and an acceleration in the rate of increase in costs, profit margin improvement began to slip after the first quarter. Pretax margins were relatively flat in 1967 after having shown steady improvement between 1961 and 1966. With a higher tax rate in 1967, 47.5 % versus 46.5%, after tax margins declined from 7.12% in 1966 to 7.05%.