Hospital Costs and the Cost of Empty Hospital Beds

24 Pages Posted: 21 Dec 2000 Last revised: 11 Aug 2010

See all articles by Martin Gaynor

Martin Gaynor

Carnegie Mellon University; National Bureau of Economic Research (NBER); Leverhulme Centre for Market and Public Organisation

Gerard F. Anderson

Johns Hopkins University - Department of Health Policy and Management; National Bureau of Economic Research (NBER)

Date Written: October 1991

Abstract

The cost of excess capacity in the hospital industry has reemerged as an important policy issue. Utilized capacity in the hospital industry, as measured by the inpatient hospital bed occupancy rate, has declined over the past 10 years and now stands at approximately 65 percent. Congress and the Administration are concerned that the costs associated with empty beds represent wasteful expense and have proposed an adjustment to Medicare payment rates which will penalize hospitals with low occupancy rates. Hospitals, on the other hand, have indicated that the costs of empty hospital beds are low and that reimbursement adjustments are unnecessary. In order to provide more current and representative estimates of the cost of an empty hospital bed we estimate the cost function model of Friedman and Pauly using data from a national sample of 5315 hospitals for the years 1963-1987. We find that empty beds account for approximately 18 percent of total costs, or $546 per admission (1987 dollars) . The estimate (in 1987 dollars) of the coat of an empty hospital bed is approximately $36,000.

Suggested Citation

Gaynor, Martin and Anderson, Gerard F., Hospital Costs and the Cost of Empty Hospital Beds (October 1991). NBER Working Paper No. w3872. Available at SSRN: https://ssrn.com/abstract=253995

Martin Gaynor (Contact Author)

Carnegie Mellon University ( email )

H. John Heinz III School of Public Policy
and Management
Pittsburgh, PA 15213-3890
United States
412-268-7933 (Phone)
412-268-5338 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Leverhulme Centre for Market and Public Organisation

12 Priory Road
Bristol BS8 1TN
United Kingdom

Gerard F. Anderson

Johns Hopkins University - Department of Health Policy and Management ( email )

624 North Broadway
Baltimore, MD 21205

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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