The Production and Cost of Ambulatory Medical Care in Community Health Centers

100 Pages Posted: 7 Feb 2002 Last revised: 26 Jun 2010

See all articles by Fred Goldman

Fred Goldman

The New School; National Bureau of Economic Research (NBER)

Michael Grossman

National Bureau of Economic Research (NBER), NY Office; CUNY The Graduate Center - Department of Economics

Date Written: June 1982

Abstract

An assessment of the efficiency of Federally funded community health centers (CHCs) in delivering ambulatory medical care to poverty populations reveals that the centers' input decisions reflect departures from cost-minimizing behavior. In particular, they employ too few physician aids (nurses and physician assistants) relative to primary care physicians and too many medical support and ancillary personnel relative to primary care physicians. The CHC system-wide cost reduction due to the elimination of allocative inefficiency is estimated at $32 million in 1978 dollars or 6 percent of total cost. This modest cost reduction and evidence that allocative inefficiency is not more widespread among CHCs than among private sector physicians seriously question the conventional wisdom that services in the public sector are produced less efficiently than in the private sector. Support is also reported for the hypothesis that, since grants are not tied to particular services rendered, centers who derive most of their revenue from this source relative to Medicaid and private insurance have a greater incentive to provide a given mix of services in the least-cost method.

Suggested Citation

Goldman, Fred and Grossman, Michael, The Production and Cost of Ambulatory Medical Care in Community Health Centers (June 1982). NBER Working Paper No. w0907. Available at SSRN: https://ssrn.com/abstract=299785

Fred Goldman (Contact Author)

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Michael Grossman

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