The object of study is to seek out and analyze factors which affect the unit cost of hospital and to evaluate the relative impacts of specific factors on hospital cost. The data used for this study is sampled from thirty-two hospitals in Korea.
In recent years, a number of studies have been undertaken to estimate the short-term cost relationship of hospitals. In general, the findings of these studies point toward the existence of economies of scale in hospital operations. This study formulates and analyzes the short-term economic desision model of hospital. The model can be helpful in placing in broader perpectivethe structureand causual relationship between the hospital cost and the selected factors. The objective of this study is to estimate the true relationship between hospital cost and selected variables.
The results of this study shows that the scalar economics exists in hopital services. The conclusion has been reached on the basis of the findings that marginal cost is continously increasing but average cost has only one minimum point where AC crosses MC. In addition, analysis of the costoutput relationship show that the size of hospital is negatively related to its unit cost and the relationship is statistically significant.
Generally, hospital can increase its outputs only by a greater rate of capacity utilization of various facilities. Since the expences of maintaining a fixed facility are largely fixed, the unit cost must decrease as output increase. The relationship observed is vhat between unit cost and capacity utiliation. This observation based by the estimated b-coefficient of capacity utilization is significantly and negatively related to hospital cost. In summary, this study shows one aspect of hospital industry which leads to economies of scale. The results of the analysis of other factors are not always conclusive. A hospital administrator and policy maker should make a judgement on what use can be made of this paper.