The determinants of hospital size: a survivor analysis

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Abstract
The meaning and reliability of existing estimates of optimal scale in the production of hospital services are suspect because of the failure to adequately deal with the role of admitting physicians. This paper develops estimates of hospital size by studying changes in the size distribution of US short-term general hospitals over the period 1971–77. The technique produces size estimates which would be socially optimal only under very strong assumptions, but it has the advantage of accounting for the impacts of factors which typically have been ignored in cost function studies of hospital size. The analysis reveals substantial differences in survival size among geographic regions. A measure of survival size of nonprofit hospitals by state is developed and its determinants are investigated in a multiple regression framework. Survival size is found to be negatively affected by growth in the profit hospital sector and by the entry of health maintenance organizations while population growth, urbanization, and age have positive impacts. The effects of insurance coverage and of direct controls on capacity and prices are equivocal.

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