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RESERVE CAPACITY OF PUBLIC AND PRIVATE HOSPITALS IN RESPONSE TO DEMAND UNCERTAINTY
Author(s) -
RodriguezAlvarez Ana,
Roibás David,
Wall Alan
Publication year - 2012
Publication title -
health economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.55
H-Index - 109
eISSN - 1099-1050
pISSN - 1057-9230
DOI - 10.1002/hec.1755
Subject(s) - frontier , queueing theory , capacity utilization , service (business) , business , economics , actuarial science , public economics , microeconomics , marketing , computer science , computer network , archaeology , history
SUMMARY A feature of hospitals is that they face uncertain demand for the services they offer. To cover fluctuations in demand, they need to maintain reserve service capacity in the form of beds, equipment, personnel, etc. to minimize the probability of excess queuing or turning away patients, creating a trade‐off between reserve service capacity and economic costs. Using a simple theoretical framework, we show how the reserve capacity established depends on institutional characteristics that can affect the objective of the hospital. In particular, we show that private and public hospitals may provide different levels of reserve capacity. In an empirical application using a panel data set of Spanish hospitals over the period 1996–2006, we model reserve service capacity using a distance frontier approach. Our results show that private hospitals generally react to a lesser extent to demand uncertainty than public hospitals. Copyright © 2011 John Wiley & Sons, Ltd.