nach oben

International Journal of Health Economics and Management

Erschienen in:

12.09.2017 | Research Article

Specialization and production cost efficiency: evidence from ambulatory surgery centers

verfasst von: Kathleen Carey, Jean M. Mitchell

Erschienen in: International Journal of Health Economics and Management | Ausgabe 1/2018

Einloggen, um Zugang zu erhalten

Abstract

In the U.S. health care sector, the economic logic of specialization as an organizing principle has come under active debate in recent years. An understudied case is that of ambulatory surgery centers (ASCs), which recently have become the dominant provider of specific surgical procedures. While the majority of ASCs focus on a single specialty, a growing number are diversifying to offer a wide range of surgical services. We take a multiple output cost function approach to an empirical investigation that compares production economies in single specialty ASCs with those in multispecialty ASCs. We applied generalized estimating equation techniques to a sample of Pennsylvania ASCs for the period 2004–2014, including 73 ASCs that specialized in gastrointestinal procedures and 60 ASCs that performed gastrointestinal as well as other specialty procedures. Results indicated that both types of ASC had small room for expansion. In simulation analysis, production of GI services in specialized ASCs had a cost advantage over joint production of GI with other specialty procedures. Our results provide support for the focused factory model of production in the ASC sector.

Although the number of ASCs has continued to grow, this is not the case for SSHs. Empirical studies documenting increased utilization and cherry-picking of both well-insured and less sick patients by SSHs prompted Congress to essentially halt construction of new specialty facilities and expansion of existing hospitals under Section 6001 of the ACA. Since passage of the ACA, however, Section 6001 has been challenged in numerous forums including the courts, advocacy groups, and the U.S. Congress. Most recently, H.R.2513—the Promoting Access, Competition, and Equity (PACE) Act of 2015—was introduced in the House calling for easing current ACA restrictions on existing physician-owned hospitals to expand their facilities. https://www.congress.gov/bill/114th-congress/house-bill/2513/all-info.

The number of colonoscopies performed at each ASC is identified by (CPT-4/ HCPCS codes 44388–44397; 45300–45327;45330–45345; 45355–45392; G0104, G0105, G0106, G0121). Counts of endoscopy procedures performed at each ASC are identified by (CPT-4/ HCPCS codes 43200–43272; 44360–44379; 43450–43499; 44380–44386; 46600–46615).

Other approaches have been taken to measure scale economies from short-run cost functions (Braeutigam and Daughety 1983). The theoretically faithful method is applying the envelope condition to solve for the optimal level of the fixed factor using the parameter estimates from the cost function estimates and price data on the fixed factor (in essence, deriving the long-run cost function). Vita (1990) has demonstrated that using the actual rather than the optimal level is a reliable alternative.

A third possibility is that marginal costs asymptote to some number such that increasing quantity would increase profits, but expansion is bounded by demand or limited referral patterns even when EOS are present. We are unable with the data at hand to test for this scenario.

In log cost models, retransformation of predicted values is not straightforward, because the expected value of the log of dependent variable y conditional on independent variable x is not likely to be equal to the log of the expected value of Yconditional on x. GLM has the advantage of avoiding this problem because it estimates ln(E[Y ${\vert }$ x]), not E(ln(Y ${\vert }$ x)).

The Park test assumes that:

$$\begin{aligned} V(Expenditures|x)=\alpha (\mu (Expenditures|x))^{\lambda } \end{aligned}$$

(4)

for some constants $\alpha $ and $\lambda $ = 0, where Vis the conditional variance and the function $\mu $ indicates the conditional mean function. We estimated (4) by regressing the log of the raw-scale residuals squared obtained from a log-linked, gamma distributed model of expenditures on the log of the raw-scale prediction. We found that ${\lambda }=2$, such that the standard deviation is proportional to the mean, as is found in a gamma distribution (Manning and Mullahy 2001).

GEE takes the dependence of observations into account by specifying a “working correlation structure”. We fit the GEE with the SAS default of an independence correlation structure, which produces sandwich (robust) standard errors. Note that GEE offers robust estimates even when the correlation structure is unknown (Diggle et al. 2002).

Berger, A. N., Hanweck, G. A., & Humphrey, D. B. (1987). Competitive viability in banking: Scale, scope, and product mix economics. Journal of Monetary Economics, 20(3), 501–520.CrossRef

Blough, D. K., Madden, C. W., & Hornbrook, M. C. (1999). Modeling risk using generalized linear models. Health Services and Outcomes Research Methodology, 18(2), 153–171.

Braeutigam, R. R., & Daughety, A. F. (1983). On the estimation of returns to scale using variable cost functions. Economics Letters, 11(1–2), 25–31.CrossRef

Bredenhoff, E., van Lent, W. A. M., & van Harten, W. H. (2010). Exploring types of focused factories in hospital care: A multiple case study. BMC Health Services Research, 10(1), 154–169.CrossRefPubMedPubMedCentral

Carey, K., Burgess, J. F., & Young, G. J. (2008). Specialty and full-service hospitals: A comparative cost analysis. Part II. Health Services Research, 43(5), 1869–1887.CrossRefPubMedPubMedCentral

Carey, K., & Stefos, T. (2011). Controlling for quality in the hospital cost function. Health Care Management Science, 14(2), 125–134.CrossRefPubMed

Caves, D. W., Christensen, L. R., & Swanson, J. A. (1981). Productivity growth, scale economies, and capacity utilization in U.S. railroads 1955–1974. American Economic Review, 71(5), 994–1002.

Clark, J. R., & Huckman, R. S. (2012). Broadening focus: Spillovers, complementarities, and specialization in the hospital industry. Management Science, 58(4), 708–722.CrossRef

Diggle, P. J., Heagerty, P., Liang, K. Y., & Zeger, S. L. (2002). Analysis of longitudinal data (2nd ed.). Oxford, UK: Oxford University Press.

Fournier, G. M., & Mitchell, J. M. (1992). Hospital costs and competition for services: A multiproduct analysis. The Review of Economics and Statistics, 74(4), 627–634.CrossRef

Gaynor, M., & Anderson, G. (1995). Uncertain demand, the structure of hospital costs, and the cost of empty hospital beds. Journal of Health Economics, 14(3), 291–317.CrossRefPubMed

Herzlinger, R. E. (2004). Specialization and its discontents: The pernicious impact of regulation against specialization and physician-ownership in the US health care system. Circulation, 109(20), 2376–2378.CrossRefPubMed

Heskett, J. L. (1986). Managing in the service economy. Boston: Harvard Business School Press.

Hollingsworth, J. M., Ye, Z., Strope, S. A., Krein, S. L., Hollenbeck, A. T., & Hollenbeck, B. K. (2010). Physician-ownership of ambulatory surgery centers linked to higher volume of surgeries. Health Affairs, 29(4), 683–689.CrossRefPubMed

Hubbard, A. E., Ahern, J., Fleischer, N. L., Van der Laan, M., Lippman, S. A., Jewell, N., et al. (2010). To GEE or not to GEE: Comparing population average and mixed models for estimating the associations between neighborhood risk factors and health. Epidemiology, 21(4), 467–474.CrossRefPubMed

Ketokivi, M., & Jokinen, M. (2006). Strategy, uncertainty and the focused factory in international process manufacturing. Journal of Operations Management, 24(3), 250–270.CrossRef

Liang, K. Y., & Zeger, S. L. (1986). Longitudinal data analysis using generalized linear models. Biometrika, 73(1), 13–22.CrossRef

Manning, W. G., & Mullahy, J. (2001). Estimating log models: To transform or not to transform? Journal of Health Economics, 20(4), 461–494.CrossRefPubMed

Medicare Payment Advisory Commission. (2006). Report to the congress: Physician-owned specialty hospital revisited. Washington, DC: MedPAC.

Medicare Payment Advisory Commission. (2012). Report to the congress: Medicare payment policy. Washington, DC: MedPAC.

Medicare Payment Advisory Commission. (2015). Report to the congress: Medicare payment policy. Washington, DC: MedPAC.

Mitchell, J. M. (2007). Utilization changes following market entry by physician-owned specialty hospitals. Medical Care Research and Review, 64(4), 395–415.CrossRefPubMed

Mukherjee, A., Mitchell, W., & Talbot, B. (2004). Adaptation of a focused factory to new objectives: The influence of manufacturing requirements and capabilities. Advances in Strategic Management, 21, 161–198.

Munnich, E., & Parente, S. L. (2014). Procedures take less time at ambulatory surgery centers, keeping costs down and ability to meet demand up. Health Affairs, 33(5), 764–769.CrossRefPubMed

Panzar, J. C., & Willig, R. D. (1981). Economies of scope. The American Economic Review, 71(2), 268–272.

Park, R. E. (1966). Estimation with heteroscedastic error terms. Econometrica, 34(4), 888.CrossRef

Pesch, M. J. (1996). Defining and understanding the focused factory: A Delphi survey. Production and Inventory Management Journal, 37(2), 32–36.

Porter, M. E., & Teisberg, E. O. (2006). Redefining health care: Creating value-based competition on results. Boston: Harvard Business School Press.

Schmenner, R. W., & Swink, M. L. (1998). On theory in operations management. Journal of Operations Management, 17(1), 97–113.CrossRef

Skinner, W. (1969). Manufacturing: Missing link in corporate strategy. Harvard Business Review, 47, 136–145.

Skinner, W. (1974). The focused factory. Harvard Business Review, 52, 113–121.

Teece, D. J. (1980). Economies of scope and the scope of the enterprise. Journal of Economic Behavior and Organization, 1(3), 223–247.CrossRef

Trybou, J., De Regge, M., Gemmel, P., Duyck, P., & Annemans, L. (2014). Effects of physician-owned specialized facilities in health care: A systematic review. Health Policy, 118(2), 316–340.CrossRefPubMed

Vita, M. (1990). Exploring hospital production relationships with flexible functional forms. Journal of Health Economics, 9(1), 1–21.CrossRefPubMed

Wheelock, D. C., & Wilson, P. W. (2001). New evidence on returns to scale and product mix among U.S. commercial banks. Journal of Monetary Economics, 47(3), 653–674.CrossRef

Willig, R. D. (1979). Multiproduct technology and market structure. American Economic Review Papers and Proceedings, 69(2), 346–351.

Wilson, P. W., & Carey, K. (2004). Nonparametric analysis of returns to scale in the US hospital industry. Journal of Applied Econometrics, 19(4), 505–524.CrossRef

Yaisawarng, S., & Burgess, J. F. (2006). Performance-based budgeting in the public sector: An illustration from the VA health care system. Health Economics, 15(3), 295–310.CrossRefPubMed

Zorn, C. J. W. (2001). Generalized estimating equation models for correlated data: A review with applications. American Journal of Political Science, 45(2), 470–490.CrossRef

Zwanziger, J., & Melnick, G. (1988). The effects of hospital competition and the Medicare PPS program on hospital cost behavior in California. Journal of Health Economics, 7(4), 310–320.CrossRef

Titel: Specialization and production cost efficiency: evidence from ambulatory surgery centers
verfasst von: Kathleen Carey
Jean M. Mitchell
Publikationsdatum: 12.09.2017
Verlag: Springer US
Erschienen in: International Journal of Health Economics and Management / Ausgabe 1/2018
Print ISSN: 2199-9023
Elektronische ISSN: 2199-9031
DOI: https://doi.org/10.1007/s10754-017-9225-9

Springer Medizin

Abstract

Bitte loggen Sie sich ein, um Zugang zu diesem Inhalt zu erhalten

Weitere Artikel der Ausgabe 1/2018

Reducing excess hospital readmissions: Does destination matter?

Taking the hassle out of wellness: Do peers and health matter?

Health expenditure and growth dynamics in the SADC region: evidence from non-stationary panel data with cross section dependence and unobserved heterogeneity

Organizational learning-by-doing in liver transplantation