Problem 2: Look at the hospital cost data in the "Cost Functions" slides (to be posted on Monday, 10/12). To interpret this data: the values are indices, where 1.00 is the average cost for hospitals with 10,000 discharges. For example, the average cost of communications for hospitals with 5000 discharges is listed as 1.22. This means that the average cost of communications with hospitals with 5000 discharges is 122% of the average cost of communications for hospitals with 10,000 discharges (i.e. 22% higher). The final row ("all cost centers" gives the average total cost for the given number of discharges (relative to hospitals with 10,000 discharges). a) What (approximately) is the minimum efficient scale for hospitals, according to this data? Explain. (You can consider very small differences to be effectively zero when answering this question, and there are at least two answers that could be considered correct). b) In the range between 2,500 discharges and 10,000 discharges do hospitals exhibit economies or diseconomies of scale, according to this data? Example: average costs for hospitals Table Average cost per discharge Costcenter SCOO 7500 10.000 15.000 20,000 discharges discharges discharges discharges dischares discharges (100 beds) (136 beds) (200 beds) (270 beds) 10 beds) (440 beds) Hospital administration 164 1.24 1.08 093 00 Public relations 0.98 10 103 107 General conting 16 1.34 LON 10 090 Communication 161 1.22 1.07 Purchasing +01 10 Pent 1.24 10 10 10 102 0.92 10 110 Credit and com +4 1.06 10 + Medical records 1.10 10 0 Printing and duplication 101 100 101 10 098 0.97 Personel 10 Ceteria 14 1.30 107 10 0 Laundry 10 0.26 Housekeeping 140 05 All contes Source: Dravone, D. (1998), "Economies of scale in non-revenue producing cost centers: implications for hospital me Journal of Health Economics, vol 17. Problem 2: Look at the hospital cost data in the "Cost Functions" slides (to be posted on Monday, 10/12). To interpret this data: the values are indices, where 1.00 is the average cost for hospitals with 10,000 discharges. For example, the average cost of communications for hospitals with 5000 discharges is listed as 1.22. This means that the average cost of communications with hospitals with 5000 discharges is 122% of the average cost of communications for hospitals with 10,000 discharges (i.e. 22% higher). The final row ("all cost centers" gives the average total cost for the given number of discharges (relative to hospitals with 10,000 discharges). a) What (approximately) is the minimum efficient scale for hospitals, according to this data? Explain. (You can consider very small differences to be effectively zero when answering this question, and there are at least two answers that could be considered correct). b) In the range between 2,500 discharges and 10,000 discharges do hospitals exhibit economies or diseconomies of scale, according to this data? Example: average costs for hospitals Table Average cost per discharge Costcenter SCOO 7500 10.000 15.000 20,000 discharges discharges discharges discharges dischares discharges (100 beds) (136 beds) (200 beds) (270 beds) 10 beds) (440 beds) Hospital administration 164 1.24 1.08 093 00 Public relations 0.98 10 103 107 General conting 16 1.34 LON 10 090 Communication 161 1.22 1.07 Purchasing +01 10 Pent 1.24 10 10 10 102 0.92 10 110 Credit and com +4 1.06 10 + Medical records 1.10 10 0 Printing and duplication 101 100 101 10 098 0.97 Personel 10 Ceteria 14 1.30 107 10 0 Laundry 10 0.26 Housekeeping 140 05 All contes Source: Dravone, D. (1998), "Economies of scale in non-revenue producing cost centers: implications for hospital me Journal of Health Economics, vol 17