Look at the hospital cost data on slide 14 of the Cost Functions slides. To interpret this
Question:
Look at the hospital cost data on slide 14 of the “Cost Functions” slides. 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?
Statistics and Data Analysis for Financial Engineering
ISBN: 978-1461427490
1st edition
Authors: David Ruppert