Economies of scale and scope in the English hospital sector

Abstract

In this paper we estimate hospital costs and evaluate economies of scale and scope using a generalised multiproduct cost function and a sample of English NHS Trusts with different types of ownership, namely Foundation Trusts and non Foundation Trusts. Evaluating the behaviour of different types of hospitals separately might be particularly helpful for the design, and future developments, of the optimal provider reimbursement tariff. Also it might shed some light on the ability of different types of hospitals pro t from the existence of economies of scale and scope. Results show that, even though these two group of providers do not exhibit differences regarding economies of scale, Foundation Trusts exhibit global diseconomies of scope while non Foundation Trusts exhibit global scope economies.