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The impact of agglomeration economies on hospital input prices.

ABSTRACT: This paper examines the extent to which agglomeration of the hospital service industry enhances the productivity of producing health care. Specifically, we use a large set of private insurance claims from the FAIR Health database to show that an increasing spatial concentration of hospital services results in a decreased cost of obtaining intermediate medical services. We explicitly test whether the reduced cost at concentrated locations arises from the ability to share intermediate service providers. The identification relies on state variation in medical lab technician licensure requirements, which influence the cost of intermediate services only through the cost of running a lab. Our findings suggest that agglomeration of the hospital service industry attracts specialized medical labs, which in turn help to reduce the cost of producing laboratory tests.

SUBMITTER: Friedson AI

PROVIDER: S-EPMC4671981 | biostudies-literature | 2015 Dec

REPOSITORIES: biostudies-literature

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The impact of agglomeration economies on hospital input prices.

Friedson Andrew I AI Li Jing J

Health economics review 20151208 1

This paper examines the extent to which agglomeration of the hospital service industry enhances the productivity of producing health care. Specifically, we use a large set of private insurance claims from the FAIR Health database to show that an increasing spatial concentration of hospital services results in a decreased cost of obtaining intermediate medical services. We explicitly test whether the reduced cost at concentrated locations arises from the ability to share intermediate service prov ...[more]

PMID: 26642802

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Project description:BackgroundThis study aims to analyse the relative importance of the health care sector (health care activities and services), its interrelations with the rest of productive activities, aggregate supply and demand, employment requirements and apparent labour productivity in the European Union (EU) economy as a whole, and in the economies of member countries.MethodsThe methodology used is based on input-output analysis. Data are extracted from National Accounts and, specifically, from the input-output framework for 2010. Data in national currencies are adjusted using as a conversion factor, specific purchasing power parities for health.ResultsIn the EU, market production predominates in the provision of health care activities, which are financed mainly by public funding. However, there is significant variability among countries, and, in fact, non-market production predominates in most EU countries. The health care sector has direct backward and forward linkages lower than the average for all sectors of the economy and the average for the services sector. Thus, this sector is relatively independent of the rest of the productive structure in the EU. The health care activities industry is key because of its ability to generate value added and employment. Regarding apparent labour productivity, there are significant differences among EU countries, showing that productivity is positively related to the weight of market production in health care activities and negatively related to the number of hours worked per person employed.ConclusionsOur results provide useful insights for health authorities in the EU, as they analyse the effect of health policies on macroeconomic indicators using an input-output framework, as well as comparing these effects with those in EU member countries. To the best of our knowledge, an analysis of the health care sector in the EU economy and the countries that integrate it using an input-output framework has not been undertaken. In addition, to compare health care expenditure between countries, data in national currencies have been adjusted using specific purchasing power parities for "health", and not ones referring to the total economy (GDP), which is common practice in many previous studies.

Dataset Information

The impact of agglomeration economies on hospital input prices.

Publications

The impact of agglomeration economies on hospital input prices.

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