Marginal costs in general acute care hospitals: A comparison among California,New York and Canada

In the present paper we offer a detailed comparison of hospital costs between California and New York and two Canadian provinces (Ontario and British Columbia) in 1981 and 1985. We find that production technologies differ significantly between the two countries and between California and New York. Marginal costs and their distributions also differ across jurisdictions and across different size hospitals. Marginal cost levels were the lowest in Canadian hospitals for almost all outputs in both years and their distribution was also the tightest. Some very mild scale effects were also present in the acute care production. Hospitals in California experienced for the most part increasing marginal costs for acute care, whereas Canadian hospitals showed the reverse pattern. In New York we find a weak negative scale effect in acute care production. Density estimates conditional on hospital output reinforce these results.