Returns to scope: a metric for production synergies demonstrated for hospital production

Brandon Pope () and Andrew Johnson

Journal of Productivity Analysis, 2013, vol. 40, issue 2, 239-250

Abstract: Knowledge of the production function’s scope properties can provide insights for firms choosing their operating strategy, policy-makers considering industry structure, and analysts determining appropriate tools. We introduce a new property, returns to scope, which is distinct from scale properties and does not rely on price information. Based on desirable characteristics of an estimator of returns to scope, we propose two methods for assessment. We present examples using simulated data and hospital production data from the 2008 National Inpatient Sample of the Agency for Healthcare Research and Quality’s Healthcare Cost and Utilization Project. We find that hospitals experience negative returns to scope (productivity losses) from the joint production of minor and major diagnostic procedures. Based upon our results we conclude that the new returns to scope property allows sharper insights than classic economies of scope approaches. Copyright Springer Science+Business Media New York 2013

Keywords: Returns to scope; Diversification; Hospital production; D24; I12 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (4)

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DOI: 10.1007/s11123-012-0327-6

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