Hospital costs and random demand

Abstract

This research note’s primary objective is to assert for the impact of random demand for emergencies in Portuguese hospital costs. In order to do so, three different estimation methods are applied: Pooled OLS, Fixed-effects and Stochastic Frontier Analysis. Some conclusions of this note point out that dispersion measures of demand for emergencies are not significant in explaining total costs for the preferred models. Moreover, following Battese and Corra (1977), 58% of the total variance of the disturbance is due to the inefficiency term. Finally, predicting Coelli’s cost efficiency (1996), Portuguese hospitals have shown not to be far from the efficiency frontier.