An Econometric Analysis of Running Costs of Scottish NHS Hospitals: A Comparison of Teaching and Non-Teaching Hospitals' Cost Structure

Abebe Wolde, Amsalu (1987) An Econometric Analysis of Running Costs of Scottish NHS Hospitals: A Comparison of Teaching and Non-Teaching Hospitals' Cost Structure. MSc(R) thesis, University of Glasgow.

Full text available as:
[thumbnail of 13834272.pdf] PDF
Download (11MB)


This study undertook an econometric analysis of total running costs of Scottish hospitals for the fiscal year 1985-86, Its objectives can be classified into two main strands: (a) to search for a means of investigating the higher costs of hospitals involved in teaching and related activities, and (b) to apply this analytical technique to Scottish hospitals data and try to approximate the extent of additional financial resources that might be incurred due to the leaching responsibilities of hospitals. In order to satisfy the first objective, a detailed review of the literature in this topic was made, which included the methodological aspects and the views taken by these studies about higher costs of teaching hospitals as well as the difficulties encountered in the process. The review showed the various sources that could generate additional costs to teaching hospitals, outwith that involved for the provision of patient care services. It also pointed that econometric approach to be the sole methodology favoured in the analysis of hospital costs. The study, therefore, selected econometric approach to be the basic tool of analysis. Models were specified for total running costs of hospitals and the several components constituting it, such as, costs for employing medical staff and provision of supplies. The independent variables of the models defined are measures of hospital levels of resources and services provided. The functional relationship postulated between these variables reflects the multi-product nature of hospital operation. Among others, measures of level of teaching activity of hospitals were included in the modelling process, some of which were not tested in the past studies of Scottish hospital costs due to absence of satisfactory data. These are, number of undergraduate medical students and nurses in training, in addition to teaching status of hospitals. After considering the methodological set-up, the available data on Scottish teaching and non-teaching hospitals were compiled in the required manner, but due to apparent incomparability of some non-teaching hospitals with the teaching ones, specific hospitals were selected to form the sample of hospitals to be analysed, 81 hospitals, 33 teaching and 48 non-teaching hospitals were chosen among more than 300 present in Scotland. The following main deductions were made from the analysis of these SI hospitals total running costs and its cost components: (a) The analysis gives evidence to the hypothesis that hospitals' level of teaching activity does indeed generate additional running costs. It presented supportive justification for the amount of allowance being made to Scottish hospitals per undergraduate medical students at present. But, it also shows that allowances should be made for costs incurred for training nurses and the teaching status of hospitals, especially the major teaching hospitals. Therefore it recommended that to facilitate their teaching responsibility, the major and minor teaching hospitals in Scotland might need to allocate on the average about 14.9% and 12.3%, respectively, of their total running costs based on 1985-86 levels of expenditure. Similarly, it calls on the non-teaching hospitals to make an allowance of 6.4% of their training costs for teaching activity, with particular reference to the 48 hospitals selected as control groups. (b) Even though the teaching hospitals might have spent a larger part of their resources on teaching activities in comparison to their non-teaching counterparts, the analysis lacked conclusive evidence to suggest that the various types of patient care services, inpatient and non-inpatient care could be provided with differing marginal costs between teaching and non-teaching hospitals studied. (c) The analysis stressed the possibility that the level of teaching activity of hospitals to significantly influence some specific components of total running costs than others. Thus, the evidence implied that teaching loads of hospitals could possibly create a significant uplift in hospital total costs for employing staff but not for provision of supplies. (d) The models estimated for total running costs and cost components generally showed that hospital costs could be linearly approximated from variables measuring levels of resources (beds) and services (inpatient cases, patient days, outpatient visits, number of medical students, nurses in training and teaching status), with high explanatory power obtained. The result, thus questioned the possibility of economic gain or saving in costs in Scottish hospitals from expansion or diversification of services. That is economies of scale and scope may not prevail in Scottish NHS hospitals sector.

Item Type: Thesis (MSc(R))
Qualification Level: Masters
Additional Information: Adviser: Ben Torsney
Keywords: Statistics, Economics, Health care management
Date of Award: 1987
Depositing User: Enlighten Team
Unique ID: glathesis:1987-76490
Copyright: Copyright of this thesis is held by the author.
Date Deposited: 19 Nov 2019 14:16
Last Modified: 19 Nov 2019 14:16

Actions (login required)

View Item View Item


Downloads per month over past year