Advisory Committee Chair
Robert Weech-Maldonado
Advisory Committee Members
Nathaniel W Carroll
Larry R Hearld
Michael A Morissey
Bunyamin Ozaydin
Document Type
Dissertation
Date of Award
2020
Degree Name by School
Executive Doctor of Science (DSc) School of Health Professions
Abstract
Cost structures (the ratio of fixed to variable costs) vary across and within indus-tries. Hospital managers and policymakers can make better decisions when they under-stand cost structures, including marginal costs (the change in the total cost that arises when the quantity produced is increased by one unit). Although some studies have inves-tigated hospital cost structures, the results have been mixed and less than definitive, and very little attention has been given to critical access hospitals and marginal costs specifi-cally. Rural hospitals, including critical access hospitals, have increasingly experienced financial distress. Between 2005 and 2019, 159 rural hospitals closed across the United States, and at least 800 are currently considered at risk of closing because of financial pressures. These financial pressures are affected by policy and managerial decisions, both of which are better informed with an understanding of critical access hospital cost struc-tures. A quantitative, retrospective, longitudinal study was performed to compare inpa-tient volumes with inpatient costs at critical access hospitals. The purpose of the study was to establish the relationship between volume and cost, to estimate variable or mar-ginal costs, and to identify the fixed and variable portions of costs at critical access hospi-tals. iv Data from a national sample of hospitals, representing operations from 2003 through 2015, was gathered from the Centers for Medicare & Medicaid Services Healthcare Cost Report Information System. Results indicate a significant correlation between the number of patient days and total inpatient service costs at critical access hospitals. The variable cost of an inpatient day at critical access hospitals was estimated at $815.83. The variable cost ratio for inpa-tient services at critical access hospitals was estimated at 54%. Critical access hospitals with higher inpatient volumes were found to have lower average total costs, and lower fixed cost ratios when compared to critical access hospitals with lower inpatient volumes. There are implications for policymakers, hospital managers, and researchers. Hos-pital managers and policymakers will be better informed with an understanding of varia-ble (or marginal) costs and cost ratios. Further research is warranted.
Recommended Citation
Lyman, Jeremy J., "Fixed and Variable Costs at Critical Access Hospitals" (2020). All ETDs from UAB. 638.
https://digitalcommons.library.uab.edu/etd-collection/638