Hospital Cost Analysis provides an overview of theoretical developments in the economic analysis of production and costs in the multiproduct firm, and discusses these developments. Following a lucid explanation of the concepts of jointness, input/output separability and returns to scale, a detailed discussion of the concept measurement and classification of hospital output is provided. A fundamental dilemma confronting economists interested in estimating hospital cost functions is highlighted, viz. the trade-off between flexibility in functional form and homogeneity within hospital output categories. Empirical results on the effects of case mix, scale and utilisation, public/private ownership, and the centralised administration of hospital systems on hospital costs are presented. The implications of hospital cost analysis for public policy with respect to hospital payment schemes, including schemes based on Diagnosis Related Groups (DRGs), are also considered. This book brings together the literature on hospital cost analysis with theoretical developments in the analysis of the multiproduct cost functions. It will be of considerable interest to teachers and students of health economics and health policy advisers interested in the determinants of hospital costs and the design of hospital payment schemes.

1. Introduction.- A - Theoretical Considerations.- 2. The Economic Theory of Production and Cost in the Multiproduct Firm.- 3. The Concept, Measurement and Classification of Hospital Output.- B - Empirical Results.- 4. The Queensland Public Hospital System-An Overview.- 5. The Effect of Case Mix on Hospital Costs-Evidence from Queensland.- 6. The Effects of Scale, Utilisation and Input Prices on Hospital Costs-Evidence from Queensland.- 7. A Comparison of the Costs of Teaching and Non-Teaching Public Hospitals in Queensland.- 8. A Comparison of Public and Private Hospital Costs in Queensland.- 9. A Comparison of Public Hospital Costs in Queensland and New South Wales.- C - Hospital Cost Analysis and Hospital Payment Schemes.- 10. A Hospital Performance Appraisal and Payment Scheme based on Estimated Cost Functions.- 11. The DRG Hospital Payment Scheme: Some Economic Aspects.- 12. Conclusions.- References.- Index of Names.- Index of Subjects.