Measuring inpatient and outpatient costs: A cost-function approach

In this article, the authors estimate a multiple-output cost function for a sample of 2,235 hospitals during the period 1984-88 to disaggregate total costs into inpatient and outpatient components. The results suggest that outpatient cost growth is roughly proportional to that of inpatient cost, despite much higher relative growth in revenues and utilization on the outpatient side. The stability in the outpatient/inpatient cost ratio implies that the increase in the outpatient-to-inpatient utilization ratio was offset by a decline in their relative unit costs.