Abstract

Demand for hospital services varies in an uncertain way and affects both the optimal size and the variable cost of
hospitals. From this selective review the following main points for further research are resulted. The theory of
hospital costs needs to take into consideration the impact of demand variability. The insurance role of hospital
excess capacity should be treated endogenously. Better econometric techniques can improve the efficiency of
empirical results. Disaggregated data may be more appropriate, and finally, more countries in order to be able to
generalize the conclusions concerning the impact of demand variability on hospital costs are needed.

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