Economies of Scale in the Production of Public Health Services: An Analysis of Local Health Districts in Florida

摘要

Objectives. We examined the existence and the extent of scale and scope economies in the delivery of public health services. We also tested the strength of agency, population, and community characteristics that moderate scale and scope economies. Methods. We collected service count and cost data for all Florida local health districts for 2008 and 2010, complemented with data on agency, population, and community characteristics. Using translog cost functions, we built models of operating efficiencies for 5 core public health activities: communicable disease surveillance, chronic disease prevention, food hygiene, on-site sewage treatment, and vital records. Results. Economies of scale were found in most activities, with cost per unit decreasing as volume increased. The models did not, however, identify meaningful economies of scope. Conclusions. Consolidation or regionalization might lower cost per unit for select public health activities. This could free up resources for use in other areas, further improving the public’s health. In its 2012 report, “For the Public's Health: Investing in a Healthier Future,” the Institute of Medicine called for the development of measures to capture information on “key elements of public health delivery, including program implementation costs.” 1 (p7) At the same time, recent public health funding reductions put local health districts (LHDs) under increased pressure to get more done with limited resources. 2,3 Borrowing from the adage, “you can’t manage what you can’t measure,” an important first step in improving the use of public health resources is to understand what it costs to provide services today. Although a growing body of research has investigated the costs of providing public health services, the findings vary widely, and precise estimates are not yet available. 4–8 One of the challenges in assessing public health activities is a lack of common definitions. 9 Even common services, such as well inspections, are done by staff with different training, testing for different chemicals, applying different minimum acceptable standards, and using different methods. With such inconsistencies, it is difficult to compare or benchmark costs. 1 Theories of economies of scale 10,11 suggest that the cost per unit decreases as more units are produced. First, fixed costs can be spread over more units, reducing per unit costs. Higher volumes also permit greater specialization of staff. For example, a small rural LHD may not have adequate patient volume for a full-time prenatal nurse and a full-time health educator. Using 1 person for both services requires LHDs to pay that staff member for the higher job classification, even when the staff member performs duties of the less-skilled, lower paying position. In this manner, cost per unit can be higher at lower volumes. Regionalization has been considered a possible path to greater efficiency for LHDs. 4,5,12,13 If several smaller LHDs combined efforts, cost per service would decrease, freeing up scarce resources to expand public health services in other areas. Theories of economies of scope 10 propose that the cost per unit decreases as more different services are produced. In effect, producing several different models of an automobile in a single factory makes the production of each model more efficient. Similarly, in public health service delivery, environmental health activities (e.g., vector control) may not employ epidemiologists. However, if an LHD’s population-based health activities have epidemiological investigators available to answer quick questions, vector control might be more productive. Regionalization scenarios might include keeping existing LHDs in place, but having each specialize in a subset of activities. So 1 LHD might provide all clinical prevention, medical treatment, and specialty care services to both LHD populations, and the other LHD would do likewise for population, regulatory, and environmental activities. A number of studies have looked at the costs of producing services for individual public health programs, such as influenza vaccination, 14 federally qualified health centers clinical operations, 15 or diabetes education. 16 However, such studies are narrowly focused on a single service or a limited geography, such as a study of HIV programs that specifically examines high-risk urban women in 3 US cities. 17 Although such studies are important, they are not easily generalizable. On a broader scale, a handful of studies have investigated the relationship between LHD performance and scale and scope of services. 4–6 Even then, few have employed the detailed operating statistics on service counts needed to accurately estimate scale and scope economies. Such precision is a vital building block in our understanding of the costs of public health services. Unlike most states, LHDs in the state of Florida use a standard method of counting services, customers, costs, and revenues for each category of se