William Weeks makes an important observation about why bottom-line cost savings associated with short-run efficiency gains are elusive. In the short run, only variable costs are affected by efficiency gains; the fixed costs of an avoided hospitalization or outpatient visit remain. Health care has a high percentage of fixed costs, such as those for labor, buildings, and equipment. We chose to estimate unit costs using average total costs instead of average variable costs because the Patient Aligned Care Teams (PACT) is not a short-run initiative (Jun 2014). In the long run, all costs are variable. PACT is a long-term investment designed to change the way the Veterans Health Administration (VHA) delivers care during the coming decades. PACT has already increased fixed costs by hiring new nurses and other primary care staff.
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