Productive scale and scope efficiencies in U.S. hospital-based nursing homes

Excessive costs may be attributable to inefficiencies in production, non-optimal scale and diseconomies of scope. This paper calculates these three components of excess costs for a sample of U.S. hospital-based nursing homes using non-parametric methods. After adjusting for interstate regulatory and wage differences, we find evidence in support of all three sources of cost savings. Productive inefficiency is the most important, followed by non-optimal scale and diseconomies of scope.