Cost control in nursing homes by means of economies of scale and care profile optimization

Abstract

The call to enlarge or merge nursing homes in order to lower costs rests on the assumption that economies of scale exist within the cost structure of these homes. Economies of scale means that an increasing number of residents will reduce the costs per person needing care. However, the existence and the extent of economies of scale as such in nursing homes are the subject of controversy because studies of this issue performed in nursing homes up to now have yielded contradictory results. In this study, researchers demonstrated economies of scale in Tyrolean, Austria, nursing homes and showed that the composition of the nursing home residents in respect to their care needs influences the development of the average costs. Changing the size of the facility and/or influencing the average care level can have a considerable influence on the progression of average costs in nursing homes. Cost reductions can be achieved by increasing the size of the facility or by improved distribution of the care levels of the persons in need of care.