The rising cost of Scottish hospitals, 1951-1981
In this study an economic analysis is conducted into the cost of the Scottish hospital sector from 1951 to 1981. The analysis is based upon data gathered from the Summarised Accounts of the Scottish Health Service, and additional published and unpublished data. The study suggests that many existing hypotheses on hospital cost inflation are inappropriate to the characteristics of the Scottish hospital sector, and that others have been overemphasised. The analysis presents a detailed account of changes in aggregate expenditure and, its components, showing these changes in current and constant prices and demonstrating the magnitude of the relative price effect. Using data on the changing conditions of service of hospital employees, the study then calculates an index of labour inputs to the hospital sector, which reveals that routinely published labour statistics considerably overstate the increase in working hours. Thus although wages and salaries have taken an increasing share of total hospital expenditure, the volume increase in labour inputs has been outstripped by that of non-labour inputs. In order to evaluate the hypothesis that hospital costs have increased as a result of the pay of hospital employees catching-up with other groups, the study compiles pay indices for the main hospital occupational groups and considers the influences on the patterns of settlement. The formal catching-up hypothesis is not supported by the evidence. Similarly, the study shows that the impact of compositional change in the hospital labour-force on total costs has not been significant, although substantial compositional changes are revealed. Finally, the study calculates the impact of demographic changes on hospital costs between 1951 and 1981, and concludes that, although the direct impact has not been great, such changes coupled to changes in rates of use may have brought about major long-term alterations in patterns of hospital care and resource allocation. Drawing on these and previous findings, the analysis is concluded with a discussion of policy and research implications.