Estimating output substitutability of hospital services: a distance function approach

Hospital estimates of the marginal costs and elasticity of transformation of hospital services in California and New York is measured using shadow prices. These estimates are also used to compare hospitals by ownership. The marginal rates of transformation and elasticities of subsitution of hospitals are compared with those of public hospitals. The shadow prices varied across samples but very little across ownership type implying similar tradeoffs on technology and ownership type.