Title

AN ECONOMIC ESTIMATION OF THE DENTAL PRACTICE PRODUCTION PROCESS (ECONOMETRIC, RETURNS TO SCALE)

Date of Completion

January 1984

Keywords

Economics, General

Degree

Ph.D.

Abstract

The purpose of this study was to perform an estimation of the dental practice production process. This estimation provides information on the contributions of each input to dental production and the type of returns to scale exhibited by dental practices. Previous studies in this area have presented contradictory results and conclusions concerning input contributions and returns to scale. In addition, these studies have been based on data sets where the individual dentist, not the dental practice, is the unit of observation. The present study uses data collected on a dental practice basis and estimates a dental practice production function and the reduced form direct cost function, and indirect cost, revenue, and profit functions.^ Estimation of the production function was performed using both patient visits and gross billings as measures of output. Dentist hours, staff hours, and operatories per practice were the input measures. Staff hours represents the grouping of all non-dentist labor inputs into one category.^ The estimation results of the dental practice production function found that dental practices exhibit constant returns to scale. A test was performed to determine if there were statistically significant differences between the estimated coefficients of solo and nonsolo practices. The test found no significant differences. This study also found a systematic variation across estimated coefficients when patient visits and gross billings were used as output measures. The coefficient of dentist hours is higher with patient visits as output, while the coefficient of staff hours is always higher with gross billings. The present study presents an explanation for this variation based on the more frequent occurrence of multiple service visits as more staff are employed. These results have implications for public and private policy regarding the organization and use of inputs in the dental production process.^ Estimation of the reduced forms presented reasonable results only for the direct cost function, which indicated that dental practices exhibit increasing returns to scale. These results are not conclusive, but demonstrate the uncertainty that exists in dental production research and the need for further investigation of alternative methods. ^