Improving the productivity of the healthcare system, for example by taking advantage of scale economies or encouraging substitution of expensive specialist personnel with less expensive workers, is often seen as an attractive way to meet increasing demand within a constrained budget. Using data on 558 dentists participating in the Longitudinal Study of Dentists Practice Activity (LSDPA) survey between 1993 and 2003 linked to patient data and average fee schedules, we estimate production functions for private dental services in Australia to quantify the contribution of different capital and labour inputs and identify economies of scale in the production of dental care. Given the challenges in measuring output in the healthcare setting, we discuss three different output measures (raw activity, time-, and price-weighted activity) and test the sensitivity of results to the choice of measure. Our results suggest that expansion of the scale of dental services is unlikely to be constrained by decreasing returns to scale. We note that conclusions about the contribution of individual input factors and the estimated returns to scale are sensitive to the choice of output measure employed.
Gutacker, N., Harris, A. H., Brennan, D. S., & Hollingsworth, B. P. (2015). The determinants of dentists' productivity and the measurement of output. Social Science and Medicine, 124, 76 - 84. https://doi.org/10.1016/j.socscimed.2014.11.020