Optimal administrative scale for planning public services: a social cost model applied to Flemish hospital care

In choosing the scale of public services, such as hospitals, both economic and public administrative considerations play important roles. The scale and the corresponding spatial distribution of public institutions have consequences for social costs, defined as the institutions' operating costs and the users' travel costs (which include the money and time costs). Insight into the relationship between scale and spatial distribution and social costs provides a practical guide for the best possible administrative planning level. This article presents a purely economic model that is suitable for deriving the optimal scale for public services. The model also reveals the corresponding optimal administrative planning level from an economic perspective. We applied this model to hospital care in Flanders for three different types of care. For its application, we examined the social costs of hospital services at different levels of administrative planning. The outcomes show that the social costs of rehabilitation in Flanders with planning at the urban level (38 areas) are 11% higher than those at the provincial level (five provinces). At the regional level (18 areas), the social costs of rehabilitation are virtually equal to those at the provincial level. For radiotherapy, there is a difference of 88% in the social costs between the urban and the provincial level. For general care, there are hardly any cost differences between the three administrative levels. Thus, purely from the perspective of social costs, rehabilitation should preferably be planned at the regional level, general services at the urban level and radiotherapy at the provincial level.