Hotel and Dependency Costs of Residents in Old People's Homes

A comparison of costs to the organization of alternative forms of care requires estimates for similar types of client. The degree of dependency is the main characteristic in which comparability is necessary with regard to services for the aged. This paper presents estimates of the costs incurred in providing residential care for clients of four degrees of incapacity for self-care – the capacity implicit in Bevan's residential hotel model of the old people's home, and three progressively more severe states of dependency. The estimates are for two cost concepts – average (unit) costs and marginal costs (the cost of caring for an additional person). The paper also estimates both long-run costs (costs that it is appropriate to take into account in decisions in which capital investment in new plant is being considered), and short-run costs (costs that it is appropriate to consider when the issue is the allocation of existing capacity between client groups). It also examines the consequences of the size of the home with regard to costs. Inter alia the paper shows:(a) that the size of home beyond which costs do not fall with scale provides for as many as fifty places (equivalent to an average daily census of forty-six residents); and(b) that, although the dependency components of costs are much smaller than the hotel components, dependency costs are large enough for it to be important to base comparisons of alternative forms of care on estimates of costs for clients which are comparable with respect to dependency.