This paper provides a logical framework for considering possible alternatives to inpatient care. First it presents the concept of a substitute-complement relationship among factors of production (or goods and services in consumption) and examines several problems often encountered when applying this concept. Second, it presents four general sources of substitution: (1) technological innovation; (2) changes in organization; (3) capital accumulation; and (4) the dissemination of knowledge. Third, it examines nine activities which are frequently mentioned as providing alternatives to inpatient care. Fourth, it examines some problems and consequences of governmental efforts to plan substitution. The general thrust of the paper is that the substitution process is complex and often depends upon amorphous variables whose influences are subtle, generally nonquantifiable, and often of overriding importance. These variables introduce a downward bias in estimates of program costs and an upward bias in the estimates of program accomplishments. The result is that government attempts to plan substitution are not well conceived and will generally fall short of announced goals and/or cost significantly more than original estimates.

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