IDEAS home Printed from https://ideas.repec.org/a/kap/jproda/v53y2020i1d10.1007_s11123-019-00550-z.html
   My bibliography  Save this article

Efficiency of New Zealand’s District Health Boards at Providing Hospital Services: A stochastic frontier analysis

Author

Listed:
  • Nan Jiang

    (Auckland University of Technology)

  • Antony Andrews

    (Auckland University of Technology)

Abstract

The majority of secondary and tertiary healthcare services in New Zealand are provided through public hospitals managed by 20 local District Health Boards. Due to data issues and ill-judged generic public perceptions, efficiency studies are insufficient in spite of the extensive empirical literatures available. This inevitably leads to criticisms about the perverse incentives which might be created by the National Health Targets designed to improve the performance of public health services. Utilizing a multifaceted administrative hospital dataset, this is the first case study to measure both the technical and cost efficiency of New Zealand public hospitals during the period of 2011–2017. More specifically, it deals with the question of how hospital efficiency varies with respect to activities accounted for by the National Health Targets. The empirical results show no evidence that these targets are achieved at the expenses of lowering the overall efficiency of hospital operations. The national technical efficiency is averaged at 86 percent over the period and cost efficiency is 85 percent. The results are derived by stochastic input distance function and cost frontier in order to accommodate multiple outputs and limited number of census observations. Efficiency ranking is sensitive to specifications of the inefficiency error term, but reasonably robust to the choice of functional form and different proxies for capital input.

Suggested Citation

  • Nan Jiang & Antony Andrews, 2020. "Efficiency of New Zealand’s District Health Boards at Providing Hospital Services: A stochastic frontier analysis," Journal of Productivity Analysis, Springer, vol. 53(1), pages 53-68, February.
    • Handle: RePEc:kap:jproda:v:53:y:2020:i:1:d:10.1007_s11123-019-00550-z
    DOI: 10.1007/s11123-019-00550-z
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s11123-019-00550-z
    File Function: Abstract
    Download Restriction: Access to full text is restricted to subscribers.
    File URL: https://libkey.io/10.1007/s11123-019-00550-z?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Leopold Simar & Paul Wilson, 2000. "A general methodology for bootstrapping in non-parametric frontier models," Journal of Applied Statistics, Taylor & Francis Journals, vol. 27(6), pages 779-802.
    2. Ole Olesen & Niels Petersen, 2002. "The Use of Data Envelopment Analysis with Probabilistic Assurance Regions for Measuring Hospital Efficiency," Journal of Productivity Analysis, Springer, vol. 17(1), pages 83-109, January.
    3. Fare,Rolf & Grosskopf,Shawna & Lovell,C. A. Knox, 2008. "Production Frontiers," Cambridge Books, Cambridge University Press, number 9780521072069.
    4. Annika Herr, 2008. "Cost and technical efficiency of German hospitals: does ownership matter?," Health Economics, John Wiley & Sons, Ltd., vol. 17(9), pages 1057-1071, September.
    5. Ancarani, A. & Di Mauro, C. & Giammanco, M.D., 2009. "The impact of managerial and organizational aspects on hospital wards' efficiency: Evidence from a case study," European Journal of Operational Research, Elsevier, vol. 194(1), pages 280-293, April.
    6. Léopold Simar & Paul W. Wilson, 1998. "Sensitivity Analysis of Efficiency Scores: How to Bootstrap in Nonparametric Frontier Models," Management Science, INFORMS, vol. 44(1), pages 49-61, January.
    7. Chowdhury, Hedayet & Zelenyuk, Valentin, 2016. "Performance of hospital services in Ontario: DEA with truncated regression approach," Omega, Elsevier, vol. 63(C), pages 111-122.
    8. Kontodimopoulos, Nick & Nanos, Panagiotis & Niakas, Dimitris, 2006. "Balancing efficiency of health services and equity of access in remote areas in Greece," Health Policy, Elsevier, vol. 76(1), pages 49-57, March.
    9. Cristian Nedelea, I. & Matthew Fannin, J., 2013. "Analyzing cost efficiency of Critical Access Hospitals," Journal of Policy Modeling, Elsevier, vol. 35(1), pages 183-195.
    10. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
    11. R G Dyson & E A Shale, 2010. "Data envelopment analysis, operational research and uncertainty," Journal of the Operational Research Society, Palgrave Macmillan;The OR Society, vol. 61(1), pages 25-34, January.
    12. Annika Herr & Hendrik Schmitz & Boris Augurzky, 2011. "Profit efficiency and ownership of German hospitals," Health Economics, John Wiley & Sons, Ltd., vol. 20(6), pages 660-674, June.
    13. H. Shelton Brown, 2003. "Managed care and technical efficiency," Health Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 149-158, February.
    14. Aletras, Vassilios & Kontodimopoulos, Nick & Zagouldoudis, Athanasios & Niakas, Dimitris, 2007. "The short-term effect on technical and scale efficiency of establishing regional health systems and general management in Greek NHS hospitals," Health Policy, Elsevier, vol. 83(2-3), pages 236-245, October.
    15. Chang, Hsihui & Cheng, Mei-Ai & Das, Somnath, 2004. "Hospital ownership and operating efficiency: Evidence from Taiwan," European Journal of Operational Research, Elsevier, vol. 159(2), pages 513-527, December.
    16. Kao, Chiang & Liu, Shiang-Tai, 2009. "Stochastic data envelopment analysis in measuring the efficiency of Taiwan commercial banks," European Journal of Operational Research, Elsevier, vol. 196(1), pages 312-322, July.
    17. Brenda Gannon, 2005. "Testing for Variation in Technical Efficiency of Hospitals in Ireland," The Economic and Social Review, Economic and Social Studies, vol. 36(3), pages 273-294.
    18. David Parkin & Bruce Hollingsworth, 1997. "Measuring production efficiency of acute hospitals in Scotland, 1991-94: validity issues in data envelopment analysis," Applied Economics, Taylor & Francis Journals, vol. 29(11), pages 1425-1433.
    19. Griffin, Ronald C. & Montgomery, John M. & Rister, M. Edward, 1987. "Selecting Functional Form In Production Function Analysis," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 12(2), pages 1-12, December.
    20. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-1248, September.
    21. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
    22. Jos Blank & Vivian Valdmanis, 2010. "Environmental factors and productivity on Dutch hospitals: a semi-parametric approach," Health Care Management Science, Springer, vol. 13(1), pages 27-34, March.
    23. Friesner, Daniel & Mittelhammer, Ron & Rosenman, Robert, 2013. "Inferring the incidence of industry inefficiency from DEA estimates," European Journal of Operational Research, Elsevier, vol. 224(2), pages 414-424.
    24. Peter Bogetoft & Lars Otto, 2011. "Benchmarking with DEA, SFA, and R," International Series in Operations Research and Management Science, Springer, number 978-1-4419-7961-2, September.
    25. Aigner, Dennis & Lovell, C. A. Knox & Schmidt, Peter, 1977. "Formulation and estimation of stochastic frontier production function models," Journal of Econometrics, Elsevier, vol. 6(1), pages 21-37, July.
    26. William W. Cooper & Lawrence M. Seiford & Kaoru Tone, 2007. "Data Envelopment Analysis," Springer Books, Springer, edition 0, number 978-0-387-45283-8, December.
    Full references (including those not matched with items on IDEAS)

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. Dino Rizzi & Michele Zanette, 2021. "Potential efficiency gains and expenditure savings in the Italian Regional Healthcare Systems," Politica economica, Società editrice il Mulino, issue 2, pages 187-214.
    2. Zhichao Wang & Valentin Zelenyuk, 2021. "Performance Analysis of Hospitals in Australia and its Peers: A Systematic Review," CEPA Working Papers Series WP012021, School of Economics, University of Queensland, Australia.
    3. Cristian Barra & Raffaele Lagravinese & Roberto Zotti, 2022. "Exploring hospital efficiency within and between Italian regions: new empirical evidence," Journal of Productivity Analysis, Springer, vol. 57(3), pages 269-284, June.

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Varabyova, Yauheniya & Schreyögg, Jonas, 2013. "International comparisons of the technical efficiency of the hospital sector: Panel data analysis of OECD countries using parametric and non-parametric approaches," Health Policy, Elsevier, vol. 112(1), pages 70-79.
    2. Ivonne Lindlbauer & Jonas Schreyögg, 2014. "The relationship between hospital specialization and hospital efficiency: do different measures of specialization lead to different results?," Health Care Management Science, Springer, vol. 17(4), pages 365-378, December.
    3. Deng, Zhongqi & Jiang, Nan & Pang, Ruizhi, 2021. "Factor-analysis-based directional distance function: The case of New Zealand hospitals," Omega, Elsevier, vol. 98(C).
    4. Sebastian Kohl & Jan Schoenfelder & Andreas Fügener & Jens O. Brunner, 2019. "The use of Data Envelopment Analysis (DEA) in healthcare with a focus on hospitals," Health Care Management Science, Springer, vol. 22(2), pages 245-286, June.
    5. Cláudia Araújo & Carlos Barros & Peter Wanke, 2014. "Efficiency determinants and capacity issues in Brazilian for-profit hospitals," Health Care Management Science, Springer, vol. 17(2), pages 126-138, June.
    6. Tiemann, Oliver & Schreyögg, Jonas & Busse, Reinhard, 2012. "Hospital ownership and efficiency: A review of studies with particular focus on Germany," Health Policy, Elsevier, vol. 104(2), pages 163-171.
    7. Sucharita Ghosh & Camilla Mastromarco, 2013. "Cross-border Economic Activities, Human Capital and Efficiency: A Stochastic Frontier Analysis for OECD Countries," The World Economy, Wiley Blackwell, vol. 36(6), pages 761-785, June.
    8. Valentin Zelenyuk & Zhichao Wang, 2023. "Random vs. Explained Inefficiency in Stochastic Frontier Analysis: The Case of Queensland Hospitals," CEPA Working Papers Series WP052023, School of Economics, University of Queensland, Australia.
    9. Francesco Aiello & Camilla Mastromarco & Angelo Zago, 2011. "Be productive or face decline. On the sources and determinants of output growth in Italian manufacturing firms," Empirical Economics, Springer, vol. 41(3), pages 787-815, December.
    10. Davtalab-Olyaie, Mostafa & Asgharian, Masoud & Nia, Vahid Partovi, 2019. "Stochastic ranking and dominance in DEA," International Journal of Production Economics, Elsevier, vol. 214(C), pages 125-138.
    11. Mareike Heimeshoff & Jonas Schreyögg & Lukas Kwietniewski, 2014. "Cost and technical efficiency of physician practices: a stochastic frontier approach using panel data," Health Care Management Science, Springer, vol. 17(2), pages 150-161, June.
    12. Franz R. Hahn, 2007. "Determinants of Bank Efficiency in Europe. Assessing Bank Performance Across Markets," WIFO Studies, WIFO, number 31499, April.
    13. Thanh Ngo & Kan Wai Hong Tsui, 2022. "Estimating the confidence intervals for DEA efficiency scores of Asia-Pacific airlines," Operational Research, Springer, vol. 22(4), pages 3411-3434, September.
    14. Lukas Kwietniewski & Jonas Schreyögg, 2018. "Efficiency of physician specialist groups," Health Care Management Science, Springer, vol. 21(3), pages 409-425, September.
    15. Oliver Tiemann & Jonas Schreyögg, 2012. "Changes in hospital efficiency after privatization," Health Care Management Science, Springer, vol. 15(4), pages 310-326, December.
    16. Tsionas, Mike & Patel, Pankaj C. & Guedes, Maria João, 2022. "Endogenous efficiency of the dynamic profit maximization in the intertemporal production models of venture behavior," International Journal of Production Economics, Elsevier, vol. 246(C).
    17. Roberto Colombi & Gianmaria Martini & Giorgio Vittadini, 2017. "Determinants of transient and persistent hospital efficiency: The case of Italy," Health Economics, John Wiley & Sons, Ltd., vol. 26(S2), pages 5-22, September.
    18. Liu, John S. & Lu, Louis Y.Y. & Lu, Wen-Min, 2016. "Research fronts in data envelopment analysis," Omega, Elsevier, vol. 58(C), pages 33-45.
    19. Francesco Aiello & Graziella Bonanno, 2013. "Profit and cost efficiency in the Italian banking industry (2006-2011)," Economics and Business Letters, Oviedo University Press, vol. 2(4), pages 190-205.
    20. Calogero Guccio & Marco Ferdinando Martorana & Luisa Monaco, 2016. "Evaluating the impact of the Bologna Process on the efficiency convergence of Italian universities: a non-parametric frontier approach," Journal of Productivity Analysis, Springer, vol. 45(3), pages 275-298, June.

    More about this item

    Keywords

    NZ hospitals; Stochastic frontier analysis; Technical efficiency; Cost efficiency;
    All these keywords.

    JEL classification:

    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:kap:jproda:v:53:y:2020:i:1:d:10.1007_s11123-019-00550-z. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.