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Cost and technical efficiency of German hospitals: does ownership matter?

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  • Annika Herr

Abstract

This paper is the first to investigate both the technical and cost efficiency of more than 1500 German general hospitals. More specifically, it deals with the question how hospital efficiency varies with ownership, patient structure, and other exogenous factors, which are neither inputs to nor outputs of the production process. The empirical results for the years from 2001 to 2003 indicate that private and non-profit hospitals are on average less cost efficient and less technically efficient than publicly owned hospitals. The hospital rankings based on estimated efficiency scores turn out to be negatively correlated with average length of stay, which is highest in private hospitals. The results are derived by conducting a Stochastic Frontier Analysis assuming both Cobb-Douglas and translog production technologies and using a newly available and multifaceted administrative German data set. Copyright © 2008 John Wiley & Sons, Ltd.

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File URL: http://hdl.handle.net/10.1002/hec.1388
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Article provided by John Wiley & Sons, Ltd. in its journal Health Economics.

Volume (Year): 17 (2008)
Issue (Month): 9 ()
Pages: 1057-1071

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Handle: RePEc:wly:hlthec:v:17:y:2008:i:9:p:1057-1071

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Web page: http://www3.interscience.wiley.com/cgi-bin/jhome/5749

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  1. Mark Duggan, 2000. "Hospital Ownership and Public Medical Spending," NBER Working Papers 7789, National Bureau of Economic Research, Inc.
  2. Mehdi Farsi & Massimo Filippini, 2008. "Effects of ownership, subsidization and teaching activities on hospital costs in Switzerland," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 17(3), pages 335-350.
  3. Hung-Jen Wang, 2002. "Heteroscedasticity and Non-Monotonic Efficiency Effects of a Stochastic Frontier Model," Journal of Productivity Analysis, Springer, Springer, vol. 18(3), pages 241-253, November.
  4. 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, Springer, vol. 20(2), pages 325-32.
  5. Tomas J. Philipson & Richard A. Posner, 2009. "Antitrust in the Not-for-Profit Sector," Journal of Law and Economics, University of Chicago Press, University of Chicago Press, vol. 52(1), pages 1-18, 02.
  6. H. Shelton Brown, 2003. "Managed care and technical efficiency," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 12(2), pages 149-158.
  7. 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, Western Agricultural Economics Association, vol. 12(02), December.
  8. Sloan, Frank A., 2000. "Not-for-profit ownership and hospital behavior," Handbook of Health Economics, Elsevier, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 21, pages 1141-1174 Elsevier.
  9. William Greene, 2002. "Fixed and Random Effects in Stochastic Frontier Models," Working Papers, New York University, Leonard N. Stern School of Business, Department of Economics 02-16, New York University, Leonard N. Stern School of Business, Department of Economics.
  10. Villalonga, Belen, 2000. "Privatization and efficiency: differentiating ownership effects from political, organizational, and dynamic effects," Journal of Economic Behavior & Organization, Elsevier, Elsevier, vol. 42(1), pages 43-74, May.
  11. Zuckerman, Stephen & Hadley, Jack & Iezzoni, Lisa, 1994. "Measuring hospital efficiency with frontier cost functions," Journal of Health Economics, Elsevier, Elsevier, vol. 13(3), pages 255-280, October.
  12. Miika Linna, 1998. "Measuring hospital cost efficiency with panel data models," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 7(5), pages 415-427.
  13. Mehdi Farsi & Massimo Filippini, 2006. "An Analysis of Efficiency and Productivity in Swiss Hospitals," Swiss Journal of Economics and Statistics (SJES), Swiss Society of Economics and Statistics (SSES), Swiss Society of Economics and Statistics (SSES), vol. 142(I), pages 1-37, March.
  14. Matthias Staat, 2006. "Efficiency of hospitals in Germany: a DEA-bootstrap approach," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 38(19), pages 2255-2263.
  15. Sherman T. Folland & Richard A. Hofler, 2001. "How reliable are hospital efficiency estimates? Exploiting the dual to homothetic production," Health Economics, John Wiley & Sons, Ltd., John Wiley & Sons, Ltd., vol. 10(8), pages 683-698.
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