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Public and Private Hospitals

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  • Productivity Commission
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    Abstract

    The average efficiency of public and private hospitals is about 20 per cent below best practice after adjusting for differences in what hospitals do and who they treat, according to the ‘Public and Private Hospitals’ Research Report released by the Productivity Commission. However, the Commission also found that the private sector tends to be slightly more efficient among large hospitals, while the public sector tends to be more efficient among small hospitals. The Report responds to a request by the Australian Government to examine three aspects of the health care system - the relative performance of public and private hospitals; rates of informed financial consent for privately-insured patients; and the most appropriate indexation factor for the Medicare Levy Surcharge income thresholds. Comparing the relative performance of hospitals was challenging. There are major differences within and between public and private hospital systems that make like-for-like comparisons difficult. There was also data limitations, which the Commission sought to address. Future comparisons will be assisted by enhanced data collections for public hospitals already foreshadowed by governments and would be further improved by expanded reporting for private hospitals. Based on available data, the Commission also found that: public and private hospitals have similar overall costs, but there are differences in the composition of costs - medical and diagnostics, and prostheses are more costly in private hospitals; while general hospital costs and capital costs are higher in public hospitals; Private hospitals appear to have lower infection rates than public hospitals (but private hospitals generally treat patients who have a lower risk of infection); private hospitals have higher labour productivity and shorter lengths of stay than public hospitals (partly due to differences between the sectors in what they do and who they treat).

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    File URL: http://www.pc.gov.au/__data/assets/pdf_file/0015/93030/hospitals-report.pdf
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    File URL: http://www.pc.gov.au/projects/study/hospitals/report
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    Bibliographic Info

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    This book is provided by Productivity Commission, Government of Australia in its series Research Reports with number 37 and published in 2009.

    ISBN: 978-1-74037-297-8
    Handle: RePEc:ris:prodcs:37

    Note: 488 pages.
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    Postal: Level 28, 35 Collins St, Melbourne Victoria 3000
    Phone: 61 3 9653 2100
    Fax: 61 3 9653 2199
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    Web page: http://www.pc.gov.au/
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    Related research

    Keywords: public hospitals; private hospitals; best practice; Medicare Levy Surcharge; privately-insured patients;

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    References

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    1. Skinner, Jonathan, 1994. "What do stochastic frontier cost functions tell us about inefficiency?," Journal of Health Economics, Elsevier, vol. 13(3), pages 323-328, October.
    2. 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.
    3. Vitaliano, Donald F. & Toren, Mark, 1994. "Cost and efficiency in nursing homes: a stochastic frontier approach," Journal of Health Economics, Elsevier, vol. 13(3), pages 281-300, October.
    4. Suthathip Yaisawarng & James F. Burgess, 2006. "Performance-based budgeting in the public sector: an illustration from the VA health care system," Health Economics, John Wiley & Sons, Ltd., vol. 15(3), pages 295-310.
    5. Miika Linna, 1998. "Measuring hospital cost efficiency with panel data models," Health Economics, John Wiley & Sons, Ltd., vol. 7(5), pages 415-427.
    6. Bruce Hollingsworth, 2008. "The measurement of efficiency and productivity of health care delivery," Health Economics, John Wiley & Sons, Ltd., vol. 17(10), pages 1107-1128.
    7. Jeff Richardson, 2004. "Priorities of health policy: cost shifting or population health," Centre for Health Economics Working Papers 147/04, Monash University, Centre for Health Economics.
    8. O'Neill, Liam & Rauner, Marion & Heidenberger, Kurt & Kraus, Markus, 2008. "A cross-national comparison and taxonomy of DEA-based hospital efficiency studies," Socio-Economic Planning Sciences, Elsevier, vol. 42(3), pages 158-189, September.
    9. Meeusen, Wim & van den Broeck, Julien, 1977. "Efficiency Estimation from Cobb-Douglas Production Functions with Composed Error," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 18(2), pages 435-44, June.
    10. Andrew Street, 2003. "How much confidence should we place in efficiency estimates?," Health Economics, John Wiley & Sons, Ltd., vol. 12(11), pages 895-907.
    11. Gerdtham, Ulf-G. & Löthgren, Mickael & Tambour, Magnus & Rehnberg, Clas, 1998. "Internal Markets and Health Care Efficiency: A Multiple-Output Stochastic Frontier Analysis," Working Paper Series in Economics and Finance 222, Stockholm School of Economics.
    12. Vitikainen, Kirsi & Street, Andrew & Linna, Miika, 2009. "Estimation of hospital efficiency--Do different definitions and casemix measures for hospital output affect the results?," Health Policy, Elsevier, vol. 89(2), pages 149-159, February.
    13. Luigi Siciliani, 2006. "Estimating Technical Efficiency in the Hospital Sector with Panel Data: A Comparison of Parametric and Non-Parametric Techniques," Applied Health Economics and Health Policy, Springer Healthcare | Adis, vol. 5(2), pages 99-116.
    14. Kim-Huong Nguyen & Tim Coelli, 2009. "Quantifying the effects of modelling choices on hospital efficiency measures: A meta-regression analysis," CEPA Working Papers Series WP072009, School of Economics, University of Queensland, Australia.
    15. James J. Heckman, 1976. "The Common Structure of Statistical Models of Truncation, Sample Selection and Limited Dependent Variables and a Simple Estimator for Such Models," NBER Chapters, in: Annals of Economic and Social Measurement, Volume 5, number 4, pages 475-492 National Bureau of Economic Research, Inc.
    16. Anthony Scott & David Parkin, 1995. "Investigating hospital efficiency in the new NHS: The role of the translog cost function," Health Economics, John Wiley & Sons, Ltd., vol. 4(6), pages 467-478, November.
    17. Mickael Lothgren, 2000. "Specification and estimation of stochastic multiple-output production and technical inefficiency," Applied Economics, Taylor & Francis Journals, vol. 32(12), pages 1533-1540.
    18. Schmidt, Peter & Sickles, Robin C, 1984. "Production Frontiers and Panel Data," Journal of Business & Economic Statistics, American Statistical Association, vol. 2(4), pages 367-74, October.
    19. Grosskopf, S. & Margaritis, D. & Valdmanis, V., 1995. "Estimating output substitutability of hospital services: A distance function approach," European Journal of Operational Research, Elsevier, vol. 80(3), pages 575-587, February.
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