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The scale of hospital production in different settings: One size does not fit all

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Author Info

  • Mette Asmild

    ()
    (Institute of Food and Resource Economics, University of Copenhagen)

  • Bruce Hollingsworth

    (Division of Health Research, Lancaster University, UK)

  • Stephen Birch

    (Centre for Health Economics and Policy Analysis, McMaster University, Canada)

Abstract

This paper analyses the productive efficiency of 141 public hospitals from 1998-2004 in two Canadian provinces; one a small province with a few small cities and a generally more rural population and the other a large province that is more urban in nature, with a population who mainly live in large cities. The relative efficiencies of the hospitals, the changes in productivity during this time period, and the relationship between efficiency and the size or scale of the hospitals are investigated using data envelopment analysis. The models for the production of health care use case mix adjusted hospital discharges as the output, and nursing hours as inputs. We find clear differences between the two provinces. Making use of ‘own’ and ‘meta’ technical efficiency frontiers, we demonstrate that efficient units in the larger and more urban province are larger than non-efficient units in that province. However, efficient hospitals in the smaller and more rural province are smaller than non-efficient hospitals in that province. Overall, efficient hospitals in the larger more urban province are larger than efficient hospitals in the smaller more rural province. This has interesting policy implications - different hospitals may have different optimal sizes, or different efficient modes of operation, depending on location, the population they serve, and the policies their respective provincial governments wish to implement. In addition, there are lessons to be learned by comparing the hospitals across the two provinces, since the inefficient hospitals in the small rural province predominantly use hospitals from the large urban province as benchmarks, such that substantially larger improvement potential can be identified by inter-provincial rather than intra-provincial benchmarking analysis.

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File URL: http://okonomi.foi.dk/workingpapers/MSAPpdf/MSAP2012/MSAP_WP04_2012.pdf
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Bibliographic Info

Paper provided by University of Copenhagen, Department of Food and Resource Economics in its series MSAP Working Paper Series with number 04_2012.

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Length: 38 pages
Date of creation: 2012
Date of revision:
Handle: RePEc:foi:msapwp:04_2012

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Web page: http://www.msap.life.ku.dk/
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Related research

Keywords: Data Envelopment Analysis (DEA); Scale; Efficiency; Hospitals; Provinces;

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References

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  1. 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.
  2. Preyra, Colin & Pink, George, 2006. "Scale and scope efficiencies through hospital consolidations," Journal of Health Economics, Elsevier, vol. 25(6), pages 1049-1068, November.
  3. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
  4. Daniel Bilodeau & Pierre-Yves Crémieux & Brigitte Jaumard & Pierre Ouellette & Tsévi Vovor, 2004. "Measuring Hospital Performance in the Presence of Quasi-Fixed Inputs: An Analysis of Québec Hospitals," Journal of Productivity Analysis, Springer, vol. 21(2), pages 183-199, March.
  5. David C. Wheelock & Paul W. Wilson, 1996. "Technical progress, inefficiency and productivity change in U.S. banking, 1984-1993," Working Papers 1994-021, Federal Reserve Bank of St. Louis.
  6. Daniel Bilodeau & Pierre-Yves Cremieux & Pierre Ouellette, 2009. "Hospital performance in a noncompetitive environment," Applied Economics, Taylor & Francis Journals, vol. 41(4), pages 459-468.
  7. Vitaliano, Donald F., 1987. "On the estimation of hospital cost functions," Journal of Health Economics, Elsevier, vol. 6(4), pages 305-318, December.
  8. Mette Asmild & Fai Tam, 2007. "Estimating global frontier shifts and global Malmquist indices," Journal of Productivity Analysis, Springer, vol. 27(2), pages 137-148, April.
  9. Daniel Bilodeau & Pierre-Yves Crémieux & Pierre Ouellette, 2002. "Hospital Technology in a Nonmarket Health Care System," Southern Economic Journal, Southern Economic Association, vol. 68(3), pages 511-529, January.
  10. Dranove, David, 1998. "Economies of scale in non-revenue producing cost centers: Implications for hospital mergers," Journal of Health Economics, Elsevier, vol. 17(1), pages 69-83, January.
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