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Internal Markets and Health Care Efficiency: A Multiple-Output Stochastic Frontier Analysis

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Author Info

  • Gerdtham, Ulf-G.

    ()
    (Dept. of Economics, Stockholm School of Economics)

  • Löthgren, Mickael

    ()
    (Dept. of Economic Statistics, Stockholm School of Economics)

  • Tambour, Magnus

    ()
    (Dept. of Economics, Stockholm School of Economics)

  • Rehnberg, Clas

    ()
    (Dept. of Economics, Stockholm School of Economics)

Abstract

This paper has two purposes. The first purpose is methodological and aims to extend previous work on efficiency analysis by implementing a multiple-output stochastic ray frontier production function model. This model generalizes the single-output stochastic frontier model to multiple-input, multiple-output technologies and allows simultaneous estimation of technical efficiency and analysis of influential variables on efficiency. The second, empirical purpose, is to test for existence and magnitude of the effect of purchaser/provider split combined with new reimbursement schemes on technical efficiency in the Swedish public hospital system. The analysis is carried out with a panel data set covering the total population of 26 Swedish County Councils from 1989 to 1995. Our empirical results support the frontier model specification and indicate that output-based reimbursement improves technical efficiency. The potential saving in costs due to a switch from budget-based allocation to output-based allocation is estimated to be almost 10%.

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Bibliographic Info

Paper provided by Stockholm School of Economics in its series Working Paper Series in Economics and Finance with number 222.

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Length: 22 pages
Date of creation: 26 Feb 1998
Date of revision:
Publication status: Published in Health Economics, 1999, pages 151-164.
Handle: RePEc:hhs:hastef:0222

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Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
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Web page: http://www.hhs.se/
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Keywords: Internal markets; stochastic ray frontier model; technical efficiency; panel data.;

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References

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  1. Zuckerman, Stephen & Hadley, Jack & Iezzoni, Lisa, 1994. "Measuring hospital efficiency with frontier cost functions," Journal of Health Economics, Elsevier, vol. 13(3), pages 255-280, October.
  2. Kooreman, P., 1994. "Nursing home care in the netherlands: A nonparametric efficiency analysis," Open Access publications from Tilburg University urn:nbn:nl:ui:12-377583, Tilburg University.
  3. 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 325-32.
  4. Kooreman, Peter, 1994. "Nursing home care in The Netherlands: a nonparametric efficiency analysis," Journal of Health Economics, Elsevier, vol. 13(3), pages 301-316, October.
  5. 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.
  6. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-48, September.
  7. 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.
  8. Gerdtham, Ulf-G., 1993. "The impact of aging on health care expenditure in Sweden," Health Policy, Elsevier, vol. 24(1), pages 1-8, April.
  9. Shawna Grosskopf & Kathy J. Hayes & Lori L. Taylor & William L. Weber, 1997. "Budget-Constrained Frontier Measures Of Fiscal Equality And Efficiency In Schooling," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 116-124, February.
  10. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
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Cited by:
  1. Carol Propper & Deborah Wilson & Simon Burgess, 2005. "Extending Choice In English Health Care: The implications of the economic evidence," The Centre for Market and Public Organisation 05/133, Department of Economics, University of Bristol, UK.
  2. Anders Anell, 2005. "Swedish healthcare under pressure," Health Economics, John Wiley & Sons, Ltd., vol. 14(S1), pages S237-S254.
  3. William Griffiths & Xiaohui Zhang & Xueyan Zhao, 2014. "Estimation and efficiency measurement in stochastic production frontiers with ordinal outcomes," Journal of Productivity Analysis, Springer, vol. 42(1), pages 67-84, August.
  4. Andrew Worthington, 1999. "An Empirical Survey Of Frontier Efficiency Measurement Techniques In Healthcare Services," School of Economics and Finance Discussion Papers and Working Papers Series 067, School of Economics and Finance, Queensland University of Technology.
  5. R. Cellini & G. Pignataro & I. Rizzo, 1999. "Competition and Efficiencyin health care: an analysis of the Italian case," Working Papers 354, Dipartimento Scienze Economiche, Universita' di Bologna.
  6. 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.
  7. World Bank, 2009. "Serbia - Baseline Survey on Cost and Efficiency in Primary Health Care Centers Before Provider Payment Reforms," World Bank Other Operational Studies 3036, The World Bank.
  8. Pablo Gottret & George Schieber, 2006. "Health Financing Revisited : A Practitioner's Guide," World Bank Publications, The World Bank, number 7094, October.
  9. William Griffiths & Xiaohui Zhang & Xueyan Zhao, 2010. "A Stochastic Frontier Model for Discrete Ordinal Outcomes: A Health Production Function," Department of Economics - Working Papers Series 1092, The University of Melbourne.
  10. Niquidet, Kurt & Nelson, Harry, 2010. "Sawmill production in the interior of British Columbia: A stochastic ray frontier approach," Journal of Forest Economics, Elsevier, vol. 16(4), pages 257-267, December.
  11. Bhattacharyya, Aditi & Pal, Sudeshna, 2013. "Financial reforms and technical efficiency in Indian commercial banking: A generalized stochastic frontier analysis," Review of Financial Economics, Elsevier, vol. 22(3), pages 109-117.
  12. Productivity Commission, 2009. "Public and Private Hospitals," Research Reports, Productivity Commission, Government of Australia, number 37.
  13. H. Shelton Brown, 2003. "Managed care and technical efficiency," Health Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 149-158.
  14. Pedersen, Kjeld Møller, 2009. "Reforming decentralized integrated health care systems: Theory and the case of the Norwegian reform," HERO On line Working Paper Series 2002:7, Oslo University, Health Economics Research Programme.

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