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Does Higher Cost Inefficiency Imply Higher Profit Inefficiency? - Evidence on Inefficiency and Ownership of German Hospitals

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Author Info
Annika Herr
Hendrik Schmitz
Boris Augurzky

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Abstract

This paper investigates cost and profit efficiency of German hospitals. More specifically, it deals with the question how hospital efficiency varies with ownership, patient structure and other exogenous factors, which are neither inputs nor outputs of the production process. We conduct a Stochastic Frontier Analysis (SFA) on a multifaceted administrative German dataset combined with the balance sheets of 374 hospitals for the years 2002 to 2005.The results indicate that private (for-profit) and (private) non-profit hospitals are on average less cost efficient but more profit efficient than publicly owned hospitals.

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Publisher Info
Paper provided by Rheinisch-Westfälisches Institut für Wirtschaftsforschung, Ruhr-Universität Bochum, Universität Dortmund, Universität Duisburg-Essen in its series Ruhr Economic Papers with number 0132.

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Length: 28 pages
Date of creation: Aug 2009
Date of revision:
Handle: RePEc:rwi:repape:0132

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Related research
Keywords: Hospital efficiency; ownership; stochastic frontier analysis; profit function;

Find related papers by JEL classification:
C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: General - - - Estimation
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Boundaries of Public and Private Enterprise; Privatization; Contracting Out

References listed on IDEAS
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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. [Downloadable!]
  2. Allen N. Berger & Loretta J. Mester, 1997. "Inside the Black Box: What Explains Differences in the Efficiencies of Financial Institutions?," Center for Financial Institutions Working Papers 97-04, Wharton School Center for Financial Institutions, University of Pennsylvania. [Downloadable!]
    Other versions:
  3. 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. [Downloadable!]
  4. Villalonga, Belen, 2000. "Privatization and efficiency: differentiating ownership effects from political, organizational, and dynamic effects," Journal of Economic Behavior & Organization, Elsevier, vol. 42(1), pages 43-74, May. [Downloadable!] (restricted)
  5. 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. [Downloadable!] (restricted)
  6. Subal Kumbhakar, 2006. "Specification and estimation of nonstandard profit functions," Empirical Economics, Springer, vol. 31(3), pages 799-799, September. [Downloadable!] (restricted)
    Other versions:
  7. Ali, Farman & Parikh, Ashok & Shah, Mir Kalan, 1994. "Measurement of Profit Efficiency Using Behavioural and Stochastic Frontier Approaches," Applied Economics, Taylor and Francis Journals, vol. 26(2), pages 181-88, February.
  8. Michael D. Rosko, 2001. "Cost efficiency of US hospitals: a stochastic frontier approach," Health Economics, John Wiley & Sons, Ltd., vol. 10(6), pages 539-551. [Downloadable!]
  9. Jalal D. Akhavein & Allen N. Berger & David B. Humphrey, 1997. "The effects of megamergers on efficiency and prices: evidence from a bank profit function," Finance and Economics Discussion Series 1997-9, Board of Governors of the Federal Reserve System (U.S.). [Downloadable!]
    Other versions:
  10. Hoerger, Thomas J., 1991. "'Profit' variability in for-profit and not-for-profit hospitals," Journal of Health Economics, Elsevier, vol. 10(3), pages 259-289, October. [Downloadable!] (restricted)
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This page was last updated on 2009-12-2.

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