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Hospital Competition, Technical Efficiency and Quality

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  • CHEW LIAN CHUA
  • ALFONS PALANGKARAYA
  • JONGSAY YONG

Abstract

This paper studies the link between competition and technical efficiency of public hospitals in the State of Victoria, Australia by accounting both quantity and quality of hospital output using a two-stage semi-parametric model of hospital production and Data Envelopment Analysis. On the one hand, it finds a positive relationship between efficiency and competition measured by the Hirschman-Herfindahl Index (HHI). On the other, it finds that efficiency and the number of competing hospitals, in particular the number of competing private hospitals, to be negatively correlated. More importantly, it finds that whether or not quality is treated as an endogenous output variable, as opposed to as an exogenous control variable, may impact on the statistical estimates of the link between efficiency and competition. Also, how the effect of competition on efficiency is modelled empirically may matter, though the impact of the treatment of quality as described above appears to be more important. Overall, the results highlight the importance of quality consideration in assessing the effects of competition on efficiency and points to possibly undesirable resource allocation effects when public hospitals are made to compete with a large number of private hospitals.
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  • Chew Lian Chua & Alfons Palangkaraya & Jongsay Yong, 2011. "Hospital Competition, Technical Efficiency and Quality," The Economic Record, The Economic Society of Australia, vol. 87(277), pages 252-268, June.
    • Handle: RePEc:bla:ecorec:v:87:y:2011:i:277:p:252-268
    DOI: j.1475-4932.2010.00704.x
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    2. Sara Barcenilla-Visús & José-María Gómez-Sancho & Carmen López-Pueyo & María-Jesús Mancebón & Jaime Sanaú, 2013. "Technical Change, Efficiency Change and Institutions: Empirical Evidence for a Sample of OECD Countries," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 207-227, June.
    3. Sebastian Kohl & Jan Schoenfelder & Andreas Fügener & Jens O. Brunner, 2019. "The use of Data Envelopment Analysis (DEA) in healthcare with a focus on hospitals," Health Care Management Science, Springer, vol. 22(2), pages 245-286, June.
    4. Bao Hoang Nguyen & Zhichao Wang & Valentin Zelenyuk, 2023. "Efficiency of Queensland Public Hospitals via Spatial Panel Stochastic Frontier Models," CEPA Working Papers Series WP102023, School of Economics, University of Queensland, Australia.
    5. Alfons Palangkaraya & Jongsay Yong, 2013. "Effects of competition on hospital quality: an examination using hospital administrative data," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 14(3), pages 415-429, June.
    6. Abbas, Touqeer & Awan, Masood Sarwar & Aslam, Muhammad Amir & Waqas, Muhammad, 2011. "Analyzing the efficiency differences among basic health units in Sargodha District," MPRA Paper 32244, University Library of Munich, Germany.
    7. Jos Blank & Evelien Eggink, 2014. "The impact of policy on hospital productivity: a time series analysis of Dutch hospitals," Health Care Management Science, Springer, vol. 17(2), pages 139-149, June.
    8. Hideaki Kitaki, 2018. "Managing Technical Efficiency of Public and Private Hospitals in Vietnam: Do Market-Oriented Policies Matter?," Working Papers 163, JICA Research Institute.
    9. Peter Dohmen & Martin Ineveld & Aniek Markus & Liana Hagen & Joris Klundert, 2023. "Does competition improve hospital performance: a DEA based evaluation from the Netherlands," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 24(6), pages 999-1017, August.
    10. Helmut Herwartz & Christoph Strumann, 2014. "Hospital efficiency under prospective reimbursement schemes: an empirical assessment for the case of Germany," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 15(2), pages 175-186, March.
    11. Zhichao Wang & Valentin Zelenyuk, 2021. "Performance Analysis of Hospitals in Australia and its Peers: A Systematic Review," CEPA Working Papers Series WP012021, School of Economics, University of Queensland, Australia.
    12. Touqeer Abbas & Muhammad Amir Aslam & Muhammad Waqas, 2011. "Analyzing the Efficiency Differences among Basic Health Units in Sargodha District," Journal of Economics and Behavioral Studies, AMH International, vol. 3(1), pages 42-50.
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    More about this item

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • D40 - Microeconomics - - Market Structure, Pricing, and Design - - - General

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