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Reforming the hospital service structure to improve efficiency: Urban hospital specialization


  • Lee, Kwang-soo
  • Chun, Ki-hong
  • Lee, Jung-soo


The objective of this study is to explain the relationship between the case-mix specialization index and efficiency of inpatient hospital care services. Hospital specialization was measured using the information theory index constructed from diagnosis-related group numbers of hospitals in Seoul, Korea, in 2004. Hospital performance was measured by technical efficiency scores computed by data envelopment analysis for 2004. Multiple regression analysis models were applied to identify the internal and external factors that affected the extent of hospital specialization status as well as the efficiency of hospitals. The data envelopment analysis showed that input variables such as the number of beds, doctors and nurses were related to hospital efficiency. Hospitals had different levels of specialization in patient services, and more specialized hospitals were more likely to be efficient (odds ratio = 25.95). Internal characteristics of providers had more significant effects on the extent of specialization than market conditions. These findings help to explain the relationship among hospitals, specialization, market conditions and provider performance. The study results related to the rearrangement of hospital services in a city. Further study including hospitals from other regions will increase the generalizability of results, and policy makers can use the information in making policy for the specialized hospital industry in Korea.

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  • Lee, Kwang-soo & Chun, Ki-hong & Lee, Jung-soo, 2008. "Reforming the hospital service structure to improve efficiency: Urban hospital specialization," Health Policy, Elsevier, vol. 87(1), pages 41-49, July.
  • Handle: RePEc:eee:hepoli:v:87:y:2008:i:1:p:41-49

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    References listed on IDEAS

    1. David Dranove & Mark Shanley & Carol Simon, 1992. "Is Hospital Competition Wasteful?," RAND Journal of Economics, The RAND Corporation, vol. 23(2), pages 247-262, Summer.
    2. Charnes, A. & Cooper, W. W. & Rhodes, E., 1978. "Measuring the efficiency of decision making units," European Journal of Operational Research, Elsevier, vol. 2(6), pages 429-444, November.
    3. Lee, Kwangsoo & Lee, Sangil, 2007. "Effects of the DRG-based prospective payment system operated by the voluntarily participating providers on the cesarean section rates in Korea," Health Policy, Elsevier, vol. 81(2-3), pages 300-308, May.
    4. Ozcan, Yasar A., 1995. "Efficiency of hospital service production in local markets: The balance sheet of U.S. medical armament," Socio-Economic Planning Sciences, Elsevier, vol. 29(2), pages 139-150, June.
    5. Farley, Dean E., 1989. "Measuring casemix specialization and the concentration of diagnoses in hospitals using information theory," Journal of Health Economics, Elsevier, vol. 8(2), pages 185-207, June.
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    Cited by:

    1. Lukas Kwietniewski & Mareike Heimeshoff & Jonas Schreyögg, 2017. "Estimation of a physician practice cost function," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 18(4), pages 481-494, May.
    2. Carvalho, Pedro & Marques, Rui Cunha, 2014. "Computing economies of vertical integration, economies of scope and economies of scale using partial frontier nonparametric methods," European Journal of Operational Research, Elsevier, vol. 234(1), pages 292-307.
    3. 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.
    4. Ralf Dewenter & Thomas Jaschinski & Björn A. Kuchinke, 2013. "Hospital Market Concentration and Discrimination of Patients," Schmollers Jahrbuch : Journal of Applied Social Science Studies / Zeitschrift für Wirtschafts- und Sozialwissenschaften, Duncker & Humblot, Berlin, vol. 133(3), pages 345-374.
    5. Mariani, Laura & Cavenago, Dario, 2014. "Defining hospital's internal boundaries. An organisational complexity criterion," Health Policy, Elsevier, vol. 117(2), pages 239-246.
    6. repec:eee:ejores:v:266:y:2018:i:2:p:716-735 is not listed on IDEAS
    7. Gary Ferrier & Hervé Leleu & James Moises & Vivian Valdmanis, 2013. "The Focus Efficiency of U.S. Hospitals," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 41(3), pages 241-263, September.
    8. Kim, Sun Jung & Park, Eun-Cheol & Jang, Sung In & Lee, Minjee & Kim, Tae Hyun, 2013. "An analysis of the inpatient charge and length of stay for patients with joint diseases in Korea: Specialty versus small general hospitals," Health Policy, Elsevier, vol. 113(1), pages 93-99.
    9. Ivonne Lindlbauer & Jonas Schreyögg, 2014. "The relationship between hospital specialization and hospital efficiency: do different measures of specialization lead to different results?," Health Care Management Science, Springer, vol. 17(4), pages 365-378, December.
    10. Chowdhury, Hedayet & Zelenyuk, Valentin, 2016. "Performance of hospital services in Ontario: DEA with truncated regression approach," Omega, Elsevier, vol. 63(C), pages 111-122.
    11. Gary D. Ferrier & Hervé Leleu & James Moises & Vivian Valdmanis, 2009. "The Size and Service Offering Efficiencies of U.S. Hospitals," Working Papers 2009-ECO-09, IESEG School of Management.
    12. Cláudia Araújo & Carlos Barros & Peter Wanke, 2014. "Efficiency determinants and capacity issues in Brazilian for-profit hospitals," Health Care Management Science, Springer, vol. 17(2), pages 126-138, June.
    13. Helmut Herwartz & Christoph Strumann, 2012. "On the effect of prospective payment on local hospital competition in Germany," Health Care Management Science, Springer, vol. 15(1), pages 48-62, March.

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