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Comparing the allocative efficiencies of hospitals

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  • Morey, RC
  • Fine, DJ
  • Loree, SW

Abstract

A new technique for comparing the performance of firms in controlling costs is introduced and applied to a sample of 60 hospitals. The multi-output, multi-input approach utilizes observed costs, process counts and non-controllable factors for a sample of hospitals to form peer groups to build allocative cost frontiers. The approach can be used to provide insights regarding conjectures about the relative efficiencies of various institutional types as well as the cost differentials associated with different levels of quality of care. The programming approach handles environmental factors such as case mix severity, the teaching mission of the institution, etc. Our illustrative results found an average of a 14% differential in the efficient cost between public and not-for-profits. Much better data is needed before any definitive findings can be stated, but the type of insights regarding the varying degree of separation of the cost frontiers for different levels of outputs is concretely illustrated.

Suggested Citation

  • Morey, RC & Fine, DJ & Loree, SW, 1990. "Comparing the allocative efficiencies of hospitals," Omega, Elsevier, vol. 18(1), pages 71-83.
  • Handle: RePEc:eee:jomega:v:18:y:1990:i:1:p:71-83
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    References listed on IDEAS

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    1. Richard Ehrhardt, 1979. "The Power Approximation for Computing (s, S) Inventory Policies," Management Science, INFORMS, vol. 25(8), pages 777-786, August.
    2. Richard Ehrhardt & Charles Mosier, 1984. "A Revision of the Power Approximation for Computing (s, S) Policies," Management Science, INFORMS, vol. 30(5), pages 618-622, May.
    3. Arthur F. Veinott, Jr. & Harvey M. Wagner, 1965. "Computing Optimal (s, S) Inventory Policies," Management Science, INFORMS, vol. 11(5), pages 525-552, March.
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    Citations

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    Cited by:

    1. Thomas Czypionka & Markus Kraus & Susanne Mayer & Gerald Röhrling, 2014. "Efficiency, ownership, and financing of hospitals: The case of Austria," Health Care Management Science, Springer, vol. 17(4), pages 331-347, December.
    2. N. Maniadakis & N. Kotsopoulos & P. Prezerakos & J. Yfantopoulos, 2009. "Health Care Services Performance Measurement: Theory, Methods and Empirical Evidence," European Research Studies Journal, European Research Studies Journal, vol. 0(3), pages 151-170.
    3. Puig-Junoy, Jaume, 2000. "Partitioning input cost efficiency into its allocative and technical components: an empirical DEA application to hospitals," Socio-Economic Planning Sciences, Elsevier, vol. 34(3), pages 199-218, September.
    4. Sahoo, Biresh K. & Luptacik, Mikulas & Mahlberg, Bernhard, 2011. "Alternative measures of environmental technology structure in DEA: An application," European Journal of Operational Research, Elsevier, vol. 215(3), pages 750-762, December.
    5. García Prieto, C., 2003. "La ineficiencia en costes de los hospitales del Insalud:un estudio detallado / Cost inefficiency in spanish public hospitals: A detailled stydy," Estudios de Economía Aplicada, Estudios de Economía Aplicada, vol. 21, pages 467-484, December.
    6. O'Neill, Liam & Rauner, Marion & Heidenberger, Kurt & Kraus, Markus, 2008. "A cross-national comparison and taxonomy of DEA-based hospital efficiency studies," Socio-Economic Planning Sciences, Elsevier, vol. 42(3), pages 158-189, September.
    7. 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.
    8. Sami Chaabouni & Chokri Abednnadher, 2016. "Cost Efficiency of Tunisian Public Hospitals: a Bayesian Comparison of Random and Fixed Frontier Models," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 7(3), pages 771-781, September.
    9. Giokas, Dimitris I., 2001. "Greek hospitals: how well their resources are used," Omega, Elsevier, vol. 29(1), pages 73-83, February.
    10. Beatriz Gonzalez Lopez-Valcarcel & Patricia Barber Perez, 1996. "Changes in the efficiency of spanish public hospitals after the introduction of program-contracts," Investigaciones Economicas, Fundación SEPI, vol. 20(3), pages 377-402, September.
    11. Barros, Carlos Pestana & Menezes, Antonio & Vieira, José António Cabral & Peypoch, Nicolas & Solonandrasana, Bernardin, 2007. "An Analysis of Hospital Efficiency and Productivity Growth Using the Luenberger Productivity Indicator," IZA Discussion Papers 2689, Institute for the Study of Labor (IZA).

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