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Data Envelopment Analysis to determine efficiencies of health maintenance organizations


  • Kris Siddharthan
  • Melissa Ahern
  • Robert Rosenman


We use Data Envelopment Analysis (DEA) to measure the relative technical efficiencies of 164 HMOs licensed to practice in the United States in 1995 with data collected from the American Association of Health Plans. Health care output measures used in the analysis are the number of commercial, Medicare and Medicaid lives covered in each plan. Inputs to the model are health care utilization measures such as the number of medical and surgical inpatient days, number of maternity and newborn stays in days, number of outpatient and emergency room visits and the number of non‐invasive and invasive procedures performed on patients in an ambulatory setting. Mean efficiency of health plans was 40% (of the most efficient). We use multivariate analysis to try and explain variations in efficiency. Enrollment influences efficiency, with larger HMOs being more efficient than those with fewer enrollees. Plans with a more even distribution of Commercial, Medicare and Medicaid patients were more efficient on average than plans with heterogeneous mixes in enrollment. HMOs with Medicare patients are significantly less efficient, with efficiency decreasing with increasing Medicare participation in plan membership. Health plans in operation for longer periods of time had greater outputs with the same inputs. Health plans that had a majority of their enrollees in network or IPA type arrangements were more efficient as were for‐profit plans compared to not‐for‐profits. Policy implications are discussed. Copyright Kluwer Academic Publishers 2000

Suggested Citation

  • Kris Siddharthan & Melissa Ahern & Robert Rosenman, 2000. "Data Envelopment Analysis to determine efficiencies of health maintenance organizations," Health Care Management Science, Springer, vol. 3(1), pages 23-29, January.
  • Handle: RePEc:kap:hcarem:v:3:y:2000:i:1:p:23-29
    DOI: 10.1023/A:1019072819828

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    Cited by:

    1. Dan Friesner & Chris Stevens, 2007. "Ownership and rent-seeking behavior in specialty health care practices," Economics Bulletin, AccessEcon, vol. 9(10), pages 1-14.
    2. Greta Falavigna & Roberto Ippoliti & Alessandro Manello, 2012. "Performance of the health care industry: the Italian case study," CERIS Working Paper 201216, Institute for Economic Research on Firms and Growth - Moncalieri (TO) ITALY -NOW- Research Institute on Sustainable Economic Growth - Moncalieri (TO) ITALY.
    3. Greta Falavigna & Roberto Ippoliti & Alessandro Manello, 2013. "Hospital organization and performance: a directional distance function approach," Health Care Management Science, Springer, vol. 16(2), pages 139-151, June.
    4. repec:ebl:ecbull:v:9:y:2007:i:10:p:1-14 is not listed on IDEAS
    5. 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.
    6. Filipe Amado, Carla Alexandra & Dyson, Robert G., 2008. "On comparing the performance of primary care providers," European Journal of Operational Research, Elsevier, vol. 185(3), pages 915-932, March.
    7. Lu Ji & Fei Liu, 2007. "HMO versus non-HMO private managed care plans: an investigation on pre-switch consumption," Health Care Management Science, Springer, vol. 10(1), pages 67-80, February.
    8. Shanmugam, Ramalingam & Johnson, Charles, 2007. "At a crossroad of data envelopment and principal component analyses," Omega, Elsevier, vol. 35(4), pages 351-364, August.
    9. Douglas Wholey & John Engberg & Cindy Bryce, 2006. "A descriptive analysis of average productivity among health maintenance organizations, 1985 to 2001," Health Care Management Science, Springer, vol. 9(2), pages 189-206, May.
    10. Kalyan S. Pasupathy & Alexandra Medina-Borja, 2008. "Integrating Excel, Access, and Visual Basic to Deploy Performance Measurement and Evaluation at the American Red Cross," Interfaces, INFORMS, vol. 38(4), pages 324-337, August.

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