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Analysis of uncompensated hospital care using a DEA model of output congestion

  • Gary Ferrier
  • Michael Rosko
  • Vivian Valdmanis

    ()

Uncompensated care can create financial difficulties for hospitals. The problem is likely to worsen as the number of individuals lacking health insurance continues to grow. The objective of this study is to measure how uncompensated care affects hospitals' ability to provide the services for which they do receive compensation. Applying output-based data envelopment analysis (DEA) under various assumptions on the disposability of outputs to a sample of Pennsylvania hospitals, we find that, on average, hospitals could have produced 7% more output if they had all operated on the best-practice frontier and that uncompensated care reduced the production of other hospital outputs by 2%. Thus, even if hospitals were to operate efficiently, they might still face financial distress as a result of providing uncompensated care. The findings in our study suggest that policy makers should continue looking at ways to increase funding to hospitals providing uncompensated care while not distorting economic incentives to reduce excessive costs. Copyright Springer Science + Business Media, Inc. 2006

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File URL: http://hdl.handle.net/10.1007/s10729-006-7665-8
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Article provided by Springer in its journal Health Care Management Science.

Volume (Year): 9 (2006)
Issue (Month): 2 (May)
Pages: 181-188

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Handle: RePEc:kap:hcarem:v:9:y:2006:i:2:p:181-188
Contact details of provider: Web page: http://www.springerlink.com/link.asp?id=101767

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  1. Fare, Rolf, et al, 1989. "Multilateral Productivity Comparisons When Some Outputs Are Undesirable: A Nonparametric Approach," The Review of Economics and Statistics, MIT Press, vol. 71(1), pages 90-98, February.
  2. Léopold Simar & Paul Wilson, 2000. "Statistical Inference in Nonparametric Frontier Models: The State of the Art," Journal of Productivity Analysis, Springer, vol. 13(1), pages 49-78, January.
  3. Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
  4. Guan Zhengfei & Alfons Oude Lansink, 2003. "Input Disposability and Efficiency in Dutch Arable Farming," Journal of Agricultural Economics, Wiley Blackwell, vol. 54(3), pages 467-478.
  5. Fare, Rolf & Grosskopf, Shawna, 2000. "Slacks and congestion: a comment," Socio-Economic Planning Sciences, Elsevier, vol. 34(1), pages 27-33, March.
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