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On the (in)efficiency of Swiss hospitals

  • L. Steinmann
  • P. Zweifel
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    The efficiency of hospitals is of interest to health insurers, government authorities and hospital management itself. However, econometric methods for determining (in)efficiency have severe drawbacks since hospitals are multiproduct firms and because the duality between production and cost functions cannot be assumed. In this work, non-parametric, deterministic data envelopment analysis (DEA) is used to measure the relative inefficiency of 89 Swiss hospitals covering the years 1993-1996 (310 observations). Special attention is given to the role of patient days in the production of health. The findings depend on whether patient days are viewed as an input of patient time or as an output, as in previous studies. While the probability of a unit being inefficient cannot be explained using the available data, the degree of overall inefficiency is shown to significantly depend on the financial incentives faced by management, in particular due to subsidization. Private hospitals do not seem to be less inefficient than public ones; however, this may be caused by their 'overusing' inputs that in fact are valued as amenities by patients. This consideration points to an important limitation in applying the purely quantitative criteria of DEA to hospitals.

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    File URL: http://www.tandfonline.com/doi/abs/10.1080/00036840210167183
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    Article provided by Taylor & Francis Journals in its journal Applied Economics.

    Volume (Year): 35 (2003)
    Issue (Month): 3 ()
    Pages: 361-370

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    Handle: RePEc:taf:applec:v:35:y:2003:i:3:p:361-370
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    1. 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.
    2. Thompson, Russell G. & Langemeier, Larry N. & Lee, Chih-Tah & Lee, Euntaik & Thrall, Robert M., 1990. "The role of multiplier bounds in efficiency analysis with application to Kansas farming," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 93-108.
    3. Charnes, A. & Cooper, W. W. & Huang, Z. M. & Sun, D. B., 1990. "Polyhedral Cone-Ratio DEA Models with an illustrative application to large commercial banks," Journal of Econometrics, Elsevier, vol. 46(1-2), pages 73-91.
    4. Rajiv D. Banker & Robert F. Conrad & Robert P. Strauss, 1986. "A Comparative Application of Data Envelopment Analysis and Translog Methods: An Illustrative Study of Hospital Production," Management Science, INFORMS, vol. 32(1), pages 30-44, January.
    5. R. D. Banker & A. Charnes & W. W. Cooper, 1984. "Some Models for Estimating Technical and Scale Inefficiencies in Data Envelopment Analysis," Management Science, INFORMS, vol. 30(9), pages 1078-1092, September.
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