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Hospital efficiency targets

Author

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  • Rowena Jacobs

    (Centre for Health Economics, University of York, UK)

  • Diane Dawson

    (Centre for Health Economics, University of York, UK)

Abstract

Cost-efficiency targets, used to encourage downward pressure on hospital unit costs, have been employed within the UK NHS for many years. There has been considerable speculation that these targets create incentives to reduce beds and increase occupancy rates at the expense of holding spare capacity to accommodate fluctuations in emergency admissions. This research used panel data for the period 1994|1995-1999|2000, supplemented by a series of semi-structured interviews, to explore the strategies Trusts employ to reduce unit costs. No relationship could be found between published targets and changes in unit costs, nor that targets were successful in reducing the dispersion of unit costs over time. Interviews revealed that efficiency gains required of Trusts, usually dictated by the local health economy, often bore no correspondence to the national or regional published targets. Results further indicated that contrary to prior speculation, Trusts divide into two distinct groups, those with high occupancy rates and those with a high proportion of free beds to accommodate emergencies, with Trust characteristics displaying stability over time. A pressing need for future work is the development of measures to encourage efficiency that take account of quality improvement. Copyright © 2002 John Wiley & Sons, Ltd.

Suggested Citation

  • Rowena Jacobs & Diane Dawson, 2003. "Hospital efficiency targets," Health Economics, John Wiley & Sons, Ltd., vol. 12(8), pages 669-684.
  • Handle: RePEc:wly:hlthec:v:12:y:2003:i:8:p:669-684 DOI: 10.1002/hec.758
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    References listed on IDEAS

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    1. Propper, Carol, 1995. "Agency and incentives in the NHS internal market," Social Science & Medicine, Elsevier, vol. 40(12), pages 1683-1690, June.
    2. Hausman, Jerry, 2015. "Specification tests in econometrics," Applied Econometrics, Publishing House "SINERGIA PRESS", pages 112-134.
    3. Neil Soderlund & Rowena Jacobs, 2001. "Towards panel data specifications of efficiency measures for English acute hospitals," Working Papers 185chedp, Centre for Health Economics, University of York.
    4. T. S. Breusch & A. R. Pagan, 1980. "The Lagrange Multiplier Test and its Applications to Model Specification in Econometrics," Review of Economic Studies, Oxford University Press, vol. 47(1), pages 239-253.
    5. David M. Cutler & Mark McClellan, 2001. "Productivity Change in Health Care," American Economic Review, American Economic Association, vol. 91(2), pages 281-286, May.
    6. Cutler, David & McClellan, Mark, 2001. "Productivity Change in Health Care," Scholarly Articles 2640585, Harvard University Department of Economics.
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    Cited by:

    1. Mehdi Farsi, 2008. "The temporal variation of cost-efficiency in Switzerland’s hospitals: an application of mixed models," Journal of Productivity Analysis, Springer, vol. 30(2), pages 155-168, October.
    2. Mehdi Farsi & Massimo Filippini, 2008. "Effects of ownership, subsidization and teaching activities on hospital costs in Switzerland," Health Economics, John Wiley & Sons, Ltd., vol. 17(3), pages 335-350.
    3. Rossella Verzulli & Rowena Jacobs & Maria Goddard, 2011. "Do hospitals respond to greater autonomy? Evidence from the English NHS," Working Papers 064cherp, Centre for Health Economics, University of York.
    4. Rowena Jacobs & Peter Smith, 2004. "A descriptive analysis of general acute Trust star ratings," Working Papers 189chedp, Centre for Health Economics, University of York.
    5. Martijn Ludwig & Frits Merode & Wim Groot, 2010. "Principal agent relationships and the efficiency of hospitals," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 11(3), pages 291-304, June.

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