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Measuring hospital cost efficiency with panel data models


  • Miika Linna

    (National Research and Development Centre for Welfare and Health, Helsinki, Finland)


This paper investigated the development of hospital cost efficiency and productivity in Finland in 1988-1994 using a comparative application of parametric and non-parametric panel models. Stochastic cost frontier models with a time-varying inefficiency component were used as parametric methods. As non-parametric methods various DEA models were employed to calculate efficiency scores and the Malmquist productivity index. The results revealed a 3-5% annual average increase in productivity, half of which was due to improvement in cost efficiency and half due to technological change. The results by parametric and non-parametric methods compared well with respect to individual efficiency scores, time-varying efficiency and technological change. The state subsidy reform of 1993 did not seem to have any observable effects on the hospital efficiency. © 1998 John Wiley & Sons, Ltd.

Suggested Citation

  • Miika Linna, 1998. "Measuring hospital cost efficiency with panel data models," Health Economics, John Wiley & Sons, Ltd., vol. 7(5), pages 415-427.
  • Handle: RePEc:wly:hlthec:v:7:y:1998:i:5:p:415-427
    DOI: 10.1002/(SICI)1099-1050(199808)7:5<415::AID-HEC357>3.0.CO;2-9

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