Modern Tools for Evaluating the Performance of Health-Care Providers

The hospital industry in many countries is characterized by right-skewed distributions of hospitals’ sizes and varied ownership types, raising numerous questions about the performance of hospitals of different sizes and ownership types. In an era of aging populations and increasing health-care costs, evaluating and understanding the consumption of resources to produce health-care outcomes is increasingly important for policy discussions. This paper discusses recent developments in the statistical and econometric literature on DEA and FDH estimators that can be used to examine hospitals’ technical efficiency and productivity. Use of these new results and methods is illustrated by revisiting the Burgess and Wilson hospital studies of the 1990s to estimate and make inference about the technical efficiency of U.S. hospitals, to make inference about returns to scale and other model features, and to test for differences among U.S. hospitals across ownership types and size groups in the context of a rigorous, statistical paradigm that was unavailable to researchers until recently.