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Factor-Analysis-Based Directional Distance Function: The case of New Zealand hospitals

Author

Listed:
  • Nan Jiang

    (School of Economics, Auckland University of Technology)

  • Zhongqi Deng

    (School of Economics, Sichuan University, China)

  • Ruizhi Pang

    (College of Economics and Social Development, Nankai University, China)

Abstract

This paper develops a new factor-analysis-based (FAB) approach for choosing the optimal direction in a directional distance function (DDF) analysis. It has the combined merits of factor analysis and slacks-based measure (SBM) and incorporates the relative ease with which various input-output could be adjusted. This development relieves the dependency of price information that is normally unavailable in the provision of public goods. This new FAB-DDF model has been applied on a dataset containing all public hospitals in New Zealand (NZ) observed during 2011-2017. The empirical results indicate that the average reduction across different labor is in the range of 3-10 percent, and the corresponding figure for capital input is 25.7 percent. The case-adjusted inpatient-discharge and price-adjusted outpatient-visit are used as measures of desirable output, the average efficiencies are 92.7 percent and 99 percent respectively. Hospital readmission within 28 days of discharge is used as a measure for undesirable output, and the average efficiency score is 90 percent. These evidence support the suspicion that perverse incentives might exist under the National Health Targets abolished in 2018, which was a set of six indicators used in the last decade to evaluate the performance of local District Health Boards.

Suggested Citation

  • Nan Jiang & Zhongqi Deng & Ruizhi Pang, 2019. "Factor-Analysis-Based Directional Distance Function: The case of New Zealand hospitals," Working Papers 2019-01, Auckland University of Technology, Department of Economics.
    • Handle: RePEc:aut:wpaper:201901
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    Cited by:

    1. Xian‐Hui He & Yung‐ho Chiu & Tzu‐Han Chang & Liang‐Chun Lu & Shih‐Yung Chiu, 2021. "Analyzing hospital medical efficiency of administration and medical treatment in China," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 42(6), pages 1564-1578, September.
    2. Gao, Qiuming & Wang, Derek, 2021. "Hospital efficiency and equity in health care delivery: A study based in China," Socio-Economic Planning Sciences, Elsevier, vol. 76(C).
    3. Vardanyan, Michael & Valdmanis, Vivian G. & Leleu, Hervé & Ferrier, Gary D., 2022. "Estimating technology characteristics of the U.S. hospital industry using directional distance functions with optimal directions," Omega, Elsevier, vol. 113(C).
    4. Tavana, Madjid & Izadikhah, Mohammad & Toloo, Mehdi & Roostaee, Razieh, 2021. "A new non-radial directional distance model for data envelopment analysis problems with negative and flexible measures," Omega, Elsevier, vol. 102(C).
    5. Zhichao Wang & Bao Hoang Nguyen & Valentin Zelenyuk, 2024. "Performance analysis of hospitals in Australia and its peers: a systematic and critical review," Journal of Productivity Analysis, Springer, vol. 62(2), pages 139-173, October.
    6. Zhongqi Deng & Yu Zhang & Ao Yu, 2020. "The New Economy in China: An Intercity Comparison," SAGE Open, , vol. 10(4), pages 21582440209, December.
    7. Zhichao Wang & Valentin Zelenyuk, 2021. "Performance Analysis of Hospitals in Australia and its Peers: A Systematic Review," CEPA Working Papers Series WP012021, School of Economics, University of Queensland, Australia.
    8. Deng, Zhongqi & Song, Shunfeng & Jiang, Nan & Pang, Ruizhi, 2023. "Sustainable development in China? A nonparametric decomposition of economic growth," China Economic Review, Elsevier, vol. 81(C).
    9. Zhongqi Deng & Qianyu Zhao & Helen X. H. Bao, 2020. "The Impact of Urbanization on Farmland Productivity: Implications for China’s Requisition–Compensation Balance of Farmland Policy," Land, MDPI, vol. 9(9), pages 1-24, September.

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    Keywords

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    JEL classification:

    • C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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