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The Impact of Internal Markets on Health Care Efficiency: Evidence from Health Care Reforms in Sweden

  • Gerdtham, Ulf-G.

    ()

    (Centre for Health Economics)

  • Rehnberg, Clas

    ()

    (Centre for Health Economics)

  • Tambour, Magnus

    ()

    (Centre for Health Economics)

A purchaser/provider split together with output- based reimbursement were recently introduced by several Swedish county councils. These changes have been motivated by arguments of efficiency and consumer choice. This paper tests the null hypothesis that hospital services are provided as efficiently by county councils with internal markets as by county councils with budget reimbursement. We first estimate technical efficiency using data envelopment analysis and then we regress the efficiency scores as the dependent variable on new internal organisations in a multiple regression by use of pooled cross-section data for the 26 county councils for two years (1993 and 1994). The results reject our null hypothesis and we conclude that the organizational changes in the county councils improve health care efficiency. Our results further indicate that the potential savings in costs due to a hypothetical switch from a budget based allocation to a performance based allocation is about 13%. We also found some evidence indicating that county councils with a non-socialist political majority are relatively more efficient than those with a socialist regime and that large county councils are more efficient than small county councils.

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Paper provided by Stockholm School of Economics in its series SSE/EFI Working Paper Series in Economics and Finance with number 170.

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Length: 33 pages
Date of creation: Apr 1997
Date of revision:
Publication status: Published in Applied Economics, 1999, pages 935-945.
Handle: RePEc:hhs:hastef:0170
Contact details of provider: Postal: The Economic Research Institute, Stockholm School of Economics, P.O. Box 6501, 113 83 Stockholm, Sweden
Phone: +46-(0)8-736 90 00
Fax: +46-(0)8-31 01 57
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  1. Per Andersen & Niels Christian Petersen, 1993. "A Procedure for Ranking Efficient Units in Data Envelopment Analysis," Management Science, INFORMS, vol. 39(10), pages 1261-1264, October.
  2. Borden, James P., 1988. "An assessment of the impact of diagnosis-related group (DRG)-based reimbursement on the technical efficiency of New Jersey hospitals using data envelopment analysis," Journal of Accounting and Public Policy, Elsevier, vol. 7(2), pages 77-96.
  3. Blomqvist, Ake, 1991. "The doctor as double agent: Information asymmetry, health insurance, and medical care," Journal of Health Economics, Elsevier, vol. 10(4), pages 411-432.
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