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Internal Markets and Health Care Efficiency: A Multiple-Output Stochastic Frontier Analysis

Author

Listed:
  • Gerdtham, Ulf-G.

    () (Dept. of Economics, Stockholm School of Economics)

  • Löthgren, Mickael

    () (Dept. of Economic Statistics, Stockholm School of Economics)

  • Tambour, Magnus

    () (Dept. of Economics, Stockholm School of Economics)

  • Rehnberg, Clas

    () (Dept. of Economics, Stockholm School of Economics)

Abstract

This paper has two purposes. The first purpose is methodological and aims to extend previous work on efficiency analysis by implementing a multiple-output stochastic ray frontier production function model. This model generalizes the single-output stochastic frontier model to multiple-input, multiple-output technologies and allows simultaneous estimation of technical efficiency and analysis of influential variables on efficiency. The second, empirical purpose, is to test for existence and magnitude of the effect of purchaser/provider split combined with new reimbursement schemes on technical efficiency in the Swedish public hospital system. The analysis is carried out with a panel data set covering the total population of 26 Swedish County Councils from 1989 to 1995. Our empirical results support the frontier model specification and indicate that output-based reimbursement improves technical efficiency. The potential saving in costs due to a switch from budget-based allocation to output-based allocation is estimated to be almost 10%.

Suggested Citation

  • Gerdtham, Ulf-G. & Löthgren, Mickael & Tambour, Magnus & Rehnberg, Clas, 1998. "Internal Markets and Health Care Efficiency: A Multiple-Output Stochastic Frontier Analysis," SSE/EFI Working Paper Series in Economics and Finance 222, Stockholm School of Economics.
  • Handle: RePEc:hhs:hastef:0222
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    References listed on IDEAS

    as
    1. Christensen, Laurits R & Jorgenson, Dale W & Lau, Lawrence J, 1973. "Transcendental Logarithmic Production Frontiers," The Review of Economics and Statistics, MIT Press, vol. 55(1), pages 28-45, February.
    2. Zuckerman, Stephen & Hadley, Jack & Iezzoni, Lisa, 1994. "Measuring hospital efficiency with frontier cost functions," Journal of Health Economics, Elsevier, vol. 13(3), pages 255-280, October.
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    4. Kooreman, Peter, 1994. "Nursing home care in The Netherlands: a nonparametric efficiency analysis," Journal of Health Economics, Elsevier, vol. 13(3), pages 301-316, October.
    5. Shawna Grosskopf & Kathy J. Hayes & Lori L. Taylor & William L. Weber, 1997. "Budget-Constrained Frontier Measures Of Fiscal Equality And Efficiency In Schooling," The Review of Economics and Statistics, MIT Press, vol. 79(1), pages 116-124, February.
    6. Lothgren, Mickael, 1997. "Generalized stochastic frontier production models," Economics Letters, Elsevier, vol. 57(3), pages 255-259, December.
    7. Kodde, David A & Palm, Franz C, 1986. "Wald Criteria for Jointly Testing Equality and Inequality Restriction s," Econometrica, Econometric Society, vol. 54(5), pages 1243-1248, September.
    8. Gerdtham, Ulf-G., 1993. "The impact of aging on health care expenditure in Sweden," Health Policy, Elsevier, vol. 24(1), pages 1-8, April.
    9. Battese, G E & Coelli, T J, 1995. "A Model for Technical Inefficiency Effects in a Stochastic Frontier Production Function for Panel Data," Empirical Economics, Springer, vol. 20(2), pages 325-332.
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    Citations

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    Cited by:

    1. Burgess, Simon & Propper, Carol & Wilson, Deborah, 2005. "Extending Choice In English Health Care: The implications of the economic evidence," CEPR Discussion Papers 5328, C.E.P.R. Discussion Papers.
    2. Anders Anell, 2005. "Swedish healthcare under pressure," Health Economics, John Wiley & Sons, Ltd., vol. 14(S1), pages 237-254.
    3. Stefan Meyer, 2015. "Payment schemes and cost efficiency: evidence from Swiss public hospitals," International Journal of Health Economics and Management, Springer, vol. 15(1), pages 73-97, March.
    4. Aditi Bhattacharyya & Sudeshna Pal, 2011. "Financial Reforms and Technical Efficiency in Indian Commercial Banking: A Generalized Stochastic Frontier Analysis," Working Papers 1104, Sam Houston State University, Department of Economics and International Business.
    5. H. Shelton Brown, 2003. "Managed care and technical efficiency," Health Economics, John Wiley & Sons, Ltd., vol. 12(2), pages 149-158.
    6. Niquidet, Kurt & Nelson, Harry, 2010. "Sawmill production in the interior of British Columbia: A stochastic ray frontier approach," Journal of Forest Economics, Elsevier, vol. 16(4), pages 257-267, December.
    7. William Griffiths & Xiaohui Zhang & Xueyan Zhao, 2010. "A Stochastic Frontier Model for Discrete Ordinal Outcomes: A Health Production Function," Department of Economics - Working Papers Series 1092, The University of Melbourne.
    8. Mikkola, Hennamari & Keskimaki, Ilmo & Hakkinen, Unto, 2002. "DRG-related prices applied in a public health care system--can Finland learn from Norway and Sweden?," Health Policy, Elsevier, vol. 59(1), pages 37-51, January.
    9. Pablo Gottret & George Schieber, 2006. "Health Financing Revisited : A Practitioner's Guide," World Bank Publications, The World Bank, number 7094.
    10. Cavalieri, M. & Guccio, C. & Lisi, D. & Pignataro, G., 2015. "Does the Extent of Per-Case Payment System Affect Hospital Efficiency? Evidence from the Italian NHS," Health, Econometrics and Data Group (HEDG) Working Papers 15/29, HEDG, c/o Department of Economics, University of York.
    11. Roberto Cellini & Giacomo Pignataro & Ilde Rizzo, 2000. "Competition and Efficiency in Health Care: An Analysis of the Italian Case," International Tax and Public Finance, Springer;International Institute of Public Finance, vol. 7(4), pages 503-519, August.
    12. Pedersen, Kjeld Møller, 2009. "Reforming decentralized integrated health care systems: Theory and the case of the Norwegian reform," HERO On line Working Paper Series 2002:7, Oslo University, Health Economics Research Programme.
    13. Kim-Huong Nguyen & Tim Coelli, 2009. "Quantifying the effects of modelling choices on hospital efficiency measures: A meta-regression analysis," CEPA Working Papers Series WP072009, School of Economics, University of Queensland, Australia.
    14. Bhattacharyya, Aditi & Pal, Sudeshna, 2013. "Financial reforms and technical efficiency in Indian commercial banking: A generalized stochastic frontier analysis," Review of Financial Economics, Elsevier, vol. 22(3), pages 109-117.
    15. William Griffiths & Xiaohui Zhang & Xueyan Zhao, 2014. "Estimation and efficiency measurement in stochastic production frontiers with ordinal outcomes," Journal of Productivity Analysis, Springer, vol. 42(1), pages 67-84, August.
    16. Productivity Commission, 2009. "Public and Private Hospitals," Research Reports, Productivity Commission, Government of Australia, number 37.
    17. Varabyova, Yauheniya & Schreyögg, Jonas, 2013. "International comparisons of the technical efficiency of the hospital sector: Panel data analysis of OECD countries using parametric and non-parametric approaches," Health Policy, Elsevier, vol. 112(1), pages 70-79.
    18. World Bank, 2009. "Serbia - Baseline Survey on Cost and Efficiency in Primary Health Care Centers Before Provider Payment Reforms," World Bank Other Operational Studies 3036, The World Bank.
    19. Andrew Worthington, 1999. "An Empirical Survey Of Frontier Efficiency Measurement Techniques In Healthcare Services," School of Economics and Finance Discussion Papers and Working Papers Series 067, School of Economics and Finance, Queensland University of Technology.

    More about this item

    Keywords

    Internal markets; stochastic ray frontier model; technical efficiency; panel data.;

    JEL classification:

    • C12 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Hypothesis Testing: General
    • C13 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Estimation: General
    • C23 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Models with Panel Data; Spatio-temporal Models
    • D24 - Microeconomics - - Production and Organizations - - - Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
    • I10 - Health, Education, and Welfare - - Health - - - General

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