Hospital Competition, Technical Efficiency, and Quality
This paper studies the link between competition and technical efficiency of public hospitals in the State of Victoria, Australia by accounting both quantity and quality of hospital output using a two-stage semi-parametric model of hospital production and Data Envelopment Analysis. On the one hand, it finds a positive relationship between efficiency and competition measured by the Hirschman-Herfindahl Index (HHI). On the other, it finds that efficiency and the number of competing hospitals, in particular the number of competing private hospitals, to be negatively correlated. More importantly, it finds that whether or not quality is treated as an endogenous output variable, as opposed to as an exogenous control variable, may impact on the statistical estimates of the link between efficiency and competition. Also, how the effect of competition on efficiency is modelled empirically may matter, though the impact of the treatment of quality as described above appears to be more important. Overall, the results highlight the importance of quality consideration in assessing the effects of competition on efficiency and points to possibly undesirable resource allocation effects when public hospitals are made to compete with a large number of private hospitals.
|Date of creation:||Jun 2009|
|Date of revision:|
|Contact details of provider:|| Postal: Melbourne Institute of Applied Economic and Social Research, The University of Melbourne, Victoria 3010 Australia|
Phone: +61 3 8344 2100
Fax: +61 3 8344 2111
Web page: http://www.melbourneinstitute.com/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Wang, Jian & Zhao, Zhong & Mahmood, Amir, 2006. "Relative Efficiency, Scale Effect, and Scope Effect of Public Hospitals: Evidence from Australia," IZA Discussion Papers 2520, Institute for the Study of Labor (IZA).
- Fare, Rolf & Shawna Grosskopf & Mary Norris & Zhongyang Zhang, 1994. "Productivity Growth, Technical Progress, and Efficiency Change in Industrialized Countries," American Economic Review, American Economic Association, vol. 84(1), pages 66-83, March.
- José J. Escarce & Arvind K. Jain & Jeannette Rogowski, 2006. "Hospital Competition, Managed Care and Mortality After Hospitalization for Medical Conditions: Evidence From Three States," NBER Working Papers 12335, National Bureau of Economic Research, Inc.
- Dranove, David & White, William D, 1994. "Recent Theory and Evidence on Competition in Hospital Markets," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 169-209, Spring.
- Simar, Leopold & Wilson, Paul W., 2007. "Estimation and inference in two-stage, semi-parametric models of production processes," Journal of Econometrics, Elsevier, vol. 136(1), pages 31-64, January.
- Bruce Hollingsworth & P.J. Dawson & N. Maniadakis, 1999. "Efficiency measurement of health care: a review of non‐parametric methods and applications," Health Care Management Science, Springer, vol. 2(3), pages 161-172, July.
- R. Cellini & G. Pignataro & I. Rizzo, 1999.
"Competition and Efficiencyin health care: an analysis of the Italian case,"
354, Dipartimento Scienze Economiche, Universita' di Bologna.
- 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, vol. 7(4), pages 503-519, August.
- Karen Eggleston & Yu-Chu Shen & Joseph Lau & Christopher H. Schmid & Jia Chan, 2008. "Hospital ownership and quality of care: what explains the different results in the literature?," Health Economics, John Wiley & Sons, Ltd., vol. 17(12), pages 1345-1362.
- Jean M. Abraham & Martin S. Gaynor & William B. Vogt, 2005.
"Entry and Competition in Local Hospital Markets,"
NBER Working Papers
11649, National Bureau of Economic Research, Inc.
- Jean Abraham & Martin Gaynor & William B. Vogt, 2005. "Entry and Competition in Local Hospital Markets," GSIA Working Papers 1999-E32, Carnegie Mellon University, Tepper School of Business.
- Jean Marie Abraham & Martin Gaynor & William B Vogt, 2003. "Entry and Competition in Local Hospital Markets," The Centre for Market and Public Organisation 03/088, Department of Economics, University of Bristol, UK.
- Peter Zweifel & Stefan Felder & Markus Meiers, 1999. "Ageing of population and health care expenditure: a red herring?," Health Economics, John Wiley & Sons, Ltd., vol. 8(6), pages 485-496.
- Andrew Street, 2003. "How much confidence should we place in efficiency estimates?," Health Economics, John Wiley & Sons, Ltd., vol. 12(11), pages 895-907.
- Eulália Dalmau-Atarrodona & Jaume Puig-Junoy, 1998. "Market Structure and Hospital Efficiency: Evaluating Potential Effects of Deregulation in a National Health Service," Review of Industrial Organization, Springer, vol. 13(4), pages 447-466, August.
- Anatoly I. Pilyavsky & William E. Aaronson & Patrick M. Bernet & Michael D. Rosko & Vivian G. Valdmanis & Mikhail V. Golubchikov, 2006. "East-west: does it make a difference to hospital efficiencies in Ukraine?," Health Economics, John Wiley & Sons, Ltd., vol. 15(11), pages 1173-1186.
- Preyra, Colin & Pink, George, 2006. "Scale and scope efficiencies through hospital consolidations," Journal of Health Economics, Elsevier, vol. 25(6), pages 1049-1068, November.
- Daniel P. Kessler & Mark B. McClellan, 2000. "Is Hospital Competition Socially Wasteful?," The Quarterly Journal of Economics, Oxford University Press, vol. 115(2), pages 577-615.
- Léopold Simar & Paul W. Wilson, 1998.
"Sensitivity Analysis of Efficiency Scores: How to Bootstrap in Nonparametric Frontier Models,"
INFORMS, vol. 44(1), pages 49-61, January.
- SIMAR, LÃ©opold & WILSON, Paul, 1995. "Sensitivity Analysis to Efficiency Scores : How to Bootstrap in Nonparametric Frontier Models," CORE Discussion Papers 1995043, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Simar, L. & Wilson, P.W., . "Sensitivity analysis of efficiency scores: how to bootstrap in nonparametric frontier models," CORE Discussion Papers RP 1304, Université catholique de Louvain, Center for Operations Research and Econometrics (CORE).
- Fournier, Gary M & Mitchell, Jean M, 1992.
"Hospital Costs and Competition for Services: A Multiproduct Analysis,"
The Review of Economics and Statistics,
MIT Press, vol. 74(4), pages 627-34, November.
- Fournier, G.M. & Mitchell. J.M., 1991. "Hospital Costs and Competition for Services : A Multiproduct Analysis," Working Papers 1991_03_6, Department of Economics, Florida State University.
- Gaynor, Martin, 2007. "Competition and Quality in Health Care Markets," Foundations and Trends(R) in Microeconomics, now publishers, vol. 2(6), pages 441-508, February.
- Robinson, James C. & Luft, Harold S., 1985. "The impact of hospital market structure on patient volume, average length of stay, and the cost of care," Journal of Health Economics, Elsevier, vol. 4(4), pages 333-356, December.
- Daniel P. Kessler & Jeffrey J. Geppert, 2005. "The Effects of Competition on Variation in the Quality and Cost of Medical Care," NBER Working Papers 11226, National Bureau of Economic Research, Inc.
- Propper, Carol & Burgess, Simon & Green, Katherine, 2004. "Does competition between hospitals improve the quality of care?: Hospital death rates and the NHS internal market," Journal of Public Economics, Elsevier, vol. 88(7-8), pages 1247-1272, July.
- Zwanziger, Jack & Melnick, Glenn A., 1988. "The effects of hospital competition and the Medicare PPS program on hospital cost behavior in California," Journal of Health Economics, Elsevier, vol. 7(4), pages 301-320, December.
- Miika Linna, 1998. "Measuring hospital cost efficiency with panel data models," Health Economics, John Wiley & Sons, Ltd., vol. 7(5), pages 415-427.
- Daniel P. Kessler & Jeffrey J. Geppert, 2005. "The Effects of Competition on Variation in the Quality and Cost of Medical Care," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 14(3), pages 575-589, 09.
- Lindrooth, Richard C. & Lo Sasso, Anthony T. & Bazzoli, Gloria J., 2003. "The effect of urban hospital closure on markets," Journal of Health Economics, Elsevier, vol. 22(5), pages 691-712, September.
When requesting a correction, please mention this item's handle: RePEc:iae:iaewps:wp2009n16. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Abbey Treloar)
If references are entirely missing, you can add them using this form.