Measuring the productive efficiency of hospitals - a comparison of parametric and non-parametric approaches

Funded Activity Summary

In the face of rising health service costs, an ageing population, and falling private health insurance rates, the efficient use of scarce health service resources has become a central theme in health system reform. Productive (or technical) efficiency is a key aspect of health system reform - that given health services are produced with the minimum feasible amount of resources. Despite the importance of technical efficiency there have been few published studies in Australia which measure technical efficiency in the health sector. This study will develop theoretical and empirical approaches to measuring technical efficiency in the production of hospital services using data from Victoria. Measures of hospital technical efficiency will be developed using two quantitative modelling approaches: stochastic frontier modelling and data envelopment analysis. Results will be used to investigate the impact of patient and hospital characteristics on efficiency, and to identify economies of scale and scope in the provision of hospital services. The robustness of results to changes in variables, the sample of hospitals studied, and model assumptions will be tested, and two techniques will be compared to assess their appropriateness in the health services context which has not previously been done. Criteria for assessing the approaches include the degree to which: assumptions affect the robustness of results; the techniques capture the salient features of health services production; and the techniques produce similar rankings and estimates of inefficiency. The methods used will represent a significant contribution to international knowledge of hospital efficiency measurement, and the relationships between hospital characteristics, casemix, and efficiency. The study wil provide improved measures of hospital efficiency in Victoria, and will inform debate on hospital funding policy.

Funded Activity Details

Start Date: 01-01-2000

End Date: 01-01-2001

Funding Scheme: NHMRC Project Grants

Funding Amount: $61,815.00

Funder: National Health and Medical Research Council

Research Topics

ANZSRC Field of Research (FoR)

Inorganic green chemistry

ANZSRC Socio-Economic Objective (SEO)

There are no SEO codes available for this funding activity

Other Keywords

Data Envelopment Analysis | Economies of scale and scope | Efficiency of health services | Measurement of Hospital Efficiency | Production and cost functions in the health sector | Production of health services | Productive/Technical Efficiency | Stochastic Frontier Modelling

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