Title

How reliable are hospital efficiency estimates? Exploiting the dual to homothetic production

Authors

Authors

S. T. Folland;R. Hofler

Comments

Authors: contact us about adding a copy of your work at STARS@ucf.edu

Abbreviated Journal Title

Health Econ.

Keywords

efficiency; frontiers; hospitals; FRONTIER COST-FUNCTIONS; STOCHASTIC FRONTIER; TECHNICAL EFFICIENCY; INEFFICIENCY; PERFORMANCE; CARE; OWNERSHIP; QUALITY; US; Economics; Health Care Sciences & Services; Health Policy & Services

Abstract

For scientific use, stochastic frontier estimates of hospital efficiency must be robust to plausible departures from the assumptions made by the investigator. Comparisons of alternative study designs. each well within the 'accepted' range according to current practice, generate similar mean inefficiencies but substantially different hospital rankings. The three alternative study contrasts feature (I) pooling vs partitioned estimates, (2) a cost function dual to a homothetic production process vs the translog. and (3) two conceptually valid but empirically different cost-of-capital measures. The results suggest caution regarding the use of frontier methods to rank individual hospitals, a use that seems to be required for reimbursement incentives. but they are robust when generating comparisons of hospital group mean inefficiencies, such as testing models that compare non-profits and for-profits by economic inefficiency. Demonstrations find little or no efficiency differences between these paired groups: non-profit vs for-profit: teaching vs non-teaching, urban vs rural, high percent of Medicare reliant vs low percent; and chain vs independent hospitals. Copyright (C) 2001 John Wiley Sons, Ltd.

Journal Title

Health Economics

Volume

10

Issue/Number

8

Publication Date

1-1-2001

Document Type

Article

Language

English

First Page

683

Last Page

698

WOS Identifier

WOS:000173064700001

ISSN

1057-9230

Share

COinS