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Measuring Hospital Performance in the Presence of Quasi-Fixed Inputs: An Analysis of Québec Hospitals

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  • Daniel Bilodeau
  • Pierre-Yves Crémieux
  • Brigitte Jaumard
  • Pierre Ouellette
  • Tsévi Vovor

Abstract

This research proposes an approach to measure hospital performance based on a generalization of Banker and Morey (1986) and Førsund (1996). This approach considers quasi-fixed inputs explicitly, calculates their implicit cost, and quantifies returns to scale. The performance measure is decomposed into allocative and technical inefficiencies. Based on a very complete data set of Québec hospitals, we find that significant inefficiencies of up to 17% ($700 CAN million) could have been saved through improved performance. Postestimation analyses that include qualitative measures of care suggest that differences in performance are attributable to differences in management or unobservable quality of care rather than patient case mix. Copyright Kluwer Academic Publishers 2004

Suggested Citation

  • Daniel Bilodeau & Pierre-Yves Crémieux & Brigitte Jaumard & Pierre Ouellette & Tsévi Vovor, 2004. "Measuring Hospital Performance in the Presence of Quasi-Fixed Inputs: An Analysis of Québec Hospitals," Journal of Productivity Analysis, Springer, vol. 21(2), pages 183-199, March.
    • Handle: RePEc:kap:jproda:v:21:y:2004:i:2:p:183-199
    DOI: 10.1023/B:PROD.0000016872.33530.e8
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    References listed on IDEAS

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    1. Charles Blackorby & R. Russell, 1999. "Aggregation of Efficiency Indices," Journal of Productivity Analysis, Springer, vol. 12(1), pages 5-20, August.
    2. Jensen, Gail A & Morrisey, Michael A, 1986. "The Role of Physicians in Hospital Production," The Review of Economics and Statistics, MIT Press, vol. 68(3), pages 432-442, August.
    3. Grosskopf, S. & Margaritis, D. & Valdmanis, V., 1995. "Estimating output substitutability of hospital services: A distance function approach," European Journal of Operational Research, Elsevier, vol. 80(3), pages 575-587, February.
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    5. Bays, Carson W, 1980. "Specification Error in the Estimation of Hospital Cost Functions," The Review of Economics and Statistics, MIT Press, vol. 62(2), pages 302-305, May.
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    Cited by:

    1. Frankovic, Ivan & Kuhn, Michael & Wrzaczek, Stefan, 2020. "Medical innovation and its diffusion: Implications for economic performance and welfare," Journal of Macroeconomics, Elsevier, vol. 66(C).
    2. Monica Giancotti & Annamaria Guglielmo & Marianna Mauro, 2017. "Efficiency and optimal size of hospitals: Results of a systematic search," PLOS ONE, Public Library of Science, vol. 12(3), pages 1-40, March.
    3. Mette Asmild & Bruce Hollingsworth & Stephen Birch, 2013. "The scale of hospital production in different settings: one size does not fit all," Journal of Productivity Analysis, Springer, vol. 40(2), pages 197-206, October.
    4. Ouellette, Pierre & Petit, Patrick & Tessier-Parent, Louis-Philippe & Vigeant, Stéphane, 2010. "Introducing regulation in the measurement of efficiency, with an application to the Canadian air carriers industry," European Journal of Operational Research, Elsevier, vol. 200(1), pages 216-226, January.
    5. Frankovic, Ivan & Kuhn, Michael, 2023. "Health insurance, endogenous medical progress, health expenditure growth, and welfare," Journal of Health Economics, Elsevier, vol. 87(C).
    6. Boon Lee & Andrew Worthington, 2011. "Operational performance of low-cost carriers and international airlines: New evidence using a bootstrap truncated regression," School of Economics and Finance Discussion Papers and Working Papers Series 271, School of Economics and Finance, Queensland University of Technology.
    7. Petros Hadjicostas & Andreas Soteriou, 2010. "Different orders of one-sided scale elasticities in multi-output production," Journal of Productivity Analysis, Springer, vol. 33(2), pages 147-167, April.
    8. Lee, Boon L. & Worthington, Andrew C., 2014. "Technical efficiency of mainstream airlines and low-cost carriers: New evidence using bootstrap data envelopment analysis truncated regression," Journal of Air Transport Management, Elsevier, vol. 38(C), pages 15-20.
    9. Cinaroglu, Songul, 2021. "Changes in hospital efficiency and size: An integrated propensity score matching with data envelopment analysis," Socio-Economic Planning Sciences, Elsevier, vol. 76(C).
    10. Venkatesh, Anand & Kushwaha, Shivam, 2018. "Short and long-run cost efficiency in Indian public bus companies using Data Envelopment Analysis," Socio-Economic Planning Sciences, Elsevier, vol. 61(C), pages 29-36.
    11. Frankovic, Ivan & Kuhn, Michael, 2018. "Health insurance, endogenous medical progress, and health expenditure growth," ECON WPS - Working Papers in Economic Theory and Policy 01/2018, TU Wien, Institute of Statistics and Mathematical Methods in Economics, Economics Research Unit.
    12. Chen, Yah-Wei & Huang, Tai-Hsin, 2009. "The LeChatelier principle in a DEA model," European Journal of Operational Research, Elsevier, vol. 197(1), pages 371-373, August.
    13. Bellio, Ruggero & Grassetti, Luca, 2011. "Semiparametric stochastic frontier models for clustered data," Computational Statistics & Data Analysis, Elsevier, vol. 55(1), pages 71-83, January.

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