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The internal market and hospital efficiency: a stochastic distance function approach

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  • Alessandra Ferrari

Abstract

The UK internal market was one of the first European attempts to introduce a competitive mechanism in the provision of hospital services. The assumption was that competition would have led hospitals to increase efficiency in the use of their resources. The aim of this paper is to analyse the effectiveness of this kind of reform by measuring the changes in technical efficiency of a panel of 52 acute Scottish hospitals observed from 1991/92 to 1996/97. The time period covers the whole duration of the internal market and the sample contains a different mix of both trusts and non-trusts, where the former embed the proper working of the reform. The selected model is a stochastic output distance function that includes an interaction dummy variable to allow for parameters to change over time. The results show a structural break after which hospitals change not only the way in which they provide their services, but also the kind of services they provide, favouring the quicker treatment of patients on a day basis. No significant improvement in technical efficiency is detected instead over time, nor any significant difference in efficiency between trusts and non-trusts.

Suggested Citation

  • Alessandra Ferrari, 2006. "The internal market and hospital efficiency: a stochastic distance function approach," Applied Economics, Taylor & Francis Journals, vol. 38(18), pages 2121-2130.
    • Handle: RePEc:taf:applec:v:38:y:2006:i:18:p:2121-2130
    DOI: 10.1080/00036840500427437
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    References listed on IDEAS

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    1. Alessandra Ferrari, 2004. "NHS reforms and efficiency of hospital services: a stochastic distance function approach," Economic Analysis Research Group Working Papers earg-wp2004-04, Henley Business School, University of Reading.
    2. repec:rdg:wpaper:em-dp2004-19 is not listed on IDEAS
    3. Alessandra Ferrari, 2004. "NHS reforms and efficiency of hospital services: a stochastic distance function approach," Economics Discussion Papers em-dp2004-19, Department of Economics, University of Reading.
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    Cited by:

    1. C. O’Donnell & K. Nguyen, 2013. "An econometric approach to estimating support prices and measures of productivity change in public hospitals," Journal of Productivity Analysis, Springer, vol. 40(3), pages 323-335, December.
    2. Carolina Crispin-Fory & Ligia Alba Melo-Becerra & Diego Alexander Restrepo-Tobón & Diego Vásquez-Escobar, 2023. "Eficiencia y solidez financiera de las Instituciones prestadoras de Servicio de Salud (IPS) en Colombia," Borradores de Economia 1248, Banco de la Republica de Colombia.
    3. Nitin Kumar & Rudra Sensarma, 2017. "Efficiency of Microfinance Institutions in India: A Stochastic Distance Function Approach," Journal of Emerging Market Finance, Institute for Financial Management and Research, vol. 16(2), pages 151-168, August.
    4. Ana Rodríguez-Álvarez & David Roibás-Alonso & Alan Wall, 2013. "The response of decentralized health services to demand uncertainty and the role of political parties in the Spanish public health system," Journal of Productivity Analysis, Springer, vol. 40(3), pages 357-365, December.
    5. Kirsi Vitikainen & Miika Linna & Andrew Street, 2010. "Substituting inpatient for outpatient care: what is the impact on hospital costs and efficiency?," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 11(4), pages 395-404, August.
    6. Chew Lian Chua & Alfons Palangkaraya & Jongsay Yong, 2011. "Hospital Competition, Technical Efficiency and Quality," The Economic Record, The Economic Society of Australia, vol. 87(277), pages 252-268, June.
    7. Rodríguez-Álvarez, Ana & Roibás, David & Wall, Alan, 2009. "Factors determining the response of hospitals to demand uncertainty," Efficiency Series Papers 2009/04, University of Oviedo, Department of Economics, Oviedo Efficiency Group (OEG).
    8. Alonso, José M. & Clifton, Judith & Díaz-Fuentes, Daniel, 2015. "The impact of New Public Management on efficiency: An analysis of Madrid's hospitals," Health Policy, Elsevier, vol. 119(3), pages 333-340.
    9. Ana Rodriguez‐Alvarez & David Roibás & Alan Wall, 2012. "Reserve Capacity Of Public And Private Hospitals In Response To Demand Uncertainty," Health Economics, John Wiley & Sons, Ltd., vol. 21(7), pages 839-851, July.
    10. Víctor Giménez & Jorge R. Keith & Diego Prior, 2019. "Do healthcare financing systems influence hospital efficiency? A metafrontier approach for the case of Mexico," Health Care Management Science, Springer, vol. 22(3), pages 549-559, September.
    11. Juan Piedra-Peña & Diego Prior, 2023. "Analyzing the effect of health reforms on the efficiency of Ecuadorian public hospitals," International Journal of Health Economics and Management, Springer, vol. 23(3), pages 361-392, September.

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