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Efficiency Analysis of Rural Hospitals: Parametric and Semi-parametric Approaches

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  • Nedelea, I. Cristian
  • Fannin, James Matthew

Abstract

This paper examined cost efficiency differences between rural hospitals participating in the Critical Access Hospital (CAH) Program and a group of non-converting, prospectively paid rural hospitals using both a two-stage semi-parametric approach as well as stochastic frontier analysis (SFA). CAHs receive Medicare cost-based reimbursement, in contrast with the rest of the hospitals reimbursed under Medicare prospective payment system (PPS). However, cost-based reimbursement has been associated with inefficiency in hospital operations and, consequently, concerns have been raised about the efficiency of CAHs. Results showed a positive and significant effect of CAH status on cost inefficiency under both model specifications suggesting that CAHs were less cost efficient than non-converting rural hospitals.

Suggested Citation

  • Nedelea, I. Cristian & Fannin, James Matthew, 2012. "Efficiency Analysis of Rural Hospitals: Parametric and Semi-parametric Approaches," 2012 Annual Meeting, February 4-7, 2012, Birmingham, Alabama 119725, Southern Agricultural Economics Association.
    • Handle: RePEc:ags:saea12:119725
    DOI: 10.22004/ag.econ.119725
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    References listed on IDEAS

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    More about this item

    Keywords

    Community/Rural/Urban Development; Health Economics and Policy; Production Economics; Productivity Analysis; Public Economics; Research Methods/ Statistical Methods;
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