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Hospital Multiproducts: An Analysis of Cost Efficiency.

Lee YJ, Miller VP, Alam IS, Thorpe KE; Academy for Health Services Research and Health Policy. Meeting.

Abstr Acad Health Serv Res Health Policy Meet. 2000; 17: UNKNOWN.

Presented by: Yi-Ju Janelle Lee, Dr.PH. Senior Research Scientist, Berkeley Economic Research Associates, P.O. Box 5665, Berkeley, CA 94705. Tel: 510-653-1256; Fax: 510-653-1257; e-mail: janelle@bera.com.

Research Objective: One of the major problems in determining the hospital cost function is posed by multiple outputs provided by hospitals. A related problem concerns quality variations in measuring outputs. Unobserved or incorrectly measured variations in quality between hospitals may create biased estimates of the hospital cost function. If these complexities are not accurately accounted for, unmeasured variations in quality or other characteristics of output may be confused with inefficiency. This paper demonstrates how sensitive an index of cost efficiency may be under different definitions of hospital multiproductions.Study Design: The study uses unbalanced panel data for 1,529 general hospitals, obtained from the Office of Statewide Health Planning and Development's (OSHPD) annual financial report for California for the period 1992-1996. Sensitivity analysis is used to specify the change in the index of cost efficiency due to omission of different categories of hospital outputs and service-mixes.Principal Findings: Our study shows that inclusion of some of the previously omitted output or service mix variables does not significantly change the result. However, omission of the service intensity variable gives the least correlation with the model used in our study.Conclusions: Our study suggests that the index of cost efficiency does not change when the service-mix is incorporated as a separate output. This could be due to the fact that our study includes relatively homogeneous outputs or samples (i.e. inclusion of detailed output and service mix, general hospitals, or only California). As hospital outputs have not yet been standardized, this result suggests that studies of a single State hospitals, same type of hospitals, or disaggregated detailed outputs may be helpful in achieving a constant estimation of hospital costs. To improve the accuracy of hospital efficiency measurement, more research needs to be directed towards developing efficient methods for standardization of hospitals' output differences. It is true that unobserved quality and amenity differentials could masquerade as inefficiency. However, the issue is not whether quality or amenities affect observations of cost and inefficiency in single hospitals, but whether the presence of unobserved quality differentials are likely to create systematic bias in comparisons across hospitals. Implications for Policy, Delivery or Practice: From the research perspective, a relatively homogeneous output or sample may produce a better estimation of cost efficiency. Policymakers need accurate methods for measuring hospital efficiency in order to evaluate appropriately the impact of a policy on the hospital industry. Hospital administrators need accurate methods for measuring hospital efficiency in order to identify efficiency problems at the hospital level. Primary Funding Source: Doctoral Dissertation

Publication Types:
  • Meeting Abstracts
Keywords:
  • Biomedical Research
  • California
  • Costs and Cost Analysis
  • Efficiency
  • Efficiency, Organizational
  • Health Services Research
  • Hospital Costs
  • Hospitals
  • Hospitals, General
  • Research
  • economics
  • methods
  • hsrmtgs
Other ID:
  • GWHSR0000451
UI: 102272125

From Meeting Abstracts




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