Alternative methods to examine hospital efficiency: Data Envelopment Analysis and Stochastic Frontier Analysis

Rowena Jacobs ()
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Rowena Jacobs: Centre for Health Economics, The University of York

No 177chedp, Working Papers from Centre for Health Economics, University of York

Abstract: There has been increasing interest in the ability of different methods to rank efficient hospitals over their inefficient counterparts. The UK Department of Health has used three cost indices to benchmark NHS Trusts. This study uses the same dataset and compares the efficiency rankings from the cost indices with those obtained using Data Envelopment Analysis (DEA) and Stochastic Cost Frontier Analysis (SCF). The paper concludes that each method each has particular strengths and weaknesses and potentially measure different aspects of efficiency. Several specifications should be used to develop ranges of inefficiency to act as signalling devices rather than point estimates. There appears to be a large amount of random ‘noise’ in the study which suggests that there are not truly large efficiency differences between Trusts, and savings from bringing up poorer performers would in fact be very modest.

Keywords: efficiency (search for similar items in EconPapers)
Pages: 30 pages
Date: 2000-02
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http://www.york.ac.uk/media/che/documents/papers/d ... on%20Paper%20177.pdf First version, 2000 (application/pdf)

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