Hospital Competition, Technical Efficiency, and Quality

Chew Chua, Alfons Palangkaraya and Jongsay Yong

Melbourne Institute Working Paper Series from Melbourne Institute of Applied Economic and Social Research, The University of Melbourne

Abstract: This paper studies the link between competition and technical efficiency of public hospitals in the State of Victoria, Australia by accounting both quantity and quality of hospital output using a two-stage semi-parametric model of hospital production and Data Envelopment Analysis. On the one hand, it finds a positive relationship between efficiency and competition measured by the Hirschman-Herfindahl Index (HHI). On the other, it finds that efficiency and the number of competing hospitals, in particular the number of competing private hospitals, to be negatively correlated. More importantly, it finds that whether or not quality is treated as an endogenous output variable, as opposed to as an exogenous control variable, may impact on the statistical estimates of the link between efficiency and competition. Also, how the effect of competition on efficiency is modelled empirically may matter, though the impact of the treatment of quality as described above appears to be more important. Overall, the results highlight the importance of quality consideration in assessing the effects of competition on efficiency and points to possibly undesirable resource allocation effects when public hospitals are made to compete with a large number of private hospitals.

Keywords: hospital competition; technical efficiency; Hirschman-Herfindahl Index; data envelopment analysis; hospital quality (search for similar items in EconPapers)
JEL-codes: D24 D40 I11 (search for similar items in EconPapers)
Pages: 27 pages
Date: 2009-06
New Economics Papers: this item is included in nep-com, nep-eff and nep-hea
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Journal Article: Hospital Competition, Technical Efficiency and Quality (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:iae:iaewps:wp2009n16

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