How much confidence should we place in efficiency estimates?

Ordinary least squares (OLS) and stochastic frontier (SF) analyses are commonly used to estimate industry-level and firm-specific efficiency. Using cross-sectional data for English public hospitals, a total cost function based on a specification developed by the English Department of Health is estimated. Confidence intervals are calculated around the OLS residuals and around the inefficiency component of the SF residuals. Sensitivity analysis is conducted to assess whether conclusions about relative performance are robust to choices of error distribution, functional form and model specification. It is concluded that estimates of relative hospital efficiency are sensitive to estimation decisions and that little confidence can be placed in the point estimates for individual hospitals. The use of these techniques to set annual performance targets should be avoided.

Street A 《HEALTH ECONOMICS》

Variation in unit costs of hospitals in the English National Health Service.

Jacobs R ，Dawson D 《Journal of Health Services Research & Policy》

Efficiency and productivity change in the English National Health Service: can data envelopment analysis provide a robust and useful measure?

Hollingsworth B ，Parkin D 《Journal of Health Services Research & Policy》

Hospital efficiency targets.

Cost-efficiency targets, used to encourage downward pressure on hospital unit costs, have been employed within the UK NHS for many years. There has been considerable speculation that these targets create incentives to reduce beds and increase occupancy rates at the expense of holding spare capacity to accommodate fluctuations in emergency admissions. This research used panel data for the period 1994/1995-1999/2000, supplemented by a series of semi-structured interviews, to explore the strategies Trusts employ to reduce unit costs. No relationship could be found between published targets and changes in unit costs, nor that targets were successful in reducing the dispersion of unit costs over time. Interviews revealed that efficiency gains required of Trusts, usually dictated by the local health economy, often bore no correspondence to the national or regional published targets. Results further indicated that contrary to prior speculation, Trusts divide into two distinct groups, those with high occupancy rates and those with a high proportion of free beds to accommodate emergencies, with Trust characteristics displaying stability over time. A pressing need for future work is the development of measures to encourage efficiency that take account of quality improvement.

Jacobs R ，Dawson D 《HEALTH ECONOMICS》

Further evidence that hospital production is inefficient.

Chirikos TN 《INQUIRY-THE JOURNAL OF HEALTH CARE ORGANIZATION PROVISION AND FINANCING》