Efficiency and total quality management in health care organizations: A dynamic frontier approach

This paper analyses hospital performance using Data Envelopment Analysis (DEA) and the Malmquist productivity index. We follow two approaches to quantify movements in productivity: (1) the traditional approach that only considers output and input variables; and (2) a more comprehensive approach that incorporates movements in quality and restricts some achievements, if quality is reduced. On the premise that the indicator for quality (nosocomial infections) is equivalent to a bad output, we explore the characteristics of, and compare the results of, the different technological ways to incorporate quality (good or bad attributes, strong or weak disposability technological assumptions). After discussing the virtues and limitations of the existing possibilities, the paper presents a better formulation that allows the preservation of TQM postulates. The decomposition in the Malmquist productivity index shows an improvement in productivity and a positive technical change, especially when quality is introduced. This paper forms part of a more extensive research work, financed by the Spanish Science and Technology Ministry (ref. SEC2003-047707).