The utility of returns to scale in DEA programming: An analysis of Michigan rural hospitals

In 1984, Banker, Charnes, and Cooper introduced the capability of using data envelopment analysis to assess increasing, decreasing, or constant returns to scale. This analysis would appear to make an important contribution to the health care field because of the regulatory environment within which the industry exists and the competition among hospitals for additional services and capacity. In many states, hospitals must submit a “certificate of need” to prove eligibility to add capacity or services. Agency administrators at the state level should analyze each hospital's production performance to determine the effectiveness of resource utilization. Residents of a state where hospitals are regulated need to know the effectiveness of agencies in allowing resources to be properly allocated to hospitals. Returns to scale analysis can help provide answers to these concerns. We examine Michigan rural hospitals and propose a simple, yet logical procedure for evaluating returns to scale for technically inefficient hospitals.     

Do mergers enhance the performance of hospital efficiency?

Due to the wave of mergers that have taken place in the USA, the early 1990s could be labelled as a restructuring era for health care systems. The question of whether mergers have an impact on organizational performance is still an area of interest for health services researchers. In this study, we examined the impacts of horizontal mergers of US hospital's technical efficiency before and after merger using longitudinal Data Envelopment Analysis (DEA). The findings of our study illustrate that mergers do increase a hospital's level of efficiency. Constant returns-to-scale model indicated an overall reduction in input utilisation after merger, compared to variable returns-to-scale model. This indicates the role of scale efficiency as a dominant source of improvement in inefficiency of hospitals involved in horizontal mergers, but not for technical efficiency. Suggestions for future study are provided.     

A comparison of shadow prices and reimbursement rates of hospital services

The purpose of this paper is to calculate shadow prices of hospital services and compare them to the reimbursement rates those hospitals receive. These shadow prices are calculated by estimating a multiple-output distance function and applying a dual Shephard's lemma, a technique suggested by Färe and Grosskopf [8]. In contrast to cost functions, distance functions require no price data and do not presume cost minimization. We apply this technique to a sample of California hospitals operating in 1986. We find that hospitals engaged in selective contracting for Medi-Cal patients exhibit closer agreement between relative shadow prices and relative reimbursement rates (Medi-Cal relative to private patients) than noncontracting hospitals.Contact author.     

Introducing competition in healthcare services: The role of private care and increased patient mobility

We study the operational implications from competition in the provision of healthcare services, in the context of national public healthcare systems in Europe. Specifically, we study the potential impact of two alternative ways through which policy makers have introduced such competition: (i) via the introduction of private hospitals to operate alongside public hospitals and (ii) via the introduction of increased patient choice to grant European patients the freedom to choose the country they receive treatment at. We use a game-theoretic framework with a queueing component to capture the interactions among the patients, the hospitals and the healthcare funders. Specifically, we analyze two different sequential games and obtain closed form expressions for the patients’ waiting time and the funders’ reimbursement cost in equilibrium. We show that the presence of a private provider can be beneficial to the public system: the patients’ waiting time will decrease and the funders’ cost can decrease under certain conditions. Also, we show that the cross-border healthcare policy, which increases patient mobility, can also be beneficial to the public systems: when welfare requirements across countries are sufficiently close, all funders can reduce their costs without increasing the patients’ waiting time. Our analysis implies that in border regions, where the cost of crossing the border is low, “outsourcing” the high-cost country’s elective care services to the low-cost country is a viable strategy from which both countries’ systems can benefit.     

Modelling hospital costs to produce evidence for policies that promote equity and efficiency

Third party payers for health care, when introducing policies to promote equity, through formulas for resource allocation by capitation, and efficiency, through prospective payment by case-mix, have sought to make adjustments for “unavoidable” hospital costs, which are caused by structural characteristics and are beyond the scope of local hospital management. To date, however, most published studies of such estimates have been inadequate. This paper reports the development of a generalisable model that aims to produce sound estimates of “unavoidable” hospital costs and shows how this stochastic multilevel model can be used to estimate unavoidable costs per unit of measurable output, identify sources of allocative inefficiency, and capture systematic variations in costs between different types of hospitals, through prospective payment by case-mix or formulas for resource allocation by capitation The application of the model to Portuguese hospitals has identified various causes of allocative inefficiencies: centrally-determined distributions of beds and doctors, a lack of local flexibility, systems with perverse incentives, and the existence of diseconomies of scale.     

Hospital profit planning under Medicare reimbursement.

The federal Medicare regulations reimburse hospitals on a pro rata share of the hospital's cost. Hence, to meet its financial requirements, a hospital is forced to shift more of the financial burdens onto its private patients. This procedure has contributed to double digit inflation in hospital prices and to proposed federal regulation to control the rate of increase in hospital revenues. In this regulatory environment, we develop nonlinear programming pricing and cost allocation models to aid hospital administrators in meeting their profit maximizing and profit satisfying goals. The model enables administrators to explore tactical issues such as: (i) studying the relationship between a voluntary or legislated cap on a hospital's total revenues and the hospital's profitability, (ii) identifying those departments within the hospital that are the most attractive candidates for cost reduction or cost containment efforts, and (iii) isolating those services that should be singled out by the hospital manager for renegotiation of the prospective or "customary and reasonable" cap. Finally the modeling approach is helpful in explaining the departmental cross subsidies observed in practice, and can be of aid to federal administrators in assessing the impacts of proposed changes in the Medicare reimbursement formula.     

Trends in labor efficiency among American hospital markets

The health care sector is one of the most labor intensive sectors of the economy. As a major player in health service delivery, hospitals must closely examine their largest cost — labor expenses. This study evaluates trends in the efficiency of health care labor among urban hospital markets. More specifically, it assesses the hypothesis that technological changes and market and regulatory pressures have increased aggregate labor efficiency. Using data envelopment analysis (DEA), this study evaluates labor efficiency in 1989 and 1993 in 298 metropolitan statistical areas (MSAs) with two or more hospitals. Results of this study suggest that between 1989 and 1993, hospital markets generally demonstrated higher labor inefficiencies. The U.S. health care system could save approximately $16.6 billion in 1993 by eliminating hospitals' excessive use of health care provider labor.     

The Development of a Decision-support System for Planning Services within Hospitals

The planning of services within district health authorities is a complex task, but the process of planning is often crude: few options for addressing issues are considered, and these are inadequately assessed. These deficiencies led to research of which the aim was to identify the types of information and systems needed for improved planning. This paper describes the product of that research, the Hospital Planning Model. It is a decision-support system which gives planners fast access to relevant information for planning hospital services. This allows them to consider quickly a range of options for addressing a particular planning issue, and to test how sensitive the implications of proposals are to differing planning assumptions. The system has been shown to be generalizable, and is currently used in 28 health districts and other health organizations throughout the United Kingdom. The proposed reforms of the NHS are likely to increase the relevance of the system: the purchaser/provider market will result in a greater awareness by hospitals of the importance of identifying measures to improve the cost-effectiveness of care. Purchasers too may want to scrutinize hospitals in terms of their efficiency.     

市场化改革背景下养老机构服务供给博弈研究

考虑政府补贴、市场化程度、养老机构服务成本、老年人偏好等因素,构建了完全国有化、公私并存的半市场化和完全市场化三种情形下公办和民办养老机构之间的两阶段博弈模型,比较分析了市场化程度对养老机构服务价格制定和服务水平选择的影响,实证讨论了各参数变化对养老机构收益及社会福利的影响。研究表明:完全市场化机制会降低养老机构服务质量,完全国有化机制会陷入社会福利陷阱,探索公私并存的最佳市场化水平才能更好地提高社会福利;适度推进市场化改革,提高养老机构服务水平,降低民办养老机构服务成本,适度提高对民办养老机构的补贴,将有效缓解公办和民办养老机构的不公平竞争;提高老年人支付能力,推进养老机构供给侧结构性改革,将保障机构养老服务的有效供给,促进养老服务业的健康有序发展。     

A note on returns to scale in DEA

This brief note adds computational convenience and efficiency to the article by Banker and Thrall on returns to scale in DEA by modifying one of their suggestions to avoid the need for examining all alternate optima in order to reach a decision.     

Analysis of capacity management of the intensive care unit in a hospital

A hospital's intensive care unit (ICU) is a limited and critical resource. The efficient utilization of ICU capacity impacts on both the welfare of patients and the hospital's cost effectiveness. Decisions made in the ICU affect the operations of other departments. Yet, decision making in an ICU tends to be mainly subjective and lacking in clear criteria upon which to base any given decision. This study analyzes the admission-and-discharge processes of one particular ICU, that of a public hospital in Hong Kong, by using queuing and computer simulation models built with actual data from the ICU. The results provide insights into the operations management issues of an ICU facility to help improve both the unit's capacity utilization and the quality of care provided to its patients.     

Incorporating health outcomes in Pennsylvania hospital efficiency: an additive super-efficiency DEA approach

The health care sector is one of the fastest growing sectors in the United States. Researchers are interested in conducting studies in the area of health economics in order to propose solutions to curb the rapid increase in health care spending and to improve the efficiency of the health care system in the United States. Specifically, hospital efficiency is one important research area in health economics. In this paper, data envelopment analysis (DEA) is used to assess hospital efficiency. An additive super-efficiency model is presented and applied to a sample of general acute care hospitals in Pennsylvania. In addition to the conventional choice of input and output variables, we include the survival rate as a quality measure of health outcome in the set of output variables. Thus our model takes both the quantity and the quality of the output into account. With the results obtained from our proposed DEA model, inefficiencies can be identified for hospitals to address without sacrificing the quality of care.     

The impossibility of convex constant returns-to-scale production technologies with exogenously fixed factors

The extensions to the variable (VRS) and the constant (CRS) returns-to-scale models developed by Banker and Morey are considered among the main approaches to the incorporation of exogenously fixed factors in models of data envelopment analysis (DEA). Recently, Syrjänen showed that the Banker and Morey CRS technology is not convex. Taking into account that its subset VRS technology is explicitly assumed convex, this observation leads to difficulties with explaining the fundamental production assumptions of the CRS extension. Motivated by the example of Syrjänen, the contribution of this paper is twofold. First, we show that the nonconvex Banker and Morey CRS technology is nevertheless a suitable reference technology for the assessment of scale efficiency. Second, we ask if a convex technology could be constructed that would “correct” the nonconvexity of the CRS technology of Banker and Morey. The answer to this is negative: one consequence of assuming both convexity and ray unboundness with fixed exogenous factors is that we can always “mix-and-match” discretionary and nondiscretionary factors taken from different units, arriving at totally unrealistic production plans. This demonstrates that generally there exists no meaningful convex CRS technology with exogenously fixed factors that can be used in its own right, apart from its use as a reference technology in the measurement of scale efficiency.     

Home health care routing and scheduling problems: a literature review

4OR - Home health services arise from the need for hospitals to care for patients and/or dependent persons who, due to special conditions, require hospitalisation and/or care at home. The...     

Performance and congestion analysis of the portuguese hospital services

The health care services have been characterized by a growing demand by the citizens leading to the need of more and more resources. Population aging, new pathologies, drugs, as well as new treatments are some of the major factors for this. However, in hospitals, for example, consumption of a large number of inputs has not frequently corresponded to the production of the same or more proportion of outputs. Sometimes, the outputs even decline with the increase of inputs due to the influence of the congestion effect on efficiency. The heavy burden of the health sector on the state budget brings about the interest of research over its efficiency. This paper aims to assess the performance of the Portuguese hospitals and particularly the contribution of the congestion effect. We use the non-parametric technique of data envelopment analysis for this purpose and a double-bootstrap procedure to take into account the influence of operational environment on efficiency. Afterwards, by comparing three different approaches, we determine the importance of congestion in efficiency measurement and discuss its computation methodologically. The results suggest significant levels of inefficiency in 68 major Portuguese hospitals for the year 2005 and more than half of them were found to be congested.     

Two‐tier healthcare service systems and cost of waiting for patients

Waiting has been a significant concern for healthcare services. We address this issue in the context of a two‐tier service system in this study. A two‐tier healthcare service system consists of two different service providers, typically one public service provider and one private service provider. In a baseline model, the two service providers are modeled by two queue servers, which charge each patient a common fixed fee for the service. Then, we study a queue model in which one service provider offers a subsidy or charges a premium while the other maintains the fixed service fee. This system provides a mechanism to segment patients along their waiting time cost through price discrimination. We analyze the problem from both the perspective of minimizing total waiting cost for all patients and the perspective of maximizing social gain for the public service provider or profit for the private service provider. We show that this model can significantly alleviate the burden of waiting for patients. The study addresses the design, the efficiency, and the implementation of two‐tier healthcare service systems. Copyright © 2017 John Wiley & Sons, Ltd.     

DEA-based hypothesis tests for comparing two groups of decision making units

In this paper, we develop five statistical tests to compare the efficiencies of different groups of DMUs. We consider a data generating process (DGP) that models the deviation of the output from the best practice frontier as the sum of two components, a one-sided inefficiency term and a two-sided random noise term. We use simulation to evaluate the performance of the five tests against the Banker tests (Banker, 1993) that were designed for DGPs containing a single one-sided error term. It is found that while the Banker tests are very effective when efficiency dominates noise, the tests developed in this paper perform better than the Banker tests when noise levels are significant.     

Determining Ambulance Deployment in Santo Domingo,Dominican Republic

In 1983, The Ministry of Health of the Dominican Republic (SESPAS) began planning an emergency medical service (E.M.S.) system for the capital city of Santo Domingo. This paper reports on one component of this effort, the development of options regarding the type of E.M.S. care to be delivered, by whom, via what number of types of equipment, sited at which locations. SESPAS has used the results to develop a plan for a public ‘urgency care’ system quite different from the uncoordinated mix of public, private and voluntary services operating previously. The system has been implemented according to plan with basic life support vehicles staffed by physicians.     

Performance measurement criteria in health care organizations: Review and future research directions

As pressures from government, insurance companies, communities, and individual consumers to lower the cost and improve health care quality increase, various health care performance measures have emerged as critical elements for cost containment. Previous research has not addressed the issue of standard performance measures for the health care industry. This paper has attempted to review the current literature and suggest future directions for both practitioners and researchers.     

Operational and economic efficiency analysis of public hospitals in Greece

The continuous growth of hospital costs has driven governments in many countries to seek ways to improve their efficiency. In Greece, this has consistently been a major issue for almost two decades, as efficiency assessment and monitoring systems are lacking. In response to this need, the evaluation of the National Health System hospitals’ efficiency level is a precondition for planning, implementing and monitoring any promising reform. In this paper, a non-parametric modeling approach is employed to assess and analyze the efficiency of 87 Greek public hospitals over the period 2005–2009, using data envelopment analysis. The operational and economic aspects of the hospitals’ operation are considered on the basis of their service/case mix and cost structure. We also investigate the efficiency trends over time with the Malmquist index and a second stage regression analysis is performed to explain the operational and economic efficiency results in terms of the hospitals’ operating characteristics and the environment in which they operate.