The utility of returns to scale in DEA programming: An analysis of Michigan rural hospitals |
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| Institution: | 1. Faculty of Management, Economics and Social Sciences, University of Cologne, Albertus-Magnus-Platz, 50923 Cologne, Germany;2. Department of Economics, State University of New York, Binghamton, NY 13902-6000, USA;3. University of Stavanger Business School, Stavanger, Norway;1. College of Economics and Management, Nanjing University of Aeronautics and Astronautics, Nanjing 211106, Jiangsu Province, China;2. Research Center for Soft Energy Science, Nanjing University of Aeronautics and Astronautics, 29 Jiangjun Avenue, Nanjing 211106, Jiangsu Province, China;3. Center of Operations Research (CIO), University Miguel Hernandez of Elche (UMH), Elche, Alicante 03202, Spain;4. School of Business Administration, Faculty of Business Administration, Southwestern University of Finance and Economics, Chengdu 611130, Sichuan Province, China;5. School of Management, University of Science and Technology of China, Hefei 230026, Anhui Province, China;1. Department of Mathematics and Engineering, Universidad Loyola Andalucia;2. Department of Mathematics and Engineering, Universidad Loyola Andalucia, Escritor Castilla Aguayo, 4. 14004 Córdoba, Spain\n;3. Brain and Mind Research Institute, and Centre for Disability Research and PolicyFaculty of Health Sciences, University of Sydney, Sydney, Australia;4. Department of Business Organization, Universidad Loyola Andalucia\n |
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| Abstract: | 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. |
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