Trends in hospital efficiency among metropolitan markets

This study evaluates trends in efficiency among American hospital markets. A total of 6010 hospitals were identified for use in the analysis from the American Hospital Association's Annual Surveys for 1989 and 1993. Using data envelopment analysis (DEA), a longitudinal study of hospital efficiency was conducted on all 314 metropolitan markets in the United States. Results suggest that large hospital markets generally demonstrated higher inefficiency. The major inefficiencies exist in the availability of hospital services, the number of operating beds, the utilization of hospital staffing and operating expenses. Consequently, the large hospital market had a significant excess of health manpower that resulted in inefficiency that amounted to approximately $23 billion. From a policy perspective, this study has shed some light on the need to establish more specific policies to address inefficiency in the health care industry.