Managed care and technical efficiency

By focusing exclusively on consumer benefit, previous studies of the effects of managed care have ignored important hospital efficiency gains. This study uses the HCUP sample of hospitals for 1992-1996 to estimate a stochastic frontier model of hospital technical efficiency. After controlling for hospital and market area variables, the study finds strong evidence that increased managed care insurance in a given market is associated with improved technical efficiency in the area's hospitals, especially in tertiary cases. Using Battese and Coelli's one-stage method (1995), the coefficients estimates are more efficient than for two-stage methods found in the literature.