Day surgery and hospital efficiency: empirical analysis of Norwegian hospitals, 1999-2001

Day surgery has gained increasing significance in Norwegian health care during the 1990s, and now constitutes more than 50% of all elective surgery. Although the underlying general assumption is that this mode of delivering surgery will increase the efficiency of hospitals, most former studies have focused only on the cost-efficiency for specific types of surgical operations. The present study therefore uses data from Norwegian hospitals to test whether the proposition that day surgery spells efficiency also holds true at the hospital level. Hospital efficiency is measured as the technical efficiency of hospitals. This indicator captures how efficient hospitals are in utilising their total resources, and builds on a variety of hospital inputs (inpatient care, outpatient care) and hospital outputs (physician full-time equivalents (FTEs), other labour equivalents, medical expenses). Our empirical analysis is based on a simple decision model where the hospitals maximise utility functions of income, patients and effort under the constraint of the budget and various structural characteristics. The empirical model thus controls for several other important determinants of efficiency, such as hospital budget, the outpatient revenue share, irregularly long length of stay, hospital type and the share of emergency admissions. After accounting for these variables, our results document significant effects of day surgery on technical efficiency. The results furthermore show that the positive effect of day surgery is contingent upon hospital budget, as hospitals with large budgets experience stronger efficiency effects of day surgery.