Longitudinal analysis of efficiency in multiple output dialysis markets

Provider efficiency in the dialysis industry in the U.S.A. has been of great interest for a variety of parties mainly because of the continuing growth in the number of such patients and providers and in the industry's costs. This study examined technical efficiency longitudinally among the multiple-output producers of freestanding facilities, as the dominant group of providers, using the DEA-based Malmquist index. Nationally representative data were obtained from Independent Renal Facility Cost Report Data Files for the years 1994 through 2000. The resulting sample comprised 140 facilities that had operated throughout the seven study years and jointly produced all dialysis outputs with nonzero inputs. The results show that over the period 1994-2000, on average multi-output, freestanding dialysis facilities did not achieve improvement in productivity. Decomposition of the Malmquist productivity indices showed improvement in technical efficiency but at the same time regress in technologies with potential to improve their quality of care. Negative change in technology was the major source of negative movement in productivity. The study concludes that under the fixed-price payment policy, multiple dialysis outputs are produced efficiently, but it may be that the quality of care is being sacrificed.