The economics of cancer care: longitudinal changes in provider efficiency

Renewed debate over competition in healthcare suggests that greater specialization is good for the health economy. In essence, greater specialization is hypothesized to lead to lower average costs, due to learning curve effects, scale, or other operating efficiencies. This hypothesis was tested in oncology care, since this disease group is one of the few with existing specialized cancer centers already in place. Data envelopment analysis (DEA), and specifically a longitudinal Malmquist index over a 5-year period was applied to the major, specialized inpatient cancer centers to determine if these specialized centers achieve higher productivity over time, and if scale leads to higher operating efficiency. Results suggest policy and payer implications since these DRG-exempt hospitals may not be improving their technical efficiency over time. Despite advancements in technology and greater scale, the average efficiency of cancer care has marginally declined. Similarly, when compared to other hospitals with greater numbers of other service offerings, oncology care has not benefited from increasing returns to scale.