Rural vs urban hospital performance in a 'competitive' public health service

In some western countries, market-driven reforms to improve efficiency and quality have harmed the performance of some hospitals, occasionally leading to their closure, mostly in rural areas. This paper seeks to explore whether these reforms affect urban and rural hospitals differently in a European health service. Rural and urban hospital performance is compared taking into account their efficiency and perceived quality. The study is focused on the Andalusian Health Service (SAS) in Spain, which has implemented a freedom of hospital choice policy and a reimbursement system based on hospital performance. Data Envelopment Analysis, the Mann-Whitney U test and Multidimensional Scaling techniques are conducted for two years, 2003 and 2006. The results show that rural and urban hospitals perform similarly in the efficiency dimension, whereas rural hospitals perform significantly better than urban hospitals in the patient satisfaction dimension. When the two dimensions are considered jointly, some rural hospitals are found to be the best performers. As such, market-driven reforms do not necessary result in a difference in the performance of rural and urban hospitals.