Efficiency, ownership, and financing of hospitals: the case of Austria

While standard economic theory posits that privately owned hospitals are more efficient than their public counterparts, no clear conclusion can yet be drawn for Austria in this regard. As previous Austrian efficiency studies rely on data from the 1990s only and are based on small hospital samples, the generalizability of these results is questionable. To examine the impact of ownership type on efficiency, we apply a Data Envelopment Analysis which extends the existing literature in two respects: first, it evaluates the efficiency of the Austrian acute care sector, using data on 128 public and private non-profit hospitals from the year 2010; second, it additionally focusses on the inpatient sector alone, thus increasing the comparability between hospitals. Overall, the results show that in Austria, private non-profit hospitals outperform public hospitals in terms of technical efficiency. A multiple regression analysis confirms the significant association between efficiency and ownership type. This conclusive result contrasts some international evidence and can most likely be attributed to differences in financial incentives for public and private non-profit hospitals in Austria. Therefore, by drawing on the example of the Austrian acute care hospital sector and existing literature on the German acute care hospital sector, we also discuss the impact of hospital financing systems and their incentives on efficiency. This paper thus also aims at providing a proof of principle, pointing out the importance of the respective market conditions when internationally comparing hospital efficiency by ownership type.