How to detect hospitals where quality would not be jeopardized by health cost savings? A methodological approach...

In Spain the health care cuts have been the norm after the international economic crisis. The aim of this study is fourfold: (1) to measure hospital performance analysing two different perspectives: technical efficiency and quality; (2) to determine how technically efficient hospitals operate when faced with undesirable production; (3) to determine whether a potential trade-off between efficiency and quality exists or not; and (4) to propose a methodology to detect which hospitals could reduce their running costs without jeopardizing the quality of the services provided. Budget cutbacks imposed in Spain should focus solely on these hospitals, unless an increase in undesirable production is considered acceptable.

In this paper a SBM (slacks-based measure) of efficiency model is employed incorporating undesirable outputs using the case-mix adjusted deaths of patients. The study is carried out using information from 232 general hospitals in Spain.

We find four different groups of hospitals based on the relationship between efficiency and undesirable outputs.

We show that undesirable outputs affect the measurement of technical efficiency, proposing a tool that allows the identification of hospitals where efficiency can be increased, that is, where budget cuts and/or more production outputs can be implemented without necessarily increasing the undesirable output.