Unravelling heterogeneity in efficiency measurements: a case study of public hospitals in Spain

Understanding efficiency in the hospital setting is now recognized as a fundamental pillar for making informed decisions and is crucial to ensuring the sustainability of health care systems. However, a significant portion of the literature assessing efficiency in the hospital sector tends to overlook heterogeneity across hospitals, leading to a notable bias in inefficiency estimation. In this paper, a stochastic frontier Bayesian model with random coefficients was used to estimate cost efficiency in the hospital sector, assuming heterogeneity across hospitals. The sample included 278 public hospitals in Spain during the period 2016-2019. The results revealed that public hospitals in Spain operate at a medium level of cost inefficiency of 12.86%, with this inefficiency being overestimated by 9.2% points if heterogeneity across hospitals is not adequately considered. This result underscores the importance of incorporating heterogeneity across hospitals in the evaluation of hospital efficiency to obtain accurate and reliable estimates.