Measuring routine nursing service efficiency: a comparison of cost per patient day and data envelopment analysis models

This article provides an illustrative application of Data Envelopment Analysis (DEA) methodology to the measurement of routine nursing service efficiency at a group of Wisconsin hospitals. The DEA efficiency ratings and cost savings estimates are then compared to those resulting from application of Medicare's routine cost limitation to the sample data. DEA is also used to determine if any changes in the potential for efficient operations occurred during the 1978-1979 period. Empirical results were representative of the fundamental differences existing between the DEA and cost per patient day approaches. No evidence was found to support the notion that the overall potential for efficient delivery of routine services by the sample institutions was greater in one year than another.