Hospital Inefficiency: What is the Impact of Membership in Different Types of Systems?

The primary objective of this study is to assess whether systematic differences in inefficiency are associated with hospital membership in different types of systems. We employed the Battese/Coelli simultaneous stochastic frontier analysis (SFA) technique to estimate hospital cost inefficiency. Mean estimated inefficiency was 8.42%. Membership in different types of systems was related to estimated cost inefficiency (p < .05). Compared to hospitals that were members of centralized health systems, membership in centralized physician/insurance or decentralized systems was associated with decreased inefficiency; membership in independent systems was associated with increased inefficiency.