Has competition increased hospital technical efficiency?

ABSTRACT

Hospital competition and managed care have affected the hospital industry in various ways including technical efficiency. Hospital efficiency has become an important topic, and it is important to properly measure hospital efficiency in order to evaluate the impact of policies on the hospital industry. The primary independent variable is hospital competition. By using the 2001-2004 inpatient discharge data from Florida, we calculate the degree of hospital competition in Florida for 4 years. Hospital efficiency scores are developed using the Data Envelopment Analysis and by using the selected input and output variables from the American Hospital Association's Annual Survey of Hospitals for those acute care general hospitals in Florida. By using the hospital efficiency score as a dependent variable, we analyze the effects of hospital competition on hospital efficiency from 2001 to 2004 and find that when a hospital was located in a less competitive market in 2003, its technical efficiency score was lower than those in a more competitive market.