Journal of Productivity Analysis

, Volume 7, Issue 1, pp 63–80 | Cite as

Rural hospital performance and its correlates

  • Gary D. Ferrier
  • Vivian Valdmanis


The cost, technical, allocative and scale efficiencies of a sample of rural U.S. hospitals are calculated via linear programming models. Tobit analysis is used to assess possible correlates of each of the efficiency measures. A large amount of dispersion in operating efficiency is found within our data set; the majority of the dispersion is due to technical inefficiency. In general, for-profit hospitals are found to outperform not-for-profit and public hospitals. Demand characteristics, quality of care, and the mix of services offered are also found to influence performance.


Rural hospitals efficiency frontiers 


Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.


  1. Banker, R., R. Conrad and R. Strauss. (1986). “A Comparative Application of Data Envelopment Analysis and Translog Methods: An Illustrative Study of Hospital Production”. Management Science 32, 30–44.Google Scholar
  2. Bothwell, J.L. and T.F. Cooley. (1982). “Efficiency in the Provision of Health Care: An Analysis of Health Maintenance Organizations”. Southern Economic Journal 48, 970–984.Google Scholar
  3. Bronstein, J., and M. Morrisey. (1991). “Bypassing Rural Hospitals for Obstetrics Care”. Journal of Health Politics, Policy and Law 16, 87–118.Google Scholar
  4. Burgess, J.F. and P.W. Wilson. (1993). “Technical Efficiency in Veterans Administration Hospitals”. In H.O. Fried, C.A.K. Lovell and S.S. Schmidt (eds.), The Measurement of Productive Efficiency: Techniques and Applica-Tions. New York: Oxford University Press.Google Scholar
  5. Byrnes, P.B. and V. Valdmanis. (1989). “Variable Cost Frontiers and Efficiency: An Investigation of Labor Costs in Hospitals”. In T.R. Gulledge, Jr. and L.A. Litteral (eds.), Cost Analysis Applications of Economics and Operations Research. Berlin: Springer-Verlag.Google Scholar
  6. Chang, C. and H. Tuckman. (1991). “The Single-Hospital County: Is Its Hospital at Risk?” Health Services Research 26, 207–221.Google Scholar
  7. Christianson, J.B., I.S. Moscovice, A.L. Wellever and T.D. Wingert. (1990). “Institutional Alternatives to the Rural Hospital”. Health Care Financing Review 11, 87–97.Google Scholar
  8. Cleverly, W. and R. Harvey. (1992). “Critical Strategies for Successful Rural Hospitals”. Health Care Management Review 17, 27–33.Google Scholar
  9. Debreu, G. (1951). “The Coefficient of Resource Utilization”. Econometrica 19, 273–292.Google Scholar
  10. Doeksen, G., R. Loewen and D. Strawn. (1990). “A Rural Hospital's Impact on a Community's Economic Health”. Journal of Rural Health 6, 53–64.Google Scholar
  11. Dubois, R.W., W.H. Rogers, J.H. Moxley, D. Draper and R.H. Brook. (1987). “Hospital Inpatient Mortality: Is it a Predictor of Quality?” New England Journal of Medicine 317, 1674–1680.Google Scholar
  12. Eakin, B.K. (1991). “Allocative Inefficiency in the Production of Hospital Services”. Southern Economic Journal 58, 240–248.Google Scholar
  13. Eakin, B.K. and T.J. Kniesner. (1988). “Estimating a Nonminimum Cost Function for Hospitals”. Southern Economic Journal 54, 583–597.Google Scholar
  14. Eastaugh, S.R. (1990). “Hospital Nursing Technical Efficiency: Nurse Extenders and Enhanced Productivity”. Hospital and Health Services Administration 35, 561–573.Google Scholar
  15. Eastaugh, S.R. (1992). Health Economics: Efficiency, Quality and Equity. Westport, CT: Auburn House.Google Scholar
  16. Färe, R. and S. Grosskopf. (1985). “A Nonparametric Cost Approach to Scale Efficiency”. Scandinavian Journal of Economics 87, 594–604.Google Scholar
  17. Färe, R., S. Grosskopf and C.A.K. Lovell. (1994). Production Frontiers. Cambridge: Cambridge University Press.Google Scholar
  18. Farrell, M.J. (1957). “The Measurement of Productive Efficiency”. Journal of the Royal Statistical Society, Series A (General) 120, 253–281.Google Scholar
  19. Ferrier, G.D. and V. Valdmanis. (1996). “Hospital Ownership and Efficiency: An Empirical Investigation”. Nonprofit Management and Leadership, forthcoming.Google Scholar
  20. Fickenscher, K. and M. Lagerwey-Vorrman. (1992). “An Overview of Rural Health”. In S. Shortell and U. Reinhardt (eds.), Improving Health Care and Management. Ann Arbor, MI: Health Administration Press.Google Scholar
  21. General Accounting Office. (1990). Report to Congress: Rural Hospitals: Factors that Affect Risk of Closure. Washington, D.C.: GAO.Google Scholar
  22. Gianfrancesco, F.D. (1990). “The Fairness of the PPS Reimbursement Methodology”. Health Services Research 25, 1–23.Google Scholar
  23. Grosskopf, S. and V. Valdmanis. (1987). “Measuring Hospital Performance: A Nonparametric Approach”. Journal of Health Economics 6, 89–108.Google Scholar
  24. Hartz, A.J., H. Krakhauer, E.M. Kuhn, M. Young, S.J. Jacobsen, G. Gay, L. Muenz, M. Katzoff, R.C. Bailey and A.A. Rimm. (1989). “Hospital Characteristics and Mortality Rates”. New England Journal of Medicine 321, 1720–1725.Google Scholar
  25. Jensen, G. and M. Morrisey. (1985). “Role of Physicians in Hospital Production”. Hospital Research and Educational Trust. Chicago: American Hospital Association.Google Scholar
  26. Joskow, P. (1980). “The Effects of Competition and Regulation on Hospital Bed Supply and the Reservation Quality of the Hospital”. Bell Journal of Economics 11, 421–446.Google Scholar
  27. Lee, M.L. (1971). “A Conspicuous Production Theory of Hospital Behavior”. Southern Economic Journal 38, 48–54.Google Scholar
  28. Mayo, J.W. and D.A. McFarland. (1989). “Regulation, Market Structure, and Hospital Costs”. Southern Economic Journal 55, 559–568.Google Scholar
  29. Mick, S.S. and L.L. Morlock. (1990). “America's Rural Hospitals: A Selected Review of 1980s Research”. Journal of Rural Health 6, 437–466.Google Scholar
  30. Mick, S.S., L.L. Morlock, D. Salkever, G. de Lissovoy, F. Malitz, C.G. Wise and A. Jones. (1994). “Strategic Activity and Financial Performance of U.S. Rural Hospitals: A National Study, 1983 to 1988”. Journal of Rural Health 10, 150–167.Google Scholar
  31. Moscovice, I.S. (1989). “Rural Hospitals: A Literature Synthesis and Health Services Research Agenda”. Health Services Research 23, 891–930.Google Scholar
  32. Norton, E.D. and D.O. Staiger. (1994). “How Hospital Ownership Affects Access to Care for the Uninsured”. RAND Journal of Economics 25, 171–185.Google Scholar
  33. Nyman, J.A. and D.L. Bricker. (1989). “Profit Incentive and Technical Efficiency in the Production of Nursing Home Care”. Review of Economics and Statistics 71, 586–594.Google Scholar
  34. Ozcan, Y.A. and J.R. Lynch. (1992). “Rural Hospital Closures: An Inquiry into Efficiency”. Advances in Health Economics and Health Services Research 13, 205–224.Google Scholar
  35. Register, C. and E. Bruning. (1987). “Profit Incentives and Technical Efficiency in the Production of Hospital Care”. Southern Economic Journal 53, 899–914.Google Scholar
  36. Rohrer, J., D. Wakefield, R. Ludke, and N. Foster. (1991). “Dilemmas Surrounding the Identification of Essential Rural Hospitals”. Journal of Public Health Policy Winter, 525–537.Google Scholar
  37. Sloan, F. and B. Steinwald. (1980). Insurance, Regulation, and Hospital Costs. Lexington, MA: D.C. Heath Publishers.Google Scholar
  38. Smith, H. and N. Piland. (1990). “Strategic Adaptations to PPS by Rural Hospitals: Implications for Theory and Research”. Journal of Rural Health 6, 140–160.Google Scholar
  39. Valdmanis, V. (1992). “Sensitivity Analysis for DEA Models: An Empirical Example Using Public vs. NFP Hospitals”. Journal of Public Economics 48, 185–205.Google Scholar
  40. Williams, D., J. Hadley, and J. Pettengill. (1992). “Profits, Community Role and Hospital Closure”. Medical Care 3, 174–187.Google Scholar
  41. Woolley, J.M. (1993). “Hospitals: Price Increasing Competition”. In L.L. Deutsch (ed.), Industry Studies. Englewood Cliffs, NJ: Prentice-Hall, Inc.Google Scholar

Copyright information

© Kluwer Academic Publishers 1996

Authors and Affiliations

  • Gary D. Ferrier
    • 1
  • Vivian Valdmanis
    • 2
  1. 1.Department of EconomicsUniversity of ArkansasFayetteville
  2. 2.Department of Health Administration and PolicyUniversity of OklahomaOklahoma City

Personalised recommendations