The European Journal of Health Economics

, Volume 15, Issue 2, pp 175–186 | Cite as

Hospital efficiency under prospective reimbursement schemes: an empirical assessment for the case of Germany

  • Helmut Herwartz
  • Christoph StrumannEmail author
Original Paper


The introduction of prospective hospital reimbursement based on diagnosis-related groups (DRG) has been a conspicuous attempt to decelerate the steady increase of hospital expenditures in the German health sector. In this work, the effect of the financial reform on hospital efficiency is subjected to empirical testing by means of two complementary testing approaches. On the one hand, we apply a two-stage procedure based on non-parametric efficiency measurement. On the other hand, a stochastic frontier model is employed that allows a one-step estimation of both production frontier parameters and inefficiency effects. To identify efficiency gains as a consequence of changes in the hospital incentive structure, we account for technological progress, spatial dependence and hospital heterogeneity. The results of both approaches do not reveal any increase in overall efficiency after the DRG reform. In contrast, a significant decline in overall hospital efficiency over time is observed.


Hospital efficiency Stochastic frontier analysis Data envelopment analysis Spatial analysis Diagnosis related groups 

JEL Classification

C21 D61 I11 I18 



We thank two anonymous referees, Uwe Jensen, Andrew Street, the participants in the “10 Jahre Forschungsdatenzentren” conference of the Statistischen Ämter des Bundes und der Länder 2012 in Berlin, dggö—Jahrestagung 2011 in Bayreuth and Jahrestagung des Vereins für Socialpolitik 2010 in Kiel for helpful comments and discussions on earlier versions of this manuscript. We also thank the employees of the Forschungsdatenzentrum der Statistischen Landesämter-Standort Kiel/Hamburg for their cooperation.


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Copyright information

© Springer-Verlag Berlin Heidelberg 2013

Authors and Affiliations

  1. 1.Department VWLGeorg-August-Universität zu GöttingenGottingenGermany
  2. 2.Institut für Statistik und ÖkonometrieChristian-Albrechts-Universität zu KielKielGermany

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