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How the Great Recession affects performance: a case of Pennsylvania hospitals using DEA

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Abstract

Health care spending usually contributes to a large part of a developed country’s economy. In 2011, the U.S. consumed about 17.7% of its GDP on health care. As one of the most significant components of the health care industry, the hospital sector plays a key role to provide healthcare services. Healthcare services industry can be affected by many factors, of which economic downturn is a crucial one. As a result, it is worth investigating the condition and state of hospital management when economic downturn occurs. This paper aims to analyze how the Great Recession affects hospital performance in Pennsylvania during the period 2005–2012 by using data envelopment analysis (DEA). Specifically, we measure efficiency for hospitals in Pennsylvania, and use several DEA models to calculate the global Malmquist index (GMI). We find that: (1) 15.4% hospitals are always efficient while 36.9% hospitals are always inefficient for all years in 2005–2012; (2) The relative distance for a group of hospitals to the frontier is almost unchanged post-recession and pre-recession; (3) The average efficiency/GMI decreases by 2.43%/3.07% from pre-recession to post-recession. The analysis indicates that hospital performance slightly decreased due to the economic downturn in Pennsylvania.

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Notes

  1. Data Accessed on June 25, 20014. Available at http://research.stlouisfed.org/fred2/categories/29613.

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Acknowledgements

The authors are grateful for the comments and suggestions from two anonymous reviewers on an earlier version of this paper. Dr. Ya Chen thanks the support by the National Natural Science Foundation of China (Grant No. 71601064) and Natural Science Foundation of Anhui Province (Grant No. 1708085QG161). Support from the Priority Academic Program Development of the Jiangsu Higher Education Institutions (China) is acknowledged.

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Authors and Affiliations

  1. School of Economics, Hefei University of Technology, Hefei, 230009, Anhui, People’s Republic of China

    Ya Chen

  2. College of Auditing and Evaluation, Nanjing Audit University, Nanjing, 211815, People’s Republic of China

    Joe Zhu

  3. Foisie School of Business, Worcester Polytechnic Institute, Worcester, MA, 01609, USA

    Justin Wang & Joe Zhu

  4. College of Business Administration, Northeastern University, 422 Hayden Hall, Boston, MA, 02115, USA

    H. David Sherman

  5. Department of Economics, Lehigh University, Bethlehem, PA, 18015, USA

    Shin-Yi Chou

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  1. Ya Chen
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Correspondence to Joe Zhu.

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Chen, Y., Wang, J., Zhu, J. et al. How the Great Recession affects performance: a case of Pennsylvania hospitals using DEA. Ann Oper Res 278, 77–99 (2019). https://doi.org/10.1007/s10479-017-2516-1

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