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Hospital organization and performance: a directional distance function approach

Abstract

The present study considers the Italian healthcare system, investigating the aspects that might affect the efficiency of Italian hospitals. The authors analyze what influences a specific definition of efficiency, which is calculated maximizing healthcare production but minimizing potential financial losses. In other words, this work considers efficient each hospital which is able to maximize the production of medical treatments while complying, at the same time, with budget constraints. Hence, the results of this paper are twofold: from the organizational point of view, they underline the need for rebalancing the various administrative levels of hospitals; from the technical point of view, a more coherent model is proposed in order to account for all the aspects of the healthcare industry.

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Fig. 1
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Notes

  1. The choice of this specific year is affected by data availability. Indeed, data about technical inputs are currently proposed only for that year.

  2. According to the aforementioned Italian law, financial losses are equal to the sum of total value of production (i.e. code A9999, positive factor), total cost of production (i.e. code B9999, negative factor), total financial income and charges (i.e. code C9999, negative or positive factor), total value adjustments to financial assets (i.e. code D9999, negative or positive factor), total extraordinary income and charges (i.e. code E9999, negative or positive factor) and total taxes (i.e. code Y9999, negative factor).

  3. Notice that the professional employees are not organized in the same way as the administrative ones. Indeed, we can find single professional workers (e.g. architects or lawyers) within departments that mainly include administrative employees.

  4. Italy’s public administrative structure within the Health Care System can be better understood by looking at the current national work contract, i.e. “Contratto Colletivo Nazionale di Lavoro del personale del comparto del servizio sanitario nazionale quadriennio normativo 2006–2009 e biennio economico 2006–2007”. Notice that the same hierarchical structure is applied to all Italian hospitals since the cited national work contract is the common legal frame-work for the whole country. What can change is the allocation of employees to each level, according to the specific organization of each center.

  5. Efficient hospitals are observations with a score equal to zero, whereas inefficient ones are observations with a score equal or higher than one. The values showed in the figure are the mean of these two sub-samples of observations.

  6. The parameters, extracted from the sub-sample of efficient hospitals and showed in Fig. 1 and in Table 8, are proposed as a percentage of the total number of administrative employees. Specifically, the following parameters are considered: 4.07 % for people in charge, 24.16 % for level D, 40.34 % for level C, and 29.60 % for level B. The remaining 1.82 % are clerical assistants, which means workers of level A. For each hospital, both the efficient and inefficient ones, the shares of administrative employees for each level are calculated and then compared with the above parameters. Obviously, values equal to 1 are coherent with the proposed distribution, whereas values higher than 1 indicate a number of employees higher than the proposed parameter.

  7. Note that the authors are not suggesting a reduction in administrative employees, which is an input in the proposed model, but a reallocation of these workers across the hierarchical levels in order to reduce the expected costs and, as a consequence, hospitals’ inefficiency.

  8. This paper suggests how Italian policy makers could increase the efficiency of public hospitals, taking both the health production and the budget constraint into account. However, even if this work is focusing on the Italian reality, the policy implication could be extended to other European countries, which are facing the same policy of spending review and redefinition of the national welfare system.

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Acknowledgments

The authors thank three anonymous referees who have provided feedback and interesting ideas concerning the proposed analysis. Moreover, we have greatly benefited from extensive discussions with S. Straneo, as well as from continued support by G. Calabrese.

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Correspondence to Greta Falavigna.

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Falavigna, G., Ippoliti, R. & Manello, A. Hospital organization and performance: a directional distance function approach. Health Care Manag Sci 16, 139–151 (2013). https://doi.org/10.1007/s10729-012-9217-8

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Keywords

  • Hospital efficiency
  • Directional distance function (DDF)
  • Hierarchical organization
  • Healthcare management