Skip to main content

Efficiency, ownership, and financing of hospitals: The case of Austria

Health Care Management Science volume 17, pages 331–347 (2014)Cite this article

Abstract

While standard economic theory posits that privately owned hospitals are more efficient than their public counterparts, no clear conclusion can yet be drawn for Austria in this regard. As previous Austrian efficiency studies rely on data from the 1990s only and are based on small hospital samples, the generalizability of these results is questionable. To examine the impact of ownership type on efficiency, we apply a Data Envelopment Analysis which extends the existing literature in two respects: first, it evaluates the efficiency of the Austrian acute care sector, using data on 128 public and private non-profit hospitals from the year 2010; second, it additionally focusses on the inpatient sector alone, thus increasing the comparability between hospitals. Overall, the results show that in Austria, private non-profit hospitals outperform public hospitals in terms of technical efficiency. A multiple regression analysis confirms the significant association between efficiency and ownership type. This conclusive result contrasts some international evidence and can most likely be attributed to differences in financial incentives for public and private non-profit hospitals in Austria. Therefore, by drawing on the example of the Austrian acute care hospital sector and existing literature on the German acute care hospital sector, we also discuss the impact of hospital financing systems and their incentives on efficiency. This paper thus also aims at providing a proof of principle, pointing out the importance of the respective market conditions when internationally comparing hospital efficiency by ownership type.

This is a preview of subscription content, access via your institution.

Access options

Buy single article

Instant access to the full article PDF.

43,34 €

Price includes VAT (Finland)
Tax calculation will be finalised during checkout.

Notes

  1. As Hollingsworth [31] shows in his review, DEA is the preferred method for efficiency analyses in the health care sector compared to other related techniques such as Stochastic Frontier Analyses (SFA) and the Malmquist index.

  2. Due to lacking data concerning secondary costs, three out of the 131 Austrian fund hospitals had to be excluded from the analysis.

  3. The planning of health care provision in Austria is carried out for 32 regions of provision.

  4. To check for potential endogeneity of the capacity and HHI variables, we applied the Hausman test to the regression model. No indication for endogeneity was found in either case.

References

  1. Banker RD, Charnes A, Cooper WW (1984) Some models for estimating technical and scale inefficiencies in data envelopment analysis. Manage Sci 30(9): 1078–1092. doi:10.1287/mnsc.30.9.1078

    Article  Google Scholar 

  2. Barbetta GP, Turati G, Zago AM (2007) Behavioral differences between public and private not-for-profit hospitals in the Italian National Health Services. Health Econ 16(1): 75–96. doi:10.1002/hec.1143

    Article  Google Scholar 

  3. Bernet PM, Moises J, Valdmanis VG (2011) Social efficiency of hospital care delivery: frontier analysis from the consumer’s perspective. Med Care Res Rev 68(1): 36–54. doi:10.1177/1077558710366267

    Article  Google Scholar 

  4. Berta P, Callea G, Martini G, Vittadini G (2010) The effects of upcoding, cream skimming and readmissions on the Italian hospitals efficiency: a population-based investigation. Econ Model 27:812–821. doi:10.1016/j.econmod.2009.11.001

    Article  Google Scholar 

  5. Bordignon M, Turati G (2009) Bailing out expectations and public health expenditure. J Health Econ 28:305–321. doi:10.1016/j.jhealeco.2008.12.008

    Article  Google Scholar 

  6. Brekke KR, Siciliani L, Straume OR (2013) Hospital competition with soft budgets. CESifo working paper: Public Finance, No 4073

  7. Busse R, Riesberg A (2004) Health care systems in transition: Germany WHO regional office for Europe on behalf of the european observatory on health systems and policies, Copenhagen

  8. Burgess JF, Wilson PW (1995) Decomposing hospital productivity changes, 1985–1988: a nonparametric Malmquist approach. J Prod Anal 6:343–363. doi:10.1007/BF01073525

    Article  Google Scholar 

  9. Burgess JF, Wilson PW (1996) Hospital ownership and technical inefficiency. Manage Sci 42:110–123. doi:10.1287/mnsc.42.1.110

    Article  Google Scholar 

  10. Burgess JF, Wilson PW (1998) Variation in inefficiency among US hospitals. Inf Syst Oper Res J 36:84–102

    Google Scholar 

  11. Capps C, Dranove D, Lindrooth C (2010) Hospital closure and economic efficiency. J Health Econ 29(1):87–109. doi:10.1016/j.jhealeco.2009.10.006

    Article  Google Scholar 

  12. Chang H, Cheng MA, Das S (2004) Hospital ownership and operating efficiency: evidence from Taiwan. Eur J Oper Res 159:513–527. doi:10.1016/S0377-2217(03)00412-0

    Article  Google Scholar 

  13. Charnes A, Cooper WW, Rhodes E (1978) Measuring the efficiency of decision making units. Eur J Oper Res 2(4):429–444. doi:10.1016/0377-2217(78)90138-8

    Article  Google Scholar 

  14. Duggan MG (2000) Hospital ownership and public medical spending. Q J Econ 15:1342–1373. doi:10.1162/003355300555097

    Google Scholar 

  15. Dyson RG, Allen R, Camanho AS, Podinovski VV, Sarrico CS, Shale EA (2001) Pitfalls and protocols in DEA. Eur J Oper Res 132:245–259. doi:10.1016/S0377-2217(00)00149-1

    Article  Google Scholar 

  16. Faere R, Grosskopf S, Logan J (1983) The relative efficiency of Illinois electric utilities. Resour Energy 5(4):349–367

    Article  Google Scholar 

  17. Ferrier GD, Valdmanis V (1996) Rural hospital performance and its correlates. J Prod Anal 7:63–80. doi:10.1007/BF00158477

    Article  Google Scholar 

  18. Grosskopf S, Valdmanis V (1987) Measuring hospital performance: a non-parametric approach. J Health Econ 6:89–107

    Article  Google Scholar 

  19. Grosskopf S, Margaritis D, Valdmanis V (2001) The effects of teaching on hospital productivity. Socio Econ Plan Sci 35:189–204. doi:10.1016/S0038-0121(01)00006-4

    Article  Google Scholar 

  20. Grossmann BE, Hauth E, Felderer B (2007) Verwaltungs- und Pensionsreformen im öffentlichen Dienst sowie Finanzierung des Krankenanstaltenwesens Staatsschuldenausschuss Österreich

  21. Gruca TS, Nath D (2001) The technical efficiency of hospitals under a single payer system: the case of Ontario community hospitals. Health Care Manag Sci 4:91–101

    Article  Google Scholar 

  22. Hauptverband der österreichischen Sozialversicherungsträger (2013) Handbuch der österreichischen Sozialversicherung 2013. Wien

  23. Helmig B, Lapsley I (2001) On the efficiency of public, welfare and private hospitals in Germany over time: a sectoral data envelopment analysis study. Health Serv Manage Res 14(4):263–274. doi:10.1258/0951484011912762

    Article  Google Scholar 

  24. Herr A (2008) Cost and technical efficiency of German hospitals: does ownership matter. Health Econ 17(9):1057–1071. doi:10.1002/hec.1388

    Article  Google Scholar 

  25. Herr A, Schmitz H, Augurzky B (2011) Profit efficiency and ownership of German hospitals. Health Econ 20(6):660–674. doi:10.1002/hec.1622

    Article  Google Scholar 

  26. Herwartz H, Strumann C (2012) On the effect of prospective payment on local hospital competition in Germany. Health Care Manag Sci 15(1):48–62. doi:10.1007/s10729-011-9180-9

    Article  Google Scholar 

  27. Hofmarcher MM, Paterson I, Riedel M (2002) Measuring hospital efficiency in Austria—a DEA approach. Health Care Manag Sci 5(1):7–14. doi:10.1023/A:1013292801100

    Article  Google Scholar 

  28. Hofmarcher MM, Rack HM (2006) Austria: health system review. Health Syst Trans 8(3):1–247

    Google Scholar 

  29. Hofmarcher MM, Lietz C, Schnabl A (2005) Inefficiency in Austrian inpatient care: identifying ailing providers based on DEA results. Cent Europ J Oper Res 13:341–263

    Google Scholar 

  30. Hollingsworth B (2003) Non-parametric and parametric applications measuring efficiency in health care. Health Care Manag Sci 6(4):203–218. doi:10.1023/A:1026255523228

    Article  Google Scholar 

  31. Hollingsworth B (2008) The measurement of efficiency and productivity of health care delivery. Health Econ 17(10):1107–1128. doi:10.1002/hec.1391

    Article  Google Scholar 

  32. Hollingsworth B, Peacock SJ (2008) Efficiency measurement in health and health care. Routledge, Abingdon

  33. Klauber J, Geraedts M, Friedrich J (2010) Krankenhausreport 2010. Schwerpunkt Krankenhausversorgung in der Krise. Schattauer, Stuttgart

  34. Kornai J (1980) Economics of shortage, vol B. North-Holland

  35. Kornai J (2009) The soft budget constraint syndrome in the hospital sector. Int J Health Care Finance Econ 9:117–135. doi:10.1007/s10754-009-9064-4

    Article  Google Scholar 

  36. Lee KH, Yang SB, Choi M (2009) The association between hospital ownership and technical efficiency in a managed care environment. J Med Syst 33:307–315. doi:10.1007/s10916-008-9192-2

    Article  Google Scholar 

  37. Morey RC, Fine DJ, Loree SW (1990) Comparing the allocative efficiencies of hospitals. Omega 18:71–83

    Article  Google Scholar 

  38. Newhouse JP (1970) Toward a theory of nonprofit institutions: an economic model of a hospital. Am Econ Rev 60(1):64–74

    Google Scholar 

  39. Ozcan YA (2008) Health care benchmarking and performance evaluation. An assessment using Data Envelopment Analysis (DEA). Springer, Boston

    Google Scholar 

  40. OECD (2013a) Health Data 2013. http://stats.oecd.org/index.aspx?DataSetCode=HEALTH_STAT. Accessed 14 Aug 2013

  41. OECD (2013b) Health Data 2013. Definitions, Sources and Methods. Curative (acute) care beds in hospitals

  42. O’Neill L, Rauner M, Heidenberger K, Kraus M (2008) A cross-national comparison and taxonomy of DEA-based hospital efficiency studies. Socio Econ Plan Sci 42(3):158–189. doi:10.1016/j.seps.2007.03.001

    Article  Google Scholar 

  43. Ozcan YA, Luke RD, Haksever C (1992) Ownership and organizational performance: a comparison of technical efficiency across hospital types. Med Care 30(9):781–794

    Article  Google Scholar 

  44. Ozcan YA, Luke RD (1993) A national study of the efficiency of hospitals in urban markets. Health Serv Res 7(6):719–739

    Google Scholar 

  45. Ozcan YA, McCue MJ, Okasha AA (1996) Measuring the technical efficiency of psychiatric hospitals. J Med Syst 20:141–150. doi:10.1007/BF02281992

    Article  Google Scholar 

  46. Piacenza M, Turati G (2013) Does fiscal discipline towards subnational government affect citizens well-being? Evidence on health. Health Econ. doi:10.1002/hec.2910

  47. Röhmel J (2009) Effizienzmessung im Gesundheitswesen: eine Analyse der Effizienz ostdeutscher Krankenhäuser. Kovac

  48. Shen YC, Eggleston K, Lau J, Schmid CH (2007) Hospital ownership and financial performance: what explains the different findings in the empirical literature? Inq 44(1):41–68. doi:10.5034/inquiryjrnl44.1.41

    Article  Google Scholar 

  49. Sherman D (1984) Data envelopment analysis as a new managerial audit methodology—test and evaluation. Audit J Pract Theory 4:35–53

    Google Scholar 

  50. Sommersguter-Reichmann M (2000) The impact of the Austrian hospital financing system on hospital productivity: empirical evidence on efficiency and technology changes using a non-parametric input-based Malmquist approach. Health Care Manag Sci 3:309–321. doi:10.1023/A:1019022230731

    Article  Google Scholar 

  51. Staat M, Hammerschmidt M (2000) Benchmarking the health sector in Germany—an application of Data Envelopment Analysis, Research Paper. Institute for Market-Oriented Management, University Mannheim

  52. Staat M (2006) Efficiency of hospitals in Germany: a DEA-bootstrap approach. Appl Econ 38:2255–2263. doi:10.1080/00036840500427502

    Article  Google Scholar 

  53. Statistisches Bundesamt (ed) Grunddaten der Krankenhäuser 2010 (1.3.2012). Fachserie 12, Reihe 6.1.1, Wiesbaden

  54. Stepan A, Sommersguter-Reichmann M (2002) Analyse des neuen leistungsorientierten Krankenanstaltenfinanzierungssystems in Österreich. In: Wille E (ed) Anreizkompatible Vergütungssysteme im Gesundheitswesen. Gesundheitsökonomische Beiträge, vol 38. Nomos, Baden, pp 109–141

    Google Scholar 

  55. Stepan A, Sommersguter-Reichmann M (2005) Applied performance measurement: a case study using DEA and other frontier production function-related indexes. In: Steven M, Sonntag S (eds) Quantitative Unternehmensführung. Physica-Verlag, Heidelberg, pp 107–125

    Chapter  Google Scholar 

  56. Tiemann O, Schreyögg J (2009) Effects of ownership on hospital efficiency in Germany. BuR Bus Res J 2(2):115–145

    Article  Google Scholar 

  57. Tiemann O, Schreyögg J (2012) Changes in hospital efficiency after privatization. Health Care Manag Sci 15(4):310–326. doi:10.1007/s10729-012-9193-z

    Article  Google Scholar 

  58. Tiemann O, Schreyögg J, Busse R (2012) Hospital ownership and efficiency: a review of studies with particular focus on Germany. Health Policy 104(2):163–171. doi:10.1016/j.healthpol.2011.11.010

    Article  Google Scholar 

  59. Valdmanis VG (1990) Ownership and technical efficiency of hospitals. Med Care 28:552–561. doi:10.2307/3765678

    Article  Google Scholar 

  60. Valdmanis V (1992) Sensitivity analysis for DEA models. An empirical example using public vs. NFP hospitals. J Public Econ 48:185–205. doi:10.1016/0047-2727(92)90026-C

    Article  Google Scholar 

  61. Werblow A, Robra BP (2007) Einsparpotenziale im medizinfernen Bereich deutscher Krankenhäuser: eine regionale Effizienzfront-Analyse. In: Klauber J, Robra BP, Schellschmidt H (eds) Krankenhausreport 2006—Schwerpunkt: Krankenhausmarkt im Umbruch. Schattauer, Stuttgart, pp 133–151

    Google Scholar 

  62. Werblow A, Karmann A, Robra BP (2010) Effizienz, Wettbewerb und regionale Unterschiede in der stationären Versorgung.In: Krankenhausreport 2010—Schwerpunkt: Krankenhausversorgung in der Krise? Schattauer, Stuttgart, pp 47–70

  63. White KR, Ozcan YA (1996) Church ownership and hospital efficiency. Hosp Health Serv Adm 41:297–310

    Google Scholar 

  64. World Health Organization—WHO (2012) European health for all database, July 2012. http://data.euro.who.int/hfadb/. Accessed 28 Oct 2012

  65. Xirasagar S, Lin HC (2006) Effects of payment incentives, hospital ownership and competition on hospitalization decisions for ambulatory surgical procedure. Health Policy 76:26–37. doi:10.1016/j.healthpol.2005.04.011

    Article  Google Scholar 

Download references

Acknowledgments

We wish to thank Helmut Hofer, Monika Riedel and Ludwig Strohner for their valuable comments on an earlier draft of this paper. We also gratefully acknowledge the three anonymous reviewers’ comments that greatly improved this article.

Author information

Affiliations

  1. Department for Economics and Finance, Institute for Advanced Studies (Vienna), Stumpergasse 56, 1060, Vienna, Austria

    Thomas Czypionka, Markus Kraus & Gerald Röhrling

  2. Department of Socioeconomics, Institute for Social Policy, Vienna University of Economics and Business (WU), Building 4, Welthandelsplatz 1, 1020, Vienna, Austria

    Susanne Mayer

Authors
  1. Thomas Czypionka
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Markus Kraus
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Susanne Mayer
    View author publications

    You can also search for this author in PubMed Google Scholar

  4. Gerald Röhrling
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Thomas Czypionka.

Appendix

Appendix

Table 7 Spearman rank correlation coefficients between input and output variables, model 1
Full size table
Table 8 Spearman rank correlation coefficients between input and output variables, model 2
Full size table
Table 9 Scale efficiency: model 1
Full size table
Table 10 Scale efficiency: model 2
Full size table
Table 11 SFA estimation results: model 1
Full size table
Table 12 SFA estimation results: model 2
Full size table
Table 13 Regression analysis for SFA efficiency scores: model 1
Full size table
Table 14 Regression analysis for SFA efficiency scores: model 2
Full size table
Table 15 Spearman rank correlation coefficients between efficiency scores for different specifications
Full size table

Rights and permissions

Reprints and Permissions

About this article

Cite this article

Czypionka, T., Kraus, M., Mayer, S. et al. Efficiency, ownership, and financing of hospitals: The case of Austria. Health Care Manag Sci 17, 331–347 (2014). https://doi.org/10.1007/s10729-013-9256-9

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s10729-013-9256-9

Keywords

  • Efficiency
  • Data envelopment analysis
  • Austrian hospitals
  • Ownership
  • Financing

Mathematics Subject Classification (2010)

  • 90-XX