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Health systems: changes in hospital efficiency and profitability

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Abstract

This study investigates potential changes in hospital performance after health system entry, while differentiating between hospital technical and cost efficiency and hospital profitability. In the first stage we obtained (bootstrapped) data envelopment analysis (DEA) efficiency scores. Then, genetic matching is used as a novel matching procedure in this context along with a difference-in-difference approach within a panel regression framework. With the genetic matching procedure, independent and health system hospitals are matched along a number of environmental and organizational characteristics. The results show that health system entry increases hospital technical and cost efficiency by between 0.6 and 3.4 % in four alternative post-entry periods, indicating that health system entry has not a transitory but rather a permanent effect on hospital efficiency. Regarding hospital profitability, the results reveal an increase in hospital profitability only 1 year after health system entry, and the estimations suggest that this effect is a transitional phenomenon. Overall, health system entry may serve as an appropriate management instrument for decision makers to increase hospital performance.

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Acknowledgments

This study was supported by a research grant from the Federal Ministry of Education and Research (BMBF) in Germany (Grant number: 01FL10055). The sponsor had no role in the study design, collection and analysis of data; the writing of the report; or the submission of the paper for publication. The authors declare that they have no conflicts of interest.

Author information

Authors and Affiliations

  1. Hamburg Center for Health Economics, Universität Hamburg, Esplanade 36, 20354, Hamburg, Germany

    Vera Antonia Büchner, Vera Hinz & Jonas Schreyögg

Authors
  1. Vera Antonia Büchner
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  2. Vera Hinz
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  3. Jonas Schreyögg
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Corresponding author

Correspondence to Jonas Schreyögg.

Appendix Table 1. Balance in measured covariates before and after matching

Appendix Table 1. Balance in measured covariates before and after matching

 

Unmatchend sample

Matched sample

Group

Intervention (n = 399)

Control (n = 465)

di (%)

Intervention (n = 399)

Control (n = 399)

di (%)

Mean

Mean

 

Mean

Mean

 

Weighted cases (in 1,000)

9.7

11.3

6.4

9.7

9.5

1.6

Beds

297.5

340.8

4.9

297.5

292.4

1.1

Leased beds

0.071

0.051

9.3

0.071

0.071

0.9

Market concentration

0.196

0.200

2.4

0.197

0.193

1.2

Technical efficiency

0.598

0.604

3.7

0.598

0.598

0.7

Cost efficiency

0.338

0.360

2.8

0.320

0.321

0.6

Operating margin

0.013

0.015

11.9

0.013

0.016

5.3

ROI

0.007

0.019

3.2

0.007

0.009

1.7

EBIT

−56,711

243.282

20.2

−56,711

−56,469

4.0

EAT

75.463

239.331

8.5

75.463

78.281

4.7

  1. Number of hospitals varies across the different models

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Büchner, V.A., Hinz, V. & Schreyögg, J. Health systems: changes in hospital efficiency and profitability. Health Care Manag Sci 19, 130–143 (2016). https://doi.org/10.1007/s10729-014-9303-1

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