Do smaller rural hospitals face greater performance constraints than referral hospitals?

Abstract

The Federal Government's increased focus on public hospital care and its efficiency has required more in-depth analysis of public hospital performance over time. This paper focuses on New South Wales (NSW) public acute care hospitals, looking at efficiency scores and technology gaps among four categories of NSW hospitals. A balanced panel data set comprises six years of New South Wales health service comparison data for 1993/94 to 1997/98 and 2007/08. It is decomposed and analysed in four categories: Principal Referral, Major Referral, District/Regional and Community hospitals. Data envelopment analysis is used to obtain technical efficiency scores for each category to estimate individual production frontiers. A metafrontier is then constructed, encompassing each category's individual production frontiers, allowing a measure of the metatechnology ratio to be calculated. Results indicate that the average technical efficiency scores for each category of acute care hospital in NSW are 0.965, 0.921, 0.835 and 0.875 for Principal Referral, Major Referral, District/Regional and Community hospitals, respectively. The average metatechnology ratios for each of these categories are 0.964, 0.966, 0.926 and 0.910. The metatechnology ratios indicate that smaller hospitals (District/Regional and Community hospitals) find it more difficult to operate on the metafrontier due to environmental or technological factors.