Characteristics of High- and Low-Efficiency Hospitals

Abstract

We compared performance, operating characteristics, and market environments of low- and high-efficiency hospitals in the 37 states that supplied inpatient data to the Healthcare Cost and Utilization Project from 2006 to 2010. Hospital cost-inefficiency estimates using stochastic frontier analysis were generated. Hospitals were then grouped into the 100 most- and 100 least-efficient hospitals for subsequent analysis. Compared with the least efficient hospitals, high-efficiency hospitals tended to have lower average costs, higher labor productivity, and higher profit margins. The most efficient hospitals tended to be nonteaching, investor-owned, and members of multihospital systems. Hospitals in the high-efficiency group were located in areas with lower health maintenance organization penetration and less competition, and they had a higher share of Medicaid and Medicare admissions. Results of the analysis suggest there are opportunities for public policies to support improved efficiency in the hospital sector.

Keywords

hospital efficiency stochastic frontier analysis hospital quality patient safety

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