Variation in inefficiency among US hospitals

This study analyzes the impact of policy variables and other factors on hospital technical inefficiency in the US. Distance functions are used to estimate technical efficiency for each hospital relative to contemporaneous technologies. The resulting panel of efficiency estimates are then regressed on exogenous factors to gain insight into various issues impacting the debate over health-care reform in the US. Methodologically, we extend previous work by recognizing data envelopment analysis (DEA) efficiency scores as estimates and by dealing with a censoring problem at the estimated technology frontier. We use annual data on US hospitals operated by the US Department of Veterans Affairs (VA), state and local governments, and for-profit as well as nonprofit organizations from 1985 to 1988.