Estimating the efficiency of Portuguese hospitals using an appropriate production technology

This paper investigates the production technology of Portuguese hospitals using various statistical tests and highlights the importance of technology assessment before efficiency estimates are done. Two different models were considered, one based on monetary units and another on quantities for a 4‐year period (2005–2008). An analysis involving all observations (all years) simultaneously led to the conclusion that the technologies of the Portuguese hospitals are globally nonincreasing returns to scale for a confidence interval of 95%. Based on this technology, we found significant inefficiency levels in the Portuguese hospitals. We also concluded that most groups of hospitals had improvements in the studied period and, on average, both models prove that single hospitals and those located in the North were the most efficient. An analysis of returns to scale seems to indicate that hospitals should reach an optimal scale by reducing their cost levels and increasing their assets.