Does Higher Cost Inefficiency Imply Higher Profit Inefficiency? Evidence on Inefficiency and Ownership of German Hospitals

30 Pages Posted: 30 Oct 2009

See all articles by Annika Herr

Annika Herr

Düsseldorf Institute for Competition Economics (DICE), Heinrich-Heine-Universität; Ruhr Graduate School in Economics; CINCH

Hendrik Schmitz

University of Duisburg-Essen - Department of Economics and Business Administration

Boris Augurzky

Rhine-Westphalia Institute for Economic Research (RWI-Essen); IZA Institute of Labor Economics

Date Written: August 1, 2009

Abstract

This paper investigates cost and profit efficiency of German hospitals. More specifically, it deals with the question how hospital efficiency varies with ownership, patient structure,and other exogenous factors, which are neither inputs nor outputs of the production process.We conduct a Stochastic Frontier Analysis (SFA) on a multifaceted administrative German dataset combined with the balance sheets of 374 hospitals for the years 2002 to 2005.The results indicate that private (for-profit) and (private) non-profit hospitals are on average less cost efficient but more profit efficient than publicly owned hospitals.

Keywords: Hospital efficiency, ownership, stochastic frontier analysis, profit function

JEL Classification: C13, I11, L33

Suggested Citation

Herr, Annika and Schmitz, Hendrik and Augurzky, Boris, Does Higher Cost Inefficiency Imply Higher Profit Inefficiency? Evidence on Inefficiency and Ownership of German Hospitals (August 1, 2009). Ruhr Economic Paper No. 132, Available at SSRN: https://ssrn.com/abstract=1495602 or http://dx.doi.org/10.2139/ssrn.1495602

Annika Herr (Contact Author)

Düsseldorf Institute for Competition Economics (DICE), Heinrich-Heine-Universität ( email )

Universitaetsstrasse 1
Düsseldorf, 40225
Germany

Ruhr Graduate School in Economics

Germany

CINCH ( email )

Universitätsstraße 2
Essen, 45141
Germany

Hendrik Schmitz

University of Duisburg-Essen - Department of Economics and Business Administration ( email )

Universitätsstr. 9
Essen, 45141
Germany

Boris Augurzky

Rhine-Westphalia Institute for Economic Research (RWI-Essen) ( email )

45128 Essen
Germany

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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