Measuring Efficiency from Casemix Funding in Victoria Using the Stochastic Frontier

28 Pages Posted: 16 Jan 2014

Date Written: November 7, 2007

Abstract

The Australian state of Victoria experienced a fundamental change in public hospital funding in 1993 with the introduction of casemix funding using diagnosis related groups. One of the primary drivers of this altered funding regime was to introduce a mechanism by which public hospitals could be compared for costs. Cost comparisons would then create an incentive for efficiency improvements because efficient hospitals would attract increased funding. This paper applies stochastic frontier estimation of a production function to panel data for the period 92/93 to 95/96 in order to establish whether, in fact, efficiency improvements were realised over this period. The results show that there was no significant change to individual hospital efficiency levels.

Keywords: stochastic frontier, casemix funding, efficiency measurement, Victoria

JEL Classification: I11, I18

Suggested Citation

Mangano, Maria, Measuring Efficiency from Casemix Funding in Victoria Using the Stochastic Frontier (November 7, 2007). CRAE Research Paper No. 200710. Available at SSRN: https://ssrn.com/abstract=2379927 or http://dx.doi.org/10.2139/ssrn.2379927

Maria Mangano (Contact Author)

Curtin University ( email )

GPO Box U1987
Perth, WA WA
Australia

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