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Health Care Manag Sci (2012) 15:310326 DOI 10.1007/s10729-012-9193-z
Changes in hospital efficiency after privatization
Oliver Tiemann & Jonas Schreygg
Received: 17 August 2011 /Accepted: 13 January 2012 /Published online: 2 February 2012 # The Author(s) 2012. This article is published with open access at Springerlink.com
Abstract We investigated the effects of privatization on hospital efficiency in Germany. To do so, we obtained bootstrapped data envelopment analysis (DEA) efficiency scores in the first stage of our analysis and subsequently employed a difference-in-difference matching approach within a panel regression framework. Our findings show that conversions from public to private for-profit status were associated with an increase in efficiency of between 2.9 and 4.9%. We defined four alternative post-privatization periods and found that the increase in efficiency after a conversion to private for-profit status appeared to be permanent. We also observed an increase in efficiency for the first three years after hospitals were converted to private non-profit status, but our estimations suggest that this effect was rather transitory. Our findings also show that the efficiency gains after a conversion to private for-profit status were achieved through substantial decreases in staffing ratios in all analyzed staff categories with the exception of physicians and administrative staff. It was also striking that the efficiency gains of hospitals converted to for-profit status were significantly lower in the diagnosis-related groups (DRG) era than in the pre-DRG era. Altogether, our results suggest that converting hospitals to private for-profit status may be an effective way to ensure the scarce resources in the hospital sector are used more efficiently.
Keywords Hospitals . Privatization . Performance measurement . Data envelopment analysis . Propensity score matching . Germany
1 Introduction
Rising health expenditure and tight public budgets over the past four decades have led decision makers in many Western industrialized countries to seek ways to improve the performance of health care organizations. Hospitals, in particular, are increasingly being held accountable for their efficiency and financial performance. Having identified inefficiencies and financial risks in public hospitals, national and local governments in a wide range of countries have responded by privatizing these institutions. The chief motivation behind the privatizations that have taken place in these countries during the past twenty years has been the expectation that shifting from public...