High versus lower quality hospitals: a comparison of environmental characteristics and technical efficiency

Abstract

We seek to determine whether hospitals providing high-quality care are associated with different environmental and organizational factors than hospitals providing lower quality of care. We address this question using congestion analysis, which is an extension of data envelopment analysis (DEA). We employ a rich data set comprised of urban hospitals operating in 34 states in 2004. The data include measures of inputs, outputs, case mix, and indicators of patient safety, which we use to derive separate best-practice frontiers for high-, medium-, and low-quality hospitals. By comparing the frontier of the high-quality hospitals with the lower quality hospital frontiers, we find that higher quality hospitals perform better on the criteria of overall technical efficiency and pure technical efficiency than lower quality institutions. We found that a variety of characteristics, including expenditures, percentage of admissions that are births, Medicaid share of admissions, and government ownership are associated with differences in performance among the medium-quality hospitals. Expenditures and birth rate were associated with differences within low-quality hospital performance, as were variables related to scope and depth of activities, such as capital expenditures per bed and teaching status. We find evidence that hospitals should be able to improve both the quality and efficiency of their operations by adopting, where possible, the characteristics of the highest performing institutions.