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A. Stepan, M. Sommersguter-Reichmann:
"Measuring the efficiency of public sector hospitals";
Talk: INFORMS 2003 Annual Meeting, Atlanta, USA (invited); 2003-10-20.

In 1997 an activity-based hospital financing system, called LKF, was introduced in Austria. The LKF is a modified, Austrian-specific system of Diagnoses Related Groups (DRGs) which regulates the financing of public sector hospitals and ensures that the billing of hospital services is based on services actually rendered. These serious changes in public sector hospital financing have been motivated by the necessary enhancement in hospital efficiency to cope with increasing hospital costs. This paper suggests a broad framework using Data Envelopment Analysis (DEA) for assessing the evolution of public sector hospital performance. First, data from 22 Austrian public sector hospitals are analysed over four years from 1997 to 2000 to assess hospital performance. In order to ensure a correct comparison between hospitals, we address the question of whether there are considerable differences in self appraisal and peer appraisal and of whether those hospitals rated as efficient can be classified as being genuinely efficient. Based on these results we then compare the efficiency indexes with the hospitals’ annual budget shares to investigate whether there are appropriate incentives provided for hospitals. Secondly, using the Malmquist productivity index we analyse hospital data over time to illustrate productivity changes between 1997 and 2000 and to examine whether observed changes are due to efficiency or technology changes.