Hospital quality, efficiency, and input slack differentials

Abstract

Objective: To use an advance in data envelopment analysis (DEA) called congestion analysis to assess the trade-offs between quality and efficiency in U.S. hospitals.

Study setting: Urban U.S. hospitals in 34 states operating in 2004.

Study design and data collection: Input and output data from 1,377 urban hospitals were taken from the American Hospital Association Annual Survey and the Medicare Cost Reports. Nurse-sensitive measures of quality came from the application of the Patient Safety Indicator (PSI) module of the Agency for Healthcare Research and Quality (AHRQ) Quality Indicator software to State Inpatient Databases (SID) provided by the Healthcare Cost and Utilization Project (HCUP).

Data analysis: In the first step of the study, hospitals' relative output-based efficiency was determined in order to obtain a measure of congestion (i.e., the productivity loss due to the occurrence of patient safety events). The outputs were adjusted to account for this productivity loss, and a second DEA was performed to obtain input slack values. Differences in slack values between unadjusted and adjusted outputs were used to measure either relative inefficiency or a need for quality improvement.

Principal findings: Overall, the hospitals in our sample could increase the total amount of outputs produced by an average of 26 percent by eliminating inefficiency. About 3 percent of this inefficiency can be attributed to congestion. Analysis of subsamples showed that teaching hospitals experienced no congestion loss. We found that quality of care could be improved by increasing the number of labor inputs in low-quality hospitals, whereas high-quality hospitals tended to have slack on personnel.

Conclusions: Results suggest that reallocation of resources could increase the relative quality among hospitals in our sample. Further, higher quality in some dimensions of care need not be achieved as a result of higher costs or through reduced access to health care.

Figure 1

Comparison of Unadjusted and Adjusted Production Frontiers