Competition and ownership effect on hospitals’ efficiency. A Simar–Wilson methodology analysis

In this paper we study the efficiency of 89 Italian hospitals between 1999 and 2006 using the two-stage procedure proposed by Simar and Wilson (2007). In the first stage, we estimate the efficient frontier with Data Envelopment Analysis. In the second stage, the Simar–Wilson double bootstrap procedure is used to analyze the determinants of efficiency. We find evidence that large hospitals are more efficient than small ones, i.e. small hospitals have spare capacity since they are more distant from the frontier than large ones. The truncated regression on the estimated DEA scores shows that efficiency is not influenced by ownership and teaching status. Competition, measured in terms of share of beds per hospital specialty in competition within a ray of 20 km, has a positive impact on hospitals technical efficiency. Activity concentration, measured by the sum of squares of the share of discharges per specialty, has a strong negative impact on efficiency, meaning that those hospitals which specialize and provide a limited number of services are less efficient. Last, we compute the Malmquist TFP index, which highlights an increase in the average efficiency in the Italian hospital sector due to a growing capacity of operating at an optimal scale with a consequent reduction in average costs due to the decrease of the scale of operation.