The effectiveness-efficiency trade-off in Lombardy hospitals

We study the sign of the trade-off between hospital effectiveness in achieving health outcomes and efficiency on a data set regarding Lom- bardy during the period 2008-2010. The pressure to increase hospital efficiency may affect their performances in terms of population health status. We build a three-stage econometric model using, differently from previous contributions, as unit of observation not consider the hospital as a whole by the ward level. This implies that the same hospital is compared with the other ones when providing more homo- geneous treatments. In the first-stage we apply a multilevel approach to estimate hospitals’ effectiveness. In the second-stage we estimate a hospitals production function. In the third stage we estimate the sign of the trade-off. We show that there is negative trade-off in the wards where physicians have high degree of discretion in setting the treat- ments provided to patients (e.g., general medicine). On the contrary, a positive trade-off is identified in those wards where treatments fol- low tighter procedures (e.g., heart surgery and neuro surgery). Last, we find that specialization has a positive effect on health outcomes, that private not-for-profit hospitals tend to have better performances, while there is a positive reputation effect in case of teaching hospitals.