Technical Efficiency of Hospitals in Ireland

Similar to many other European countries, the funding system for Irish hospitals is partially based on casemix, whereby resources are redistributed annually to hospitals with greater efficiency. For this reason, accurate measurement of efficiency is essential, so in this paper, we use Data Envelopment Analysis and Stochastic Frontier Analysis to measure technical efficiency of acute public hospitals in Ireland between 1992 and 2000. Although previous research elsewhere has used DEA extensively, the more recent panel model approach to estimating the stochastic frontier has not been employed to the same extent. The results from both methodologies will provide estimates of average efficiency in the hospital sector in Ireland, and this is the first time an application of this type has been performed on input and output data from Irish hospitals. While our output measure is not adjusted for casemix, it is useful for obtaining initial estimates of technical efficiency in Irish hospitals, and we show that our results are in the same range as those obtained recently for hospitals in Northern Ireland. We then use a measure of output adjusted with Diagnostic Related Groups weights and determine whether or not efficiency estimates are different to those found when we use the simple measure of output. Internationally, the comparison of the results of the stochastic frontier model to the DEA efficiency scores contribute to the expanding literature of comparisons between DEA and SFA applications.