The effectiveness-efficiency trade-off in the hospital sector: an application with Italian data

Abstract

We study the sign of the trade-off between hospital effectiveness and efficiency on a data set regarding Lombardy for 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 to investigate, differently from previous contributions, hospitals at the ward level, to compare them when providing more homogeneous treatments. We consider different health outcomes: mortality and readmission rates, voluntary discharges and returns in surgery room. We show that there is a positive trade-off at the sample level for mortality and readmission rates. No trade-off is instead observed for voluntary discharges and returns in surgery room. In terms of ward effects, we find that general medicine and surgery have a negative trade-off between effectiveness and efficiency. On the contrary, oncology has a positive trade-off with efficiency. This implies that DRG tariffs in some wards should be designed to limit the negative consequences that costs containment incentives may have on health care.