Performance of Australian public and private hospitals

Abstract

Given the importance of the Australian hospital industry, understanding the performance of public and private hospitals is essential for interested groups including patients, hospital staff, insurance companies and governments. Jn Australia, little information is available on hospitals' relative performance. Hence, studies investigating the issue are needed. This thesis addresses a part of this gap, in the context of hospital performance, investigating how public and private hospitals in Western Australia perform differently in terms of quality of care, and how Australian public hospitals in different peer groups perform differently in terms of cost technical efficiency. The thesis consists of two main parts and the data for each part were obtained from different sources. Data on hospital quality of care analysis are obtained from the Department of Health, Western Australia. Hospital morbidity and mortality data in Western Australia in the period 1995-2004 are provided by the Data Linkage Unit. Data on hospital cost technical efficiency analysis are obtained from the Australian Institute of Health and Welfare and information on hospital cost5 in Victoria, New South Wales, Queensland, South Australia, Tasmania, and Northern Territory in the period 2002-2005 is provided. The study is structured as follows. The first chapter states the motivations and the questions this study attempts to address. The second chapter summarizes the state of the Australian hospital industry in the past two decades with respect to the relative importance of public and private hospitals. Chapter three presents the literature review including brief outlines of theoretical and empirical work concerning the performance of public and private firms, and a critical summary of studies involving the hospital quality of care measurement, hospital cost function and technical efficiency measures. Chapters four and five outline the descriptive statistics, the models used for analyzing the quality of care of public and private hospitals in Western Australia, the econometric results obtained, and the discussion. Similarly, chapters six and seven include the descriptive statistics, the methods of efficiency analysis for Australian public hospitals, the regression results and the discussion. While concluding the whole study, chapter eight also points out the study's limitations and suggestions for further research. The study uses appropriate methods to derive important results. For hospital quality of care, this study applies multi-level random intercept logistic models. Since the data include information on patient and hospital characteristics, multi-level models appear to be the most suitable approach for analyzing the data. Among six quality of care indicators, only one gives the results that public hospital perform worse than their private counterparts. On two indicators, public hospitals' performance is superior and on the other three, no difference in the performance of the two sectors can be found. For hospital technical cost efficiency, the stochastic frontier approach (SFA) is applied. Among the two main approaches of technical efficiency investigation, namely Data Envelopment Analysis (DEA) and SFA, the later has advantages on its relaxation of statistical noise non-existence. The results show that major and large public hospitals are more cost efficient than small ones, and there is no evidence of a trade-off between hospital cost technical efficiency and quality of care. The study provides important policy implications. The results of hospital quality of care analysis suggest policies to reduce the gap in operation between public and private hospitals. They include private hospitals taking a larger share of more severely-sick patients and more complicated cases, and public hospitals being provided with more funding as part of solution for medical staff and bed availability shortage. The results of hospital cost efficiency analysis suggest policies to reduce the heavy workload for major public hospitals. Improving hospital quality of care policies would not damage technical cost efficiency since no evidence of a trade-off between the two can be found. Show more