Scandinavian Working Papers in Economics

HERO Online Working Paper Series,
University of Oslo, Health Economics Research Programme

No 2006:9: Heterogenety in hospitals responses to a financial reform: A random coefficient analysis of the impact of activity-based financing on efficiency

Biørn Eric (), Terje P. Hagen (), Tor Iversen () and Jon Magnussen ()
Additional contact information
Biørn Eric: Department of Economics, University of Oslo, Postal: P.O. Box 1095 Blindern, 0317 Oslo, Norway
Terje P. Hagen: Institute of Health Management and Health Economics, Postal: P.O. Box 1089 Blindern, NO-0317 Oslo
Tor Iversen: Institute of Health Management and Health Economics, Postal: P.O. Box 1089 Blindern, NO-0317 Oslo, Norway
Jon Magnussen: Department of Public Health and General Practice, Postal: Norwegian University of Science and Technology, 7491 Trondheim, Norway,

Abstract: The paper examines the heterogeneity with respect to the impact of a financial reform - Activity Based Financing (ABF) - on hospital efficiency in Norway. Measures of technical efficiency and of cost-efficiency are considered. The data set is from a contiguous ten-year panel of 47 hospitals covering both pre-ABF years and years after its imposition. Substantial heterogeneity in the responses, as measured by both estimated and predicted coefficients, is found. Rank correlations between the estimated/predicted coefficients of the ABF dummy and the pre-ABF/post-ABF efficiencies are examined. Overall, improvement seems to be more pronounced in technical efficiency than in cost-efficiency.

Keywords: Health econometrics; Panel data; Hospital efficiency; Activity-based financing; Random coefficients; Heterogeneity; Rank Correlation

JEL-codes: C23; C33; H51; I12; I18

37 pages, June 4, 2009

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