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Session: Hospital Performance
Room: Meeting Room 21
Time: Fri 14:30-15:45

Presenter: Oliver Tiemann (Munich University and Helmholtz Zentrum München. Departement for Health Services Management)

Abstract

Background: Empirical studies on the post-acquisition effects of privatization on the organizational performance, and especially on the dynamic effects of privatization, are scarce. Furthermore, these studies have data and methodological problems limiting the generalizability of their findings. Additional longitudinal studies are thus needed to evaluate the impact of privatization. The hospital market in Germany is a fruitful field for studying the effects of privatization on the organizational performance. It is large, and was subject to an extensive trend towards privatization during the past decade, ensuring an appropriate sample size.

Objectives: The objective of the present study was to measure and compare the performance (i.e. efficiency and quality-adjusted efficiency) of privatized hospitals, both for public hospitals acquired by a private non-profit (n = 15) or a private for-profit organization (n = 73).

Methods:
The data for our longitudinal study were derived from the hospitals' annual reports collected and administered by the by the Research Data Centre of the Statistical Offices of the Länder. This rich dataset covers all public, private for-profit, and private non-profit hospitals in Germany and contains hospital-level and patient-level information. In order to determine the impact of privatization on hospital performance we proceeded in three steps. First, bootstrapped data envelopment analysis (DEA) was used to determine the relative efficiency and quality-adjusted efficiency of public hospitals in Germany (n = 1,015) between 1996 and 2007, i.e. privatized (n = 88) and non-privatized public hospitals (n = 927). This was followed by a second-step random-effects linear regression model for truncated longitudinal data with bootstrapped DEA efficiency scores as dependent variable. A difference-in-difference specification of the regression model was applied to examine whether privatization improved hospital performance while controlling for patient heterogeneity and the impact of hospital organizational and environmental characteristics. For sensitivity purposes and to check the robustness of our findings we allowed four alternative post-privatization periods (i.e. 1, 2, 3 and 4 years). Furthermore, a propensity score matching (PSM) approach was used to ensure the comparability (i.e. hospital organizational and environmental characteristics) between the group of privatized public hospitals and the comparator group of non-privatized public hospitals.

Results: The results of our analysis show that there was a significant positive impact of privatization on hospital performance. However, we found that public hospitals acquired by private for-profit organizations outperformed hospitals acquired by private non-profit organizations, both in terms of efficiency and quality-adjusted efficiency. Taking the effect of the introduction of DRG payments in 2003 into account it is striking that the efficiency gains of privatized hospitals were significantly larger in the post-DRG era. Moreover, privatized hospitals operating in regions with less competition also have higher efficiency scores.

Conclusion: The ongoing trend towards privatization in Germany may be an appropriate way to ensure a better use of the scarce resources in the hospital sector, because privatized hospitals appear to use relatively fewer resources and to provide a higher quality of care than before their privatization. Another important implication is that hospitals' behavior is highly affected by environmental characteristics (i.e. competition and reimbursement scheme) in the hospital sector.

Key Terms

privatization, public hospitals, ownership, data envelopment analysis, performance measure-ment, nonparametric technique, truncated regression, Germany

Authors:

Oliver Tiemann (Munich University and Helmholtz Zentrum München. Departement for Health Services Management) and Jonas Schreyögg (Munich University and Helmholtz Zentrum München. Departement for Health Services Management)

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