Exploring hospital efficiency within and between Italian regions: new empirical evidence

Abstract

This paper investigates the efficiency of Italian hospitals and how their performances have changed over the years 2007–2016, characterized by the great economic recession and budget constraints. We apply the Benefit of Doubt (BoD) approach to determine a composite index that considers the multi-dimensionality of the hospital outcome to be used as main output in a metafrontier production function based on a stochastic frontier framework. The efficiency score distribution is then used to construct a Theil index in order to compare, over time, the inequality of the estimated efficiency between hospitals, both within and between regions. The main findings show that the primary source of inefficiency comes from managerial inefficiency especially for hospitals located in southern regions. A clear and persistent North-South gap in efficiency performances of hospitals has been found along with an increase in the inequality in terms of efficiency between the areas of the country mostly determined by between region inequality.