Hospital efficiency studies must acknowledge that hospitals are multi-product units, providing different types of personal services, which are not homogeneous in quality. Previous literature incorporating quality in hospital efficiency analysis, tended to relate efficiency scores to quality or to incorporate quality indicators related to only part of the hospitals’ outputs. The objective of this paper is to develop a methodology that incorporates quality indicators, measured by patient satisfaction surveys, in hospital efficiency analysis, for all outputs of hospital production.
Our goal is to assess whether there is a trade-off between efficiency and quality in Portuguese NHS hospitals. We develop a methodology to compute DEA technical efficiency scores adjusted for output quality, for a sample of 37 Portuguese NHS hospitals in 2009.
When DEA efficiency scores are adjusted for output quality, the decision making units that lie on the technical efficiency frontier remain largely unaltered, even if a great weight is given to quality indicators over quantity indicators of output. Nevertheless, we find that outside of the frontier adjusting for quality does have an impact in efficiency scores.
We conclude that the empirical evidence is not sufficient to identify a clear trade-off between efficiency and quality in the hospitals under review, implying the possibility that efficiency gains may be achieved without a significant sacrifice of service quality. Nevertheless, there is enough evidence to conclude that analyzing hospital efficiency without consideration of differences in quality of service will generate biased results. When perceived quality is brought to the analysis, the gap between efficient and inefficient units tends to widen.