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Heterogeneity in Hospitals' Responses to a Financial Reform: A Random Coefficient Analysis of The Impact of Activity-Based Financing on Efficiency

Biorn, Erik and Hagen, Terje P. and Iversen, Tor and Magnussen, Jon (2006): Heterogeneity in Hospitals' Responses to a Financial Reform: A Random Coefficient Analysis of The Impact of Activity-Based Financing on Efficiency. Published in: HERO Working Paper No. 2006:9 (2006): pp. 1-34.

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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.

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