Impact of the Local Public Hospital Reform on the Efficiency of Medium-Sized Hospitals in Japan: An Improved Slacks-Based Measure Data Envelopment Analysis Approach

ObjectiveTo assess the change in efficiency and total factor productivity (TFP) of the local public hospitals in Japan after the local public hospital reform launched in late 2007, which was aimed at improving the financial capability and operational efficiency of hospitals. Data Sources and Data CollectionSecondary data were collected from the Ministry of Internal Affairs and Communications on 213 eligible medium-sized hospitals, each operating 100-400 beds from FY2006 to FY2011. Study DesignThe improved slacks-based measure nonoriented data envelopment analysis models (Quasi-Max SBM nonoriented DEA models) were used to estimate dynamic efficiency score and Malmquist Index. Principal FindingsThe dynamic efficiency measure indicated an efficiency gain in the first several years of the reform and then was followed by a decrease. Malmquist Index analysis showed a significant decline in the TFP between 2006 and 2011. The financial improvement of medium-sized hospitals was not associated with enhancement of efficiency. Hospital efficiency was not significantly different among ownership structure and law-application system groups, but it was significantly affected by hospital location. ConclusionsThe results indicate a need for region-tailored health care policies and for a more comprehensive reform to overcome the systemic constraints that might contribute to the decline of the TFP.