Productivity changes in Taiwanese hospitals and the National Health Insurance

In 1995 Taiwan launched the National Health Insurance (NHI) programme, which changed the method payment for hospital finances. This article examines the impact of this financial reform on hospital productivity during this period. Using the Malmquist productivity index approach, a hospital's change in productivity is decomposed into quality, efficiency, and technological change components. Factors affecting efficiency and productivity are also assessed. Results indicate that most hospitals experienced a significant productivity slowdown due to declines in technology and quality of service, but efficiency did significantly improve. The inception of the NHI programme does greatly improve a hospital's productivity and quality of service, but decreases efficiency. Public hospitals' efficiency improvements are significant.