Evaluating Hospital Efficiency Adjusting for Quality Indicators: An Application to Portuguese NHS Hospitals

The increase in healthcare costs is a source of concern in most health systems, and the adoption of measures to control costs is at the center of current health policies in most European countries. Efficiency has become a key concern for hospital managers, who are under pressure to provide more services at a lower cost. Associated with this concern, there is an increasing interest of hospital managers and health administration authorities in designing methods to evaluate hospital performance. The ability to rank efficient hospitals over their inefficient counterparts provides a benchmark for hospital managers to discover and reduce potential inefficiencies, and provides health administration authorities with measures that may be used to reward good managers. With this increasing interest in hospital performance, a vast academic literature has emerged on measures and comparisons of hospital efficiency, where quantitative measures of inputs are compared with quantitative measures of outputs, usually using Data Envelopment Analysis (DEA) or Stochastic Frontier Analysis (SFA).