Better outcomes at lower costs? The effect of public health expenditures on hospital efficiency
Date
2016
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Publisher
University of Delaware
Abstract
Local health departments play a critical role in the community that they serve as they comprise the foundation of the U.S. public health system. Providing public health services such as immunizations to the less affluent and advocating for state smoking bans, local health departments rely on government resources to fund their operations. Research indicates a positive impact of public health expenditures on the overall health of the population. However, individuals may not be the sole beneficiaries of public health expenditures. A healthier population may lead to efficiency gains for surrounding health care providers. ☐ In this research, I use efficiency analysis to explore the relationship between public health expenditures and hospital efficiency. Specifically, I use the two-stage semi-parametric Data Envelopment Analysis proposed by Simar and Wilson (2007) to estimate how public health spending affects the technical efficiency of the surrounding hospitals. The results of this research suggest that hospitals are indeed positively affected by higher levels of public health spending that has occurred in their patient market two years prior. Specifically, hospitals operating in an area with a high level of per capita public health expenditures experience gains in efficiency of approximately 1.66 percentage points relative to those hospitals operating in low public health spending areas.