An analysis of hospital efficiency and productivity growth using the Luenberger indicator

Abstract

We analyze hospital efficiency and productivity growth using an innovative approach which employs the directional distance function and the Luenberger productivity indicator. The primary advantage of our approach is that both input contractions and output expansions are considered. Our model generates a productivity indicator that is decomposed into the usual constituents of productivity growth: technological change and efficiency change. For the sake of comparison, we also use the Malmquist productivity index. The empirical results based on a sample of Portuguese hospitals from 1997 to 2004 show that, on average, those hospitals experienced very weak productivity growth over that period. In addition, the incidence of technological change was remarkably low.