Sunday, October 7, 2012: 9:00 AM
This paper examines the role of “peer effects” on hospitals’ technical efficiency levels. First, hospitals’ Farrell input-oriented technical efficiencies are calculated using data envelopment analysis (DEA). Then, each hospital’s competitors are determined by identifying the other hospitals operating within the geographic radius from which 75% (alternatively, 90%) of its patients are drawn. Finally, each hospital’s efficiency score is regressed against the mean efficiency score of its competitors as well as other factors that may be expected to be correlates of efficiency. We find that peers’ average efficiency level has a significant influence on a hospital’s own efficiency.