How to evaluate the productivity and efficiency of public and private hospitals? The challenges of tariff convergence.

Summary This article aims to understand the differences in productivity observed in France between public hospitals, private non-profit hospitals (PSPH) and private clinics. We examine whether there is an influence of the composition of patients and stays on the productivity of hospitals. If this is the case, introducing competition between hospitals on the basis of Activity-Based Pricing not only promotes efficiency, but also creates strong pressure within institutions to reorient the supply of care. The database used is a panel of hospitals close to exhaustiveness for acute care: 1,604 hospitals are observed over the period 1998-2003. The analysis covers the six years preceding the introduction of T2A in France in order to observe the situation that existed before the introduction of new incentives. We show that the diagnosis of the productive efficiency of public hospitals depends on the definition of the production frontier: with a classical function, the efficiency scores of public hospitals are lower than those of PSPH hospitals, which are themselves lower than those of private clinics. However, the order of relative performance is reversed when the characteristics of the patient population and the composition of hospital stays are taken into account: with the exception of small establishments, public and PSPH hospitals then appear to be more efficient than private clinics. These results must be interpreted in the light of the differences in the specifications governing the activities of public and private hospitals. A final breakdown shows that the lower productivity of public hospitals is mainly explained by their size, the composition of their patient base and the composition of their stays, characterized by a low proportion of surgical stays. It is not explained by a lower efficiency of public hospitals.