Rural vs urban hospital performance in a ‘competitive’ public health service

Abstract

In some western countries, market-driven reforms to improve efficiency and quality have harmed the performance of some hospitals, occasionally leading to their closure, mostly in rural areas. This paper seeks to explore whether these reforms affect urban and rural hospitals differently in a European health service. Rural and urban hospital performance is compared taking into account their efficiency and perceived quality. The study is focused on the Andalusian Health Service (SAS) in Spain, which has implemented a freedom of hospital choice policy and a reimbursement system based on hospital performance. Data Envelopment Analysis, the Mann–Whitney U test and Multidimensional Scaling techniques are conducted for two years, 2003 and 2006. The results show that rural and urban hospitals perform similarly in the efficiency dimension, whereas rural hospitals perform significantly better than urban hospitals in the patient satisfaction dimension. When the two dimensions are considered jointly, some rural hospitals are found to be the best performers. As such, market-driven reforms do not necessary result in a difference in the performance of rural and urban hospitals.

Introduction

European public healthcare systems are implementing market-driven reforms to improve the efficiency and quality of the services they provide. These reforms include managerial decentralisation, the separation of purchasers and providers, the use of prospective payment systems, mostly performance-based, and the implementation of policies that allow patients to choose their hospital (Allen, 2009, Botten et al., 2004). The main objective of these measures is to introduce some kind of competition into healthcare systems. It is expected that patients will choose the hospitals with the best quality or, at least, will try to avoid ‘bad’ hospitals, and that ‘good’ hospitals will be rewarded with more resources.

However, the importance of healthcare services in welfare policies and their specific characteristics, such as the information asymmetries that exist between the different actors involved, make the implementation of ‘market mechanisms’ a controversial issue that does not always produce the desired effects in terms of efficiency and quality improvements (Propper et al., 2008, Woolhandler and Himmelstein, 2007). Braithwaite (1997) argues that a market runs the risk of failing to provide healthcare services equitably in publicly funded systems. The introduction of market-driven reforms has resulted in the closure of hospitals, especially in rural areas, in the US (Adams et al., 1996, GAO, 1990) Korea (see Noh et al., 2006), Canada (see James, 1999, Lepnurm and Lepnurm, 2001) and New Zealand (see Healy, 2002). However, in Western Europe, the restructuring of acute care has meant a reduction in the number of acute beds in hospitals (Kroneman & Siegers, 2004) but only rarely has it led to the closure of hospitals (Healy & McKee, 2002).

This paper carries out a comparative analysis of the performance of rural and urban hospitals belonging to the Servicio Andaluz de Salud (SAS), the Health Service in Andalusia, which has implemented key market-driven reforms. The introduction of market-driven mechanisms raises questions over the efficiency and financial viability of rural hospitals (Rosko & Mutter, 2010), and might be detrimental for hospitals in rural areas because it is argued that sometimes they are justified for social equity reasons rather than for economic reasons. The objective is to determine whether rural hospitals are performing worse than their urban counterparts in order to evaluate whether the provision of hospital services in rural areas is justified according to different performance criteria. In our analysis of hospital performance, we focus on efficiency in the use of the resources and on patient satisfaction. Clinical quality considerations are beyond the scope of this paper.

The paper is structured as follows. We briefly present the most significant market-driven reforms implemented in the healthcare sector, particularly in hospitals. We review the literature about the performance of rural and urban hospitals in the two hospital dimensions studied in this paper: hospital efficiency and perceived quality. We describe the main features of the SAS. We introduce the methodology used for the analyses and present the results. Finally, the paper closes with a discussion and conclusions section, including some policy recommendations.