Are Hospitals Seasonally Inefficient? Evidence from Washington State Hospitals

Efficiency measurement has been one of the most extensively explored areas of health services research over the past two decades. Despite this attention, few studies have examined whether a provider’s efficiency varies on a monthly, quarterly or other, sub-annual basis. This paper presents an empirical study that looks for evidence of seasonal inefficiency. Using a quarterly panel of general, acute-care hospitals from Washington State, we find that hospital efficiency does vary over time; however, the nature of this dynamic inefficiency depends on the type of efficiency being measured. Our results suggest that technical and cost efficiency vary by quarter. Allocative and scale efficiency also vary on a quarterly basis, but only if the data are jointly disaggregated by quarter and another, firm-specific factor such as size or operating status. Thus, future research, corporate decisions and government policies designed to improve the efficiency of hospital care need to account for seasonal trends in hospital efficiency.