Decomposing the productivity differences between hospitals in the Nordic countries

Previous studies indicate that Finnish hospitals have significantly higher productivity than in the other Nordic countries. We decompose the productivity levels into technical efficiency, scale efficiency and country specific possibility sets (technical frontiers). Data have been collected on operating costs and patient discharges in each DRG group for all hospitals in the Nordic countries. We find that there are small differences in scale and technical efficiency between countries, but large differences in production possibilities (frontier position). The results are robust to the choice of bootstrapped Data Envelopment Analysis (DEA) or Stochastic Frontier Analysis (SFA) as frontier estimation methodology.