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date: 25 February 2020

Abstract and Keywords

This article describes econometric approaches to comparing the efficiency of health care organizations. It deals with organizational performance measurement by first formulating a principal-agent model in which a regulator (principal) delegates responsibility to health care organizations (agents) to advance a subset of overall health sector objectives. Both effort and efficiency have to be estimated indirectly, after taking account of measurable phenomena, such as inputs, outputs, and constraints on the production process. This article considers four issues fundamental to the development of an efficiency model in an economic context, regarding appropriate unit of analysis, relevant system outputs, and constraints on the production process. This is followed by a review of the main analytical techniques used to assess efficiency, namely, stochastic frontier analysis and data envelopment analysis. Finally, it concludes that despite the challenges in measuring and comparing organizational performance, considerable analytical advances allow greater confidence to be placed in the results of analysis.

Keywords: econometric approaches, organizational performance, principal-agent model, stochastic frontier analysis, data envelopment analysis

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