Measuring efficiency in clinical departments

This paper explores the possibilities and limitations of obtaining and interpreting efficiency measurement on the level of the clinical department. We discuss the limitations of case-mix groupings such as the diagnosis related groups on this level. Methods: Hospital costs are allocated to clinical departments and efficiency measured using data envelopment analysis (DEA). Outputs are measured as number of discharges adjusted for case-mix using DRGs. The effect of department vs. hospital on the level of measured efficiency is analysed using a simple fixed effects regression model. Results: We find that measured efficiency depends critically on the chosen model specification. Some department types, notably children¿s departments have systematically lower levels of measured efficiency. Conclusions: : Our findings have implications for the monitoring and financing of clinical departments. DRG type instruments should be applied with caution both for monitoring and financing purposes on the departmental level.