An evaluation of technical efficiency in Irish nursing homes

The evaluation of technical efficiency (TE) and its determinants in the Irish nursing home (INH) care provision is an important research area for a number of reasons. First, Ireland’s population is ageing quickly, and it is the increase in the ‘oldest’ old that is going to be the most dramatic. Second, all of the nursing homes (NHs) examined in this research – both public and private – are in receipt of a quasi-subvention by the state; and third, Irish policy-makers have moved away from the traditional public provision of nursing home (NH) care in favour of incentivising private delivery. As the costs of long-term care (LTC) are expected to increase considerably as the population ages, the estimation of technical efficiencies is essential in assessing whether NHs can utilize their resources more efficiently in order to reduce their costs of care. This research is the first attempt to investigate the efficiency of nursing home services using Irish data. This thesis measures and appraises TE in 38 public and 72 private (including voluntary) LTC units in Ireland using detailed primary data which were collected via face-to-face interviews for the years 2008-2009. The analysis is input-oriented and hence looks at the amount by which inputs can be proportionally reduced, while holding output constant. Here output is given by the number of total patient days, while inputs are measured as medical staff, non-medical staff and the number of beds in a NH unit. This research also considers a case-mix adjusted efficiency model. The outcomes of this model are compared with the standard approach which does not adjust for the severity cases of patients. A comprehensive set of environmental variables are employed to investigate their effect as potential determining factors of efficiency in Irish long-stay facilities. Investigating the factors driving productive efficiency can assist policy-makers in explaining the possible managerial slack in the INH sector. Conventional determinants are included such as ownership, size and age along with other firm characteristic variables, together with output characteristics of NHs such as the HMD rate, chain status, and numerous quality related factors. Using a primary dataset for INHs, this study applies a conventional DEA model to identify technical and scale inefficiencies. Then, both the homogenous bootstrap (HB) and the two-stage double bootstrap (DB) DEA methods are employed to obtain confidence intervals for the bias-corrected DEA scores. This research compares the obtained mean technical and scale efficiency scores, and the distribution of these scores for both public and private (and voluntary) NHs, and also for other subsamples of NHs, such as chain and non-chain private homes, and urban and rural units. To examine the impact of potential TE determinants, this thesis applies alternative semi-parametric two-stage methods, such as Tobit regressions and the DB DEA model. Crucially, the DB DEA integrates the effects of TE determinants as explanatory variables in estimating the true efficiencies. Hence, the DB DEA method affords bias-corrected DEA scores after controlling for the effects of the efficiency factors. However, none of the two-stage approaches account for data noise. Hence, a fully parametric SFA input-distance function is estimated, which controls for data noise and allows us to obtain unbiased TE estimates and parameters of the determining variables. The findings of this thesis suggest that the conventional DEA model overestimates both the technical and scale efficiency of NHs in comparison to the semi-parametric (HB and DB) DEA methods. The SFA method fails to deliver valid results when output is measured as total patient days, because of convergence issues, which might be due to the small data sample and the cross-sectional nature of the data. INHs are only 52% to 58% technically efficient on average, and these estimates are based on our preferred estimation method, the DB DEA. Hence, NHs in Ireland are considerably inefficient as they could reduce the usage of resources by 42 to 48 % in order to be technically efficient. INHs are also only 89% scale efficient. The scale efficiency (SE) is higher than the TE, inferring that the productivity of INHs will result to a greater extent from pure TE improvement rather than SE. This result coincides with another finding that smaller NHs are more technically efficient than larger homes. Importantly, the private NHs are more technically efficient than public units. However, case-mix as measured by the high-max dependency rate of residents has a negative effect on TE and it is higher in public NHs. While the ratio of medical to non-medical staff, and the labour to capital ratio have positive effects on the TE of INHs, there is a trade-off between TE and other quality factors, such as staffing levels and staff flexibility. Overall, the analysis of factors which explain the TE of long-stay facilities in Ireland is important given that these units are considerably inefficient

Technical and scale efficiency in public and private Irish nursing homes a bootstrap DEA approach

This article provides methodological and empirical insights into the estimation of technical efficiency in the nursing home sector.  Focusing on long-stay care and using primary data, we examine technical and scale efficiency in 39 public and 73 private Irish nursing homes by applying an input-oriented data envelopment analysis (DEA).  We employ robust bootstrap methods to validate our nonparametric DEA scores and to integrate the effects of potential determinants in estimating the efficiencies.  Both the homogenous and two-stage double bootstrap procedures are used to obtain confidence intervals for the bias-corrected DEA scores.  Importantly, the application of the double bootstrap approach affords true DEA technical efficiency scores after adjusting for the effects of ownership, size, case-mix, and other determinants such as location, and quality.  Based on our DEA results for variable returns to scale technology, the average technical efficiency score is 62%, and the mean scale efficiency is 88%, with nearly all units operating on the increasing returns to scale part of the production frontier.  Moreover, based on the double bootstrap results, Irish nursing homes are less technically efficient, and more scale efficient than the conventional DEA estimates suggest.  Regarding the efficiency determinants, in terms of ownership, we find that private facilities are less efficient than the public units.  Furthermore, the size of the nursing home has a positive effect, and this reinforces our finding that Irish homes produce at increasing returns to scale.  Also, notably, we find that a tendency towards quality improvements can lead to poorer technical efficiency performance