Efficiency Analysis of Federally Funded Hospitals: Comparison of DoD and VA Hospitals Using Data Envelopment Analysis

Abstract

This article applies the technique known as Data Envelopment Analysis (DEA) to assess differences in performance efficiency among two branches of the federal hospital system, The Department of Defense (DoD) and The Department of Veterans' Affairs (VA). The analysis is based on two measures of performance output (inpatient days and outpatient visit, and six measures of resource input (capital investment in operational beds, service mix intensity, and supplies and three components of labor— providers, nurses and support). This study finds that based on these input and output measures, DoD hospitals are, on average, significantly more efficient than their VA counterparts. Within DoD, however, there are no significant differences in efficiency among the service components (US Air Force, Army or Navy), although Army hospitals appear more efficient in using service mix and provider labor.