On Estimation of Efficiencies of Hospitals and Electric Power Plants

Author

Usama Robin Al-Qalawi, Southern Illinois University CarbondaleFollow

Date of Award

1-1-2008

Degree Name

Doctor of Philosophy

Department

Economics

First Advisor

Sharma, Subhash

Abstract

AN ABSTRACT OF THE DISSERTATION OF Usama Al-qalawi, For the Doctor of Philosophy degree in Economics, presented on Oct 10th , 2008, at Southern Illinois University Carbondale. TITLE: On Estimation of Efficiencies of Hospitals and Electric Power Plants MAJOR PROFESSOR: Dr. Subhash C. Sharma Our objective of this dissertation was to estimate the efficiencies and the sources of total factor productivity (TFP) of hospitals and the efficiency of electrics power plants. In addition, we investigate the effect of some factors that are associated with the variation in efficiency. A translog functional form is estimated using Stochastic Frontier analysis. Then we decompose productivity growth to its main components: the economic of scale effect, the technical progress effect and the change in inefficiency effect. The dissertation is divided to three main subjects. The first subject is about Californian hospitals, the second one is about Veterans hospitals and the last one is about the electricity power plants. The results indicate that the average cost efficiency of Californian hospitals is 90.0% during the period between 1995 and 2005. It implies that those hospitals on average have a cost about 10% above the cost frontier that represent the minimum possible cost. Furthermore, the state of California lost $ 3.28 billion a year on average as consequence of this cost inefficiency. The results also indicate that inefficiency increases over time and by raising the unoccupied beds. In addition, the results suggest that inefficiency decreases as the severity of inpatient increases, and is lower for psychiatric, big and DSH reporting hospitals. The average cost efficiency of the V.A. Hospitals was 81.39 % during the period 2003 and 2007. The average annual total cost for VA hospitals during the period of study was $ 27.4 billion; out of which $ 5.4 billion can be attributed to inefficiency. Further more, the total annual cost of VA hospitals rise during the period of the study from $ 23.3 billion to $ 31.15 billion. With average growth rate equal to 7.53 %. Cost efficiency of Californian hospitals increased during the period between 2003 and 2006 while it slightly decreases in the 2007. Moreover, a concave relation between the number of beds and the efficiency of VA hospitals are founded. As the number of beds increases, efficiency of hospitals increases until it reaches the highest point of efficiency when hospitals have between 100 and 149 beds. Then, it goes back down until it reaches its lowest value for hospitals that have more than 350 beds. Furthermore, average growth of TFP was -0.0320 during the period of study and this suggests that productivity of VA hospitals decreases due to technological recess. The results specify that the technical efficiency of electric power plants was 23.63%. Moreover, it indicates that older plants are more inefficient, and inefficiency will be lower for those plants that face higher net peak demand and have smaller size measured by the maximum generator name plate. In addition, we found that storage plants are more efficient than hydro electric plants and the latter plants are more efficient than renewable energy plants and all are more efficient than fossil energy fueled plants. Furthermore, we found that the most efficient generators are associated with gulf cooling water, used closed-loop cooling systems and are using a mix of petroleum and renewable fossil material as a fuel.