Prductivity and Quality Analysis of Norwegian Hospital Mergers
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Productivity and Quality Analysis of Norwegian Hospital Mergers A Simar & Wilson Two-Stage Approach with Data Envelopment Analysis and Difference-in-Differences Estimation Author Supervisor Natalie Emanuelsson Sverre A. C. Kittelsen Student number 579626 A thesis submitted as a part of the European Master’s in Health Economics and Management, with specialization in Health Economics and Policy. Department of Health Management and Health Economics The Faculty of Medicine University of Oslo July 31st, 2020 I © Natalie Emanuelsson 2020 Project 4115 “The effect of DRG-based financing on hospital” at the Frisch Centre and NTNU, grant no. 214338 from the Research Council of Norway. Productivity and Quality Analysis of Norwegian Hospital Mergers Natalie Emanuelsson II DECLARATION OF OATH With this declaration, the student confirms having written the thesis him or herself without any outside help. Others’ thoughts and ideas are clearly marked as such and the master thesis has not been handed in during the course of another program and has not yet been published. Each master’s thesis needs to contain such a declaration and has to be signed by the student in person. An electronic signature cannot be accepted. Exact formulation of this declaration: “I hereby declare, under oath, that this master thesis has been my independent work and has not been aided with any prohibited means. I declare, to the best of my knowledge and belief, that all passages taken from published and unpublished sources or documents have been reproduced whether as original, slightly changed or in thought, have been mentioned as such at the corresponding places of the thesis, by citation, where the extent of the original quotes is indicated. The paper has not been submitted for evaluation to another examination authority, nor has it been published in this form or another.” SIGNATURE Date and signature of student Date and signature of supervisor III ACKNOWLEDGMENTS A two-year master program at European Master’s in Health Economics and Management is completed, and the process of writing this master thesis have been both very educational and fun. This master thesis is a reminder of all the hard work that I have put down during the past five years as a student at University of Oslo and marks the end of an era where new challenges will be given me in the years to come. I am appreciative for the opportunity to write this thesis for project 4115 “The effect of DRG-based financing on hospital” at the Frisch Centre and NTNU, grant no. 214338 from the Research Council of Norway. I would like to thank my supervisor Sverre A. C. Kittelsen for exceptional feedback and help with dataset when things were problematic. I am grateful that you have dedicated your own time to help me out when the situation at the Frisch Centre was affected by the Covid-19 virus this spring. I could not have done this without your help. I would also like to thank my dear friend Veerle Bun for great conversations and critical feedback at the Frisch Centre were we have shared multiple cups of coffee and loud laughter. I wish you good luck in the Netherlands. I would also like to thank my dearest friends and beloved family for proofreading, motivational speeches, and great support during the past seven months. I hope I have made you proud. Finally, I would like to thank all of my professors and fellow students at the EU-Hem program. It has been two amazing years that I will not take for granted. It has been a pleasure! Natalie Emanuelsson July 2020 IV ABSTRACT Background and research question: Hospital mergers have been a hot topic in the Norwegian healthcare sector the past two decades. This study is using a sample of 22 Norwegian hospitals that have merged from 1999 until 2014. A major ownership reform have influenced this period and contributed to both hospital mergers and reorganization. I have examined whether hospital mergers have resulted in increased productivity and quality in Norwegian hospitals. Data: To perform this study, the Norwegian Patient Register has provided patient-level data. These data are necessary to develop case-mix adjustments for all hospitals included in the analysis and to calculate each patient’s travel time from their municipality to the specific hospital. Moreover, hospital data from 1999 until 2014 have been aggregated and merged with the patient-level data from the same time. A sample of approximately 83,000,000 patient records from 1999 until 2014 were used in the analysis. Methodology: Case-mix adjustment variables such as DRG, patient characteristics, and treatment variables were used to adjust for differences in patient composition between hospitals and to estimate the performance indicators in three models. Productivity scores for both merged and non-merged hospitals were estimated through a Simar & Wilson two-stage approach using Data Envelopment Analysis (DEA-SW), where the Difference-in-Differences estimation (DiD) for productivity were calculated simultaneously. In addition, DiD estimation on quality-scores were calculated to detect the potential differences of quality between merged and non-merged hospitals. Most important findings: The DEA-SW results showed that merged hospital does not perform with better productivity than non-merged hospitals. However, there is a positive trend over time, which indicate that the productivity off all hospitals in the analysis are increasing. Furthermore, the DiD estimation did not show any evidence of increased quality for merged hospitals compared to non-merged hospitals. The merged hospitals had higher and statistically significant DID-coefficient at a 5% level in all five tables, which means that they have lower quality compared to the non-merged hospitals. V TABLE OF CONTENT DECLARATION OF OATH ................................................................................................. III ACKNOWLEDGEMENTS ................................................................................................... IV ABSTRACT ............................................................................................................................. V TABLE OF CONTENT ......................................................................................................... VI LIST OF TABLES .............................................................................................................. VIII LIST OF FIGURES ............................................................................................................... IX ATTACHMENTS IN THE APPENDIX .............................................................................. X ACRONYMS .......................................................................................................................... XI 1 INTRODUCTION ................................................................................................................. 1 1.1 Norwegian hospitals and the healthcare sector of Norway .................................................. 1 1.2 Efficiency and quality in the Norwegian health care sector ................................................. 2 1.3 The relevance of the study ................................................................................................... 3 1.4 Presentation of research question ......................................................................................... 4 1.5 Overview of chapters ........................................................................................................... 4 2 BACKGROUND .................................................................................................................... 6 2.1 The Norwegian Hospital Reform of 2002 and hospital levels ............................................. 6 2.2 Merging of Norwegian hospitals .......................................................................................... 7 2.3 International Perspective .................................................................................................... 11 3 THEORETICAL FRAMEWORKS .................................................................................. 12 3.1 What is known and what is lacking on the subject ............................................................ 12 3.2 Previous studies .................................................................................................................. 13 3.3 Elaboration on the research question.................................................................................. 16 3.3.1 Main concepts from the research question ................................................................ 16 4 DATA .................................................................................................................................... 18 4.1 Hospital data ....................................................................................................................... 18 4.2 Patient-level data ................................................................................................................ 18 4.3 Diagnosis-Related Groups (DRG) ..................................................................................... 19 4.3.1 Calculation of DRG-weights ..................................................................................... 20 VI 4.4 Quality indicators, length of stay, and travel time ............................................................. 20 4.4.1 Patient safety indicators ........................................................................................... 22 4.5 Descriptive