Quality, Efficiency, and Input Slack Differentials

Tradeoffs between efficiency and quality have been examined in the literature. It has been consistently demonstrated that increases in registered nurses in the nursing mix of hospitals is positively associated with lower rates of adverse patient outcomes. The use of technologically advanced capital and services also has been associated with higher quality of care measured by morbidity and mortality rates However, there are some economic issues in this relationship that warrant further examination. It has been found that increasing the number of registered nurses is quality enhancing, but up to a point, which is consistent with the notion of decreasing marginal productivity.

By virtue of a rich data set combining American Hospital Association (AHA) data with data from the application of the Agency for Healthcare Research and Quality (AHRQ) Quality Indicator (QI) software to 34 states providing State Inpatient Databases (SID) to the Healthcare Cost and Utilization Project (HCUP), we are able to measure production in terms of inputs and outputs via data envelopment analysis (DEA) but also to correct for potential poor quality.

We measure quality using a subset of the risk-adjusted mortality rates calculated by the Inpatient Quality Indicator (IQI) module of the QI software and risk-adjusted patient safety events, which have been shown to be affected by nurse staffing, calculated by the Patient Safety Indicator (PSI) module of the QI software.

The policy implications of our research include reducing hospital costs while maintaining positive quality and patient outcomes which are objectives for many state policy makers.