Assessing productivity changes in UK hospitals reflecting technology and input prices

In this study Malmquist productivity indexes are used to evaluate the perfo rmance of acute hospitals in the UK over the period after the introduction of the internal market in the National Health Service in 1991. The indexes are computed using nonparametric programming, known as Data Envelopment Ana lysis, and they are decomposed into multiple component measures to give ins ights into the trends in hospital performance. Overall it is found that pro ductivity regressed in the year after the reforms but progressed thereafter so that overall there was a net progress both as far as the inputs and cos ts are concerned. Productivity progress is mainly due to overall efficiency progress, which in turn is mostly attributed to allocative efficiency impr ovements. Technical change resulted in a small reduction in the amount of i nputs used but also at higher production costs, because of a worsening in t he match between input mixes and relative input prices. However, it is sugg ested that the gains in productivity are not high enough to argue that the internal market has had a significant impact on productivity. Finally, it i s argued that the methodologies employed here can be a valuable evaluative and managerial tool in the context of the new NHS reforms about to be intro duced.