Hospital System Taxonomy and Hospital Efficiency: A Data Envelopment Analysis Model

This study aimed to evaluate the economic efficiency of five different hospital system structures across the United States, with particular attention to the contrast between centralized and decentralized healthcare models. Using 2017 AHA survey data and a Data Envelopment Analysis (DEA) framework, we assessed hospital performance by examining production inputs—such as full-time physicians, nurses, beds, and operating expenses—and outputs including the number of discharged inpatients and outpatients as well as operating revenue. The DEA results indicate that centralized hospital systems achieve higher technical and financial efficiency relative to decentralized systems. We analyzed five system types—Centralized, Centralized Physician & Insurance, Moderately Centralized, Decentralized, and Independent Health Systems—revealing substantial differences in efficiency and economic performance. Overall, our findings suggest that centralized organizational models improve resource allocation, enhance operational efficiency, and strengthen the financial sustainability of healthcare systems. JEL classification: C12, C44, I11, I19, M10, M19. Keywords: Centralized Physicians & Insurance System, Centralized System, Decentralized System, Hospital Efficiency, Independent Health System.