Evaluating the impact of waiting lists on hospital efficiency and costs

This paper develops a new primal approach for the estimation of marginal costs under conditions in which technical efficiency is explicitly incorporated into the cost evaluation. To do this, we exploit the dual relationship between the input distance function and the cost function. We apply this framework in order to analyse the impact of hospital waiting lists on efficiency and costs. Waiting lists have a dual effect on social welfare. On the one hand, delays in healthcare provision exacerbate patients’ health problems. On the other hand, redistributing patient care from periods of high demand to those of lower demand allows the healthcare system to operate closer to full capacity, thereby enhancing hospital technical efficiency. However, when waiting lists become excessively long, this effect diminishes, as idle times are eliminated. Moreover, patients’ health may deteriorate significantly, leading to increased treatment costs that may outweigh the savings associated with reduced idle time. In this context, we estimate the marginal cost of hospital output while accounting for waiting lists and their impact on technical efficiency. Our results indicate that, while moderate waiting lists can improve productive efficiency and reduce costs, excessively long waiting lists may negate these benefits.