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CAN DATA ENVELOPMENT ANALYSIS PROVIDE A SCALAR INDEX OF ‘VALUE’?

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ABSTRACT

The concept of ‘value’ typically includes a combination of cost and quality measures. Some approaches to incorporating value into payment systems treat cost and quality as separate dimensions, but policymakers have expressed interest in a single scalar index that combines cost and quality. Treating risk-adjusted cost as an input and multiple measures of quality as outputs, we examine whether data envelopment analysis input efficiency is associated with higher quality and lower cost in a sample of physician practices using 2008 US Medicare claims data from Colorado. The findings suggest that input efficiency might provide a useful scalar measure of value for a value-based payment system for physician services. Copyright © 2013 John Wiley & Sons, Ltd.

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