| The U.S. health care industry is experiencing significant pressures to change. Escalating health care costs, payers payment squeezes, and changing demographics demand that hospital administrators manage resources prudently.;This study analyzed Great Plains hospital performance as a whole, comparing urban and rural hospitals efficiency, and returns to scale. Secondly, efficiency analysis of rural hospitals, with state-wise comparison was completed. Technical, allocative, scale, economic, and overall efficiencies were estimated. Finally, economies of scope for rural hospitals were analyzed for inpatient, outpatient, and nonpatient services. Hospital characteristics associated with hospital performance and economies of scope were also identified.;A nonparametric approach is used for this study. The sample of the study consists of 803 (including 548 rural and 255 urban) hospitals from ten Great Plains states. The Health Care Financing Administration, HCFA-2552-92 data set for October 1991 to September 1992 period is used for this study.;Technical efficiency is lower than either allocative or scale efficiency among the Great Plains hospitals. Technical efficiency is lower for rural hospitals. On average urban hospitals are more efficient than rural hospitals in all the efficiency measures. A majority of hospitals in the sample are too large in size. Private hospitals are more efficient than nonprofit and public hospitals. Medicare is negatively associated with hospital performance as a whole. State-wise efficiency measures differ across the sample and may be due to differences in regulations and markets.;Substantial economies of scope exist for diversification of rural hospital operations into inpatient, outpatient, and nonpatient services. Public hospitals, small and large hospitals, and hospitals with higher proportion of Medicare have more incentive to diversify.;Reduction of urban-rural Prospective Payment System rates differences, payment of additional funds for hospitals with higher proportion of Medicare, joint-venture of public and private hospitals may be promising strategies to revitalize the financial position of rural hospitals. Rural hospitals could also be encouraged to diversify into long term care, hospice, and joining in networks. |
