Improving the "usefulness" of stochastic frontier analysis for health care

Gary D. Ferrier


Newhouse (1994) questioned the usefulness of frontier efficiency estimation for health care applications.  In the intervening years, numerous modeling advances have improved the econometric approach to efficiency measurement known as stochastic frontier analysis (SFA) and myriad academic studies have analyzed efficiency of various health care providers using SFA.  This article takes stock of the current “usefulness” of applications of SFA in the health care sector and offers suggestions on how this usefulness can be further enhanced.

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