Analysis of the Cost Efficiency of Public General Hospitals in Croatia

Abstract

Purpose: The Croatian population is rapidly ageing, and if current demographic trends continue, by 2050 one in three Croatians will be over the age of 65. This demographic shift implies that a smaller working-age population will need to support a growing number of elderly individuals, placing considerable strain on economic performance. Simultaneously, increasing demand for public health services has driven up public healthcare expenditures, with general hospitals bearing the majority of accumulating unpaid obligations. In this context, assessing the cost efficiency of general hospitals becomes crucial in minimising resource wastage.
Design/Methodology/Approach: Cost efficiency is assessed by analysing how monetary inputs are converted into intermediate outputs. The cost efficiency of 19 Croatian general hospitals is analysed using the most common method—input-oriented Data Envelopment Analysis (DEA)— during the pre-pandemic years of 2015 and 2016, and the pandemic years of 2021 and 2022. One input is used (total expenditures and outlays of general hospitals, excluding investments in facilities) and three outputs (number of inpatient treatment days, beds/chairs occupancy rate in day hospitals, and number of outpatient services in polyclinic-consultative healthcare).
Findings: Cost efficiency scores range from 48% to 100%. On average, hospitals could have reduced expenditures by 7% in 2015, 14% in 2016 and 2021, and by 16% in 2022 while maintaining current output levels. During the COVID-19 pandemic, the overall cost efficiency of general hospitals declined. Pula‑Pola and Varaždin consistently emerged as benchmark (most efficient) hospitals across all four years. In contrast, Vukovar underperformed, with cost efficiency scores below 70% throughout. For most hospitals, relative efficiency rankings remained stable over time—high performers before the pandemic continued to perform well afterward; low performers remained low. The data also indicate that larger hospitals, in terms of expenditures, generally demonstrate better cost efficiency.
Academic contribution to the field: This study contributes to the literature by measuring cost inefficiencies in general hospitals, which are often overlooked in international health economics research, particularly in Central and Eastern European countries. It identifies persistent benchmarks and inefficiencies, offering a data-driven foundation for policy reforms aimed at enhancing financial sustainability and operational efficiency in Croatia’s healthcare system.
Research limitations: The model incorporates a limited set of variables due to data constraints. Including additional indicators, such as pharmaceutical expenditures or case‑weighted inpatient discharges, could provide a more nuanced cost efficiency assessment. This limitation highlights the need for more comprehensive and standardised healthcare data collection in Croatia, especially from the Ministries of Health and Finance.
Practical implications: These findings may assist policymakers, as costefficient general hospitals are vital to economic and social prosperity. Benchmark general hospitals can serve as models, sharing best practices in cost management and resource use that could help improve cost efficiency across general hospitals. Less efficient general hospitals should be targeted for audits, managerial training, or support with budgeting and resource allocation. Furthermore, the study provides a foundation for enhancing national hospital performance monitoring systems and data reporting standards.
Originality/Value: This is the first study to calculate the cost efficiency of 19 Croatian general hospitals.