Investigation of the Impact of the Massachusetts Health Care Reform on Hospital Costs and Quality of Care

In 2006, the Massachusetts legislature passed a landmark health care reform bill (the Reform) that has served as a model for the national health care reform. By aiming to provide “access to affordable, quality, accountable health care,” the goals of this reform were to reduce the number of uninsured Massachusetts residents while containing the growth of health care costs and improving the quality of health care services. The current paper examines the impact of the Reform on the quality of care in addition to hospital costs simultaneously from a perspective of efficiency analysis. We develop an integer-valued non-radial Russell data envelopment analysis (DEA) model, which is unit variant and calculate the hospitals’ efficiency directly. However, the proposed integer-valued model is non-linear. The current paper thus transforms this model into a parametric integer linear programming. We develop a method to derive its optimal solutions. We then use the new DEA model to calculate and compare the efficiency scores of hospitals in Massachusetts and Connecticut pre- and post-Reform. The analysis shows that the Reform has achieved its cost containment and quality improvement goals at the same time. These analyses provide potentially useful information to hospital regulators and government regulators, especially in light of the national interest on health care legislation.