A Two-Stage Estimation of Hospital Performance Using Mortality Outcome Measures: An Application Using Victorian Hospital Data

Melbourne Institute Working Paper No. 10/08

Date: July 2008


C. L. Chua
Alfons Pala ngkaraya
Jongsay Yong


This paper proposes a method of deriving a hospital quality performance indicator using mortality outcome measures. The method aggregates any number of mortality outcome measures observed over several years into a single indicator. We begin with the supposition that there exists an abstract quality index which drives all observed mortality outcomes in each hospital. This abstract index is not directly observable but manifested via the observed mortality outcomes, which we make use of to provide an estimate of the abstract index. The method is applied to a sample of heart disease episodes extracted from hospital administrative data from the state of Victoria, Australia. Using the quality estimates, we show that teaching hospitals and large regional hospitals perform better than other hospitals and this superior performance is related to hospital size.

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