Ring fencing of elective surgery: does it affect hospital efficiency?

Ring fencing (RF) is defined as separating elective from emergency operations in parallel hospital production lines. This study examines the effects of RF of elective surgery on hospital efficiency. The analysis is performed on two levels. First, an intensive three-month study at the departmental level of three hospitals was performed. Second, a panel data analysis of the organizational population of Norwegian hospitals over the period from 1992 to 2000 was conducted, using a 'fixed effect' regression model to analyse the effect of RF on hospitals' cost and technical efficiency. The intensive study indicates that RF could have positive effects both on cost and technical efficiency under certain conditions of case-mix and the demand for elective surgery, while the panel analyses of the effects of RF in the hospital population do not produce stable results. We cannot conclude that RF has unconditional positive effects on hospitals' efficiency. However, in certain situations of case-mix and demand for services, RF could be a valuable tool for managers to increase hospitals' efficiency.