The efficiency of labor matching and remuneration reforms: a panel data quantile regression approach with endogenous treatment variables

The paper evaluates the effect of residency matching and prospective payment on technical and cost efficiency of local public hospitals. Efficiency is estimated using panel data quantile regression models with two endogenous treatment variables. We exploit nationwide longitudinal databases on Japanese hospital participation in the two reforms and on financial performance of local public hospitals in 2005-2012. The results demonstrate that more efficient hospitals opt for each of the reforms, and participation further improves efficiency. The introduction of regional caps in residency matching resulted in efficiency losses, particularly in large prefectures, while a step towards best-practice rate setting in inpatient prospective payment system had no effect on efficiency dynamics.