Is austerity good for efficiency, at least? A counterfactual assessment for the Italian NHS

In recent decades, austerity measures have been widely adopted in public healthcare systems, so as to cope with financial constraints. This paper assesses the impact of a specific austerity policy implemented in Italy since 2007, with the purpose of reducing the budget deficit of regional governments originated by an excessive healthcare expenditure, the so called Recovery Plans (Piani di rientro). We exploit this context for a counterfactual analysis of the effects of Recovery Plans on the technical efficiency of hospitals operating in the regions where the Plans have been implemented, using as a control group similar hospitals in the regions where the policies were not enacted. The empirical analysis is based on a unique sample of administrative data relative to a large panel of hospitals in the period 2003-2010, and it employs, as identification strategy, the exogenous introduction of the austerity policy in some regions. We find that the policy had a detrimental effect on the efficiency of the hospitals operating in the regions subjected to the policy. The results show that the efficiency loss grows over time, suggesting the existence of negative cumulative effects of the austerity policy.