Estimating technical and scale efficiencies of private hospitals using a non-parametric approach: case of India

This paper applies data envelopment analysis (DEA) to estimate the technical efficiencies of 50 Indian private sector hospitals for the period 2004‐2005 to 2009‐2010. The study shows that only five hospitals turn out to be relatively efficient throughout the study period while the average overall technical efficiency (OTE) of the hospitals in India for the entire period comes out to be 79.40%, suggesting that on an average, hospitals have to increase 20.60% of their outputs with the existing level of inputs. The RTS‐wise efficiency reveals that on average OTE of hospitals operating at DRS is higher than that of those operating at IRS. This suggests that the hospitals operating at IRS could improve their OTE by increasing their size‐scale. The target analysis shows that inefficient hospitals could improve their output level by following the best practices of the efficient hospitals that form the benchmark (peer‐set) for evaluating their performance.