Performance Evaluation of Indian Private Hospitals Using DEA Approach with Sensitivity Analysis

Abstract

Private sector hospitals in India are facing the immense pressure for cost-reduction and better treatment. In order to become efficient and competitive, these hospitals have to provide medical services of international standard at affordable prices. There is a need to develop an approach to assess the efficiency of the healthcare centres. In view of this, the study measures relative efficiency of some private sector hospitals in India. DEA based CCR and BCC models are applied to evaluate the performance of 55 private sector hospitals for the year 2009-2010. The study finds that ten hospitals can set an example of best operating practice for the remaining 45 inefficient hospitals to follow. The DEA analysis reveals that on average every hospital has to increase its output by 23.70% by maintaining the existing level of inputs. The overall performance of the hospitals is largely affected due to poor utilization of the resources. Wockhardt Hospital Ltd is found to be a benchmark in the selected hospitals. Slack analysis indicates the scope for improvement in fixed capital utilization. The sensitivity analysis depicts that the efficiency scores of the hospitals are stable even after the exclusion of the top performer. Keywords: DEA, Efficiency, Hospitals and Sensitivity analysis.