TITLE:
The Cost Efficiency of Regional Public Hospitals in South Korea
AUTHORS:
Sang-Mok Kang, Moon-Hwee Kim
KEYWORDS:
Regional Public Hospitals, Cost Efficiency, Allocative Efficiency, Technical Efficiency, Scale Efficiency, Data Envelopment Analysis
JOURNAL NAME:
Modern Economy,
Vol.5 No.9,
August
20,
2014
ABSTRACT: This paper investigates the
cost efficiency (CE), technical efficiency (TE), allocative efficiency (AE),
and scale efficiency (SE) over 34 regional public hospitals in South Korea from
2007 to 2010 using Data Envelopment Analysis (DEA). The CE, AE, and TE of these
hospitals during the period are 0.52, 0.71, and 0.74, on average, respectively,
indicating that there is a possibility to reduce their inefficiency of 48%, 29%,
and 26% by reallocating the input mix or scaling input back. SE of these hospitals
during the same period is 0.85, suggesting that most of the regional public
hospitals do not operate under the optimal scale which is efficient relative to
both constant returns to scale (CRS) and variable returns to scale (VRS)
technologies. The empirical result implies that even though half of the regional
public hospitals are comparatively efficient allocatively and technically, they
have not been good at selecting the cost-minimal input mix. It also indicates
that some hospitals have suffered losses from not having the most optimal
scale.