Assessing the technical and allocative efficiency of hospital operations in Greece and its resource allocation implications

In this paper, we seek to develop a research framework concerning the assessment of the efficiency of public sector hospital operations. Public hospitals are increasingly under pressure to improve their operations both in terms of resources they use and also in terms of the quantity and quality of their outcomes. The assessment of efficiency entails both the notions of technical and allocative efficiency as they yield complementary information about the management effectiveness of individual hospitals. Technical efficiency has a diagnostic purpose as it yields comparative information about the effectiveness with which individual units convert their input resources into outputs. On the other hand allocative efficiency has a planning orientation since the objective of the assessment is to gauge efficiency improvements by means of resource reallocation. A linear programming based model is proposed for assessing allocative efficiency in the light of uncertainty about the prices of input factors. The empirical part of the paper is based on data from Greek public hospitals. Results and policy implications are discussed based on data from 98 general hospitals based on information from 1992. It was found that significant inefficiencies are present in the operations of Greek hospitals that account approximately for 100 MEcu in 1992 prices.