Identifying Inefficiencies in Multiple Output Multiple Input Organizations

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Identifying Inefficiencies in Multiple Output Multiple Input Organizations
H David Sherman
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-14- outputs, the teaching output might be viewed as a by-product or secondary output and the patients might be viewed as a single output rather than segregate this into different categories of severity. This simplifying procedure is not defensible from a cost accounting standpoint. Nevertheless, in the absence of any other way of combining and weighting the outputs, similar approaches have been used for hospitals as well as other types of DMU's (see for example [20]). Table 2 column (A) reflec...ts the average cost per patient for each DMU. This results in a ranking of hospitals reflected by the rank order in parenthe- sis directly to the right of the average cost figure in Table 2. The lowest cost (most efficient) DMU is ranked 1 and highest cost (least efficient) DMU is ranked 13. This ranking erroneously classifies H13 (ranked 6) as more efficient than H3 (rank 7) and H6 (rank 9) and it classifies H9 as more efficient than H6. In addition, there is no objective means for determining .

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