Improving Productivity of Service Businesses With a New Efficiency Evaluation Te

Cover Improving Productivity of Service Businesses With a New Efficiency Evaluation Te
Improving Productivity of Service Businesses With a New Efficiency Evaluation Te
H David Sherman
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The cost per patient day is a typical example of ratio which might be used to locate high and low cost hospitals. Note that there is no objective means of establishing a cutoff cost level which separates the more and less efficient hospitals. The local regulatory agency defined potentially inefficient hospitals as those which have costs over one standard deviation above the mean. This "rule of thumb" identifies only hospital C as inefficient. In addition, there is no way to determine if this re...presents use of excess inputs or payment of higher prices for their inputs. In addition, hospital C may have higher costs primarily because it - 15 - treats more complex patient Illness or provides greater amounts of teaching services. These are typical problems associated with financial and operating ratios. DEA identified two hospitals, D and G, as inefficient in their use of inputs to produce the actual mix of patient care and teaching services provided. Note that these hospitals would have gone unnoticed using ratios.

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