Efficiency assessment and resource allocation for hospitals by data envelopment analysis

Assessing the efficiency of hospitals is a critical research problem in the health care sector. In this paper, we employ the data envelopment analysis (DEA) method to integrate multiple inputs (beds, physicians, nurses, staffs) and multiple outputs (patients, discharges, surgeries, revenue) to develop efficiency measures of the hospitals. In addition, we derive the case-mix index to incorporate information on patient conditions into the model. Then under the DEA framework, we further investigate how to re-allocate the input resources to the hospitals to improve the overall performance of health care service without compromising each hospital's efficiency. We apply the proposed method to a set of hospitals in a representative city of China to demonstrate the effectiveness of the models. Specifically, through better allocation, a small change of input resources can lead to larger improvement in output and efficiency.