Hospital Efficiency and Data Envelopment Analysis (DEA): An Empirical Analysis of Kemang Medical Care (KMC)

Abstract

Introduction: The current health-financing situation it has become imperative for health facilities in Indonesia to ensure more efficient means of providing services. In the current scenario, there is very little price competition and little incentive to contain costs and ensure efficiency. This study focuses on analyzing the hospital efficiency of KMC. The study makes an attempt to provide an overview of the health services provided by hospitals in KMC in terms of their technical and allocative efficiency. The purpose of study addressing the efficiency issue is to provide empirical analysis of hospital in Indonesia.Methods: This cross-sectional descriptive study involved all the three years financial performance of KMC Hospital. Data collected from 2011-2013 based on financial report (audited). The production model for hospital sectors requires the treatment of multiple inputs and multiple outputs. In this study for variable inputs: cost of goods sold (COGS), operational cost (OC), general cost (GC), patient cost (PC) and doctor's fee (DF). For output variable: revenue (RV), gross margin (GM) and net margin (NM). Efficiency scores were computed using Data Envelopment Analysis (DEA).Result: The absolute efficiency of KMC as a whole was found to have improved after implemented lean. Two years before implemented lean represents not satisfactory level of efficiency. In 2011, efficiency level of input variable COGS: 91.1%, OC: 67.5%, GC: 77.9%, PC: 86.4% and DF: 86.4%. In 2012, COGS: 94.3%, OC: 89.7%, GC: 92.0%, PC : 86.7% and DF: 95.2%. In 2013, overall variable 100%. In 2011, efficiency level of output variable RV: 100.0%, GM: 85.3% and NM: -1,131.3%, in 2012, RV: 100.0%, GM: 90.9% and NM: -432.8%, in 2013, overall variable 100%.Discussion: In this study DEA has proven to be a useful methodology for measuring efficiency a sectorial analysis of hospital within a national setting. Furthermore, DEA allowed to analyze the inefficiencies of the hospital sectors in detail and helped to identify possible improvements and quantify the amount of money that could theoretically be saved, address of inefficiencies were eliminated.