The efficiency of Scottish acute hospitals: an application of data envelopment analysis

Abstract

Measurement of the efficiency of health services would aid the promotion of a better allocation of health care resources. Economic analysis suggests a number of ways of defining and measuring efficiency. However, this rarely informs measures used in health service management. This paper looks at the potential for the use in the United Kingdom's National Health Service of the linear programming based method of data envelopment analysis (DEA). DEA is applied to data from 75 UK acute hospitals. The results demonstrate the capacity of DEA to produce a user-friendly array of results, based on sound theoretical underpinnings. These range from the measurement of relative efficiencies to quantified suggestions as to how hospitals may improve efficiency, by examining both their own efficiency and that of comparable units. Information is provided both about individual hospitals and the sample as a whole. DEA is also able to distinguish between hospitals demonstrating differing returns to scale. Our findings suggest that, although still very much under development, DEA is usable and, given the weakness of current means of measuring efficiency in the National Health Service, that DEA has a strong claim for further consideration.