Productivity of public hospitals in Nepal: a data envelopment analysis

Public hospitals in Nepal account for a major share of the total health budget. Therefore, questions are often asked about the performance of these hospitals. Existing measures of performance are limited to historical ratio analyses without any benchmarks. The objective of this study is to explore the trends in inputs, outputs and productivity changes in Nepalese public hospitals from 2011-2012 to 2013-2014.

The study was conducted among 32 Nepalese public hospitals (23 district level and 9 higher level) for the three fiscal years from 2011-2012 to 2013-2014.

First, basic ratio analyses were conducted for the input and output measures over the study years. Then, Malmquist productivity change scores were obtained using data envelopment analysis. Aggregated as well as separate analyses were conducted for district level and higher level hospitals.

Real expenditures of the sampled hospitals declined over the 3-year period from an average of US$ 371 000 in year 1 to US$ 368 730 in year 2 and US$ 328680 in year 3. The average aggregated hospital outputs increased marginally from 8276 in 2011-2012 to 8613 in 2013-2014. The total factor productivity of the study hospitals declined by 6.9% annually from 2011-2012 to 2013-2014. Of the total 32 hospitals, productivity increased in only 12 (37.5%) hospitals and declined in the remaining 20 hospitals. The total factor productivity loss was influenced by a decline in technology change, despite an increase in efficiency.

In general, productivity of the study hospitals declined over the study period. Availability and accessibility of accurate, detailed and consistent measures of hospital inputs and outputs is a major challenge for this type of analysis.