Performance measurement of nonhomogeneous Hong Kong hospitals using directional distance functions

Cook et al. (Oper Res 61(3):666-676, 2013) propose a DEA-based model for the performance evaluation of non-homogeneous decision making units (DMUs) based on constant returns to scale (CRS), extended by Li et al. (Health Care Manag Sci 22(2):215-228, 2019) to variable returns to scale (VRS). This paper locates these models into more general DDF models to deal with nonhomogeneous DMUs and applies these to Hong Kong hospitals. The production process of each hospital is divided into subunits which have the same inputs and outputs and hospital performance is measured using the subunits. The paper provides CRS and VRS versions of DDF models and compares them with Cook et al. (Oper Res 61(3):666-676, 2013) and Li et al. (Health Care Manag Sci 22(2):215-228, 2019). A kernel-based method is used to estimate the distributions as well as a DEA-based efficiency analysis adapted by Simar and Zelenyuk to test the distributions. Both DDF CRS and VRS versions produce results similar to Cook et al. (Oper Res 61(3):666-676, 2013) and Li et al. (Health Care Manag Sci 22(2):215-228, 2019) respectively. However, the statistical tests find differences for the different technologies assumed as would be expected. For hospital managers, the more generalised DDF models expand their range of options in terms of directional improvements and priorities as well as dealing with non-homogeneity.