The effects of size and information

The effects of size and information technology on hospital efficiency
Budsakorn Watcharasriroj, John C.S. Tang*
School of Management, Asian Institute of Technology, P.O. Box 4, Klong Luang, Pathumthani 12120, Thailand
Accepted 22 September 2003
Abstract
This paper investigates the effects of size and information technology (IT) on the efficiency of the production process for 92 public nonprofit hospitals in Thailand. Efficiency is measured by a nonparametric technique, data envelopment analysis (DEA). The effect of size on efficiency is obtained through analyzing the differences in the distribution of the efficiency measures using a nonparametric statistical test, namely, Mann–Whitney test. IT impacts are assessed by the Tobit regression analysis, with the DEA measures and IT as dependent and independent variables, respectively. Results indicate that large hospitals significantly operate more efficiently than small hospitals and IT positively contributes to the efficiency for both large and small hospitals. Policies aiming at improving the efficiency of hospitals should thus focus on size expansion for smaller hospitals as well as on IT adoption. D 2003 Elsevier Inc. All rights reserved.
Keywords: Hospital efficiency; Data envelopment analysis; Information technology; Size; Benchmark
1. Introduction
Governments in most developing countries are beset by the problem of ever increasing health spending, which is expected to continue rising over the next decade (Tyson, 2002). The increasing trend in health spending has compelled governments to focus on the issue of assessment and improvement of hospital efficiency. Thailand is no exception; inefficient utilization of health resources has been found to be a major cause contributing to the increase in public health spending (Sriratanaban, 2001).
1047-8310/$ - see front matter D 2003 Elsevier Inc. All rights reserved. doi:10.1016/j.hitech.2003.09.001
* Corresponding author. Tel.: +66-2-524-5684; fax: +66-2-524-5667. E-mail address: tang@ait.ac.th (J.C.S. Tang).
High Technology Management Research 15 (2004) 1–16
This study employs a nonparametric approach, namely, data envelopment analysis (DEA), to measure the efficiency of the production process of public nonprofit hospitals in Thailand. These hospitals are regarded as major health service providers in the provinces under the Ministry of Public Health (MOPH). DEA technique has been recognized as a useful technique for the analysis of hospital efficiency. The technique uses benchmarking approach to measure hospital efficiency relative to others in their group. Hence, the comparative efficiency measures can assist in identifying best-practice or efficient hospitals and inefficient hospitals within the group. The results obtained can then allow policy makers to develop policies on performance-based basis that can assist the relatively inefficient hospitals to improve their performance. The purpose of this study is to analyze the effects of size and information technology (IT) on hospital efficiency, because these two factors are mainly within the control of MOPH. Size and IT can affect hospital efficiency by their impacts on mechanisms for communication, coordination, and integration of effort across hospitals (Austin, 1988; GAO, 1990; Gianfrancesco, 1990; Zinn & Mor, 1998). Improvements in these mechanisms can enhance hospital efficiency in providing health services with existing resources, giving more accurate diagnosis and providing faster services. DEA technique has been used to evaluate the effects of size or IT on hospital efficiency (Ferrier & Valdmanis, 1996; Lee & Menon, 2000; McCallion, McKillop, Glass, & Kerr, 1999). This study is the first attempt to apply DEA technique to analyze the effects of both size and IT on hospital efficiency. The analytical framework consists of three steps: (1) measurement of hospital efficiency, (2) examination of size effects on efficiency, and (3) assessment of IT impacts on efficiency.
2. Overview of health care system in Thailand
Health services in Thailand are provided by the government, state enterprises, municipalities, and the private sector. The government or public sector is the major health service provider in Thailand (Sriratanaban, 2001), with the main responsibility falling on the MOPH. Health institutions governed by MOPH consist of regional hospitals, general hospitals, community hospitals, specialized hospitals, extended outpatient department (OPD) hospitals1, health centers, and community health centers. All hospitals have full-time physicians. Health centers and community health centers are exclusively staffed by part-time physicians. Regional and general hospitals play the key role in the provision of hospital services in the provinces when taking into consideration the number of beds, physicians, nurses, admissions, and surgical operations, which are generally higher than in community, specialized, and extended OPD hospitals. Although Thailand spent a larg