Using the DEA-R model in the hospital industry to study the pseudo-inefficiency problem

Because of the unreasonable and unnecessary weight restriction assumption, a barely noticeable deficiency in pseudo-inefficiency occurs at times when applying a CCR model. The CCR was the first model designed for Data Envelopment Analysis (DEA); it remains its most popular model. To detect this type of unobvious deficiency, this study compared the following: the efficiency score and optimal weight set of an input oriented CCR model (CCR-I); the model with a weight restriction assumption; an input-oriented ratio-based DEA model (DEA-R-I); and the model without it. In this case study of hospitals, pseudo-inefficiency was discovered and the reason behind it determined. Further, this study proved that the DEA-R-I is a valid model. Because DEA-R-I is valid and without a weight restriction assumption, this study puts forward the DEA-R-I as a capable substitutive model for CCR-I in order to avoid pseudo-inefficiency.

Research highlights
► This study applied DEA-R-I and CCR-I models to evaluate the performance of medical centers in Taiwan, the pseudo-inefficiency was discovered.
► This study determined the reason for pseudo-inefficiency by comparing the optimal weight sets of two models.
► This study validated the DEA-R-I model and claimed that it can be a substitutive model for CCR-I in order to avoid pseudo-inefficiency.