The productive efficiency of Chinese hospitals

Since the implementation of health care reforms, much has been documented regarding the practices and behavior of hospitals or health profession in China. While these documentations pointed to various problems arising from the reforms, a systematic analysis is rarely found. Based on five years' data, the present study aims at providing empirical evidence of inefficiency of hospitals in China. Using the data envelopment analysis, the sources of inefficiency were examined. Echoing the unnecessary care, over-prescription of drugs and the adoption of high-tech treatments since the implementation of health care reforms, the sampled hospitals were found quite inefficient and pure technical inefficiency played a dominant role in driving the inefficiency of hospitals. Combining the panel nature of the data and the Malmquist Index computation, hospitals had experienced productivity growth between 2004 and 2008. Mirroring the behavior of hospitals, technological progress was the underlying force for the growth and the deterioration in efficiency change was found. The results summarized by region revealed that the stage of economic development and the efficiency performance of hospital did not necessarily go hand in hand.

Research highlights► We examine the overall efficiency, scale efficiency and pure technical efficiency of Chinese hospitals in Guangdong province using DEA. ► We estimate the productivity growth and its components using Malmquist Index for Guangdong hospitals between 2004 and 2008. ► The Guangdong hospitals were found to be very inefficient and the source of inefficiency stemmed from pure technical inefficiency. ► High productivity growth of hospitals was observed as a result of great improvement in technological change over time.