Technical Efficiency, Productivity, and Determinants of Technical Inefficiency of Local Hospitals in Oman: Using Data Envelopment Analysis

Abstract

Purpose of the study: Evidence suggested that inefficiency is a significant problem for many health systems around the world and, in particular, in developing countries. Oman's health system increasingly faces critical resource constraints to deliver the same or better health services. Better utilization of hospital resources will enable more services to be provided and allow the redistribution of potential resources to ensure equity, accessibility, and the delivery of sustainable quality care. Therefore, this study aims to assess the technical efficiency, productivity, and determinates of technical inefficiency of local hospitals in Oman. Methodology: Input-oriented Data Envelopment Analysis (DEA) approach was used to assess the technical efficiency of 29 local hospitals in Oman under constant return to Scale (CRS), variable returns to scale (VRS) and scale efficiency (SE) using 2018 data. Tobit model was used to assess the determinants of hospital inefficiency. The DEA based Malmquist Productivity Index (MPI) was applied to the panel data to measure the Total Factor Productivity Change (TFPCH) between 2015 and 2018. The STATA IC 16 software was used to conduct this evaluation. Main Findings: 75.8% of local hospitals were technically efficient under VRS and SE assumptions, and 79.3% achieved technical efficiency under CRS assumption. The average technical efficiency score under CRS, VRS and SE were 96%, 97% and 99%, respectively. Tobit's model suggested that the number of physicians and pharmacists negatively correlated with the VRS score at p level < 0.05 and < 0.01, respectively. Furthermore, the Tobit model suggested that the number of outpatient’s visits positively correlated with the VRS efficiency score at p level < 0.01. Local hospitals showed a productivity growth by 18.1% during 2015-2018, mainly attributed to the increase in technological change by 42.6%. Research Implications: The results suggested that one-quarter of local hospitals in Oman were technically inefficient. This study identifies opportunities for improving local hospital performance through efficient utilization of health resources and proper redistribution of human resources. The novelty of the study: This is the first study to assess the technical efficiency, productivity, and determinants of technical inefficiency of local hospitals in Oman. It is hoped that the findings of this study can inform decision-makers to tailor their policies towards better and more efficient utilization of the existing resources.