Modelling the Technical Efficiency of Hospitals in South-Eastern Nigeria Using Stochastic Frontier Analysis

Abstract

The efficient performance of hospitals is critical to cost containment and the delivery of effective health services. This paper examines the  efficiency of hospitals in LIC context using a sample of 200 hospitals generated from a survey of hospitals in southeast Nigeria. The  paper uses the translog production function version of the stochastic frontier model (SFA) to estimate the efficiency levels of individual  hospitals and the determinants of inefficiency. The results indicate large variations in the efficiency scores of sample healthcare facilities  with average efficiency of 71%. Private hospitals show greater level of efficiency than public ones. The average scale elasticity was also  found to reflect constant returns to scale. The results suggest that large social welfare gains could be made by improving the efficiency of  hospitals in LICs. Suggestions are made on how to achieve greater efficiency in these institutions.