The comprehensive measurement of efficiency and performance in the Health Service
in the UK has become one of the most important managerial developments of recent
years. The reasons for this development were examined, particularly in relation to the
difficulties involved with performance assessment in such a context. The most widely
utilised techniques were evaluated from the perspective of the Health Care Manager
and a number of serious limitations were identified.
In response to these limitations, the technique of Data Envelopment Analysis was
evaluated as an alternative. It has been proposed as an appropriate and useful tool for
the assessment of efficiency, although the literature on DEA showed limited practical
application to public sector services in the UK. The many facets of the technique were
investigated and literature on its application to hospital data was reviewed.
A two-stage application procedure for the DEA technique was developed in response
to this evaluation, to be used in the measurement hospital efficiency. The procedure
was based on a deep theoretical understanding of the DEA methodology. The most
important elements of the process were related to selection of the initial sample, the
identification of the variables to be included in the DEA model and the definition of
the weight restrictions to be incorporated. Input from Health Care Managers was used
to guide the application and data from a sample of acute hospitals in Scotland was
utilised in the analysis. The application procedure showed how the practicalities of the
DEA technique could be enhanced, in particular through the inclusion of weight
restrictions. This led to the development of efficiency strategies for the inefficient
hospitals, which could be related to the policy objectives or managerial structure of
the hospitals in the sample.
It was concluded that there were many potential benefits of the DEA approach to
efficiency assessment and the two-stage application procedure defined here, which
could be seen to fulfil many of the requirements of the Health Care Manager. It was
determined that combining theoretical and practical issues can enhance the
applicability of the DEA methodology.