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The IUP Journal of Applied Economics
Uncovering the Ideal Technical Efficiency Movements of the Private Sector Hospitals of India
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An efficient organizational system saves time, money and human resource. In todayís era, considering the importance of hospital sector, it becomes necessary to identify different methods through which more patients would be served in a more effective way. Simultaneously, with such an immense pressure to work effectively, the hospitalís management needs to build strategies which would help optimal utilization of inputs to deliver maximum welfare. Keeping this in view, the present study attempts to measure the relative performance of the selected 30 private sector hospitals listed in National Stock Exchange of India, setting benchmarks for the inefficient hospitals and suggesting alternative actions that would make them relatively efficient.

 
 
 

In the present modern and competitive world, business organizations are confronting crucial decisions regarding performance enhancement. The primary interest of an organization is to work as efficiently as possible to reduce the associated costs. Ethically, hospitals, which are part of service sector, are the economic establishments with a social concern in a society, and as an exception, hospital sector is not always expected to be optimally efficient in the same manner as a production unit. This is in contrast to the implicit behavior in the economic theory of the firm where efficiency is an outcome of optimized behavior (Evans, 1971).

However, the length of waiting lists, the number of hospital closures, reports of patients being refused treatment, cost cutting and so on indicate that the delivery of healthcare is poor and inefficient in India. According to 2001 population norms, India would require 1.75 million additional beds by 2025. However, there is still a shortage of 4,477 primary healthcare centers and 2,337 community healthcare centers (Doshi, 2010). Approximately 6,800 hospitals are needed in India to provide basic health facilities to people in rural areas (Doshi, 2010). The above statistics suggest that there is a massive burden on the existing hospitals to work properly, rationally and efficiently. So, healthcare sector is one such sector where both the aspects of being ethical and economical are very much prominent. With such an immense pressure to work effectively, the hospitalís management needs to build strategies which would help optimal utilization of inputs to deliver maximum welfare. In other words, in order to provide cost-effective medical services at affordable prices, hospital industry has to become efficient and competitive. Furthermore, given vast amount of resources that move towards funding such institutions, there is a great and growing interest in examining performance and efficiency level of the hospital sector. This rising pressure for cost-reduction and improved treatment would lead to a need for the development of efficient approaches for the proper functioning of the healthcare institutions. Therefore, with the purpose to serve this long-term mission, in recent times, the efficiency of healthcare delivery units is increasingly being examined in the empirical literature (Hollingsworth and Street, 2006).

 
 
 

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