MODELLING THE TECHNICAL EFFICIENCY OF HOSPITALS IN SOUTH-EASTERN NIGERIA USING STOCHASTIC FRONTIER ANALYSIS

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.