Applying frontier approach to measure the financial efficiency of hospitals

OBJECTIVES: The growth in global healthcare capacity has led to increased healthcare costs and a deterioration in the finances of universal health insurance. Hospitals must consider how to improve financial efficiency and service quality in order to survive and operate sustainably. METHODS: This study applies data envelopment analysis (DEA) and stochastic frontier analysis (SFA) to measure the financial efficiency of hospitals and to identify the factors and business strategies to improve profitability. RESULTS: The findings and recommendations show that (1) the DEA and SFA methods are similar and have reference values; (2) financial efficiency should be improved by reducing medical costs; (3) the quality of medical staff should be improved and manpower reduced; and (4) information, computerisation, and human intelligence in healthcare and management should be enhanced. CONCLUSIONS: In terms of practical applications, this study recommends the promotion of smart healthcare to improve the efficiency and quality of healthcare services, as well as the introduction of artificial intelligence and big data analysis to optimise the use of healthcare manpower. Electronic medical records can be used to reduce the wastage of resources and labour costs, a medication management system can be established, and changes to the procurement system can be made to reduce inventory and improve the efficiency of medical equipment use. It is hoped that this study will provide reference materials and applications for healthcare organisations to improve their operational efficiency and strategies.