Determinants of Technical Efficiency in Public Hospitals: The Case of Saudi Arabia

OBJECTIVE: In this study, we investigate the effect of the external environmental and institutional factors on the efficiency and the performance of the public hospitals affiliated to the Ministry of Health (MOH) in the Kingdom of Saudi Arabia (KSA). We estimate the demographic and socioeconomic characteristics of catchment populations that explain the demand for health services. METHODS: We apply descriptive analysis to explore what external factors (demographic and socioeconomic factors) can explain the observed differences in technical efficiency scores. We use Spearman’s rank correlation, multivariate Tobit regression and Two-part model to measure the impact of the explanatory variables (i.e. population density, nationality, gender, age groups, economic status, health status, medical interventions and geographic location) on the efficiency scores. RESULTS: The analysis shows that the external factors had a significant influence on efficiency scores. We find significant associations between hospitals efficiency scores and number of populations in the catchment area, percentage of children (0–5 years old), the prevalence of infectious diseases, and the number of prescriptions dispensed from hospital’s departments. Also, the scores significantly associate with the number of populations who faced financial hardships during medical treatments, and those received financial support from social administration. That indicates the hospitals that serve more patients in previous characteristics are relatively more technically efficient. CONCLUSIONS: The environmental and institutional factors have a crucial effect on efficiency and performance in public hospitals. In these regards, we suggested improvement of health policies and planning in respect to hospital efficiency and resource allocation, which consider the different demographic, socioeconomic and health status of the catchment populations (e.g., population density, poverty, health indicators and services utilization). The MOH should pay more attention to ensure appropriate allocation mechanisms of health resources and improve utilization of health services among the target populations, for securing efficient and equitable health services.