Technical Efficiency of Public Service Hospitals in Indonesia: A Data Envelopment Analysis (DEA)

In order to promote efficiency and the development of hospitals’ services, the Government of Indonesia has issued specific policy which require all of the government-owned hospitals to be managed based on the principals applied in public services agency (Badan Layanan Umum/Badan Layanan Umum Daerah (BLU/BLUD)). The policy of BLU/BLUD is to grant each hospital authorization in managing their funds and resources under the principles of public accounting. Unfortunately, not all government-owned hospitals were granted BLU/BLUD authorization, especially hospitals outside of Jakarta, because local government did not wish to lose one of their main income. The main focus of this research is to calculate the efficiency of the hospitals of which have been granted BLU/BLUD, since one of the main purposes of BLU/BLUD is to provide high quality and efficient health care to the public. The measurement of hospitals’ efficiency is not an easy thing to do, since there are so many inputs and outputs that were related to each other. Which is why, this research is measuring the efficiency level using the DEA (Data Envelopment Analysis) which is able to provide efficiency calculation with multiple inputs and outputs. With the total samples of 82 BLU/BLUD hospitals, this research concluded that the average of hospital’s efficiency score is still on the level of 78.9 % out of 100%.