A Strategic Financial Management Evaluation of Private Hospitals’ Effectiveness and Efficiency for Sustainable Financing: A Research Study
Purpose: The purpose of the study is to evaluate the performance οf private hospitals and identify conditions that secure sustainable financing οf the sector. Design/Methodology/Approach: The Data Envelopment Analysis (DEA) was used as the main tool to measure efficiency and effectiveness among fifteen (15) major private hospitals in Greece. Audited financial statement data were analyzed as a basis for the assessment of their performance. Αn input oriented model was applied due to the fact that assets and employee expenses are more likely to be under the control of management in private hospitals, compared to revenues and CFFO. The latter were used as outputs that represent measures of effectiveness and efficiency respectively which secure sustainability. We opted for the Variable Return to Scale (VRS) version of DEA (in connection with the CRS one), since hospital are systems extremely depended on the human capital and the knowledge management, as a means of creating value and are characterized by non-linear dynamics. Findings: The great majority of the hospitals in the sample exhibit increasing and decreasing returns scale. Inefficiencies found to emanate from a non-optimal scale of the hospitals rather, than from management’s lack of capability to transform inputs to outputs. Practical Implications: The study aspires to frame options and help management to make informed choices that promote sustainable development of the private sector, which are also applicable to the public one. It is essential for public authorities to judge the meaningful performance of the private hospitals, to administer accordingly the level of its subsidies through public insurance funds, the claw back and rebate policies in a period of fiscal austerity and act accordingly to attract or deter the inflow of scalable private funds in healthcare to promote human wellbeing. Originality/Value: Performance differences, can be leveraged to guide improvements in the operation of the private hospitals and reforms in the health care system.