Modelling the efficiency of health care foodservice operations : a stochastic frontier approach

The important role of efficiency in the health care foodservice sector has been widely addressed in the literature. Different methods for assessing performance have been proposed. In general, most measures were calculated as simple ratios such as food and labour cost per meal or limited parametric techniques such as regression analysis. These approaches are meaningful indicators of which operational performance areas require attentions; however, problems arise when managers interpret partial productivity measures of this type as indicators of overall performance without considering the effects of other related variables. This could create further problems in complex applications such as the health care foodservice sector where multiple inputs (number of full time employees, energy cost, capital, overheads) outputs (number of meals and patient satisfaction) and environmental or interfering variables (age of equipment, quality of labour or skill level of employees and the degree of readiness of materials) should be considered in the assessment of efficiency. This study contributes to overcoming these limitations by introducing the stochastic frontier approach to assess the efficiency of the health care foodservice sector. It is superior to the traditional productivity approaches as it allows for the integrations of multiple inputs and outputs in evaluating relative efficiencies. The overall objective of the study was to determine the level of cost, technical and allocative efficiency in a sample of health care foodservice operations. More specifically, the objective was pursued by estimating stochastic production and cost frontiers models, which provided the basis for measuring technical (TE), allocative (AE) and cost efficiency (CE). The factors that significantly contribute to increasing inefficiency in health care foodservice operations were also identified. In this way, this study has policy implications because it not only provided empirical measures of different efficiency indices, but also identifies some key variables that are correlated with these indices. It goes beyond much of the published literature concerning efficiency because most research in the area of efficiency analysis focuses exclusively on the measurement of technical and cost efficiency. The stochastic frontier approach was tested in a cross sectional data set from a sample of 101 health care foodservice operations in Australia and the USA. Results showed that the models and all the parameters coefficients were plausible, significant and satisfy all theoretical requirements. Further, results also showed that the average cost, technical and cost efficiency were around 70 percent, 80 percent and 88 percent respectively. These figures suggest that substantial gains in output and/or decreases in cost can be attained if hospital foodservice operations were to improve their current performance. Finally, the results indicated that an increase in the level of manager?s experience and the level of manager?s education could have a positive impact on decreasing the level of inefficiency in health care foodservice operations.