Hrev_master [page 22] [Healthcare in Low-resource Settings 2016; 4:5525] Healthcare sector efficiency in Gujarat (India): an exploratory study using data envelopment analysis Brijesh C. Purohit Madras School of Economics, Kottur, India Abstract The importance of efficiency in resource utilization in healthcare sector has been rec- ognized globally. In this paper we focus on effi- ciency of healthcare system at sub-state level (i.e., district level) in India using Gujarat state and its district level data for 2012-13. In spite of being an economically advanced state, in terms of infant mortality rate (IMR) the state is not the lowest. We explore the reasons for relative performance of different districts with data envelopment analysis (DEA). We used IMR as output variables. Using principal com- ponent analysis we tried a sub-set of variables, which had low correlations. Thus, four factor scores relating to medical officer, lady medical officer, Ayurveda, Yoga and Naturopathy, Unani, Siddha and Homoeopathy doctor, phar- macist, were used for DEA. We have focused on Charnes, Cooper, and Rhodes scores (or con- stant returns to scale technical efficiency score), and discussed efficiency rankings based on these. Thus, our results pertaining to district level health system efficiency in Gujarat State indicate that some of the dis- tricts have low efficiency in utilization of inputs like doctors, beds and workload per health institutions. There are also other dis- tricts, which need more of these inputs, which may enhance their output and efficiency. Thus, it is suggested that the efficiency in Valsad needs an improvement much more than other districts, whereas districts like Ahmadabad and Surat need more of both medical manpow- er and facilities. Even in case of Vadodara and Rajkot, the ranking in terms of most of medical manpower and facilities is low and thus these districts may also be benefitted by additional inputs. Hence, there is a mix of both ineffi- ciency and inadequacy of inputs, which is reflected in our results. Introduction The importance of efficiency in resource utilization in healthcare sector has been emphasized by a number of empirical stud- ies.1,2 Both a unit level and the aggregate level analyses have been attempted. Some researchers have focused on hospitals, nurs- ing homes, health maintenance organizations (HMOs) and district health authorities.3-9 Generally either of the methods, namely, non- parametric or parametric is employed. Among the former, data envelopment analysis (DEA) is popular. Among the latter, an idealized yard- stick is developed that is used to evaluate eco- nomic performance of health system. These methods provide a production possibility fron- tier depicting a locus of potentially technical efficient output combination that an organiza- tion or health system is capable of producing at a point in time. An output combination below this frontier is termed as technically ineffi- cient.10-12 There exists an exhaustive array of reviews which provides us in detail the steps followed and empirical problems that have been faced by the researchers.13,3 Nonetheless, there are a very few studies in the developing countries’ context. In the Indian context, the focus has mostly remained either on the all- India rural or urban sector or the analysis has been carried out up to the state level aggre- gates only. So far, a district level analysis has been attempted for a few states including Punjab, Maharashtra, Karnataka, West Bengal and Madhya Pradesh.14 We extend our analysis in this paper to focus on efficiency of the healthcare system at sub-state level (i.e., dis- trict level) in India using Gujarat state and its district level data. We explore the reasons for relative performance of different districts with DEA. Gujarat is one of the high-income Indian states and with its above national average income at INR per capita 59,157 at constant prices, is third next to Maharashtra and Harayana (Table 1). Situated in the western part of India with capital city as Gandhinagar, the state covers an area of 196,204 km2 (75,755 sq miles) and a popula- tion above 60 million. The state is bordered by the states of Rajasthan, Maharashtra, and Madhya Pradesh. In terms of literacy (2011 census), growth in literacy (between 2001- 2011) and per capita health expenditure the state occupies a rank of 5, 6 and 7 respectively among the major Indian states (Table 1). In terms of infant mortality rate (IMR) (total): rural and urban, in 2013, it is 8th, 11th and 4th rank (Table 2). The IMR in various dis- tricts of Gujarat varies considerably. The rela- tive position of different districts in terms of IMR, often considered as an important indica- tor of health status leaving aside the case of exception of Sabar Kantha district, varies from 2 (in Banas Kantha, Dohad, Panch Mahals and Porbandar) to 14 (in Ahmadabadand Surat).16 In this paper, we make an attempt to find out technical efficiency using a non-parametric approach known as DEA.11,12 Materials and Methods The DEA methodology, originating from Farrell’s (1957) and further by Charnes, Cooper and Rhodes (1978), assumes the exis- tence of a convex production frontier. The pro- duction frontier in the DEA approach is con- structed using linear programming methods. The term envelopment stems from the fact that the production frontier envelops the set of observations.11,12 The general relationship that we consider is given by the following function for each dis- trict i: Yi = f (Xi), i=1.........n(1) where we have Yi – our output measure; Xi – the relevant inputs. If Yi