Article

On Measuring Technical Efficiency

of the Health System in India:
An Application of Data
Envelopment Analysis

Journal of Health Management

17(3) 285298
2015 Indian Institute of
Health Management Research
SAGE Publications
sagepub.in/home.nav
DOI: 10.1177/0972063415589229
http://jhm.sagepub.com

Nutan Shashi Tigga1

Udaya S. Mishra2
Abstract
Huge investments have been made in improving the health system of India since early independence,
which has resulted in health outcomes such as infant and maternal maternity rates and life expectancy
levels to exhibit impressive reductions and increments, respectively. Although at the national level
these have been impressive, it is appalling at the state level. States such as Kerala and Tamil Nadu have
always topped in displaying low infant and maternal mortality rates associated with high levels of health
workers and infrastructure in contrast to states like Bihar and Uttar Pradesh. In the present study, we
use data envelopment analysis (DEA) to assess and compare the health system across states of India.
Using DEA, we attempt to derive desired levels of health manpower and infrastructure to be emulated,
to make the health systems efficient. The study limits to two outputs and two inputs for 27 states of
India and used the output oriented DEA. It was found that of the 27 states only six of them were technically efficient, having an efficiency score of 1.00. The remaining states were technically inefficient and
were using more than required amount of inputs to achieve the current levels of output. These inefficient states could make their health system efficient by following the efficient states as peers.
Keywords
Data envelopment analysis, technically efficient, health system, health manpower, infrastructure

Introduction
Health is believed to be a primary ingredient of human welfare and an engine of economic growth. There
exists a considerable body of literature assessing the influence of health on economic outcomes, inferring a strong causal relation between health and aggregate economic performance. A healthy worker is
1
2

Doctoral Student, Centre for Development Studies, Prasanth Nagar Rd, Ulloor, Trivandrum, Kerala, India.
Professor, Centre for Development Studies, Prasanth Nagar Rd, Ulloor, Trivandrum, Kerala, India.

Corresponding author:
Nutan Shashi Tigga, Centre for Development Studies, Prasanth Nagar Rd, Ulloor, Trivandrum 695 011, Kerala, India.
E-mail: nutan12d@cds.ac.in

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more productive and earns better earnings than his/her counterparts. It also has a positive impact on
educational outcomes and human capital formation (Government of India, 2005). Bloom, Canning and
Sevilla (2001) in their cross-country study reported that health has a positive and statistically significant
effect on the rate of growth of gross domestic product (GDP) per capita.
The health of the people depends to a great extent on the health system of the country, which is vital
in ensuring good health for its people. In general, health system refers to an organization of people, institutions and resources, which delivershealth care to the people. It has been conceptualized and defined in
different ways and varies from country to country. The World Health Organization (WHO) defines
health system as consisting of all organizations, institutions and resources whose primary purpose is to
improve health. The World Health Report (WHR) of the year 2000 was solely devoted towards assessing
health systems (WHO, 2000).
The health system of India is one of the largest service sectors. It follows a three-tier structure
primary, secondary and tertiary level of health care provided by the public sector, private sector and an
informal network of providers of care operating within an unregulated environment. The primary health
care is the first level of contact between individuals and the health system aiming to provide preventive,
curative and promotive services to the community. At this level, only common and simple ailments are
treated. It mainly involves care for mother and child, which also includes family planning, immunization, prevention of locally endemic diseases, treatment of common diseases or injuries, provision of
essential facilities, health education, provision of food and nutrition and adequate supply of safe drinking
water. In India, primary health care is provided through a network of sub-centres (SCs) and primary
health centres (PHCs) in rural areas and health posts and family welfare centres in urban areas. The secondary health care refers to a second tier of health system, in which patients from the PHCs are referred
to the medical specialists and other professionals in hospitals located in administrative subdivisions.
It mainly focuses on providing curative and specialized care to the community. It is the first referral
centre for PHC and SC. Community health centres (CHCs), sub-divisional hospital (SDHs) and district hospitals (DHs) function as the secondary level of health care. Tertiary health care is the third tier
of a health system, which provides specialized consultative care as well as comprehensive services to the
community for the complex ailments. In India, tertiary care service is offered by medical colleges and
advanced medical research institutes.
In India, health service delivery consists of two sectorspublic and private. The public health delivery system is characterized as underfunded, understaffed and poorly equipped. The public health system in the rural areas is structured in the form of PHC, CHC and sub-centre, which provide primary
care, secondary and tertiary level care. Almost 70 per cent of Indias population resides in the rural
areas; hence, the performance levels of the rural health system are reflected in the overall health outcomes of the country (Sankar & Kathuria, 2004). The health system in the urban areas is entirely different from its rural counterpart. Apart from public provision, it also has a large, well-endowed and
equipped private sector.
The performance of the health system in India is abysmal compared to the other technological
advances achieved by the country. This failure in improving the health status of its people cannot merely
be linked with poverty and deprivation levels given the celebrated economic growth and the position
with regard to the GDP levels. Instead, it is the poor health status of the population that places the
country in the 134th rank in the Human Development Index (Rao, 2013). Few other revealing health
indicators indicate Indias position vis--vis other countries132 in terms of life expectancy at birth;
124 in maternal deaths; 143 in infant deaths and 145 in child deaths under five years of age. Indias
position is worse than Bangladesh, China, Nepal and Sri Lanka (Rao, 2013). Moreover, like the other
developing countries, India faces a severe shortage of health resources, both in terms of infrastructure
and manpower. The Joint Learning Initiative (JLI) report on Human Resources for Health (HRH) (2004)

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established a threshold of 25 health workers (doctors, nurses and midwives) per 10,000 population,
while the WHO Global Atlas of Health Workforce endorsed a threshold of 23 workers per 10,000 population (High Level Expert Group, 2011). It further reported that 57 countries including India are currently
facing severe health manpower shortage. Furthermore, health worker disparity across states in India is
another disturbing aspect of contention in this regard.
The WHR (2000) has rightly emphasized that the primary goal of a health system is providing better
health to the people in a responsive and fairly distributed manner. The extent to which these goals are
successfully achieved is revealed in the different levels of health outcomes. Moreover, there is a perception that health systems could operate more efficiently. Many countries have realized that there exists a
gap while analyzing the health systems, which mainly focused on the differences of the levels of outcomes rather than concentrating in the levels of resources or their use. The WHO (2000) and World
Banks Health, Nutrition and Population Report (2001) made the first attempts ever to measure the
efficiency of health systems of 119 and 115 countries, respectively, across the globe, to find out that
many countries, despite having similar levels of income and education attainments, differed in levels of
outcomes (Kathuria & Sankar, 2005).
Efficiency in the health system can be defined as attained level compared to the maximum level that
could be achieved using the given amount of resources (Tandon, Lauer, Evans & Murray, 2003).
Analyzing efficiency of the health system is of utmost importance, given the limited resources available to meet the demands of a large population in the developing countries including India. This resource
constraint further leads to unequal delivery of health services, leaving demands of many unmet, which
in turn results in poor population health outcomes. Evidently, many interventions such as universal
health coverage and Millennium Development Goals are far from achievable for many countries, which
include the South Asian countries and the African countries. Countries have been debating on improving
the efficiencies of their health system, thereby providing impetus for various health system reforms in
many developed and developing countries. A critical review of health sector reforms in sub-Saharan
African countries points that apart from poor financial inflows, poor quality of health care has significantly contributed to the failure of many reforms undertaken in many developing countries (cited in
Akazili, Adjuik, Jehu-Appiah & Zere, 2008). Most of the developing countries have realized that merely
increasing the allocation of financial resources might not ascertain an efficient delivery system; moreover, the majority of these countries have already reached the upper limit of allocating financial inflows
into the health sector (Akazili et al., 2008). The WHR (2000) points out that improving efficiency of
human resource for health is the key to reduce the crisis of human resource (WHO, 2000). Since then,
many countries, especially the African countries, are endeavouring to develop strategies and interventions to retain and employ health workers, while simultaneously utilizing the available health workers
efficiently (Kirigia et al., 2011). Thus, increasing the number of health workers would certainly lead to
the betterment of the health outcomes; improvement can also be achieved by using the existing resource
efficiently (Sousa, Tandon, Poz, Prasad & Evans, 2006). Therefore, measuring efficiency of health systems has over time originated as an important area of research in the ambit of health economics (see
Banker, Conrad & Strauss, 1986; Burgess & Wilson, 1998; Fare et al., 1993; Fizel & Nunnijhoven, 1992;
Kooreman, 1994; Burgess & Hollingsworth, 1997; Linna, 1998; Parkin & Hollingsworth, 1997; and
Maniadakis & Thanassoulis, 2000; Rollns, Lee, Xu & Ozcan, 2001 as cited in Worthington, 2004). The
two important concepts of efficiencytechnical efficiency (TE) and allocative efficiency (AE) (discussed below)in the context of health care would refer to the relation between the different resources
used, namely, capital, labour and equipment and health outcomes (Worthington, 2004). Further, according to Palmer and Torgerson (1999), these outcomes may be defined as either intermediate outputs
(number of patients treated, patient-days, waiting time, etc.) or health outcomes (lower mortality rates,
longer life expectancy, etc.). Here, AE implies the ability of an organization to use these inputs optimally,

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given the cost and productive technology. On the other hand, total economic efficiency (EE) of a
health care organization could be achieved if its resources are technically and efficiently utilized
(Worthington, 2004).
India has experienced a steady increase in health resources; however, there are differences in what is
needed, what is allocated and what is virtually in place. As a result, there is an apparent mismatch
between the levels of health resources and health outcomes across states in India. Few states, such as,
Kerala and Tamil Nadu, have health worker levels of 25 and 19 doctors and nurses (per 10,000 population), respectively, associated with better health outcomes when compared to its counterparts (Rao,
Bhatnagar, Berman, Saran & Raha, 2008). Hence, to cope with the increasing crisis of health workers,
poor management of health system and rising health care cost, efficiency measurement becomes imperative. Such an exercise would also ensure the full and efficient utilization of all the available health-related
resources for improving health outcomes.

Measures of Efficiency
In the following section, a brief discussion is provided on the modern efficiency measurement. A measure of efficiency was introduced by Farrell (1957), which came from the works of Debreu (1951) and
Koopmans (1951). Koopmans (1951) gave a formal definition of efficiency:
a producer is technically efficient if an increase in any output requires a reduction in at least one other output or
an increase in at least one input, and if a reduction in any input requires an increase in at least one other input or a
reduction in at least one output. Thus a technically inefficient producer could produce the same outputs with less
of at least one input, or could use the same inputs to produce more of at least one output.

Farrell (1957) further proposed that efficiency can be decomposed into two componentsTE and AE.
The two measures together provide a measure of total EE. The TE component refers to the ability of maximization of outputs with given level of inputs and mix of inputs, or the minimization of input used for a
given level of output. TE is usually defined in relative terms for a given benchmark, referred to as the best
practice frontier which represents the actual observed achievements (Fre & Grosskoopf, 1998). AE, on
the other hand, refers to the maximization of outputs for a given level of input cost, or the minimization of
cost for a given output level. The calculation of efficiency scores can be either input or output oriented.
In the input-oriented approach to TE, we measure the fewer inputs that could be employed and still
produce the same level of output, while the output-oriented approach measures how much additional output
could be produced without any change in current inputs (Forbes, Harslett, Mastoris & Risse, 2010).
There are various measures of efficiency that have been widely used to measure levels of efficiency,
such as, the ratio analysis, linear regression analysis, stochastic frontier analysis (SFA) and DEA.
However, DEA is preferred over other measures for the following reasonsminimal a priori assumption, does not require a specific functional form, accommodates multiple inputs and multiple outputs and
does not face problems of multicollinearity and heteroscedasticity.
DEA is a non-parametric mathematical programming technique based on linear programming (LP) to
measure the relative performance of a group of organizational units, such as, firms, plants and entities
also known as decision-making units (DMUs). The phrase DMU was coined by Charnes, Cooper and
Rhodes to include non-market agencies, such as, schools, hospitals and courts (Ray, 2004). It helps to
estimate the best or maximum performance for each DMU relative to others, which lie on or below the
efficient frontier. There are two basic models of DEAthe CCR model (Charnes, Cooper & Rhodes, 1978)

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and the BCC model (Banker, Charnes & Cooper, 1984). Apart from these, there are many other models
that have been developed over time, but the selection of the model depends of the nature of the production technology. These models generally differ in terms of orientation (input or output), disposability
(weak or strong), returns to scale (constant, diminishing or increasing) and the type of measures (radial,
non-radial or hyperbolic).
The theoretical framework of DEA was first introduced in the operations research literature by
Charnes et al. in 1978 in their seminal work. This framework was widely known as CCR model as it was
framed by Charnes, Cooper and Rhodes. The CCR model is an extension of the single-outputinput TE
measure, introduced by Farrell in 1957, into a multiple-outputinput relative efficiency measure. Many
other extensions of the original models have been made since then. The original CCR model assumed a
production technology with constant returns to scales (CRS). This was rather restrictive, as it is often
unlikely that CRS would hold in many realistic cases. As a result, the CCR model was extended to a
more flexible and refined model by Banker et al. in 1984, popularly known as the BCC model. This
model generalized the original model for technologies exhibiting increasing, constant and decreasing
returns to scale (see Ray, 2004). In other words, the BCC model relaxed the assumptions of CRS to allow
for variable returns to scale (VRS). The BCC model is derived from Shepherdss distance function
(1970) (see Fried, Lovell & Schmidt, 2008).
DEA has emerged as a popular and widely used method of measuring efficiency of DMUs across different sectors, health being one of them. Since the mid-1980s, the use of DEA as a method to measure
the productive performance of health care services has increased. In health care, DEA was first applied
by Nunamaker and Lewin in 1983 to measure nursing service efficiency. Since then, many studies have
assessed the efficiency of hospitals, health centres and the overall health care system, using the DEA
method. Most of these have been conducted in the industrialized countries and middle- and low-income
countries (Akazili et al., 2008; Kirigia et al., 2001, 2004, 2008, 2011). Few studies in the Indian context
are also found in the DEA literature (Bhat, Verma & Reuben 2001; Dash, 2009; Dash, Vaishnavi,
Muraleedharan & Acharya, 2007; De, Dhar & Bhattacharya, 2012; Shetty & Pakkala, 2010).

Methodology and Data

Methods
The objective of this study is to evaluate the efficiency of the health system in India. As discussed in the
earlier sections, DEA has two orientationsinput and output. For the present study, the output-orientated
model has been selected; however, both the input- and output-oriented models have been discussed in
brief. The assumption of CRS does not hold true in a realistic situation; hence, VRS is assumed. However,
one must be careful in assuming VRS, which sometimes leads to a higher number of DMUs being efficient (Ozcan, 2008). The LP of both input and output orientation is given below.
Input-oriented Model
The input-oriented model, which is solved for each state, in this case 27 states, minimizes the inputs,
while maintaining the same level of outputs. Presented with notations, state j uses xij inputs and yrj
outputs. Let xi j = input i for state j, where i = 1, 2 and j = 1, 2, 3, , 27 and yrj = level of output r for
statej, where r = 1, 2 and j = 1, 2, 3, , 27.
The objective of the model is to minimize the efficiency score denoted by , where 0 < < 1. represents the amount by which all the inputs can be reduced for each state while keeping the level of output

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same. The decision variables j for j = 1, 2, , 27 is the weights used to form a weighted average frontier
composite.
Therefore, the input model for state j0 is
Minimize .
Subject to:

27

l j xij xij0 i 1, 2

j1

27

yrj yrj0 r 1, 2

j1

lj 0, j = 1, 2, 3, ..., j0.27,
where, lj 0, j = 1, 2, 3, ..., j0.27
Output-oriented Model
The objective of the output-oriented model is maximizing output at the same level of inputs. Let j =
(y1j.yrj) 0 and Xj = (x1j..xij) 0, j = 1, 2, , 27.
Similar to the input oriented approach, here the efficiency score for state j0 , which is the reciprocal of
the inefficiency, that is obtained by solving the following linear programming.
Maximize
Subject to:

27
j1

27

l j xij xij0 i 1, 2

yrj yrj0 r 1, 2

j1

lj 0, j = 1, 2, 3, ..., j0.27,
where, lj 0, j = 1, 2, 3, ..., j0.27
The two models are similar and must be run individually for all the states.
DMUs (or states) having an efficiency score equal to 1 indicate an efficient unit and scores less than
1 as an inefficient unit. Apart from indicating the efficient and inefficient levels, the DEA results also tell
about the reductions or increments to be made by the DMUs to reach the frontier, thereby becoming
efficient. Next, the DMUs that are inefficient also identify the various peers or benchmarks that it can
follow, which are actually the efficient DMUs. In other words, peers show a mix of efficient DMUs the
inefficient DMUs should follow such that they become efficient. The results and findings are discussed
in the subsequent sections.

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Data
The data used in this study are solely from the secondary sourcesFamily Welfare Statistics, 2011
(Ministry of Health and Family Welfare (MoHFW)); District-Level Household and Facility Survey
(DLHS), 200708 (Reproductive and Child Health (RCH)); and National Health Profile, 2012 (Central
Bureau of Health Intelligence (CBHI)). The data for all the inputs and outputs are taken from the report
on National Health Profile for the year 2012; however, most of the data were for 2011. Due to unavailability of any information on number of health workers or number of hospitals in the private sector, the
study focuses on the public health delivery system.

Selection of Inputs and Outputs Variable

Two kinds of data are required to run the DEAinputs and outputs. The selection of these needs careful
attention as it could influence the efficiency scores. For the present study, the input and output variables
selected was guided by the existing literature on the measurement of health care using DEA and on the
availability of data. We have considered 27 states of India; union territories have been eliminated due to
the lack of data. The input variables considered for the study are health workers per 1,000 population
(doctors, nurses and paramedical staff) and health centres per 1,000 population (PHCs, CHCs and SCs),
whereas the output variables are infant survival rates and percentage of institutional deliveries.
In the present study, we have considered infant survival rate instead of infant mortality rate (IMR).
IMR refers to the number of deaths of children less than one year per 1,000 live births. As discussed
above, using output-oriented approach implies augmenting the level of output, while keeping the level
of inputs same. In other words, more the output better the performance of state. However, in the case of
IMR, it is the opposite, that is, lower the level better is the states performance. Therefore, instead of
considering IMR, which is a negative variable or undesirable output (in DEA literature), we have taken
the infant survival rates. There are few studies that have taken IMR as the output variables by using other
formulations of DEA, which takes care of these undesirable outputs (see Shetty & Pakkala, 2010). The
formula for estimating survival rate is given below:
Infant Survival Rate =

1000 Infant Mortality Rate

.
Infant Mortality Rate

It is the ratio of children with less than one year of age who survived to the number of children who died.
The inputs and outputs for 27 states for the year 2012 have been shown in Table 1. For those variables
whose data were not available for the year 2012, the latest available data were used.
It is important to point out that, for this study only a few inputs and outputs have been taken as too
many inputs and outputs for a comparatively small sample (27 DMUs in this case) may result in many
DMUs to lie on the efficiency frontier.

Results and Findings

Table 2 shows the descriptive statistics for all input and output variables used in the study. Except for one
outputinstitutional deliveriesall the other inputs and outputs show wide variations as can be seen
from the maximum and minimum values. On average, a state employed 0.43 health workers, which

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Table 1. Inputs and Outputs for States of India

States

Infant Survival
Rates (Per 1,000
Live Births)

Institutional
Deliveries (%)

Health Centres
(Per 1,000
Population)

All Health
Workers (Per
1,000 Population)

Andhra Pradesh

18.23

94.4

0.17

0.43

Arunachal Pradesh

30.25

94.2

0.31

0.63

Assam

14.63

78.1

0.18

0.47

Bihar

16.86

85.4

0.11

0.23

Chhattisgarh

16.54

54.4

0.23

0.37

Goa

99.00

99.5

0.16

0.38

Gujarat

19.00

91.8

0.14

0.27

Haryana

17.52

80.2

0.12

0.36

Himachal Pradesh

21.73

63.5

0.38

0.55

Jammu & Kashmir

19.41

76.1

0.19

0.49

Jharkhand

20.74

77.8

0.14

0.26

Karnataka

21.22

93.7

0.19

0.35

Kerala

82.33

99.8

0.17

0.30

Madhya Pradesh

13.29

83.9

0.14

0.23

Maharashtra

29.30

90.7

0.11

0.37

Manipur

70.43

75.5

0.19

0.79

Meghalaya

16.24

44.8

0.18

0.47

Mizoram

26.03

81.4

0.40

1.15

Orissa

13.49

82.3

0.20

0.33

Punjab

23.39

68.5

0.13

0.33

Rajasthan

14.87

88.5

0.20

0.48

Sikkim

29.30

81.8

0.28

0.72

Tamil Nadu

31.26

99.8

0.14

0.31

Tripura

28.41

83.6

0.22

0.73

Uttar Pradesh

13.93

57.9

0.12

0.18

Uttarakhand

21.73

60.7

0.21

0.26

West Bengal

27.57

68.1

0.13

0.25

Source: National Health Profile (2012) and DLHS-3.

Table 2. Summary Statistics

Infant Survival
Rates
(Per 1,000)

Institutional
Deliveries (%)

Health Centres
(PHCs, CHCs
& SCs)

All Health Workers

(Doctors, Nurses &
Paramedical Staff) (Per 1,000)

Mean

28.03

79.87

0.19

0.43

Standard Deviation

21.25

14.54

0.08

0.22

Minimum

13.29

44.80

0.11

0.18

Maximum

99.00

99.80

0.40

1.15

Statistics

Source: Authors own compilation.

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included doctors, nurses and paramedical staff for every 1,000 people and has an average of 0.19 health
centres for every one thousand population. The efficiency scores for output-oriented DEA was computed
using the DEA Programme, version 2.1, developed by Tim Coelli.
In the output-oriented approach, the outputs are maximized while keeping the same levels of inputs.
In reality, given the levels of inputs, attempts are made to improve the levels of output. With the government taking decision on matters related to health, it would be difficult to reduce the level of inputs, in
this case the level of manpower and infrastructure, to improve outputs.
In addition, the government needs huge funds and resources to create employment and infrastructure
facilities, which once created or appointed cannot be reversed. Hence, a more feasible approach should
be employed to improve the outcome levels keeping the level of inputs same. Therefore, output-oriented
approach was found to be more appropriate for the present study than input-oriented approach. We also
assume that the available quantity of resources is fixed for a particular point of time and the DMUs have
to utilize the given resource to maximize output.
Table 3 gives the TE scores for the 27 states. A score of 1.0 is considered to be efficient, thus lying on
the efficiency frontier, while scores below 1.0 indicate inefficiency which lies below the frontier. Of
these 27 DMUs, six DMUs (22 per cent) are efficient with a score equal to 1, lying on the efficiency
frontier, while the other 21 DMUs (78 per cent) are inefficient. All the north-eastern states, except for
Arunachal Pradesh, had an efficiency score below the average. Meghalaya was the least efficient state
with a TE score of 0.45, followed by Chhattisgarh (0.55).
The efficient states are seen to have comparatively better deliveries than the inefficient states; however, in the case of infant survival rates, Bihar and Uttar Pradesh have exhibited very poor performance.
One obvious reason for Bihar and Uttar Pradesh to lie on the frontier despite having poor outcomes is
because they are utilizing low levels of health manpower and infrastructure as compared to other states.
As can be seen, Bihar has the lowest level of health centre density, while Uttar Pradesh has the lowest
level of health worker density.
Table 3. Efficiency Scores of Output-oriented Approach
States

TE Scores

States

TE Scores

Andhra Pradesh

0.95

Maharashtra

1.00

Arunachal Pradesh

0.94

Manipur

0.76

Assam

0.78

Meghalaya

0.45

Bihar

1.00

Mizoram

0.82

Chhattisgarh

0.55

Orissa

0.83

Goa

1.00

Punjab

0.71

Gujarat

0.98

Rajasthan

0.89

Haryana

0.86

Sikkim

0.82

Himachal Pradesh

0.64

Tamil Nadu

1.00

Jammu & Kashmir

0.76

Tripura

0.84

Jharkhand

0.85

Uttar Pradesh

1.00

Karnataka

0.94

Uttarakhand

0.66

Kerala

1.00

West Bengal

0.76

Madhya Pradesh

0.98

Mean

0.84

Source: Authors own compilation.

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These TE scores further indicate how these inefficient units can be made efficient by identifying input
and output slacks. Slack refers to excess input or missing output that exists even after the proportional
change in the input or the outputs (Shim, 2000). These are estimated only for the inefficient units and
specified by the amount of input or output that could be increased or decreased to make the unit efficient.
These input and output slacks have been given in Table 4. Almost all the DMUs require augmenting their
output levels as well as reducing their input levels to make to the frontier. Arunachal Pradesh, one of the
inefficient DMUs, requires increasing its survival rate by 63 per 1,000 population, along with reducing
the number of health workers by 0.13 per 1,000 population. Likewise, the rest of the states need to make

Table 4. Input and Output Slacks of Output-oriented Approach

States

Survival Rates

Institutional Deliveries

Health Centres

All Health Workers

Andhra Pradesh

63.06

0.00

0.00

0.13

Arunachal Pradesh

50.28

0.00

0.14

0.33

Assam

63.64

0.00

0.01

0.17

Bihar

0.00

0.00

0.00

0.00

Chhattisgarh
Goa
Gujarat
Haryana
Himachal Pradesh

51.99

0.00

0.06

0.07

0.00

0.00

0.00

0.00

28.23

0.00

0.00

0.00

9.48

0.00

0.00

0.01

48.18

0.00

0.21

0.25

Jammu & Kashmir

56.88

0.00

0.02

0.19

Jharkhand

20.51

0.00

0.00

0.00

Karnataka

59.73

0.00

0.02

0.05

Kerala

0.00

0.00

0.00

0.00

Madhya Pradesh

3.33

0.00

0.03

0.00

Maharashtra

0.00

0.00

0.00

0.00

Manipur

0.00

0.00

0.03

0.44

Meghalaya

46.15

0.00

0.01

0.17

Mizoram

50.42

0.00

0.23

0.85

Orissa

65.97

0.00

0.03

0.03

0.00

0.00

0.00

0.00

Rajasthan

Punjab

65.56

0.00

0.03

0.18

Sikkim

46.58

0.00

0.11

0.42

0.00

0.00

0.00

0.00

48.42

0.00

0.05

0.43

Tamil Nadu
Tripura

0.00

0.00

0.00

0.00

Uttarakhand

Uttar Pradesh

12.14

0.00

0.07

0.00

West Bengal

0.00

0.00

0.00

0.00

Source: Authors own compilation.

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changes in both input and output levels, except for states such as Gujarat, Jharkhand and West Bengal
that need to increase only their output levels to make to the frontier.
The next step is the benchmarking process or identifying peer groups of the different inefficient
units. Peers are a set of potential role models who a unit can emulate to become efficient. On a frontier,
each DMU tries to move either horizontally or vertically, that is, increasing its outputs or reducing its
inputs by following the closest DMU to become efficient. For each inefficient DMU, a single or a set of
efficient DMUs acts as peers, which the inefficient DMU needs to follow to become efficient. Table 5
summarizes the peers for all the inefficient states. Kerala has emerged to be the best efficient state to be
emulated by all the inefficient states. It has the optimal levels of inputs to achieve the output.
Table 5. Peers of Inefficient States
States

Peers

Andhra Pradesh

Kerala

Arunachal Pradesh

Kerala

Assam

Kerala

Bihar

Bihar

Chhattisgarh

Kerala

Goa

Goa

Gujarat

Bihar, Kerala, Tamil Nadu

Haryana

Maharashtra, Tamil Nadu

Himachal Pradesh

Kerala

Jammu & Kashmir

Kerala

Jharkhand

Bihar, Kerala

Karnataka

Kerala

Kerala

Kerala

Madhya Pradesh

Bihar

Maharashtra

Maharashtra

Manipur

Goa, Kerala

Meghalaya

Kerala

Mizoram

Kerala

Orissa

Kerala

Punjab

Goa, Bihar, Tamil Nadu, Maharashtra

Rajasthan

Kerala

Sikkim

Kerala

Tamil Nadu

Tamil Nadu

Tripura

Kerala

Uttar Pradesh

Uttar Pradesh

Uttarakhand

Bihar, Kerala

West Bengal

Kerala, Uttar Pradesh, Bihar

Source: Authors own compilation.

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Journal of Health Management 17(3)

Conclusion
In this article, we used non-parametric DEA method to measure the TE of 27 states of India. DEA provides an understanding of the performance of the units and the improvements to be brought about in the
units that perform below the mark. As we have shown in the analysis, DEA identifies the states have been
using more than required inputs to achieve the current levels of output. The slacks calculated enable the
decision-makers to decide upon the input reduction or output augmentation to achieve efficiency.
From the above analysis, we found that out of the 27 states only six states health system is efficient, that is, they have the right mix of inputs to achieve the existing output levels seen in output
approach. These states are Bihar, Goa, Kerala, Maharashtra, Tamil Nadu and Uttar Pradesh as against
the other 21 states positioning farther away from the frontier. The states located on the frontier or the
efficient states do not imply that they cannot be efficient further, which is quite possible, although the
data do not provide any information with this regard. Hence, these are considered to be the best
achievable and the rest of the states lying away from the frontier are ranked relative to those which lie
on the frontier.
From the above analysis, it is observed that almost all the inefficient units utilize more than required
inputs to achieve the existing levels of outputs. These states which are inefficient could redeploy the
excess inputs in terms of health workers and facilities shown by the slacks in sectors and regions having
poor facilities, as these sectors or regions in entirety reveal the achievements of that state. Kerala has
emerged as the most efficient state in comparison to the rest of the efficient states and has emerged as a
benchmark for all the inefficient states. However, there are several limitations in using this method for
the study to measure efficiency. First and most importantly, the selection of inputs and output for the
study is most contentious, as taking too many inputs and outputs in a relative small sample (here only
27states) causes a higher number of states to lie on the frontier, thereby making them efficient. Second,
DEA, being a non-parametric method, does not qualify for statistical tests to entail valid statistical
inferences.
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