Measuring technical efficiency in health care organizations.

The rising cost of health care has created great interest in developing methods to increase the efficiency of health care organizations. Despite this interest most analyses of prospective payment and other programs designed to control expenditures have examined costs and not efficiency. This article examines a new technique--data envelopment analysis (DEA)--that facilitates the conduct of efficiency studies. The utility of DEA is analyzed by comparing this technique with other methods used to measure efficiency, by discussing the application of DEA in the health care industry and by assessing the validity of results from DEA studies. The article concludes with an assessment of the strengths and weaknesses of DEA and suggestions for refining this technique.