TECHNICAL AND SCALE EFFICIENCY OF HOSPITALS IN KISUMU COUNTY KENYA JOAN W. A. OCHIEL A RESEARCH PROJECT SUBMITTED IN PARTIAL FULFILMENT OF THE REQUIREMENTS FOR THE AWARD OF A DEGREE IN MASTER OF BUSINESS ADMINISTRATION (OPERATIONS MANAGEMENT), UNIVERSITY OF NAIROBI 2019 DECLARATION I, JOAN WINNIE OCHIEL, solemnly declare that this is my original work and it has not been and shall not be presented in any other institution or University other than the University of Nairobi for examination. Signed: Date: JOAN WINNIE OCHIEL D61/7440/2017 School of Business University of Nairobi SUPERVISOR’S APPROVAL I declare that this proposal has been presented with my approval as a university supervisor. Signed: Date: MR. ERNEST AKELLO School of Business University of Nairobi ii DEDICATION Major dedication goes to Kisumu county health management board and other health facilities in Kenya, to my daughter Kue, my sister Yvonne and my parents Musa and Jenipher. iii ACKNOWLEDGMENTS First and foremost, I thank the all-time Deity who owns the power and grants life for having blessed my schooling days that am hereby finalizing my research studies. My best regards and cheer team is my wonderful family for having graced my academic life with utmost support in terms of moral and financial support. I extend my sincere gratitude to my supervisors who indeed modeled my path in this academic endeavor, great thanks to Mr. Akello and Mr. Chirchir and other distinguished lectures for their professional unwavering support in the course of this research. I owe a great deal of gratitude to my coworkers for their moral support and all my classmates that positively influenced my schooling life and continuously inspiring the wheels of life. May the Lord bless you all. iv TABLE OF CONTENTS DECLARATION...................................................................................................................... ii DEDICATION........................................................................................................................ iii ACKNOWLEDGMENTS ...................................................................................................... iv LIST OF FIGURES ............................................................................................................... vii LIST OF TABLES ............................................................................................................... viii ABREVIATIONS AND ACRONYMS ................................................................................. ix ABSTRACT .............................................................................................................................. x CHAPTER ONE: INTRODUCTION .................................................................................... 1 1.1 Background of the study ...................................................................................................... 1 1.2 Research Problem ................................................................................................................ 3 1.3 Study Objectives .................................................................................................................. 4 1.4 Value of the Study ............................................................................................................... 5 CHAPTER TWO: LITERATURE REVIEW ....................................................................... 6 2.1 Introduction .......................................................................................................................... 6 2.2 Theoretical Literature ........................................................................................................... 6 2.3 Efficiency Concepts ............................................................................................................. 7 2.4 Empirical Literature ........................................................................................................... 12 2.5 Summary of Literature Review .......................................................................................... 14 2.6 The Conceptual Framework ............................................................................................... 18 CHAPTER THREE: RESEARCH METHODOLOGY ................................................... 20 3.1 Introduction ........................................................................................................................ 20 3.2 Research Design................................................................................................................. 20 3.3 Research Site ...................................................................................................................... 20 3.4 Target Population ............................................................................................................... 20 3.5 Sampling technique ............................................................................................................ 21 v 3.6 Sample Size ........................................................................................................................ 21 3.7 Data collection ................................................................................................................... 21 3.8 Data Collection Instruments ............................................................................................... 22 3.9 Data Analysis ..................................................................................................................... 22 CHAPTER FOUR: DATA ANALYSIS, RESULTS AND DISCUSSION ...................... 25 4.1 Introduction ........................................................................................................................ 25 4.2 Descriptive statistics .......................................................................................................... 25 4.3 Normality Test ................................................................................................................... 26 4.4 DEA Results of Input-orientated and Output-oriented Models ......................................... 27 4.5 Determinants of efficiency in public and private hospitals Regression Results ................ 30 CHAPTER FIVE: SUMMARY, CONCLUSION AND RECOMMENDATIONS ......... 33 5.1 Introduction ........................................................................................................................ 33 5.2 Summary of the Findings ................................................................................................... 33 5.3 Conclusion of the study ...................................................................................................... 33 5.4 Policy Relevance ................................................................................................................ 34 5.5 Limitations of the study ..................................................................................................... 35 5.6 Suggestions for Further Research ...................................................................................... 35 REFERENCES ....................................................................................................................... 36 APPENDICES ........................................................................................................................ 44 Appendix 1: Research Letter ............................................................................................ 44 Appendix 2: Questionnaire ............................................................................................... 45 vi LIST OF FIGURES Figure 2.1 Efficiency frontier in input-output map ................................................................. 10 Figure 2.2 Conceptual Frameworks ........................................................................................ 19 vii LIST OF TABLES Table 2.1 Summary of Literature Review ............................................................................... 16 Table 4.1 Descriptive Statistics ............................................................................................... 25 Table 4.2 Normality Test ....................................................................................................... 27 Table 4.3 DEA Results of Input-orientated and Output-oriented Models .............................. 28 Table 4.4 Descriptive Statistics of Efficiency Scores ............................................................ 29 Table 4.5 Input oriented model .............................................................................................. 30 Table 4.6 Output oriented model............................................................................................. 32 viii ABREVIATIONS AND ACRONYMS CRS: Constant Return to Scale DEA: Data Envelopment Analysis DMU: Decision Making Units FP: Family Planning HIV: Human Immunodeficiency Virus MCH: Mother-child Health OPD: Outpatient Department PET: Public Expenditure Tracking Survey STI: Sexually Transmitted Infections SARAM: Service Availability and Readiness Assessment Mapping SE: Scale Efficiency UTI: Urinary Tract Infection UHS: University Health Services VRS: Varied Return to Scale WHO: World Health Organization ix ABSTRACT This study sought to ascertain the technical and scale efficiency of hospitals in Kisumu County. More specifically, the study aimed towards two specific objectives: to analyze the technical and scale efficiency of public and private hospitals in Kisumu County for