Comparing efficiency between public and private hospitals in South Korea

Using the 2002 data from 32 Korean hospitals and using a matching method (16 public versus 16 private hospitals), this study compares Financial Efficiency (FE), Technical Efficiency (TE) and Service Efficiency (SE) between public and private hospitals. This research tests three hypotheses. The first hypothesis, that private hospitals will have higher FE than public hospitals is supported by the empirical findings. The second hypothesis, that public hospitals will have higher TE than private hospitals is also supported. The third hypothesis, that private hospitals will have higher levels of SE than public hospitals have, is not supported. Private hospitals have clear organisational goals that lead to higher FE. Public hospitals, in contrast, are less eager to improve FE than to improve TE because they are evaluated based on TE. The quality of services (i.e. SE) provided by public hospitals is indifferent from that of private hospitals. It is important to remember which aspects of efficiency we are dealing with when comparing between public and private hospitals.