Management Evaluation of Public Hospital -Approach from Factor Analysis-

Public hospitals in Japan are recently facing management difficulties and some are in bankruptcies. To tackle the problem, drastic management reforms are required. In this paper, we employ factor analysis to construct indices to evaluate local public hospitals in terms of financial managements, medical services and cost efficiency. The outcome amounts to 8 and reveals that financial status of each local hospital is deteriorated because they have lost profit-earning opportunities with a severe shortage of doctors. We also make a comparison in terms of stability between the outcomes from factor analysis and DEA (Date Envelopment Analysis), a traditional method to evaluate efficiency of public sector. The comparison reveals that it is inadvisable to discuss efficiency by either of the two methods because the two outcomes are sometimes irrelevant.