Short-Run Cost Minimization and Capacity Utilization of Regional Public Hospitals in South Korea

Abstract

This paper intends to obtain the short-run average cost minimization and capacity utilization over 34 regional public hospitals in South Korea from 2007 to 2010 using Data Envelopment Analysis (DEA). Also, it explores the average cost for each hospital in order to determine whether the cost is increasing or decreasing. The annual capacity utilization rate, using an adjusted number of patients as an output, was 0.49, and by using value added as an output was 0.56, on average. Only Jeju showed the highest level of capacity utilization regardless of output type. It indicates that almost all regional public hospitals, except for Jeju, have not run with full capacity, and have been in the decreasing area in the short-run average cost curve during the same period.