Assessment on the Operation Efficiency of the Traditional Chinese Medicine Hospitals: Can it be Competent?

After the implementation of DRG (Diagnosis Related Groups) reform in China, more hospitals are concerned with the soaring cost of healthcare services and the operation efficiency. It is an issue to identify whether the Traditional Chinese Medicine (TCM) hospitals are still competent. This article aims to evaluate the Technical Efficiency (TE) of TCM hospitals in mainland China, excluding the influence of external environmental values and statistical noise. The three-stage data envelopment analysis (DEA) method was used to assess the efficiency of TCM hospitals in China, taking into account inputs including the number of TCM hospitals, licensed doctors, and beds; outputs including outpatient and emergency visits, discharged patients, and bed occupancy rate. The results showed an average TE value of 0.776, and the second-stage Stochastic Frontier Analysis (SFA) regression model indicated a significant effect of selected environmental variables on input slack. After removing these variables and statistical noise, the mean TE efficiency increased to 0.850. To further improve the efficiency of TCM hospitals, hospital managers need to optimize resource allocation based on local level development, labor dependency ratio, population density, and other factors, while the government needs to provide support by implementing supportive policies and increasing financial subsidies.