Factors Affecting Profit Efficiency of Private Hospitals in Bangladesh: Are Urban Hospitals More Profit-Efficient?

Abstract

In Bangladesh, the number of privately owned hospitals has increased manifold over the last three decades, indicating high profitability in this sector. This study identifies the factors that affect the profit-generating ability of these hospitals. Using 185 privately owned ‘for-profit’ hospitals, the study applied Data Envelopment Analysis (DEA) technique to measure their profit efficiency and then used tobit regression analysis to identify the factors affecting profit efficiency. It was found that only a handful of private hospitals were profit-efficient. Results provide evidence that hospitals located in major metropolitan cities were more efficient than those located in semi-rural areas. It was also found that hospitals that had been in business longer and those that had less market share were likely to be more profit-efficient.