| Recently, the five items of medical system reform (the year 2009-2011) have been passed, of which the public hospital reform is the most difficult and important. In terms of public hospital reform, evaluation of directly input-output efficiency of each hospital would help those managers to find out reasons why their hospital is inefficient. Then corresponding measures would be taken, for making full use of the existed medical resources, avoiding the input waste, and increasing efficiency of fund utilization. In that case, the ideal goals of public hospital reform would be realized at an early date.The content of hospital efficiency is very complicated. In our research, we focused on the directly input-output efficiency, i.e. technical efficiency and cost efficiency. A hospital is said to be technically efficient if a reduction in any input requires an increase in at least one other input or a decrease in at least one output. Cost efficiency is measured under the assumption that all hospitals seek to minimize costs.From the 1980s, a lot of researches on hospital technical efficiency domestic and abroad have continuously come forth, most of which applied data envelopment analysis (DEA). As data of most researches were from sample surveys in only one year, we found it was not objective to reflect the variation trend of technical efficiency of all hospitals in this area in several years. Speaking of the studies on cost efficiency, it was very few at home or abroad, however, almost all of them applied stochastic frontier analysis (SFA). In China, there were only 7 literatures.In our research, we tried to investigate the technical efficiency and cost efficiency of public hospitals ranking county-level and above in Sichuan province from the year 2003-2007. This general survey referred to 340 hospitals, classified to different grades and type. We hope to evaluate the hospital efficiencies more thoroughly than before.An appropriate tool used for evaluating hospital efficiency is the guarantee for accuracy. Initially, hospital efficiency was estimated by ratio analysis, ordinary least squares (OLS), or corrected ordinary least squares (COLS) regression. These early techniques have a number of shortcomings. DEA, a nonparametric mathematical programming technique, has been the most frequently used frontier method in studies of health care organizations. After DEA, SFA was developed independently by Aigner, Lovell, and Schmidt and Meeusen and van de Broeck. This technique measured hospital efficiency on the basis of best-practice frontier. In our research, we intended to learn from other fields applying SFA to evaluate technical efficiency, and tried to ameliorate this technique while used in the evaluation of hospital technical efficiency and cost efficiency.The results told us: from the year 2003-2007, the annual average technical efficiency was 0.794. Every year 44.54 percent hospitals were classified into the highest efficiency group (technical efficiency ranged from 0.80-1.0), 55.40 percent hospitals were in middle efficiency group (technical efficiency ranged from 0.50-0.80), and the rest were classified into the lowest efficiency group (technical efficiency ranged from 0-0.50), only 0.07 percent. It seemed that the hospitals situated in much more developed area had a higher technical efficiency; the hospitals which were of higher grade, turned to have higher technical efficiency scores. Comparing the hospitals of West-medicine and TCM, the former were more technically efficient than the latter.Meanwhile, from the year 2003-2007, the annual average cost efficiency was 0.824. Using the same standard for grouping, each year 64.55 percent were in the highest efficiency group, 33.33 percent were in middle efficiency group, and the rest were classified into the lowest group. The cost efficiency of hospitals in 2nd district was higher than those in 1st and 3rd district. The provincial hospitals had higher cost efficiency scores than those in cities and counties. Comparing the hospitals of Western medicine and TCM, the former had higher cost efficiency scores than the latter.To sum up, the 340 public hospitals ranking county-level and above were fairly technically efficient, however, the average technical efficiency was dropping year by year. The hospitals with lower bed utilization ratio were suggested to control their size, and make every effort to enhance the competence of medical service. On the other hand, a series of corresponding measures could be taken by administrative department in charge of health, for encouraging medical demands in undeveloped area and increasing workload in those hospitals of lower grade. According to the results of cost efficiency, we could infer that these 340 hospitals performed well in overall. They were trying to minimize the input.We also tried to explore the potential factors making hospitals technically inefficient and cost inefficient. With regard to technical efficiency, workload, the number of beds, bed utilization ratio, percentage of drugs in total income, employee's diploma and professional title were influence factors. While the percentage of fixed assets in capital and the ratio of expenditures on wages decided the hospital cost efficient or not.Corresponding suggestions were put forward in this thesis. For ameliorating their technical efficiency, the hospitals in 3rd district could advocate low-input medical techniques, and endeavor to join in the network system of urban medical service. Those hospitals with lower bed utilization ratio are suggested to reduce the number of beds and shorten average length of stay. As drugs income is indispensable for daily operation of public hospital, however, high percentage of drugs in total income would cause technically inefficient, initially the local government should increase their input if this percentage tended to be cut down. The development of public hospitals can hardly do without talents. Government, schools and hospitals could make a joint effort to bring in high-level medical talents. As far as TCM hospitals are concerned, it's urgent for them to exploit their merits, that is, the techniques of traditional Chinese medicine. Meanwhile, TCM hospitals should be encouraged to do scientific researches.In terms of cost efficiency, the hospitals ranking county-level and those of grade 2 had better to cooperate with local hospitals of Grade 3 which were well spoken of by the citizens, and two-way transfer of patients system is encouraged to be carried out. Excellent management of costs is important for each hospital, as low consumption would lead high efficiency. Some of large scale equipments were standing idle. Each hospital should strictly control the purchase of large equipment. Lots of staff in low grade hospital seemed redundant. We advised these hospitals to economize the expenditure on employees'wages, specific methods are as following: improving benefits of high-level medical talents, reducing the number of employees and so on.
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