A Two-Stage Approach To Efficiency Modeling: an Application To the Australian Hospital Food Production Industry

Abstract

In this article, the authors have considered the use of data envelopment analysis (DEA) to calculate and analyze the level of technical, allocative, and cost efficiencies of Australian hospital foodservice operations. Based on the DEA outcomes, a Tobit regression model was then introduced to show the significance of some management characteristics on the level of each of the derived DEA efficiency. This two-stage method was tested on a sample of 89 hospital foodservice operations, representing all the states of Australia. The analysis showed that the average DEA indices of technical, allocative, and cost efficiencies were 65.3%, 81.5%, and 52.3%, respectively. This indicated that allocative efficiency is more significant than technical efficiency as a source of improvement in cost efficiency. The results from the statistical model highlighted the importance of managers' education and experience in improving the level of technical, allocative, and cost efficiencies in hospital foodservice operations.