Theme Two: Health Services Management Technical Efficiency in the Presence of Desirable and Undesirable Outputs: a Case Study of Selected District Referral Hospitals in Uganda

Introduction Not all of the output from any production process might be desirable. Thus, the inclusion of only desirable output might not provide a true picture of the technical efficiency of a decision making unit. Many production processes have a negative side effect, namely the production of undesirable byproducts. A typical example in health is the death of a patient in the course of administering treatment. Traditional production theory does not lend itself to modeling joint production of good and bad outputs. To address this issue, Shephard and Färe (1974), introduce the notion of null-joint production which explicitly allows for the joint production of desirable and undesirable outputs/products. They also introduce the idea that disposal of undesirable outputs may not be ‘free’, which is the standard assumption made in traditional production theory. As an alternative, they propose the notion of ‘weak’ disposability; that is, disposability of some outputs may be costly, at least in the sense that reducing them may require diversion Abstract