Estimation and decomposition of cost efficiency in the health care food service sector : an extended stochastic frontier approach

This paper introduces and implements an extended stochastic frontier model to estimate and decompose cost efficiency (CE) in the health care foodservice sector. The interesting feature of this model is that it allows differentiation between the three different types of efficiency: technical efficiency (TE), allocative efficiency (AE) and their associated CE. A complete illustration of these efficiencies is presented using a cross-sectional sample of 101 hospital foodservice operations. Results showed that the model and all its parameter coefficients were plausible, significant and satisfy all theoretical requirements. It was also clear that the average efficiency scores were lower for TE (80%) than AE (88%), indicating that TE is the main source of CE and requires further attention.