Chapter 5: Conclusions & Recommendations
5.1 Summary for the Results and Implication
The health care corporates play a vital role in maintaining the health and sustainability of the entire health system. The Healthcare industry has unlimited growth potential because the global population is aging rapidly, and life expectancy increases.
The significance of measuring their efficiency and financial performance is consequently highly emphasized. Nevertheless, the available literature on the efficiency measurement of healthcare services does not sufficiently cover empirical measurements of the efficiency of the health sector. As a decision-making unit, the corporates in this sector are profitable and market-oriented, with the main tasks contributing among governmental providers regarding Improving citizens' quality of life. Its twelve firms with subsidiaries show great variability in activities and significant interconnectedness. Some corporate activities include hospitals and treatments, the Manufacture of medical materials & Pharmaceuticals, and Facilities Management & Investments. Nevertheless, they are equally important when analyzing the efficiency of the entire observed firms.
The significant difference in efficiency level between firms has become an increasing issue for the stockholders, so the financial performance, i.e., financial perspective investigation, is necessary to consider the possible comparative causes of inefficiency. Two hypotheses were formulated in this context. The first one proposed a significant between-unit variability in financial performance and the second one highlighted investment as a significant source of inefficiency among the selected indicators. Therefore, the study aimed to evaluate efficiency based on financial inputs and outputs of the healthcare sector firms in the GCC region for the ten years 2011–
2021 by applying a nonparametric evidence-based approach, i.e., DEA. Furthermore, three types of efficiency were calculated: technical, pure technical, and scale efficiency, in order to determine whether the cause of inefficiency is related to inefficient operation of management or disadvantageous conditions.
Financial performance-efficiency nexus in The Healthcare Sector in The GCC Region: A nonparametric
As evident from the presented analysis, the results revealed significant between corporates, between-year, and between-efficiency-type differences in performance ratings. From the total number of companies, only 17% in 2021 can be considered efficient; SULIMAN AB throughout the entire period in both the CCR and BBC model and MUASAT & MIDAN KK in the BCC model. Some of these differences can be explained by the different nature of services and activities provided by special conditions, ranging from core activities (SULIMAN AB and MIDAN KK) to more technical activities. Different between types in fourth ranking between (ATC KK and CARE AB). Likewise, SULIMAN AB and MIDAN KK have been in existence for three years. These differences are less pronounced in the case of pure technical efficiency than in the cases of technical and scale efficiency, which leads to the conclusion that the overall inefficiency of analyzed firms can be generally attributed to scale efficiency.
In the search for the modality of organizing and delivering acceptable efficacy levels, the mentioned targets were calculated to consider improving performance by scaling up their activities and expanding their operations to achieve an optimal scale.
However, organizations can be complex, as in this example of the healthcare industry, and this complexity must be considered in developing their strategies for change. The first hypothesis proposing a significant between-unit variability in financial performance due to different firms' activities has been confirmed. Therefore, an organizational restructuring could be suggested upon the obtained DEA results. As the companies partly need to collaborate to provide their stockholder expectations, and as some predominantly provide ancillary services or products, determination of the main functions, i.e., firm which can be characterized as the primary activity bearers, is more than logical.
The financial ratio analysis shows that among the analyzed companies. The frontier analysis enables us to estimate the target for measuring and explaining the determinants of each firm's performance, including assessing the effect of economies of scale and an overall objective numerical score.
The slack variables analysis identified possible ways to improve the performance of those inefficient firms. The results show that reducing the direct cost with investment in non-current assets followed by more non-operating revenue creation is the most effective method for improving the financial performance of inefficient firms.
As stated earlier, the existing empirical research represents no efficient evaluation of performance provided among subsidiary's level and financial performance. In addition to the similarities and differences between those studies, their results should be further compared in ratios with indicators and model specifications.
However, this can only be discussed in a small part related to the models matching in selecting indicators and model type and orientation. There are significant (at both unit and department levels) differences in the number of efficient companies and their rank, the efficiency scores and their variability, the type of firm return to scale, the proposed input, and output improvements. As the latter gives neither the original values nor the descriptive statistics of the variables, it is difficult to explain the origin of such significant differences. However, it highlights investments and direct costs as two significant sources of inefficiency under the VRS assumption.
Additionally, the outcome of this study is that analyze the financial performance and characteristics of healthcare companies. The results of the study areas analyze the financial performance, including the efficiency of different ratios of selling general management expenses, ROIC, ROA, ROE, ROS, total capital growth rate, and growth rates. Unfortunately, the results show that healthcare companies in the GCC region do not spend or invest in the Research and Development (R and D) efforts for technological innovation as a competitive advantage. The firm efficiency delivers by lowering the cost of sales ratio and improving profitability. The high ratio of selling, general and administrative expenses of healthcare companies are attributable to expenditures treated as costs than non-healthcare firms and increased healthcare firms' growing costs. With this trend, the results of this study will provide implications for investors and policymakers who are much interested in the industry.
Financial performance-efficiency nexus in The Healthcare Sector in The GCC Region: A nonparametric