This is a tricky question; I guess that's why you asked it :-).

Start with the top level requirement, measure the health of the population serviced by the hospital over time. This gives the most accurate effectiveness of the hospital and includes preventative as well as responsive care effectiveness. Unfortunately, the measure is what we call a lag function; it takes a long time to see the results and it does not make clear what changes are beneficial.

So as well as the Lag function (which is necessary, but not sufficient) one needs lead functions. A lead function is one that is specific, measureable, quick to respond to changes and (most importantly) contributes in some way to the lag function.

Examples of lead functions could be number of cataract operations per surgeon per month. Waiting time in A&E etc. etc.

If one puts a financial cost against someone in the population being ill, for example lost productivity, The lag function can be numerated with a cost function and dividing this by the actual cost to run the hospital gives an indication of hospital effectiveness as measured by its impact on the population.

The same method can be applied to each lead function, and aggregated to a small number of key performance indicators to be presented to the hospital main board.

Kathmandu University Hospital have a good reputation for improving efficiency. It may be worth contacting them.  Here is one reference I found that may help build a lead function.

http://www.nepjol.info/index.php/JNPS/article/view/4161

Hope this helps

Paul

Living in Brazil, where we have an ambitious national healthcare system, I am sure that 'developing countries' cannot be taken as an uniform concept. The societal approach to assess effectiveness, for instance, will varies at every country by dozen particular reasons, as well the costs of production. Internal validity of one study, as the Vietnamese example, could hardly be assessed in a broad sense, and its external validity would be limited at most. When evaluating the cost-reward frontier for nonprofit/for-profit healthcare institutions, you will find a case-specific model, time- and local-defined.

In developing countries it can get complex.  There are nonprofit hospitals run by NGOs, by the Ministry of Health, by other entities of government including universities, state-owned enterprises (including Malaysia) and social insurance schemes (typical of Latin America).  Unless they are budget-based (as within MOH), their primary objective function is market share and/or solvency.  Capital formation is always a problem, as is charitable care and availability of foreign currency. 

Betley's description of the U.S. situation is accurate on the capital front. However, typical behavior is maximization of  share of market with profits poured into capital for further market domination.  Cost minimization is seldom seen except in small rural institutions that are struggling to survive.

Good Morning you might want first conduct a comparative analysts related to specific countries because each system is distinct from the other as a basis. Then conduct the research related to physician to patient outcomes, overall quality and ranking. In the hospitals are ranked against each orher and this is readily found online. Also check the World Health Organization to see if research and analysis has been conducted on developing countries.

http://www.npinstitute.com/public-vs-private-hospitals-s/1852.htm

An answer depends in part on the healthcare system in which the hospital is embedded. If it is in Canada, where most hospitals are provincially funded and ordered, it is one thing. If it is in the US and, say, Florida or Arizona, it is another. In Canada the public nature of hospitals results in various efficiencies when drugs and supplies are ordered generally, within the system, rather than individually, hospital by hospital. And, too while monies are raised by and for research, compensation for care is et through proivincial bursaries supported, in part by the federal government. So a decent answer to your question must begin with where you're situated and the nature of the health care system itself.

There is no precise answer to the question. Everything depends on how the regulatory framework to hospitals has been set. I agree with Tom answer comparing the cases of Canada and US.

In the case of Brazil, both public and private for profit hospitals work for the Public Health System (SUS). However, private for profit hospitals has been more selective to deal with patients were the fee scale is higher than the performed costs. Public hospitals cannot be selective and generally attend patients with more complex case-mix interventions or even other procedures that the payment is not enought to compensate the incurred costs.

On the other hand, in Brazil public hospitals had assured the payroll of the civil servants working as health workforce in the hospitas and always could use the public budget to compensate eventual deficits, and this does not happen with private for profit hospitals.

The only way to respond this question in a compartive base is to equalize the regulatory framework (regarding service delivery, fee scales, etc.) for public and private hospitals and, after some time, compare how they are performing. Maybe public hospitals in UK, some of them transformed in private by public-private partnerships, could be a good example to realize some research about the proposed question.

Thank you everyone for the interesting discussion!

Learned a lot from all your inputs.

I agree that the underlying cost function would be dependent on the setting in which the hospitals are operating.

I would actually like to study the hospitals run by the Ministry of Health, which are tax funded, budget based, and could always use public budget to compensate eventual deficit, to cite a few of you.

I think the MOH hospitals can be described as having a "satisficing" model of behaviour, in which "managers and staff only hope to achieve some level of output and quality within a fixed budget that will satisfy their own expectations and those of higher level managers." (World Bank 1993)

Found a World Bank document discussing this issue:

"Our expectation is, therefore, that even in the absence of an underlying maximisation objective that is universally applicable, a functional relation exists between observed hospital costs and output." (Howard Barnum & Joseph Kutzin 1993. Public Hospitals in Developing Countries: Resource Use, Cost, Financing - Link below.)

Another relevant document which I found useful is this: Adam Wagstaff & Howard Barnum 1992. Hospital Cost Functions for Developing Countries - link below.)

http://econ.worldbank.org/external/default/main?pagePK=64165259&theSitePK=469072&piPK=64165421&menuPK=64166093&entityID=000009265_3970128104423

http://econ.worldbank.org/external/default/main?pagePK=64165259&theSitePK=469382&piPK=64165421&menuPK=64166093&entityID=000009265_3961003235835

The interesting issue when it comes to public hospitals in developing countries is they are still trying to achieve certain targets that have already been achieved in developed countries i.e. quality care, positive health outcome and increase the quality of life in patients. However, the funding mechanisms differ by country. in some countries such as South Africa, they is a huge private sector whilst in some countries NGOs funded hospitals play as big a role as public sector. This, itself results in different cost function models.  Public sector do not worry much about cost functions as in the developed world. It worries about meeting the targets in terms of disease eradication. The burden of disease is so high such that when funding dries out, they seek the help of International NGOs,  amongst other funders. Historical budgeting has been used as the norm and not much proper costing has been done to inform programme funding. This is a worrying phenomenon which however seems understandable given the demand for services. Private Sector, on the other hand worry about profit making and have put in place mechanisms to help in costing and budget management as expected. 

In some countries, public hospitals are experiencing new contracting models that create incentives to reduce costs and improve performance and results. This is the case of the OSS model for public hospitals in Sao Paulo (Brazil). I wrote a paper about this some years ago. Maybe you could visit the following link:

https://www.researchgate.net/publication/280165387_Hospital_Performance_and_Health_Quality_Improvements_in_Sao_Paulo_Brazil_and_Maryland_USA?_iepl%5BviewId%5D=GVzzs5FhrRqk0glE53xPrkum&_iepl%5BprofilePublicationItemVariant%5D=default&_iepl%5Bcontexts%5D%5B0%5D=prfpi&_iepl%5BtargetEntityId%5D=PB%3A280165387&_iepl%5BinteractionType%5D=publicationTitle

Probably too late, but I just saw this here: https://pubmed.ncbi.nlm.nih.gov/15087154/