Background and Aim: The hospital is considered as the biggest and the most costly unit of a health care system. Therefore, paying full attention to its cost efficiency is very important. The objective of this study was to assess the technical efficiency of hospitals affiliated with Tehran University of Medical Science by data envelopment analysis method.

Materials and Methods: Technical efficiency in hospitals affiliated with Tehran University of Medical Sciences was assessed by Data Envelopment Analysis (DEA) from 1996 to 2006. The input-oriented form of variable return-to-scale (VRS) was used to collect the data using 4 inputs (number of beds, nursing staff, medical personnel, and other personnel) and 4 outputs (outpatient admissions, hospitalized-patient days, bed occupations, and the number of surgical operations performed). The software used for data analysis was Deap 2.1.

Results: The DEA results indicate that: 1.There is a potential to improve the hospital technical efficiency by 3 % (the mean technical efficiency of the hospitals was 0.972); 2. Constant return-to-scale (CRS) exists in the production process, meaning that production in the hospitals is at its optimum level; 3. Hospital services have suffered from extra production factors, especially human resources (specifically the nursing staff).

Conclusion: With proper planning, limiting the number of personnel can reduce greatly health care costs and hospital expenditures. It is suggested to conduct studies to determine the effects of the quality of services delivered in hospitals and patient satisfaction on hospital technical efficiency.