Efficiency of the hospitals affects the price of health services. Health care payments have equity implications. Evidence on hospital performance can support to design the policy; however, the recent literature on hospital efficiency produced conflicting results. Consequently, policy decisions are uncertain. Even the most of evidence were produced by using data from high income countries. Conflicting results were produced particularly due to differences in methods of measuring performance. Recently a management approach has been developed to measure the hospital performance. This approach to measure the hospital performance is very useful from policy perspective to improve health system from cost-effective way in low and middle income countries. Measuring hospital performance through management approach has some basic characteristics such as scoring management practices through double blind survey, measuring hospital outputs using various indicators, estimating the relationship between management practices and outputs of the hospitals. This approach has been successfully applied to developed countries; however, some revisions are required without violating the fundamental principle of this approach to replicate in low- and middle-income countries. The process has been clearly defined and applied to Nepal. As the results of this, the approach produced expected results. The paper contributes to improve the approach to measure hospital performance.
*Developing Countries ; Efficiency, Organizational/*classification ; Hospital Administration/*classification ; Hospitals/*classification ; Management Audit/methods/*organization & administration ; Nepal ; Outcome and Process Assessment (Health Care)/methods/*organization & administration