Chapter 1Introduction1.1 Background of the studyService quality has been an area of study of many scholars and a lot of researches have been done on service quality over past decades (Parasuraman et al., 1985, 1988, 1991, 1993, 1994a,b; Zeithaml et al., 1985, 1990, 1993, 1996). Similarly, a lot of attempts have been made to capture its meaning and assessment. Crosby (1979) defines quality as adhering to the planned goals of output and avoiding defects. Parasuraman et al. (1985) argue that service quality can be defined as the difference between predicted, or expected, service (customer expectations) and perceived serviced (customer perceptions). “Expectations” are the wants of the consumers that they feel a service provider should offer. “Perceptions” refer to the consumers’ evaluation of the service provider (Lim and Tang, 2000).Gronroos (1984), identifies two forms of quality relevant to service-providing organizations: technical quality and functional quality. Technical quality, in health-care setting, refers to the diagnoses and procedures followed during the delivery of health-care service. On the other hand, functional quality refers to the manner in which the services are delivered to the patients. Technical knowledge is considered to be within the purview of health care professionals and administrators (Bopp, 1990). Functional quality is usually considered to be the primary determinant of customers’ perceptions about quality as the users find it extremely difficult to assess the technical quality in an accurate manner due to lack of information (Kovner, 1978; Donabedian, 1980, 1982).When a patient receives medical treatment, functional quality produced will influence his or her perceptions of service quality. This is due to the patient’s comparison of his or her perception of the medical service encounter experience with his or her pre-encounter expectations (Gronroos, 1984). Thus, a medical service encounter achieves quality in perception when it meets or exceeds the level of patients’ expectations (Lam, 1997). The perception of service quality could occur at multiple levels in an organization, e.g. with the core service, physical environment, interaction with service providers and others. On the other hand, the customer’s overall satisfaction with the services organization is based on all the encounter experiences of the customers with the organization (Sureshchandar et al., 2002).1.2 Statement of ProblemsThe relationship between the health of general population and the development of a country is intertwined. For a developing country like Nepal, the investments and progress made in the healthcare sector define the pace of overall development. Despite poverty and conflicts faced in the past, Nepal has been constantly steering its efforts to provide health services to its citizens for a long time now. Many hospitals, health centers and many other organizations offering health services have been emerging both at private and public level. Moreover, with the raised awareness among the citizens, the increased consumption of such services has been witnessed. This fact is even more strengthened by the expenditure in health. Five percent of the national budget of NPR 734 billion was allocated for the health sector in fiscal year 2072/73 amounting to NPR 36 billion.Apart from the representational statistics presented above, the customers’ voice pertaining to health-care in Nepal is very weak. Despite massive spending in catering the health services, an inevitable question remains. Is the health service that is being offered meets the quality the consumers expect? This study attempts to analyze various factors that help in gauging the customer-perceived service quality for the government run or managed hospitals, basically in relation to the Bir and Teaching Hospital, Kathmandu. 1.3 Purpose of StudyThis study strives to offer a better understanding of the satisfaction level among the patients who have visited Bir and/or Teaching Hospital. This study also focuses on helping the hospital managers strategize their process in order to offer service that meet or exceed the expectations of patients. This study primarily focuses on:• Better understanding the service-quality dimensions among the patients/customers within the context of Bir and/or Teaching Hospital, Kathmandu.• Gaining insight on which of the service attributes are more preferred by the customers in making the decisions about choosing hospitals.• Knowing whether the customers/patients are satisfied with the services they are being offered at these two government managed/run hospitals.• Offering suggestions, based on the study, to the hospitals on making the service offerings even better.1.4 Objectives of the StudyThe question that arose from the research problem stated above is whether or not the Bir and the Teaching Hospital are meeting the customer/patients’ satisfaction levels. Similarly, how these government led hospitals can better position their service offerings and lead the competition also forms the basis of this study. The primary objective of this study is to measure the patients/customers’ perception of service quality and their satisfaction level with the public hospital experience. Similarly, this study also aims to estimate the effect of these constructs on the future health-care decisions in relation to these two hospitals. More specifically, the objective of this study is to assess which dimensions of service quality are related to customer satisfaction, using SERVQUAL model. 1.5 Research QuestionsIn order to analyze the aforementioned objectives of the study, the following research questions will be further investigated:RQ1: How are customer/patient satisfaction is described in context of the Bir and the Teaching Hospital, Kathmandu?RQ2: How satisfied are the patients from the services offered by the Bir and the Teaching Hospital?RQ3: How can the managers of these two hospitals improve the quality of the prevalent services and thus the satisfaction level of the patients?1.6 HypothesesBased on the objective, the following Hypotheses have been formulated: H01: There is no significant relation between tangibility and customer satisfaction. H02: There is no significant relation between reliability and customer satisfaction. H03: There is no significant relation between responsiveness and customer satisfaction. H04: There is no significant relation between assurance and customer satisfaction. H05: There is no significant relation between courtesy and customer satisfaction. H06: There is no significant relation between empathy and customer satisfaction.1.7 Significance of StudyIn today’s volatile business world, companies are constantly confronted with the fundamental business challenge – survival and success in a turbulent and increasingly competitive environment. These competitive forces direct the businesses to focus on before and after sales service rather than the products’ attributes and manufacturing.Due to phenomenal growth in the service industries, the importance of service management and the service quality is bound to grow. Service quality is one of the determining forces that set a business apart from the competition. Any decline evident in the service quality, the customers switch to the competition in no time. Recent years have witnessed an exponential growth in the health care industry. The services offered in various health-care organizations are redundant. But what sets them apart is the quality of such services offered. In order to achieve the service-quality, health care service providers must strive for zero defects and retain every customer while serving them profitably. Aiming for “zero defects” require continuous effort from the service providers to improve the quality of service.This research aims to identify the major service quality attributes that the patients/customers seek during their experience with the public hospitals, and hence, proves useful to the hospital managers. The hospital managers can utilize this study in order to find the major service gaps and emphasize and distribute their limited resources wisely on improving the quality of services that are being offered at the public hospitals.1.8 Operational Definitions• Tangibility refers to the appearance of physical facilities, equipment, personnel, and communications materials of a business (Parasuraman, Zeithaml & Berry 1988). • Reliability can be defined as the ability to accurately perform and deliver services as promised (Parasuraman, Zeithaml & Berry 1988). • Responsiveness can be viewed as a willingness to help and provide prompt service to customers (Parasuraman, Zeithaml & Berry 1988). It also concerns the readiness and timeliness of employees in providing services (Parasuraman, Zeithaml & Berry 1985). • Assurance refers to the knowledge and courtesy of employees including their ability to convey trustworthiness and confidence to customers (Parasuraman, Zeithaml & Berry 1988). • Empathy can be viewed as the caring and individualized attention that the firm provides to its customers (Parasuraman, Zeithaml & Berry 1988).