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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). • Perceived Value: Perceived Value can be defined as the consumers’ overall assessment of the utility products or services based on perceptions of what is received and what is sacrificed Monroe (1991); Parasuraman, Zeithaml & Berry (1988). • Customer satisfaction: The accumulated customer’s purchase and consumption experiences influenced by two factors: expectations and experienced service performance (Gotlieb, Grewal & Brown 1994). Customer satisfaction can be best explained by the concept of confirmation/disconfirmation resulting from the differences between expectation and perceptions (Churchill & Surprenant 1982; Oliver 1980). 1.9 Limitations of the StudyThe study in itself is not an accurate reflection the whole patients’ satisfaction with their experiences in the public hospitals due to the following limitation:• The study has been carried out only within the Kathmandu valley.• Only two public hospitals – Bir Hospital and Teaching Hospital – have been taken into consideration.• The study may have not been able to include all the necessary variables that are pertinent to this region of the world.• The study won’t be the representative of Nepal as it would include only 200 individuals from both the hospitals.1.10 Organizational Structure of the StudyIn order to make the study more organized and readable, this study has been divided into five chapters. The first chapter is started with introduction which covers background of the study, focus of the study statement of problem, objectives of the study, significance and the limitation of the study.The second chapter focuses on review of literature review and conceptual framework. It contains the conceptual framework and review of past research study related with concerning topic of this study whereas the third chapter deals with the research methodology to be adopted for the study consisting research design, sources of data, data gathering procedure, population and sample, research variables and data processing procure.Similarly, presentation, analysis, interpretation and major findings of primary data collected from questionnaires is done in fourth chapter and conclusion, summary along with forward recommendation are in mention in last chapter. At the end appendices and bibliography is presented. Chapter 2Literature Review and Theoretical Framework 2.1 Service quality and health-care industryService quality has now been one of the most researched topics in the field of marketing. It has received tremendous interest from both the scholars and the practitioners and has also been attempted to define in numerous ways. Further, its significant relation to costs (Crosby, 1979), profitability (Buzzell and Gale, 1987; Rust and Zahorik, 1993; Zahorik and Rust, 1992), customer satisfaction (Bolton and Drew, 1991; Boulding et al., 1993), customer retention (Reichheld and Sasser, 1990) and service guarantee (Kandampully and Butler, 2001) has only heightened the importance of the research. With the growing importance of the service quality, it has also been recognized as a driver of corporate marketing and financial performance (Buttle, 1996).Owing to the significance of service quality, its connection to the health-care industry only increases its importance. The quality of service in relation to the health-care industry is crucial to the industry around the world. Definitions of service quality, in relation to the patients’ expectation and perception abound, stating that “the quality of services is the ability to meet the customers’/patients’ expectations” (Pui-Mun Lee, 2006). Similarly, Evans & Lindsay (1996) defined the quality of healthcare service as “all characteristics of the service related to its ability to satisfy the given needs of its customers”. Though it has been widely accepted that a huge need for the quality indicators measuring the patients’ satisfaction with the services provided by the health-care industry, only a few researches have been carried out in this field (Berman-Brown and Bell, 1998). There is a general agreement that patient satisfaction is an essential component of service quality (Sa?ila?, 2008; Ruyter, 1997, Andaleeb, 2001).Several studies have been carried out in various countries to assess the perceived service quality of the overall health-care industry; no official studies/surveys seem to have been carried out in Nepal, however. Service quality assessment in various studies have been influenced by the works of Parasuraman et al. (1988) based on the SERVQUAL scales. Parasuraman et al.’s SERVQUAL model for measuring the service quality is based on Oliver’s Disconfirmation theory. According to the disconfirmation theory, the perception of service quality is conceptualized as the comparison of the expected level of service and the actual service performance. Expectations are the wants of consumers, that is, what they feel a service provider should offer. Perceptions refer to the consumers’ evaluation of the service provider. Therefore, if the customer’s performance perceptions exceed the customer expectations, then the service provider provides quality service. The difference in scores determines the level of service quality.  Figure 1: SERVQUAL modelParasuraman et al. identified ten dimensions, which the customer uses to evaluate the service quality by a factor analysis of 22 questions. Through an empirical test, they developed SERVQUAL from a modification of ten dimensions to five which are tangibles, reliability, responsiveness, assurance, and empathy. After Parasuraman et al. proposed SERVQUAL. James Carman adapted the original SERVQUAL instrument for use in the hospital industry. The original 22 questions were extended to 34 questions. In this study, we use this questionnaire. Many other researches in other countries have been based on this SERVQUAL model put forward by Parasuraman et al. Al-Hawary (2012) carried out a study on the service quality of the health-care services in Jordan and Saudi Arabia. His study concluded that tangibles and accessibility we better realized in the Saudi Arabian hospitals whereas, tangibles were found to be better perceived in the hospitals of Jordan. In their study of service quality in Bangladeshi private hospitals, Rahman et al.  (2013), concluded that the patients were most satisfied with the reliability and responsiveness dimensions whereas the tangibles needed the most improvement. Similarly, Zaim et al. (2010) carried out a study on the customer satisfaction in the hospitals of Turkey. Their study, also based on the SERVQUAL model, concluded that tangibility, reliability, courtesy and empathy are most significant for patient satisfaction whereas responsiveness and assurance are not. C ?eelik and S ?ehribanog ?lu (2012) indicated that tangible service quality dimension had the single largest effect on contentment perception of patients in Turkey’s hospitals; empathy and reliability were found to have lower effects. Patel and Bhatt (2017), in their attempt to measure the service quality of the hospitals in Ahmedabad, found out that the tangibility aspect of service quality showed the least service quality gap. Whereas, the other aspects like reliability, responsiveness, assurance and empathy showed the most service quality gap. Ameryoun et al. (2016), in their attempt to determine the factors most relevant to the service quality evaluation in the context of health-care industry of Iran, found out that a new dimension “trust in services” was most influential. It was followed by other SERVQUAL factors tangibles, assurance, empathy, and responsiveness, respectively. Abousi et al. (2012) did a study of the service quality in healthcare institutions of Ghana. Their study attempted to modify the original SERVQUAL model to accommodate the necessary variables in context of Ghana. The modified model consisted of four factors, viz. “prompt attention”, “tangibles”, “reliability” and “access”. The study revealed that a huge gap existed in the access factor followed by prompt attention, reliability and tangibles. Similarly, Zarei et al. (2012), in their study to measure the service quality in the private hospitals of Iran found out that the highest expectations and perceptions existed in the tangibles dimension and the lowest expectations and perceptions were related to the empathy dimension. Ariffin and Aziz (2008) indicated that patients are most tolerant to factors related to the tangible dimension and least tolerant to factors related to the reliability dimension. The gap analysis between service expectations and perceptions showed that all scores for expectations were lower than their perception scores, indicating that many service improvement efforts were needed in order to enhance the quality of services rendered by hospitals in Malaysia. Rohini and Mahadevappa (2006) found out that the hospitals in Banglore needed a huge improvement in the reliability factor followed by empathy tangibles, responsiveness and finally assurance. Likewise, Andaleeb (2001), in his study to measure the service quality in the hospitals of developing country (Bangladesh), discipline as an extension of “tangibles” dimension had the greatest impact on customer satisfaction. Following the tangibles was assurance. The impact of responsiveness and communication on patient perception of service quality was also significant. However, “baksheesh”, an additional factor in Andaleeb’s study, had the least impact on patient satisfaction. In other words, baksheesh is marginally important to patients for whom a disciplined setting, assurance of speedy recovery, and a responsive and communicative staff are of greater importance. If a small price needs to be paid in the form of baksheesh, its impact on patient satisfaction is significant but marginal.