This article focuses on analysing the efficiency of secondary-level government-run hospitals in West Bengal, a medium performer state in terms of health indicators, in India. Two main objectives of this article are (1) to measure the technical efficiency of the same and (2) to identify the factors determining their inefficiency. For the first purpose, output-oriented data envelopment analysis (DEA) under variable returns to scale has been used. For the second purpose, we have used two-part regression models, first showing why some hospitals are efficient while others are not and, secondly, what are the factors that determine the relative efficiency of inefficient hospitals. We have used different forms of regression models for both types. The results show that the overall mean efficiency of all hospitals is 0.728, suggesting that on average the hospitals could produce at least 37 per cent more of output with same input volume if they had produced efficiently. The results also reveal that the highest contributor to slack is the group D staff, followed by doctors. It is found that increase in average length of stay, availability of free medicine from the hospital, ratio between doctor and non-doctor staff strength, outpatient bed day and share of emergency admission significantly decrease the efficiency of a hospital, while the ratio of nurses to non-nurses affects it positively. The article concludes with policy suggestions based on the analysis that decrease in average length of stay (ALOS) by better medical intervention and improved quality of care would definitely allow for more patients to be treated, while increase in nursing staff vis-à-vis other staff would also result in better care. Furthermore, as far as availability of medicines is concerned, the policy should not be to reduce access and coverage, but should rather centre round improving the quality of the drugs procured and distributed through the hospitals. The article concludes that the main source of inefficiency in a specialist hospital in a typical developing country is not just resource crunch, but huge gaps in planning and implementation by the central authorities as well as managerial inefficiency of the local hospital establishment. The determinants that play a vital role in increasing efficiency levels also indicate that most of the inefficiencies can be tackled either with long-term planning or by quick intercession by the hospital authority itself. © 2014, Taylor & Francis.