Efficiency And Productivity in the Health Sector - Example

ffiсiеnсy аnd Рrоduсtivity in the Health Sector Introduction The performance of the health sector in any country is important since the health sector contributes to human welfare directly and indirectly. For instance, a healthy population implies vibrant people who are able to make significant contributions to the economy. Having a healthy population also reduces the burden of health care needs on the economy. More importantly, the performance of the health care sector is strongly reliant on the economy as well on the existing health care system of a country (Frenk, 2004). For instance, economic growth leads to the creation of more jobs, an increase in incomes, and increase in the ability of consumers to pay for health services and goods (Overholt & Saunders, 1996). Consequently, investment in health is necessary to promote the existence of healthy people and reduce the economic burden of illness. However, most health care systems across the world face difficult and multifaceted challenges that arise in part from new pressures such as growing ageing populations, increasing incidence of chronic diseases, as well as intensive use of costly yet critical health technologies (Frenk, 2004). Despite this, the health sector needs to perform effectively so that its benefits to the economy of any country can be seen. In view of the significant role that the health sector plays in the economy, this essay will discuss the indicators of performance in the health sector and analyse the factors of production in the health sector. The essay will also discuss the drivers of total factor productivity in the health sector and present some of the issues that are likely to affect the efficiency of production of individual firms within the sector. Along with this will be a discussion on how different variables influence the performance of the health sector. Commonly used indicators of performance in the health sector There are various indicators that are used to measure the performance of the health sector. Some of the performance indicators that are commonly used are discussed below. a) Population health Population health encompasses measures of cumulative data on the population’s health. Examples of indicators that are related to population health include life expectancy, years of life lost, avoidable mortality, and disability-adjusted life-years (Smith, Mossialos & Papanicolas, 2008). b) Individual health outcomes Individual health outcomes include measures of individuals’ health status, which may be in relation to the entire population or related to specific groups. Examples of indicators pertaining to individual health outcomes include general measures such as EQ-5Db and short form 36, and disease-specific measurements such as Parkinson’s disease questionnaire and arthritis impact measurement scales (Smith et al., 2008). c) Clinical quality/suitability of care Clinical quality or suitability of care involves measures of the care and services that patients receive in order to attain the desired health outcomes. These measures are used to determine whether best practice is implemented and whether services and care are provided in a technologically sound way. Two measures are important in relation to the clinical quality indicator: outcome measures and process measures. The outcome measure of clinical quality touches on issues like health status and specific mortality and post-operative readmission rates. On the other hand, process measures include areas such as the interval of blood pressure measurement (Smith et al., 2008). d) Responsiveness of the health care system Responsiveness of a health care system measures the manner in which people are treated and the atmosphere in which they receive the treatment as part of health system interactions (Smith et al., 2008). Examples of indicators that are measured to determine a health care system’s responsiveness include patient experience and patient satisfaction measurements (Smith et al., 2008). The measures under responsiveness are concerned with issues such as patient autonomy, dignity, communication, privacy, quality of basic services, timely attention, and social support (Valentine & Salomon, 2003). e) Equity The equity indicator is concerned with the degree to which there is fairness in access to health care services as well as the health care system’s responsiveness. Equity implies the absence of remediable or avoidable differences among different groups of individuals, whether these groups are categorised demographically, economically, socially, or geographically (World Health Organisation (WHO), 2017). The measures of equity in the health care sector include utilisation measures, use to needs ratios, rates of access, spending thresholds, and disaggregated health outcome indicators (Smith et al., 2008). f) Productivity The productivity indicator covers measures of how productive the health care system is in general, as well as the productivity levels of individual practitioners and health care organisations. The indicators of productivity of the health care sector include productivity in regard to labour, cost-effectiveness measures as regards interventions, technical measurements in relation to measures of inputs/outputs, and allocative efficiency (as determined by clients’ willingness to pay) (Akazili et al., 2008; Smith et al., 2008). Outputs and inputs (factors of production) in health care In the health care sector, inputs are the resources that are used in the production of health services (Overholt & Saunders, 1996; Sharpe, Bradley & Messinger, 2007). They include capital (equipment), labour (people), facilities and intermediate services and goods that are available for utilisation in a productive activity (Overholt & Saunders, 1996; Sharpe, Bradley & Messinger, 2007). The inputs are put together in the form of different activities. Activities comprise aspects such as the number of visits by physicians to a hospital or hospitals, the number of days that a hospital operates, or the number of procedures that are performed in a health institution over a given period (Sharpe, Bradley & Messinger, 2007). Conversely, outputs in the health care sector refer to the combination of actions that bring about a completed treatment (Sharpe, Bradley & Messinger, 2007). In other words, outputs are the end result of the provision of different health care services. For example, a concluded knee replacement procedure can be regarded a health care output. In contrast, the input factors for the knee replacement procedure would include aspects such as consultations, diagnoses, operative procedures, and the provision of post-operative care among other health care services that are related to the procedure. Health care organisations as production units combine various inputs in the health system to create different health service outcomes via a production process (Mujasi & Kirigia, 2016). Main drivers of total factor productivity in the health sector Total factor productivity (TFP) is the ratio of all outputs that are produced to all the inputs that are employed in the production of these outputs (Mujasi & Kirigia, 2016). TFP measures the contribution of all factors of production and can be expressed as the output divided by an aggregated input (Mujasi & Kirigia, 2016). TFP is driven by various factors including the number of health care workers that are available; the facilities , supplies and technologies that are utilised by health care organisations; and the size of the health care organisation (Masayuki, 2010; Moestad & Mwisongo, 2013; Mujasi & Kirigia, 2016). According to Moestad and Mwisongo (2013), health care workers are the most important input in the health sector. Other key inputs include medical equipment (for instance gloves, stethoscopes and thermometers), drugs, and physical infrastructure (beds and buildings). These factors combine to determine the final output, which is improved health outcomes. Since measuring changes in health outcomes is difficult, output can be looked at in terms of aspects like the number of patients treated, babies delivered or children immunised. Therefore, one key driver of TFP along this line is health indicators such as the number of cases of diseases treated by medical personnel. A study that was conducted by Masayuki (2010) suggested that the productivity of hospitals increases by over 10 percent when the hospitals’ average size at the secondary medical area level increases by 100 percent. This argument can be attributed to the fact that an increase in the size of a hospital is associated with a rise in the number of health personnel in the organisation as well as equipment and other facilities – assuming that the increase in size is complemented with an increase in operational capacity. Technology has been identified as one of the factors that increase total factor productivity by allowing for more output to be achieved for a given set of inputs (Sloan & Hsieh, 2008). Sloan and Hsieh (2008) add that in the health care sector, there is a plausible connection between change in technology and the level of product innovation as well as an increased TFP of health care inputs. Specifically, technological innovation makes it possible for physicians and other heath care workers to produce higher outputs by attending to many patients and addressing more kinds of illnesses, which results in better health outcomes. Factors likely to influence the efficiency of production of individual firms within the sector and the influence of each factor on performance Various studies that have been performed by employing the data envelopment analysis (DEA) model have suggested that many health care organisations, especially those in developing countries, are inefficient in their operations (Kirigia, Emrouznejad, Sambo, Munguti and Liambila, 2004; Pham, 2011). For instance, it was found out that more than 90 percent of acute general hospitals in Turkey were inefficient (Pham, 2011). As well, 87 percent of hospitals in South Africa were noted to be inefficient (Pham, 2011). Similarly, results of a DEA study on hospitals and health centres in Ghana suggested that 70 percent of the health centres and 47% of the hospitals were technically ineffective (Pham, 2011). A similar study that was conducted by Kirigia et al. (2004) on the health care sector in Kenya also pointed out that 44 percent of the sampled health centres were inefficient in their operations. Some of the factors that characterise inefficient health institutions include use of substandard medicines or inappropriate use of medicines; overuse or oversupply of equipment; inappropriate hospital size that leads to low use of infrastructure; costly or inappropriate staff mix and unmotivated staff; health system leakages such as wastage, fraud and corruption (e.g. theft of funds of medicines); and inefficient mix or inappropriate level strategies (World Health Organisation, n.d.). These inefficiencies act by increasing the cost of inputs with no significant improvement in outputs. The specific effects of some of these factors are outlined below: Use of substandard medicines or inappropriate use of medicines: This leads to medicines being ineffective for the illnesses that they are meant to treat. Inappropriate hospital size that leads to low use of infrastructure. For instance, a large hospital in an area with a low population is likely to operate below its optimum capacity. Overuse or oversupply of equipment: This leads to underutilisation of some equipment or lack of some equipment in some health organisations. Having a costly or inappropriate staff mix and unmotivated staff can lead to some patients not getting the services that they need even as some medical personnel are paid handsomely for services that are not essential. On the other hand, an appropriate mix of staff coupled with staff motivation will result in more productivity. Health systems leakages such as wastage, fraud and corruption e.g. theft of funds or medicines result in health organisations spending on resources whose output is rarely realised. Efficient/inefficient mix or inappropriate level strategies in cases like planning for funding various initiatives can result in efficient or inefficient production. For instance, funding high-cost interventions that have a low impact while low-cost, high-impact initiatives remain unsupported results in inefficiency in the hospital’s production system. Conclusion It has been discussed that the health sector is crucial because of its impact on the economy of any country. The indicators of performance in the health sector include personal health outcomes, population health, clinical quality, responsiveness of the health care system, fairness and overall productivity. Inputs in the health sector include equipment, labour, facilities and intermediate services and goods that are used in production. Outputs are the actual results that emanate from the combination of various inputs. The ratio of outputs to inputs is the total factor productivity. TFP is driven by factors such as the number of health care workers, facilities available and technologies used. The efficiency of production of health care organisations is determined by factors like organisation size, organisation use of resources, and the strategies adopted. References Akazili, J., Adjuik, M., Chatio, S., Kanyomse, E., Hodgson, A., Aikins, M., & Gyapong, J. (2008). What are the technical and allocative efficiencies of public health centres in Ghana? Ghana Medical Journal, 42(4), 149–155. Frenk, J. (2004, May). Health and the economy: A vital relationship. OECD Observer. Retrieved from http://oecdobserver.org/news/archivestory.php/aid/1241/Health_and_the_economy:_A_vital_relationship_.html Kirigia, J. K., Emrouznejad, A., Sambo, L. G., Munguti, N., & Liambila, W. (2004). Using data envelopment analysis to measure the technical efficiency of public health centres in Kenya. Journal of Medical Systems, 28(2), 155-166. Masayuki, M. (2010). Economies of scale and hospital productivity: An empirical analysis of medical area level panel data. RIETI Discussion Paper Series 10-E-050. Retrieved from http://www.rieti.go.jp/jp/publications/dp/10e050.pdf Moestad, O., & Mwisongo, A. (2013). Productivity of health workers: Tanzania. In A. Soucat, R. Scheffler & T. A. Ghebreyesus (Eds), The labor market for health workers in Africa: a new look at the crisis (49-66). Wasington DC: The World Bank. Mujasi, P. N., & Kirigia, J. M. ( 2016). Productivity and efficiency changes in referral hospitals in Uganda: An application of Malmquist Total Productivity Index. Health Systems and Policy Research, 3(1:9), 1-12. Overholt, C. A., & Saunders, M. K. (Eds). (1996). Policy choices and practical problems in health economics: Cases from Latin American and the Caribbean. Washington, D.C.: The World Bank. Pham, T. L. (2011). Efficiency and productivity of hospitals in Vietnam. Journal of Health Organization and Management, 25(2), 195-213. Sharpe, A., Bradley, C., & Messinger, H. (2007). The measurement of output and productivity in the health care sector in Canada: An overview. Report prepared for the Canadian Medical Association (CMA). Retrieved from http://www.csls.ca/reports/csls2007-06.PDF Sloan, F. A., & Hsieh. C.-R. (2008). The effects of incentives on pharmaceutical innovation. In F. A. Sloan & H. Kasper (Eds.), Incentives and choice in health care (pp. 227-262). Cambridge, Massachusetts: The MIT Press. Smith, P. C., Mossialos. E., & Papanicolas, I. (2008). Performance measurement for health system improvement: Experiences, challenges and prospects. Retrieved from http://www.who.int/management/district/performance/PerformanceMeasurementHealthSystemImprovement2.pdf Valentine, N. B., & Salomon, J. A. (2003). Weights for responsiveness domains: analysis of country variation in 65 national sample surveys. In C. J. L. Murray & D. B. Evans (Eds), Health systems performance assessment: debates, methods and empiricism. Geneva: World Health Organisation. World Health Organisation (n. d.). Ten leading sources of inefficiency. Retrieved from http://www.who.int/whr/2010/10_chap4_tab01_en.pdf?ua=1 World Health Organisation (WHO). (2017). Health systems. Retrieved from http://www.who.int/healthsystems/topics/equity/en/ Read More