OPTIMISING EFFICIENCY GAINS: A SITUATIONAL ANALYSIS OF TECHNICAL EFFICIENCY OF DISTRICT HOSPITALS IN GHANA

Caroline Jehu-Appiah , Frank Nyonator, Martin Adjuik, James Akazili, Selassi D’Almeida S, Charles Acquah, Dan Osei

AfHEA10-12 March 2009 , Accra

Without a wider use of economics in health care, inefficiencies will abound and decisions will be made less explicitly and hence less rationally than is desirable: we will go on spending large sums to save life in one way when similar lives in greater numbers could be saved in another way. The price of inefficiency, inexplicitness and irrationality in health care is paid in death and sickness.’

Professor Gavin H. Mooney 1986

Outline

•Rational•Objectives•Overview of Efficiency •Methodology •Results•Conclusions and •Recommendations

Rational of study• Insufficient resources for health care delivery

• Past POWs identify improving efficiency as a key strategic objective

• Hospital strategy document objectives include improving quality and efficiency of hospitals

• Lions share goes to the hospital sector - 61% of GHS recurrent expenditure in 2005.

• Evidence of hospital inefficiency (Osei et al, 2003, Adams I, 2004)

• With NHI demand for hospital care will increase and costs of provision will rise

• Improvements in their efficiency can yield tremendous gains for the entire sector

Objective of the study

•To measure and analyze the technical efficiency of district (Public, Quasi-govt, Private and Mission) hospitals in Ghana.

 

Specific objectives:

•Evaluate the technical and scale efficiency of district hospitals

•Identify institutional and environmental factors that are likely to influence the state of (in) efficiency of district hospitals.

•Assess how ownership of hospitals relates to hospital performance and efficiency.

•Recommend the policy implications of the results explicit for policy makers and hospital manager

Efficiency concepts• Using resources in the best possible way to

achieve your goals

• The minimum amount of resources used for a given level of output or achieving maximum output at least cost. If more inputs than required are used to produce a given amount of output, this implies a waste of resources and therefore inefficiency.

▫Technical efficiency: Producing outputs at minimum costs – how things are produced

▫Allocative efficiency: Producing the right combination of outputs to achieve our goals – what things are produced

.

Efficiency concepts• Scale efficiency   The size of a hospital may sometimes be a

cause for inefficiency▫If too large for its level of operation -

diseconomies of scale.▫ If too small - economies of scale .

 • Productivity   Productivity is the ratio of output to input. In

other words, it is output per unit of input. Some examples in the health sector include: outpatient visits per physician, child deliveries per midwife, and patients per bed

Assuring Efficiency

•Technical efficiency depends on managers

•Allocative efficiency depends on payers, financers, planners, and regulators

Sampling and Data collection• Quantitative and qualitative data

• A total of 167 district hospitals selected in the initial sample. Complete data was available for 128 district hospitals▫ Data collected from all GHS (73) and CHAG (42)

facilities▫ Sampling of quasi (7) private (6)

• Generic WHO/ Afro questionnaires adapted to Ghana and pretested.

• Data on multiple variables (426) – inputs and outputs.

• Data on explanatory variables collected to determine the effect of institutional factors/processes on the technical efficiency of hospitals.

Final inputs and outputs selected

Inputs Outputs

•Beds•Expenditure•Clinical staff•Non clinical staff

•OPD•IPD•Laboratory

services•Deliveries

Explanatory variables• Additional managerial

qualifications of in-charge

• Quality of beds & equipment

• Area and quality of building

• Age & sex of staff

• Level of satisfaction of staff

• Availability of equipment maintenance

• Availability of functional committees

• Management structures and processes

• Incentives and motivation

• Hospital building maintenance

Measuring efficiency- Data Envelopment Analysis (DEA/Frontier)

• DEA is a relatively easy method of handling multiple inputs and outputs and was first introduced by Charness, Cooper, and Rhodes in 1978 and has become the dominant approach to efficiency measurement in health care and in many other sectors of the economy

• A non parametric approach

• The location and shape of the efficiency Fortier is determined by the data. The construct of the frontier is based on ‘best observable practice’ and is therefore only an approximation to the true unobserved efficiency frontier.

• In other words, it can tell you how efficient you are compared to your peers but not compared to a ‘theoretical’ maximum.

• DEA will rank all hospitals on a scale from 0 to 1 being most efficient.

Data AnalysisFirst stage Second stage

An output-oriented model with VRS was assumed to estimate TE▫ Output-orientation: by

how much could output quantities be expanded without changing the quantity of inputs used?

 ▫ Input-orientation: by

how much could input quantities used be reduced without changing the quantity of outputs produced?

• Explanatory variables were regressed on the VRS efficiency score using a Tobit regression model

• First, a univariate analysis was done where the VRS efficiency score was regressed on each of the explanatory variables. Only variables with p-values of at least 0.10 were considered in the multivariable analysis.

 • The following linear Torbit

regression Model was used: 

Torbit (yj) = α0 + α1xj1 + α2xj2+ α3xj3+ … + εj  

Summary of descriptive statistics

Ownership

Num. of Hos

p

Input variables(means, sd)Output Variables (means,

sd)

Beds Clinical Non-clinical Outpatient

Visit Admissions

Government 73

85 (41.1)

72 (55.4) 47 (40.9)

33,603 (30774.2)

4,056 (2586.4)

Mission 42104

(48.8)73

(48.5) 50 (31.4)31,710

(23459.5)4,417

(3018.2)

Private 7 46 (8.6)39

(28.0) 25 (18.3)18,733

(17522.8)2,057

(1884.4)

Quasi-Govt. 6

69 (23.4)

86 (66.7) 65 (39.5)

78,096 (28034.3)

3,054 (1807.6)

Distribution of Technical efficiency scores

Mean Technical efficiency scores

Ownership N

Mean VRS

score sd min maxHospitals on

Frontier

Government 73 70.35%

22.46

27.4 100 18 (25%)

Mission 42 68.59%23.3

031.92 100 9 (21.42%)

Private 7 55.83%22.7

232.69 100 1 (14%)

Quasi-Govt 6 83.89%

18.15

61.95 100 3 (50%)

Mean TE Scores by region

Region: Number of Hospitals (N=130)

Mean VRS

score

sd Min Max

Ashanti 34 61.99 25.6 31.84 100

Brong-Ahafo 13 62.04 17.8 28.3 90.54

Central 10 76.98 20.1 51.05 100

Eastern 14 54.61 20.7 30.56 100

Greater Accra

8 65.04 25.3 29.72 100

Northern 10 83.36 19.8 49.26 100

Upper East 5 72.23 15.7 56.65 92.06

Upper West 5 50.65 29.2 26.49 100

Volta 18 45.02 13.8 22.9 74.39

Western 13 70.01 23.7 30.26 100

Scale inefficiencies-Returns to scale

Ownership RTS  

  Decreasing Constant Increasing N

Government17(22.97%

) 17(22.97

%) 39(53.42

%)73(100

%)

Mission 6(14.29%)10(23.81

%)26(61.90

%)42(100

%)

Private 6(85.71%) 1(14.29%) 07(100%

)Quasi-

Government 1(16.67%) 3(50%) 2(33.33%)6(100%

)

Total30(23.44%

)31(24.22

%)67(51.34

%)128(10

0%)

TE scores vrs selected variablesNon clinical staff Clinical staff

2040

6080

100

Varia

ble

retu

rn to

sca

le e

fficie

ncy

scor

e

0 50 100 150Number of nonclinical Staff

Blue clour represents mean nonclinical staff; Red colour represents mean score

The effect of nonclinical staff on variable return to scale efficiency score

2040

6080

100

Varia

ble

retu

rn to

sca

le e

fficie

ncy

scor

e

0 100 200 300 400Number of Clinical Staff

Blue clour represents mean clinical staff; Red colour represents mean score

The effect of clinical staff on variable return to scale efficiency score

TE scores vrs selected variablesBeds Hospital area

2040

6080

100

Varia

ble re

turn t

o sca

le eff

icien

cy sc

ore

0 50 100 150 200 250Number of Beds

Blue clour represents mean beds; Red colour represents mean score

The effect of beds on variable return to scale efficiency score

2040

6080

100

vrs T

E sc

ore

0 1000 2000 3000 4000area of functional units

bandwidth = .8

vrs efficiency score vs area of functional units

Potential improvements- Quasi gov. hospitals

Factors affecting hospital efficiency

Variable Coef.Std. Err. P 95% Conf. Interval

Hospital Area (324-634m2)

-2.9261

667.061

88 0.679(-

16.9093911.0570

5)

Hospital Area (634-1100m2)

-5.5015

816.917

59 0.428 (-19.19918.19593

4)

Hospital Area ( >1100m2)

-15.258

426.928

36 0.030(-

28.97727

-1.53957

)Managerial qualifications

11.7158

5.09762 0.023

(1.616226

21.80382)

Ownership- Mission

-2.1612

15.387

24 0.689(-

13.828488.50605

6)

Ownership-Private

-22.212

9210.96

25 0.045(-

43.91975-.50607

9)Ownership-Quasi Gov

20.18218

12.4325 0.107 (-4.43541

44.79977)

Organizational Processes

-8.8121

555.438603 0.108

(-19.58113

1.956822)

Conclusions • The data is widely dispersed in terms of inputs such as

expenditure, hospital beds and staff. This variability points to the fact that our district hospitals lack homogeneity.

• Results of the DEA model show approximately 76% of district hospitals in Ghana are inefficient.

• Attributable to both pure technical and scale inefficiency.

• Quasi-government hospitals are the most efficient making them the best performing in terms of technical efficiency, followed by government, mission and private hospitals.

• Study findings thus demonstrate that government hospitals in Ghana show higher levels of technical efficiency than their private counterparts

• Government hospitals also display greater variations in inefficiency scores compared to private and quasi hospitals.

Conclusions cont’• The most efficient district hospitals operate within a range of

approximately 50-80 beds. Economies of scale of up to 100 beds

• The most efficient hospitals employ not more that 100 clinical staff and not more than 50 nonclinical staff.

• In terms of total functional area, not more than 1100m 2 appears optimal.

• With regards to optimal hospital size, most district hospitals (75%) are not operating at an optimal size and are thus scale inefficient

 • Ownership and additional managerial qualifications positively

impact on the efficiency of hospitals

• Finally we observe that 76% of our hospitals can increase their outputs with the current levels of inputs to operate as efficiently as their peers.

Recommendations • Continue the support for public hospitals which remain

central to the provision of care and as our findings demonstrate do so more efficiently than their counterparts.

• Initiate hospital management reforms in the public sector thereby giving hospital managers greater autonomy with clear responsibility for performance. This would provide hospital mangers the capacity and motivation to introduce efficiency improvement measures in their hospitals

• Ensure requisite managerial training for all hospital managers and improve hospitals’ efficiency through performance evaluations and incentives that encourage directors and staff.

• Institutionalise hospital efficiency and health sector productivity studies as part of performance measurement of the health sector.

Recommendations cont’• Review the numbers of hospitals and their distribution,

improve allocative efficiency between hospitals and regions and reduce duplication by closing down or scaling down some hospitals with efficiency scores below a certain threshold.

• Inefficient hospitals should emulate the relatively efficient (best-practice) hospitals in terms of how they conduct their business.

• The NHIA as a purchaser has some information difficulty when negotiating contracts with providers and often find it difficult to judge whether providers are offering good value for money. Mean efficiency scores generated for each hospital should aid in better understanding performance of providers relative to best practice and introduce elements of “yardstick competition” into the purchasing arrangements.

• Finally, the health sector should begin to generate demand for its services by improving staff attitude and quality of care to advance public confidence in Allopathic care.

 

‘While the secrets of efficient production are not as complex (or secret) as one might think, the price of efficiency like that of liberty is eternal vigilance’

Mansfield

Thank you for your attention !