Professional Documents
Culture Documents
Efficiency 2023
Efficiency 2023
8/13/2023
What is efficiency?
▪ We want the health system to be
efficient.
• It may limit health gains for patients who have received treatment,
because they do not receive the best possible care available within the
health system’s resource limits.
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What is efficiency
• A measure of performance
• Identifies resources used to create health
care products
• Efficiency considers both inputs and
outputs
▪ An efficient provider
• Maximizes output for a given set of inputs
▪ Technical efficiency
▪ Productive efficiency.
▪ Allocative efficiency.
▪ Social efficiency.
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Technical efficiency?
The simplest notion of efficiency is the one
synonymous with economy, and is often
referred to as efficiency savings, where
output is expected to be maintained, while at
the same time making cost reductions, or
where additional output is generated with the
same level of inputs. This type of efficiency
has been referred to as technical efficiency or
operational efficiency, but also as cost-
effectiveness
An organization achieves technical efficiency when it cannot
produce the same outputs with any fewer inputs
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In health that means
▪ In the context of achieving health outcomes,
technical efficiency is achieved by applying
cost-effective care procedures with the least
inputs.
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Productivity Definitions
• Productivity is one measure of the effective use of
resources within an organization
Output
Pr oductivity=
Input
13
Example: Technical vs. Productive Efficiency
▪ Technical Efficiency
– Hospital A has a good HIS system and staff are
able to use it well
▪ Productive Efficiency
– Hospital A bought a HIS system, Hospital B did
not; Hospital A now turns around orders more
quickly
Inputs are put to good use Inputs are put to good use
+
Best mix of inputs chosen
+
Lowest prices are paid
Allocative
This type of efficiency exists when it is
impossible to make one person better
off without at the same time making
someone else worse off. It represents a
situation where no input and no output
can be transferred so as to make
someone better off without at the same
time making someone else worse off.
This situation is called Pareto-efficient.
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Allocative efficiency
▪ Given the distribution of income in a society,
allocative efficiency means that it is not
possible to make one person better – off
without making at least one person worse –
off.
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Social efficiency
▪ The allocative efficiency may not necessarily be the
desired one. In a situation where income is unequally
distributed, it might not be possible to improve the
situation of the poor without taxing the rich.
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Output in health care
▪ In the measurement of efficiency, it is clear
that we need to define the output of the
system. Can we measure outputs in health
care in countable form?
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Efficiency and distribution of output
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Efficiency in distribution
▪ Horizontal target efficiency: proportion of
those needing the service who actually
receive it.
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Target efficiency
measurement
▪ Vertical target
efficiency=D/(C+D)
– The ratio of the number of
those who needed the
treatment and got it to the
A= C D B=
number of all people who got
don’t need TREATED need it, regardless if they needed
treatment treatment it or not
▪ Horizontal target
efficiency=D/B
– The ratio of the number
of who needed the
treatment and got it to
the number of those who
needed it, whether they
got it or not
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Measuring Efficiency
▪ Tremendous pressure exists from various stakeholders
to measure ‘efficiency’,
▪ Concern about rising health care costs
▪ Variability in intensity of resource use not associated
with better processes and outcomes
▪ Little is known about how well available metrics capture
the quantities of interest
▪ Considerable lack of common language, conceptual
clarity
▪ Little is known about the consequences (intended and
unintended) of applying those metrics at different levels
in the system
▪ How is efficiency established in an environment with
different payment methods or multiple providers like in
Palestine?
We recommend that for any efficiency
indicator, five aspects should be explicitly
considered:
Intervention
Reduced health
Improved Family and
services Savings in
patient health friends quality
resource use productivity.
status / utility. of life.
eg. LoS.
Complicating characteristics of health services
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Complicating characteristics of health services
Market anomalies
Due to market characteristics specific to the health
sector, a proper economic perspective requires
evaluating health services in terms of health
outcomes. There are particular considerations in
relying on the market mechanism to guide the use of
cost-effective health care procedures. Typically
consumers have limited knowledge about health care.
The supply of health services is characterised by
regulation and market segmentation due to
geography, service specialty and reimbursement
arrangements.
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Providing services versus achieving outcomes
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Two Complementary types of efficiency measurement
techniques:
▪ Benchmarking analysis — which compares service providers,
individually or collectively; procedures, operational efficiency
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Cost minimization analysis (CMA)
▪ CMA comprises for the least costly alternatives when the
outcomes of two or more therapies are virtually identical.
CMA involves calculating drug costs to analyse the least costly
drug or therapeutic modality. It also reflects the cost of
preparing and administering a dose. This method of cost
evaluation is the one used most often in evaluating the cost of
a specific drug.
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Continued
1.Identify cases of overtreatment. ...
2.Reduce clinical errors. ...
3.Strengthen care coordination. ...
4.Simplify administration. ...
5.Accelerate medical research efforts to
reduce prices. ...
6.Fight fraud and abuse.
Continued
▪ Start with training
▪ Eliminate redundancies