Using Data Envelopment Analysis to Address the Challenges of Comparing Health System Efficiency

Abstract

Efficiency is one of the most potent measures of health system performance and is of particular interest to policy makers because it seeks to assess the valued outcomes of a health system in relation to the resources that are sacrificed to achieve those outcomes. However, the production process of the health care system is a complex sequence, and most indicators are only able to capture part of that process; these indicators offer limited scope for analysis. While researchers have previously constructed composite indicators which combine partial measures into a single number, the weights used for aggregating data can be contentious and may not be universally applicable across systems. Data envelopment analysis (DEA) is most often used to compare the productivity of different producing entities, including health systems. In this article, we instead propose a method that relies on DEA to construct composite health system efficiency indicators from several partial efficiency measures. Among other noted benefits, this enables the construction of composite indicators where different weights are attached to partial indicators for each country, allowing countries to be viewed according to the weights that cast each in the best light. Our application of this method suggests that there is reasonable consistency among the countries that are found to be efficient.Rising health care costs and increasing concerns about fiscal sustainability have brought the issue of health system efficiency to the forefront of policy discussions. Most high-income countries are trying to identify ways in which they can secure the same health outcomes for less, while many middle and low-income countries are attempting to expand their health systems while ensuring value for money. Comparative efficiency indicators offer policy makers an important resource in their search for efficiency improvements. These types of indicators can be used to identify areas in the health system that are underperforming, as well as highlight other countries to look towards to identify potential processes that may improve the value for money of the domestic system (Papanicolas and Smith, 2013).While the concept of health system efficiency is deceptively simple -maximizing valued health system outputs relative to inputs -it becomes more difficult to operationalise when applied to a concrete situation, particularly at the system level. Among the challenges in measuring health system efficiency are defining and measuring the valued system outputs and inputs, which may differ across institutions. In practice, definitions of outputs vary and cover a range of factors such as overall performance, quality of care, health gain or volume of treatment. Thus, efficiency indicators essentially serve as a summary measure of the extent to which the inputs to the health system, in the form of expenditures and other resources, are used to secure these goals of the health system. Yet, the limitations of available metrics to measure the valued outputs and inputs at both natio...

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