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 AfHEA 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 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 Analysis First 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 (y j ) = α 0 + α 1 x j1 + α 2 x j2 + α 3 x j3 + … + ε j

Summary of descriptive statistics Ownership Num. of Hosp Input variables(means, sd)Output Variables (means, sd) BedsClinicalNon-clinical Outpatient VisitAdmissions Government7385 (41.1)72 (55.4)47 (40.9)33,603 ( )4,056 (2586.4) Mission42104 (48.8)73 (48.5)50 (31.4)31,710 ( )4,417 (3018.2) Private746 (8.6)39 (28.0)25 (18.3)18,733 ( )2,057 (1884.4) Quasi-Govt.669 (23.4)86 (66.7)65 (39.5)78,096 ( )3,054 (1807.6)

Distribution of Technical efficiency scores

Mean Technical efficiency scores OwnershipN Mean VRS scoresdminmax Hospitals on Frontier Government % (25%) Mission % (21.42%) Private755.83% (14%) Quasi-Govt683.89% (50%)

Mean TE Scores by region Region:Number of Hospitals (N=130) Mean VRS score sdMinMax Ashanti Brong-Ahafo Central Eastern Greater Accra Northern Upper East Upper West Volta Western

Scale inefficiencies-Returns to scale OwnershipRTS DecreasingConstantIncreasingN Government17(22.97%) 39(53.42%)73(100%) Mission6(14.29%)10(23.81%)26(61.90%)42(100%) Private6(85.71%)1(14.29%)07(100%) Quasi-Government1(16.67%)3(50%)2(33.33%)6(100%) Total30(23.44%)31(24.22%)67(51.34%)128(100%)

TE scores vrs selected variables Non clinical staff Clinical staff

TE scores vrs selected variables Beds Hospital area

Potential improvements- Quasi gov. hospitals

Factors affecting hospital efficiency VariableCoef.Std. Err.P95% Conf. Interval Hospital Area ( m2) ( ) Hospital Area ( m2) ( ) Hospital Area ( >1100m2) ( ) Managerial qualifications ( ) Ownership- Mission ( ) Ownership-Private ( ) Ownership-Quasi Gov ( ) Organizational Processes ( )

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 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 !