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The Productive Efficiency of Health Care Institutions:
An Application of Chinese Hospitals Ying Chu NG
Department of EconomicsHong Kong Baptist University
Hong Kong, CHINA
Presented at The 7th International Conference on Data Envelopment Analysis
Fox School of Business, Temple UniversityPhiladelphia, PA, USA
July 10-12, 2009
Background
National expenditure on health care in China has been increasing over the years: 3.17% of GDP in 1980; 3.86% of GDP in 1995; 5.5% of GDP in 2004 Decline in government’s contribution to health
care provision: 30% in the late 1980s to 15% in 2002
Rise in individual’s out-of-pocket health care payment: 21% in 1990 to 50% in 2006
Background
Health care reform since mid 1980s Fall in government subsidies Greater autonomy to generate, retain and manage
surplus revenue of health care providers→Over-prescribing drugs and tests; adopting high-tech
medical treatments (drug sales contribute nearly 50% of hospitals’ income)
Improvement in efficiency and quality induced by market and economic incentives may be undermined by revenue generation imperative
Objectives
How efficient are Chinese hospitals in the post-reform period?
Any change in the productivity of Chinese hospitals?
→DEA efficiency measures and Malmquist Indices
Hospital Efficiency and Productivity Growth
See review studies by Hollingsworth (2003, 2008) Worthington (2004) O’Neill, Rauner, Heidenberger and Kraus (2
008) Emrouznejad, Parker, Barnett and Tavares
(2008)
Methodology - DEA
Input-oriented technical efficiency (TE) measures Overall TE (CRS) Scale efficiency Pure TE (VRS)
Malmquist productivity indices Productivity change Efficiency change Technical change
Data
537 hospitals in the Guangdong province of China for the period 2004-2006 304 in Pearl River Delta region 51 in the eastern region 94 in the western region 88 in the mountain area
2 outputs: outpatient cases and inpatient cases 5 inputs: the number of doctors; the number of
nurses; the number of pharmacists; the number of other medical staff and administrative workers; the number of beds
Table I Hospital Inputs by Region, 2004-06
Pearl River Delta Area
East Region West Region Mountain Area
2004
Number of Doctors
105.05(122.88)
92.10(75.45)
61.15(74.99)
73.25(61.38)
Number of Nurses
110.09(140.58)
87.73(98.40)
70.85(99.53)
86.83(81.13)
Number of Pharmacists
23.63(26.86)
25.45(22.24)
16.82(17.56)
22.98(15.81)
Number of Other Staff
44.32(50.52)
43.39(40.05)
32.88(41.71)
33.32(27.69)
Number of Beds
252.95(288.83)
190.96(177.41)
167.95(220.93)
179.98(167.25)
2005
Number of Doctors
110.01(128.88)
96.67(77.37)
61.39(74.75)
73.49(62.45)
Number of Nurses
116.56(148.02)
91.71(100.38)
73.59(103.53)
90.09(85.06)
Number of Pharmacists
23.91(27.33)
26.41(23.81)
16.04(16.92)
22.68(16.09)
Number of Other Staff
45.49(53.44)
42.63(37.18)
36.72(47.84)
37.34(34.23)
Number of Beds
261.37(294.54)
197.24(184.32)
172.16(224.99)
173.90(153.15)
Pearl River Delta Area
East Region West Region Mountain Area
Pearl River Delta Area
East Region West Region Mountain Area
2006
Number of Doctors
132.63(147.93)
97.14(80.67)
62.88(78.76)
75.77(68.66)
Number of Nurses
148.62(190.98)
95.04(101.80)
77.93(119.06)
91.10(86.51)
Number of Pharmacists
27.49(29.77)
25.61(22.46)
17.02(17.82)
22.76(16.43)
Number of Other Staff
53.29(63.46)
42.59(34.56)
38.15(52.61)
36.36(29.67)
Number of Beds
276.34(315.03)
202.04(184.97)
175.95(236.42)
196.59(215.41)
Sample Size 304 51 94 88
Note: Standard errors are in parenthesis.
Table II Hospital Outputs by Region, 2004-06
Pearl River Delta Area
East Region West Region Mountain Area
2004
Number of Outpatients Treated
391897.91(439225.38)
127715.73(126224.50)
90876.87(124422.62)
122547.27(128060.10)
Number of Inpatients Treated
6973.37(8388.22)
4872.14(5640.93)
3840.72(6524.18)
4435.02(4896.94)
2005
Number of Outpatients Treated
427613.89(477976.26)
134497.43(133795.61)
94867.33(134530.70)
122611.98(132067.21)
Number of Inpatients Treated
7579.26(8911.96)
5170.20(6183.20)
4085.03(6939.30)
4728.60(5252.58)
2006
Number of Outpatients Treated
462838.15(519241.50)
134095.02(134872.42)
99839.89(144136.29)
125430.20(137682.83)
Number of Inpatients Treated
8173.10(9553.34)
5738.39(6912.90)
4456.10(7592.54)
5219.15(6158.71)
Sample Size 304 51 94 88
Table III Efficiency Measures by Region, 2004-06
Pearl River Delta Area
East Region
West Region
Mountain Area
2004
Overall Efficiency 0.3498 0.2928 0.2077 0.2480
Scale Efficiency 0.7168 0.7023 0.4811 0.6769
Pure Technical Efficiency 0.4880 0.4170 0.4317 0.3663
2005
Overall Efficiency 0.3712 0.2725 0.2000 0.2587
Scale Efficiency 0.7351 0.6717 0.4529 0.6981
Pure Technical Efficiency 0.5049 0.4056 0.4415 0.3708
2006
Overall Efficiency 0.3895 0.3058 0.2282 0.2780
Scale Efficiency 0.7301 0.6836 0.4830 0.7021
Pure Technical Efficiency 0.5335 0.4474 0.4724 0.3960
Sample Size 304 51 94 88
Hospital Efficiency
Hospitals in the Pearl River Delta are relatively efficient while hospitals in the west are relatively inefficient
About 20%-40% of inputs would be required to produce existing outputs had hospitals been efficient
Improvement in overall efficiency between 2004 and 2006
Hospital Efficiency
Pure technical inefficiency is the primary source of inefficiency
However, improvement in overall efficiency stems from improvement in pure technical efficiency for the studied period
Except hospitals in the west, scale inefficiency is relatively less serious as compared to pure technical inefficiency
Hospital Productivity Change
The Malmquist indices show that there are productivity growth of hospitals in Guangdong between 2004 and 2006
West: growth in 2004-05 and 2005-06Pearl River Delta and mountain areas:
growth in 2004-05 but deterioration in
2005-06East: low growth in 2004-05 and 2005-06
Table IV Malmquist Productivity Index and Its Decomposition by Region, 2004-06
2004-06 2004-05 2005-06
A.Pearl River Delta Area
Malmquist Index 1.0495 1.0773 0.9866
Technological Change 0.9425 1.0153 0.9401
Change in Efficiency Change in Scale Efficiency Change in Pure Technical Efficiency
1.11351.01851.0932
1.06111.02551.0346
1.04940.99321.0566
Sample Size 304 304 304
B. East Region
Malmquist Index 1.0142 1.0107 1.0073
Technological Change 0.9712 1.0863 0.8975
Change in Efficiency Change in Scale Efficiency Change in Pure Technical Efficiency
1.04430.97341.0729
0.93040.95650.9727
1.12241.01761.1030
Sample Size 51 51 51
2004-06 2004-05 2005-06
C. West Region
Malmquist Index 1.1090 1.0285 1.0747
Technological Change 1.0096 1.0684 0.9419
Change in Efficiency Change in Scale Efficiency Change in Pure Technical Efficiency
1.09841.00391.0942
0.96270.94131.0227
1.14101.06641.0699
Sample Size 94 94 94
D. Mountain Area
Malmquist Index 1.0658 1.0663 0.9960
Technological Change 0.9506 1.0213 0.9275
Change in Efficiency Change in Scale Efficiency Change in Pure Technical Efficiency
1.12121.03731.0809
1.04401.03131.0124
1.07391.00581.0677
Sample Size 88 88 88
Hospital Productivity Change
Productivity growth of hospitals originates from efficiency improvement which outweighs technological regression
Technological improvement happens in 2004-05 while there is substantial regression in 2005-06
Change in efficiency echoes the yearly efficiency measures presented in Table III
Efficiency improvement mainly results from pure technical efficiency change
Concluding Remarks
Guangdong hospitals suffer technical inefficiency with improvement over time for the studied period
The efficiency performance of this sampled hospitals is far below those found in the literature
Nevertheless, health care reform in China probably exert some positive effect on hospital efficiency
Concluding Remarks
Overall productivity growth experiencing by the Guangdong hospitals is in line with those found in European studies
Same as hospitals in Ukraine and South Africa, hospitals in Guangdong face technological regression
It is suspected that efficient hospitals become less efficient while inefficient hospitals show improvement, leading to an inward shift of the froniter
Concluding Rewards
Good performers are found in the most developed region as well as the remote area, and thus economic environment may not be too important to the performance of Guangdong hospitals
Limitations Issue of case-mix in hospital services Generalization of the results to China as a
whole Variation by hospital type
THANK YOU
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