Efficiency in hospitals owned by the Iranian Social Security Organisation: measurement, determinants, and remedial actions.

Abstract

Given the need to ensure the best use of scarce resources, increasing emphasis is being placed on hospital efficiency measurement. In the literature about hospital efficiency measurement, there is an absence of a well-defined framework to select the most appropriate set of input and output variables. Variables used in hospital efficiency studies predominantly reflect a narrow view of hospital functions with a little attention to quality variables. This implies that the hospital goal and its full range of functions in efficiency measurement are poorly understood. While numerous studies have been undertaken in developed countries, there have been only a few attempts at measuring hospital efficiency in developing countries. However, there has so far been no systematic attempt, using frontier-based techniques, to measure the efficiency of Iranian hospitals, and to identify factors affecting efficiency and remedial actions to improve efficiency. By focusing on the above two issues, this thesis makes three arguments. First, by undertaking an in-depth investigation regarding the multi-product nature of hospitals, considering a fuller range of hospital functions, and the values of various stakeholders including patient, staff, and community, this study has proposed a health-oriented framework with a focus on the Iranian hospitals to select the most appropriate variables for measuring hospital efficiency. I argue that both variables (existing in the literature, and discussed for addition) should be taken into account in order to enhance the validity of hospital efficiency studies. Second, two types of techniques (simple ratio analysis and data envelopment analysis) were used for measuring the technical efficiency of hospitals owned by the Iranian Social Security Organization (SSO). The benefits and shortcomings of each method were discussed. For example, considering major surgery rates, which implicitly provide information about the case-mix, has revealed that all high-turnover, high-occupancy outlying hospitals as well as the majority of hospitals falling in the relatively well-performing quadrant in the Lasso diagram had a low major surgery rate. This suggests that simple ratio analysis can only measure the performance of hospitals over a single dimension ignoring their multi-input and multi-output nature of hospitals. Using Data Envelopment Analysis (DEA), I measured technical efficiency, scale efficiency, and types of returns to scale for the SSO hospitals. In addition to studying their overall and relative efficiency, I analysed the magnitude of the inefficiency for each individual hospital. The results revealed that 22 of the 53 hospitals were deemed to be efficient. Inefficient hospitals had an average score of 78%, implying a potential reduction in all inputs on average by about 22% with no impact on output levels. The comparison of DEA results and simple ratio analysis has revealed that hospitals with an exceptional performance on individual variable even though less valuable compared with other variables can gain a full efficiency score. This critical analysis of the study strongly suggests that the findings obtained from unconstrained DEA should be interpreted with caution. Finally, in addition to simply measuring efficiency, it was felt that a better understanding of the factors affecting hospital efficiency and remedial actions to improve efficiency is needed. Using qualitative methods, a complex mix of organisational factors such as hospital financing, political influences such as political pressures in determining hospital location, and the training and experience of the managers were argued to be influential factors in hospital efficiency. The interviews also provided a great insight into remedial actions such as reforms in the regulatory framework and corporatization.