Using Data Envelopment Analysis to Address the Challenges of Comparing Health System Efficiency
| Date | 01 March 2017 |
| DOI | http://doi.org/10.1111/1758-5899.12212 |
| Published date | 01 March 2017 |
Using Data Envelopment Analysis to Address
the Challenges of Comparing Health System
Efficiency
Jonathan Cylus
European Observatory on Health Systems and Policies and London School of Economics
and Political Science
Irene Papanicolas
London School of Economics and Political Science
Peter C. Smith
Imperial College London
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 par-
tial 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 effi-
ciency 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 effi-
ciency indicators offer policy makers an important resource in
their search for efficiency improvements. These types of indica-
tors 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 decep-
tively simple –maximizing valued health system outputs rel-
ative to inputs –it becomes more difficult to operationalise
when applied to a concrete situation, particularly at the sys-
tem level. Among the challenges in measuring health sys-
tem efficiency are defining and measuring the valued
system outputs and inputs, which may differ across institu-
tions. 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 indica-
tors 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
national and international levels further restrain efforts to
adequately delineate the true efficiency of the system.
The challenge of identifying a set of valued outputs has
implications for the conceptualization of both technical and
allocative efficiency, both of which are important to policy
makers. Technical efficiency examines the extent to which
the unit is failing to reach the maximum level of health sys-
tem output that can be produced for different levels of
inputs, otherwise known as the production frontier. Alloca-
tive efficiency relates to whether production is distributed
across outputs to maximize the value to society. To deter-
mine the technically efficient points of production, it is nec-
essary to identify the outputs of the production process and
©2015 University of Durham and John Wiley & Sons, Ltd. Global Policy (2017) 8:Suppl.2 doi: 10.1111/1758-5899.12212
Global Policy Volume 8 . Supplement 2 . March 2017
60
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