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Sri Lanka is well known for having achieved very good health
outcomes at low cost. Analysis of a survey of health facilities
in 1991 found that average costs of care in public sector
health facilities were very low by international standards.
Nonetheless, considerable variation was identified among
facilities offering similar services, suggesting that there
is potential for improving efficiency. The objectives of
this study were to (i) to explore different methods for
quantifying the magnitude of technical and economic inefficiency
in service provision by public sector providers and (ii)
to identify institutional and behavioural factors which
explain difference in efficiency.
A variety of techniques were used to quantify
the extent of inefficiency in service provision, including
standard service indicators (length of stay, occupancy rate,
turnover rate) average cost, and econometric cost and production
functions. The results of the different methods were compared
using rank correlation coefficients. Lasso diagrams were
used to compare the relative performance of facilities.
Other potential correlates of facility performance studied
included a series of management indicators, which describe
the characteristics of the facility manager, the system
used for managing key inputs such as drugs and staff, and
the characteristics of the environment.
The study found that average costs of care
in 1997 continued to be below international norms, but that
there remained an important degree of variation among similar
facilities, with ratios of high: low cost facilities ranging
from 4.3 (for cost per patient day in complex inpatient
facilities) to almost 30 (for outpatient visits in basic
inpatient facilities). Differences in average length of
stay and occupancy rate explain only a small proportion
of the variation in facility cost. Indicators of management
characteristics do not seem to explain much of the variation
in costs either.
The findings of this study led us to question
the adequacy of microeconomic approaches to efficiency for
understanding the way in which public hospitals in Sri Lanka
operate. The neo-classical production model relies on several
assumptions such as perfect information and choice over
inputs and outputs that do not necessarily hold in the context
of Sri Lankan public hospitals. In a situation where budgets
are fixed and demand is exogenous, unit costs are mainly
demand driven and are unlikely to be adequate measures of
economic efficiency at the hospital level. A macroeconomic
perspective of efficiency that takes into account the equity
and efficiency objectives of health planners who are responsible
for resource allocation would be more effective at explaining
the huge variation in unit costs and performance indicators
between the same types of facilities.
Table of Contents:
- Introduction
- Objectives
- The Sri Lankan Health System
- Literature Review
- Methodology
- Data
- Description of Facilities
- Measuring Efficiency
- Explaining Efficiency by Management Processes
- Management Issues
- Discussion
- Recommendations
- Conclusions
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