Health care performance management : insights from applications of data envelopment analysis

Abstract

The comprehensive measurement of efficiency and performance in the Health Service in the UK has become one of the most important managerial developments of recent years. The reasons for this development were examined, particularly in relation to the difficulties involved with performance assessment in such a context. The most widely utilised techniques were evaluated from the perspective of the Health Care Manager and a number of serious limitations were identified. In response to these limitations, the technique of Data Envelopment Analysis was evaluated as an alternative. It has been proposed as an appropriate and useful tool for the assessment of efficiency, although the literature on DEA showed limited practical application to public sector services in the UK. The many facets of the technique were investigated and literature on its application to hospital data was reviewed. A two-stage application procedure for the DEA technique was developed in response to this evaluation, to be used in the measurement hospital efficiency. The procedure was based on a deep theoretical understanding of the DEA methodology. The most important elements of the process were related to selection of the initial sample, the identification of the variables to be included in the DEA model and the definition of the weight restrictions to be incorporated. Input from Health Care Managers was used to guide the application and data from a sample of acute hospitals in Scotland was utilised in the analysis. The application procedure showed how the practicalities of the DEA technique could be enhanced, in particular through the inclusion of weight restrictions. This led to the development of efficiency strategies for the inefficient hospitals, which could be related to the policy objectives or managerial structure of the hospitals in the sample. It was concluded that there were many potential benefits of the DEA approach to efficiency assessment and the two-stage application procedure defined here, which could be seen to fulfil many of the requirements of the Health Care Manager. It was determined that combining theoretical and practical issues can enhance the applicability of the DEA methodology.