An assessment of efficiency of Chinese county hospitals during economic transition: data from 1993 to 2005

Presenter: Ruoyan Gai, University of Tokyo

Abstract

In China, with the market-oriented health sector reform, hospitals have tended to enlarge the scale and productivity for survival and development. Besides skewed and uneven health resource allocation, inefficiency in investing health care undermines deteriorated performance of China’s health system. Improving hospital efficiency and optimizing health resource allocation remains as an essential issue for policy makers. This study assessed changes of efficiency from 1993 to 2005 in county hospitals, which are the main health care service provider to rural residents, accounting for 80% of overall population in China, and consume 25.4% of health expenditure in the rural area. The data were originally based on annual financial report on health expenditure by the Ministry of Health. Indicators of county hospital inputs and outputs were specified and measured. Efficiency is measured using a DEA model. The model estimates efficiency scores for county hospitals in all 31 provinces of China, which is geographically and socioeconomically divided into three groups: the eastern (most developed), the middle (moderately developed) and the western (less developed). Scale efficiency, technical efficiency and inefficiency attributable to input congestion is also examined. As the results, the average efficiency score of the overall Chinese county hospitals has slightly decreased from 0.821 in 1993 to 0.809. In 2005, eight provinces achieved complete efficiency are all in the eastern. In general, the average score in the eastern provinces have been higher that in the western. The lowest score comes from the Tibet Autonomous Region during the 13 years, where county hospitals are operating at 50.5% and 46.6% level of efficiency, in 1993 and in 2005, respectively, implying that significant health resources have been wasted. Regarding the scale efficiency of county hospitals, the number of provinces exhibiting the increasing returns to scale has decreased from 20 provinces in 1993 to 6 provinces in 2005; while that exhibiting the decreasing returns to scale has increased from 4 provinces to 17 provinces. In 2005, except Hainan Province, others exhibiting increasing returns to scale are in the western, suggesting that health resources should be much more distributed to those less developed provinces. The technical efficiency in the eastern is much higher than the middle and the western under the current scale. In those provinces with incompletely effective DMUs is found excessive inputs and deficient outputs by estimates of congestion. The average congestion efficiency score in the eastern provinces is 8%, while that in the middle and the western is more than 20%. In conclusion, this study identified geographical disparity of health resource allocation and county hospital efficiency. In western provinces, health resources are deficient yet the wasting is significant. There is an urgent need to switch the development strategy of county hospitals from the enlargement of the scale to the investment and the improvement of the technique and the management, especially in the western provinces.