Cover_WHO_nr46_Mise en page 1 5/01/17 12:06 Page 1 46 Efficiency is one of the central preoccupations of health policy-makers and managers, and EFFICIENCY SYSTEM HEALTH justifiably so. Inefficient care can lead to unnecessarily poor outcomes for patients, either Health System 46 in terms of their health, or in their experience of the health system. What is more, inefficiency anywhere in the system is likely to deny health improvement to patients who might have been treated if resources had been used better. Improving efficiency is therefore a compelling policy goal, especially in systems facing serious resource constraints. Efficiency Series The desire for greater efficiency motivates a great deal of decision-making, but the routine use of efficiency metrics to guide decisions is severely lacking. How to make measurement Health Policy To improve efficiency in the health system we must first be able to measure it and must therefore ensure that our metrics are relevant and useful for policy-makers and managers. In this book the authors explore the state of the art on efficiency measurement in health matter for policy and management systems and international experts offer insights into the pitfalls and potential associated with various measurement techniques. Edited by The authors show that Jonathan Cylus • The core idea of efficiency is easy to understand in principle - maximizing valued outputs relative to inputs, but is often difficult to make operational in real-life situations Irene Papanicolas • There have been numerous advances in data collection and availability, as well as Peter C. Smith innovative methodological approaches that give valuable insights into how efficiently AND MANAGEMENT POLICY FOR MATTER MAKE MEASUREMENT TO HOW health care is delivered • Our simple analytical framework can facilitate the development and interpretation of efficiency indicators The authors use examples from Europe and around the world to explore how policy-makers and managers have used efficiency measurement to support their work in the past, and suggest ways they can make better use of efficiency measurement in the future. The study came out of the Observatory’s LSE hub. It links to a forthcoming study offering further insights into how to develop and interpret policy relevant efficiency metrics and to the earlier volumes on performance measurement. It will be of considerable use to policy- makers and their advisors, health care regulators, patient representative groups, managers and researchers. The editors Jonathan Cylus, Irene Papanicolas, Peter C. Smith C. Peter Irene Papanicolas, Jonathan Cylus, Jonathan Cylus is Research Fellow, European Observatory on Health Systems and Policies, London School of Economics and Political Science. Irene Papanicolas is Assistant Professor of Health Economics, Department of Social Policy, London School of Economics and Political Science. Peter C. Smith is Emeritus Professor of Health Policy at Imperial College London and European Observatory on Health Systems and Policies. Health Policy Series No. 46 9 7 8 ISBN 9289050418 www.healthobservatory.eu 9 2 8 9 0 5 0 4 1 8 Health system efficiency How to make measurement matter for policy and management The European Observatory on Health Systems and Policies supports and promotes evidence-based health policy-making through comprehensive and rigorous analysis of health systems in Europe. It brings together a wide range of policy-makers, academics and practitioners to analyse trends in health reform, drawing on experience from across Europe to illuminate policy issues. The Observatory is a partnership hosted by the WHO Regional Office for Europe; which includes the governments of Austria, Belgium, Finland, Ireland, Norway, Slovenia, Sweden, Switzerland, the United Kingdom, and the Veneto Region of Italy; the European Commission; the World Bank; UNCAM (French National Union of Health Insurance Funds); the London School of Economics and Political Science; and the London School of Hygiene & Tropical Medicine. The Observatory has a secretariat in Brussels and it has hubs in London (at LSE and LSHTM) and at the Technical University of Berlin. Health system efficiency How to make measurement matter for policy and management Edited by Jonathan Cylus, Irene Papanicolas and Peter C. Smith Keywords: HEALTH CARE EVALUATION MECHANISMS EFFICIENCY, ORGANIZATIONAL DELIVERY OF HEALTH CARE QUALITY OF HEALTH CARE DECISION MAKING Address requests about publications to: Publications, WHO Regional Office for Europe, UN City, Marmorvej 51, DK-2100 Copenhagen Ø, Denmark. Alternatively, complete an online request form for documentation, health information, or for permission to quote or translate, on the Regional Office web site (http://www.euro.who.int/ pubrequest). © World Health Organization 2016 (acting as the host organization for, and secretariat of, the European Observatory on Health Systems and Policies) All rights reserved. The European Observatory on Health Systems and Policies welcomes requests for permission to reproduce or translate its publications, in part or in full. The designations employed and the presentation of the material in this publication do not imply the expression of any opinion whatsoever on the part of the European Observatory on Health Systems and Policies concerning the legal status of any country, territory, city or area or of its authorities, or concerning the delimitation of its frontiers or boundaries. Dotted lines on maps represent approximate border lines for which there may not yet be full agreement. The mention of specific companies or of certain manufacturers’ products does not imply that they are endorsed or recommended by the European Observatory on Health Systems and Policies in preference to others of a similar nature that are not mentioned. Errors and omissions excepted, the names of proprietary products are distinguished by initial capital letters. All reasonable precautions have been taken by the European Observatory on Health Systems and Policies to verify the information contained in this publication. However, the published material is being distributed without warranty of any kind, either express or implied. The responsibility for the interpretation and use of the material lies with the reader. In no event shall the European Observatory on Health Systems and Policies be liable for damages arising from its use. The views expressed by authors, editors, or expert groups do not necessarily represent the decisions or the stated policy of the European Observatory on Health Systems and Policies or any of its partners. ISBN 978 92 890 5041 8 Printed in the United Kingdom Typeset by Tetragon, London Cover design by M2M Table of contents Acknowledgements viii List of contributors ix List of tables, boxes and figures x List of abbreviations xiii Glossary xvi Preface xviii Chapter 1 A framework for thinking about health system efficiency 1 Jonathan Cylus, Irene Papanicolas, Peter C. Smith 1.1 Why is health sector efficiency important? 1 1.2 What is inefficiency? 2 1.3 Allocative inefficiency 4 1.4 Technical inefficiency 6 1.5 An analytical framework for thinking about efficiency indicators 10 1.6 Concluding comments 18 References 20 Chapter 2 Measuring and comparing health system outputs: using patient classification systems for efficiency analyses 21 Wilm Quentin, Alexander Geissler, Reinhard Busse 2.1 Introduction: what are the benefits of classifying patients into groups? 21 2.2 DRG systems in Europe: background and definitions 23 2.3 Application of DRGs: indicators of efficiency 27 2.4 Patient classification systems for other areas of health care 35 2.5 Conclusion: advantages and limitations of patient classification systems 44 References 48 Chapter 3 Using registry data to compare health care efficiency 53 Reijo Sund and Unto Häkkinen 3.1 Introduction 53 3.2 Using registry data to define episodes of care 54 3.3 Constructing indicators based on episodes of care 56 3.4 Comparing provider performance: the need for risk adjustment 61 vi Health system efficiency 3.5 Adjustment techniques 64 3.6 Examples of efficiency considerations 64 3.7 International comparisons 66 3.8 The EuroHOPE project 67 3.9 The EuroREACH diabetes case study 70 4.0 Conclusions 72 References 73 Chapter 4 Management accounting and efficiency in health services: the foundational role of cost analysis 75 Christopher S. Chapman, Anja Kern, Aziza Laguecir and Wilm Quentin 4.1 Introduction 75 4.2 Analysing the challenge of cost system design 78 4.3 Demonstrating cost system design choices with two detailed examples 83 4.4 The role of cost data in delivering efficient health care 90 4.5 Cost data and support of local clinical and managerial decision-making 93 4.6 Conclusions 97 References 98 Chapter 5 Health system efficiency: measurement and policy 99 Bruce Hollingsworth 5.1 Introduction: data envelopment analysis and stochastic frontier analysis 99 5.2 Efficiency measurement methods 100 5.3 The application of DEA 105 5.4 Setting out the protocol 109 5.5 Conclusions 113 References 113 Chapter 6 Cost–effectiveness analysis 115 Ranjeeta Thomas and Kalipso Chalkidou 6.1 Introduction 115 6.2 Cost–effectiveness analysis: an overview of its strengths and weaknesses 116 6.3 Methodological issues in the use of economic evaluations at the micro level 119 6.4 Cost–effectiveness analysis as a measure of organizational and system efficiency 123 6.5 Methodological and informational challenges 124 6.6 Cost–effectiveness analysis in policy: present and future 129 6.7 Conclusion 134 References