# Determinants of health-system efficiency: evidence from OECD countries

- 940 Downloads
- 13 Citations

## Abstract

This paper analyzes the most important determinants of healthcare efficiency across OECD countries. As previously documented in the literature, we first provide evidence of significant differences in the cross-country level of efficiency in healthcare provision. We then investigate how improvements in efficiency can be achieved by considering alternative efficiency indices (parametric and non-parametric) and a novel dataset with information on the characteristics of healthcare systems across OECD countries. Our empirical findings suggest a positive correlation between policies such as increasing the regulation of prices billed by providers and reducing the degree of gate keeping and the efficiency of national healthcare systems.

## Keywords

Healthcare systems Efficiency Bayesian model averaging## JEL Classification

I12 I18 H51## Notes

### Acknowledgments

The authors would like to thank Beatriz González López-Valcárcel, Guillem López-Casasnovas, Eloísa Ortega, Bazoumana Ouattara, Anna Tur Prats, Laura Vallejo-Torres and Dominika Wranik for useful comments and discussions. They also thank two anonymous referees and Pedro Barros (The Editor) for helpful suggestions. The opinions and analyses in this paper are the responsibility of the authors and are not necessarily shared by the Banco de España or the Eurosystem.

## References

- Aigner, D., Lovell, C., & Schmidt, P. (1977). Formulation and estimation of stochastic frontier production function models.
*Journal of Econometrics*,*6*(1), 21–37.CrossRefGoogle Scholar - Athanassopoulos, A., Gounaris, C., & Sissouras, A. (1999). A descriptive assessment of the production and cost efficiency of general hospital in Greece.
*Healthcare Management Science*,*2*, 97–106.PubMedCrossRefGoogle Scholar - Barros, P. (1998). The black box of healthcare expenditure growth determinants.
*Health Economics*,*7*, 533–544.PubMedCrossRefGoogle Scholar - Bhat, N. V. (2005). Institutional arrangements and efficiency of health care delivery systems.
*European Journal of Health Economics*,*50*, 215–222.CrossRefGoogle Scholar - Bjurek, H., Hjalmarsson, L., & Forsund, F. (1990). Deterministic parametric and nonparametric estimation of efficiency in service production: A comparison.
*Journal of Econometrics*,*46*, 213–227.CrossRefGoogle Scholar - Bolin, K., Lindgren, A., Lindgren, B., & Lundborg, B. (2009). Utilization of physician services in the 501 population: The relative importance of individual versus institutional factors in 10 European countries.
*International Journal of Health Care Finance and Economics*,*9*(1), 83–112.PubMedCrossRefGoogle Scholar - Brekke, K., Nuscheler, R., & Straume, O. (2007). Gatekeeping in healthcare.
*Journal of Health Economics*,*26*, 149–170.PubMedCrossRefGoogle Scholar - Chirikos, T., & Sear, A. (2000). Measuring hospital efficiency: A comparison of two approaches.
*Health Services Research*,*34*, 1389–1408.PubMedGoogle Scholar - Coelli, T., Prasada, D., O’Donnell, Ch., & Battese, G. (2005).
*An introduction to efficiency and productivity analysis*. New York: Springer.Google Scholar - Cook, R. (1977). Detection of influential observations in linear regression.
*Technometrics*,*19*, 15–18.CrossRefGoogle Scholar - Cook, R., & Weisberg, S. (1982).
*Residuals and influence in regression*. London: Chapman and Hall.Google Scholar - Dismuke, C., & Sena, V. (1999). Has DRG payment influenced the technical efficiency and productivity of diagnostic technologies in Portuguese public hospitals?
*Healthcare Management Science*,*2*, 107–116.PubMedGoogle Scholar - Dranove, D., & Satterthwaite, M. (2000). The industrial organization of healthcare markets. In A. J. Culyer & J. P. Newhouse (Eds.),
*Handbook of health economics*(Vol. 1B). Amsterdam: Elsevier.Google Scholar - Evans, D., Tandon, A., Murray, C., & Lauer, J. (2000). The comparative efficiency of national health systems in producing health: An analysis of 191 countries. GPE discussion paper series no. 29, World Health Organization, Geneva, Switzerland.Google Scholar
- Fare, R., Grosskopf, B., Lindgren, B., & Poullier, J. (1997). Productivity growth in healthcare delivery.
*Medical Care*,*35*, 354–366.PubMedGoogle Scholar - Farrell, M. J. (1957). The measurement of productive efficiency.
*Journal of the Royal Statistics Society*,*120*(3), 253–281.Google Scholar - Freedman, D. (1983). A note on screening regression equations.
*The American Statistician*,*37*, 152–155.Google Scholar - Fried, H., Schmidt, S., & Yaisawarng, S. (1999). Incorporating the operating environment into a nonparametric measure of technical efficiency.
*Journal of Productivity Analysis*,*12*, 249–267.Google Scholar - Gay, J., Paris, V., Devaux, M., & De Looper, M. (2011). Mortality amenable to health care in 31 OECD countries: Estimates and methodological issues. OECD health working papers no. 55, OECD.Google Scholar
- Gerdtham, U.-G., Jonsson, B., MacFarlan, M., & Oxley, H. (1998). The determinants of health care expenditure in the OECD countries: A pooled analysis. In P. Zweifel (Ed.),
*Health, the medical profession and regulation*(pp. 113–134). Dordrecht: Kluwer.Google Scholar - Gong, B., & Sickles, R. (1992). Finite sample evidence on the performance of stochastic frontiers and data envelopment analysis using panel data.
*Journal of Econometrics*,*51*, 259–284.Google Scholar - Greene, W. (2004). Distinguishing between heterogeneity and inefficiency: Stochastic frontier analysis of the World Health Organization’s panel data on national healthcare systems.
*Health Economics*,*13*, 959–980.PubMedGoogle Scholar - Grytten, J., Carlsen, F., & Skau, I. (2008). Primary physicians’ response to changes in fees.
*European Journal of Health Economics*,*9*, 2.Google Scholar - Häkkinen, U., & Joumard, I. (2007). Cross-country analysis of efficiency in OECD healthcare sectors: Options for research. OECD economics department working papers, no. 554, OECD, Paris.Google Scholar
- Hjalmarsson, L., Kumbhakar, S., & Heshmati, A. (1996). DEA DFA and SFA: A comparison.
*Journal of Productivity Analysis*,*7*, 303–327.Google Scholar - Hoeting, J., Madigan, D., Raftery, A., & Volinsky, T. (1999). Bayesian model averaging: A tutorial.
*Statistical Science*,*14*, 382–417.Google Scholar - Hofmarcher, M., Paterson, I., & Riedel, M. (2002). Measuring hospital efficiency in Austria—A DEA approach.
*Healthcare Management Science*,*5*, 7–14.PubMedGoogle Scholar - Hollingsworth, B. (2003). Non-parametric and parametric applications measuring efficiency in healthcare.
*Healthcare Management Science*,*6*, 203–218.PubMedGoogle Scholar - Hollingsworth, B., Dawson, P., & Maniadakis, N. (1999). Efficiency measurement of healthcare: A review of non-parametric methods and applications.
*Healthcare Management Science*,*2*, 161–172.PubMedGoogle Scholar - Hollingsworth, B., & Wildman, J. (2003). The efficiency of health production: Re-estimating the WHO panel data using parametric and non-parametric approaches to provide additional information.
*Health Economics*,*12*, 493–504.PubMedGoogle Scholar - IMF [International Monetary Fund]. (2010, December 28). Macro-fiscal implications of healthcare reform in advanced and emerging economies.Google Scholar
- Ley, E., & Steel, M. (2009). On the effect of prior assumptions in Bayesian model averaging with applications to growth regressions.
*Journal of Applied Econometrics*,*24*, 651–674.Google Scholar - López-Casasnovas, G., & Puig-Junoy, J. (2000). Review of the literature on reference pricing.
*Health Policy*,*54*, 87–123.PubMedGoogle Scholar - López-Casasnovas, G., Rivera, B., & Currais, L. (2005).
*Health and economic growth: Findings and policy implications*. Cambridge, MA: The MIT Press.Google Scholar - Moral-Benito, E. (2011). Model averaging in economics. Banco de España working paper 1123.Google Scholar
- Moreno-Torres, I., Puig-Junoy, J., & Raya, J. (2010). The impact of repeated cost containment policies on pharmaceutical expenditure: Experience in Spain.
*The European Journal of Health Economics*,*11*, 563–573.Google Scholar - Nolte, E., & McKee, M. (2008). Measuring the health of nations: Updating an earlier analysis.
*Health Affairs*,*27*(1), 58–71.PubMedGoogle Scholar - OECD [Organization for Economic Co-operation and Development]. (2010).
*Healthcare systems: Efficiency and policy settings*. Paris: OECD.Google Scholar - Oliveira, M., Maisonneuve, C., & Bjornerud, S. (2006). Projecting OECD health and long-term care expenditures: What are the main drivers? OECD working paper no. 477, Paris.Google Scholar
- Or, Z., Wang, J., & Jamison, D. (2005). International differences in the impact of doctors on health: A multilevel analysis of OECD countries.
*Journal of Health Economics*,*24*, 531–560.PubMedGoogle Scholar - Paris, V., Devaux, M., & Wei, L. (2010). Health systems institutional characteristics: A survey of 29 OECD countries. OECD health working papers, no. 50, OECD, Paris.Google Scholar
- Raftery, A. (1995). Bayesian model selection in social research.
*Sociological Methodology*,*25*, 111–163.Google Scholar - Retzlaff-Roberts, D., Chang, C., & Rubin, R. (2004). Technical efficiency in the use of healthcare resources: A comparison of OECD countries.
*Health Policy*,*69*, 55–72.PubMedGoogle Scholar - Rosko, D. (1999). Impact of internal and external environmental pressures on hospital inefficiency.
*Healthcare Management Science*,*2*, 63–74.PubMedGoogle Scholar - Sala-i-Martin, X., Doppelhofer, G., & Miller, R. (2004). Determinants of long-term growth: A Bayesian averaging of classical estimates (BACE) approach.
*American Economic Review*,*94*, 813–835.Google Scholar - Schmidt, P., & Sickles, R. (1984). Production frontiers and panel data.
*Journal of Business & Economic Statistics*,*2*, 367–374.Google Scholar - Shafrin, J. (2010). Operating on commission: Analyzing how physician financial incentives affect surgery rates.
*Health Economics*,*19*, 562–580.PubMedGoogle Scholar - Sood, N., de Vries, H., & Gutiérrez, I. (2009). The effect of regulation on pharmaceutical revenues: Experience in nineteen countries.
*Health Affairs*,*28*, 125–137.Google Scholar - Spinks, J., & Hollingsworth, B. (2009). Cross-country comparisons of technical efficiency of health production: A demonstration of pitfalls.
*Applied Economics*,*41*, 417–427.Google Scholar - Tandon, A., Murray, C., Lauer, J., & Evans, D. (2001). Measuring overall health system performance for 191 countries. GPE discussion paper series no. 30, World Health Organization, Geneva, Switzerland.Google Scholar
- Velasco, M., Zentner, A., & Busse, R. (2010). The effects of gatekeeping: A systematic review of the literature.
*Scandinavian Journal of Primary Healthcare*,*29*, 28–38.Google Scholar - WHO [World Health Organization]. (2000). Health systems: Improving performance. The World Health Report.Google Scholar
- Wranik, D. (2012). Healthcare policy tools as determinants of health-system efficiency: Evidence from the OECD.
*Health Economics, Policy and Law*,*7*(2), 197–226.Google Scholar