Balancing Technical and Allocative Efficiency in Healthcare:

Strategies for Optimizing Resource Allocation and Delivery

Dr. Mohammad Najib bin Baharuddin (MPH, DrPH)

National Health Financing Section (NHF)
Planning Division, Ministry of Health
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Outline

Efficiency Efficiency
Introduction Discussion
types measures

Strategies for
Technical Parametric &
Definition efficiency
efficiency Non-parametric
improvement

Role of
Allocative Graphical
efficiency in the Q&A
efficiency analysis
health system

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Introduction

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Efficiency - definition
The relationship between the observed output and the best
possible output from the given input in any firm (Farrell, 1957)

The best use of resources in production (Charnes et al., 1994)

Using your limited resources in the best possible way to achieve

your goals (Aaka Pande, 2014 Global Flagship Course)

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Why we need to know efficiency?

Resource Performance
utilization measurement
(Ozcan, 2007) (Charnes et al., 1994)

Best value for

Benchmarking
(Coelli et al., 2005) money
(Palmer & Torgerson 1999)

Quality
Avoid waste
improvement (IOM, 2001)
(Zhu 2003)

Cost
containment
(Mc Kee & Healy,
2002)

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6
WHO HEALTH SYSTEM FRAMEWORK

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The
Flagship
Approach

From: Getting Health Reform

Right, p. 27, the World Bank

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 Efficiency

Technical Allocative
Efficiency Efficiency

Aaka Pande, Economist (Health); Intermediate Outcomes and Moving a Health System Towards UHC; World Bank 2014 Global Flagship Course

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 Efficiency

Technical
Efficiency
• Producing outputs at minimum (unit)
cost
• Depends upon how things are produced
• Largely determined by managers and
workers
Aaka Pande, Economist (Health); Intermediate Outcomes and Moving a Health System Towards UHC; World Bank 2014 Global Flagship Course

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 Efficiency

Allocative
Efficiency
• Producing the right set of outputs to
achieve your goals
• A function of what things are produced
• Managers’ decisions are influenced by
regulators, planners, payers , budget
setters etc.
Aaka Pande, Economist (Health); Intermediate Outcomes and Moving a Health System Towards UHC; World Bank 2014 Global Flagship Course

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Efficiency measurement - Frontier approach

Stochastic Frontier Analysis (SFA) Data Envelopment Analysis (DEA)

• Parametric • Non-parametric
• Modeling the production frontier • Does not explicitly model the
(such as Cobb-Douglas or translog production frontier
function) • Evaluates the relative efficiency of
• Measuring deviations from the firms (DMUs) in a linear programming
frontier framework.
• Assumes that inefficiencies arise from • Does not make assumptions about the
random errors and unobserved factors functional form.
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 SFA DEA

Dinh, H., Nguyen, D., Tran, T., Tran, Q., & Tran, V. (2020). Technical efficiency of small-scaled manufacturing enterprises in six different sectors in
northern Vietnam. Management Science Letters, 10(14), 3433-3444.
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 Efficiency measurement - Graphical analysis

Pabon-Lasso diagram (Pabón Lasso, 1986) 16

State vs district public hospitals 17
Strategies for efficiency improvement

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Strategies - Provider perspective
Quality
Streamlined Cost
Improvement
Workflows Containment
Initiatives

Digital Health Preventive Payment

Solutions Care Reforms

Evidence- Resource Public-Private

Based Practice Allocation Partnerships

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Strategies - Patient
perspective

• Patient-Centered Care
• Care coordination
• Patient Education
• Value-Based Care
• Patient Engagement

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 Conclusio
nand allocative efficiency is essenti al for
• Balancing technical
opti mizing healthcare resource allocati on and delivery.
• By focusing on both types of efficiency, healthcare
organizati ons can reduce costs, improve quality, and ensure
that pati ents receive the care they need.
• Strategies for achieving efficiency include streamlining
processes, opti mizing technology, needs-based resource
allocation, cost-effecti veness analysis, and priority setti ng.
Thanks!
D o yo u h ave a ny q ue sti o n s ?
 najib@ m o h . g o v. my
 +60126291244
 N H F, P l a n n i n g D i v i s i o n , M O H M a l ay s i a

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