Social Efficiency in Healthcare


Healthcare is fast becoming one of the most important aspects of social life. There is a correlation between the quality of healthcare available and the life expectancy of the population. With a growing middleclass in most developing countries, and with an aging population in most western countries, there is increasing demand for high quality healthcare. Most people take jobs that have the provision for health insurance as a basic standard.

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On the other hand, the cost of providing healthcare is escalating because of the increasing cost of living in all parts of the world. There are also newer technologies that help in the management of certain health conditions that are expensive. The logical thing to do under these circumstances is to find a way of providing a competitive level of healthcare without making the costs prohibitive. The answer lies in making healthcare more efficient. The goal of this paper is to review the literature available that deals with the issue of efficiency in healthcare. The particular areas of interest include the definition of healthcare, measurement of efficiency in healthcare, and the factors influencing the efficiency of healthcare operations.

Definition of Efficiency in Healthcare

The phrase “efficiency in healthcare” has several connotations depending on the usage. The two most prominent ones are in the areas of financing and service delivery. In the context of financing, efficiency in healthcare refers to the potential output in terms of healthcare benefits per unit expenditure (Jacobs, Rapoport and Jonsson 179). This case looks at how health systems use money to deliver health benefits, and how to make that money do the most good in the sector.

The motivation for this view comes from the realization that healthcare spending is set to grow in the coming years, while it is not yet clear where the financing will come from. The second view of efficiency in healthcare looks at in terms of service delivery. In this case, efficiency in healthcare looks at how fast or how well a system delivers healthcare service (Niles 205). This view deemphasizes the financial impact of healthcare provision because there may be better ways of providing healthcare that cost more than the traditional ones, but also deliver better results. It is difficult to have a view that holds both approaches in unison.

Measuring Efficiency in Healthcare

Based on the definitions above, the two primary measures of efficiency in healthcare is either by cost or by measures targeting elements of service provision. By using cost, we talk of “financial efficiency” of the healthcare system (Jacobs, Rapoport and Jonsson 179). The most common way of measuring this is by looking at the national healthcare spending in terms of percent of GDP (OECD 55). This measure comes from the assumption that the national GDP is a measure of the economic position of a country hence the efficiency of its healthcare system depends on the amount of money the country spends on it.

This measure normally requires further comparison to derive the perceived efficiency of the healthcare system in that country. For instance, it may mean comparing the health services provided in that country with another country with a matching GDP. This measure does not include accurate figures for healthcare spending in foreign countries when citizens go to other countries to get specialized services there, and it does not recognize the expenses incurred by the private sector in healthcare (OECD 55). In this sense, it is a very general comparison useful only for developing global targets. However, it is still a valid measure because it shows how seriously a country takes it healthcare system, or at least, it describes the financial burden of healthcare to that country. Almost all countries have experienced increasing expenditure on healthcare.

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In terms of service provision, there is a multiplicity of measures used to describe efficiency. These measures include physicians per capita, use of information technology, cost of basic services, and speed of health service delivery. The number of physicians per capita is one of the global measures of healthcare efficiency (Ulmer 49). It looks a lot like the measures based on GDP because it assumes that the benefits of the system spread to all the people equally.

Hence, if there is large number of physicians serving a particular population, then it means that healthcare provision is efficient. The basis for this thinking is that it assumes that a physician will provide the highest level of care within their capability. It compares to airline passengers who do not make decisions based on the qualifications of the pilot, because they expect that any pilot will fly the plane because of their high quality of training (Ulmer 49). In truth, the number of physicians tends to follow patterns such as population dispersion, relative economic wealth, and government placement.

The use of information technology is a new measure of healthcare efficiency. There are several benefits inherent in the use of Information technology in general. The most significant among them are the speed of information processing, storage and retrieval. Electronic health records promise to increase the speed of handling these tasks. Niles stated, “administrators of several healthcare delivery systems reported many benefits to the implementation of Electronic health Records” (205). In this sense, the use of information technology provides a viable measure relating to the overall efficiency of a health care system.

The speed of health care deliver is a secondary measure of efficiency (Ulmer 55). Speed is not always a true measure of the efficiency of the system. Nonetheless, it is important as a measure because of the implications it has on cost and capacity. Treatment of outpatients is a case in point. If it takes a healthcare system too long to deliver outpatient services, then it means that the healthcare system is inefficient. The cost of keeping the patient in the outpatient facility such as the use of holding areas, examination facilities and test services, reduce the overall capacity of the facility to handle more patients.

On the other hand, inpatients often must stay in hospital for the mandatory period prescribed by their doctor. However, if there are delays in their treatment, it means that the facility will commit resources for longer than necessary. This may help explain the need to use the speed of service delivery as a measure of efficiency in both inpatient and outpatient facilities. These examples point out to the importance of speed of service as a measure of efficiency

Factors Affecting Efficiency

Doctors Knowledge

Several factors influence the efficiency of a healthcare system. One of the prominent ones is the knowledge of the doctor (Miettinen 41). A doctor that knows the methods that other doctors use to treat ailments tend to apply the methods if they prove reliable. It is often possible to approach treatment of patients from different angles. The efficiency of a facility depends on how well the doctors there know the options available and the impact of using those options.

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In this sense, the knowledge of the doctor is an important factor in determining the efficiency of healthcare systems. Miettinen states, “If doctors were able to know, right in the course of their practices, in respect to the type of situation that confronts them at a given moment, what their most illustrious colleagues in the same situation typically do or think, they tend to do or think likewise” (41). This means that improving the level of knowledge through refresher trainings, exchange programs, and collaborative initiatives can help improve efficiency in health care provision.

Competition among Healthcare Providers

The second way to influence the efficiency of healthcare systems is by encouraging competition (Jacobs, Rapoport and Jonsson 179). This premise comes from the fact that in competitive environments, providers tend to find the most efficient way of providing prescribed services hence; there is a possibility that by using this approach in healthcare, services will become more efficient. The place of competition in healthcare has been the source of many debates.

There is the fear that if competition comes into full force in the healthcare industry, some services will suffer. The issue of competitive advantage in the healthcare industry may result in hospitals specializing in certain service they can offer profitable hence specialized care in low profit services will suffer, or will become very expensive. The pharmaceutical industry finds itself in this kind of problem because there are certain medicines needed by very few people that are not profitable to produce (Miettinen 22).

They find themselves in a moral dilemma because not producing the medicine gives them the image of profiteers while on the other side; there is no real competitive incentive to make the production of such drugs profitable to them. With some planning, competition can help facilities with poor services to make them more efficient, but sector wide competition can be detrimental to health services because the need for these services does not depend on choice on the part of the patients. If competition comes into the healthcare sector, then it ought to be under the guidance of regulators to ensure that everyone who needs healthcare services can access them at a reasonable cost.

Medical Insurance

In the recent years, there has been growing calls to expand medical insurance in most countries to cover most of the population. This comes from the realization that it is expensive for most people to pay for healthcare on demand. Health insurance aggregates the needs of the population and spreads the financing so that those who need the services get them as part of their policy (Jacobs, Rapoport and Jonsson 157). This approach makes much sense because of the rise in healthcare costs. The place of medical insurance in the efficiency of healthcare is that if forces the caregivers to plan to provide the services that their clients will need. As opposed to walk-in systems, where care is often reactive, medical insurance-dependent systems will promote a proactive stance by healthcare providers (Ulmer 42).

A medical insurance approach makes it necessary for practitioners to project the demands that the healthcare systems will have in order to determine the costs of offering services. Without it, hospitals simply prepare to treat the people that walk in. This makes them less prepared to handle epidemics. The other way that medical insurance influences the efficiency of healthcare systems is that it sorts out the issue of healthcare financing. Financing in an important aspect of medical care hence by removing that factor upfront, it means that service providers can concentrate on offering the services rather than following up on payments.

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Evidence-based Policy-Making

Finally, the third influence on the efficiency of healthcare services is what Jacobs, Rapoport and Jonsson called “evidence based policy making” (55). According to Jacobs, Rapoport and Jonsson many policy-making bodies, ranging from hospital administrators to state officials, fail to use evidence as the basis for policy (210). Many times, financial and political considerations take center stage in the development of policy in the healthcare industry. This makes it difficult for the sector to take advantage of policy measures to increase their efficiency. Evidence based policy making can help to improve learning in the healthcare settings by institutionalizing gains and using the best interest of the sector to make the basic decisions, and to develop overall policies to guide the sector.


From the above literature, it is clear that efficiency in healthcare is a work in progress. There are several measures used to describe it. The important thing is to pick measures that are relevant to the level of intervention, such as GDP for national planning and local measures for improving local efficiency. It is important to note that Information systems have a great potential of improving the efficiency of health care systems because of their capacity to improve data capture and processing. The push towards the universal use for electronic health records should provide many gains for the sector in terms of efficiency.

Works Cited

Jacobs, Philip, John Rapoport and Egon Jonsson. Cost Containment and Efficiency in National Health Systems: A Global Comparison. Weinheim: Wiley Verlag, 2009: Print.

Miettinen, Olli S. Up from Clinical Epidemiology & EBM. New York, NY: Springer, 2011: Print.

Niles, Nancy J. Basics of the U.S. Healthcare System. Sadbury, MA: Jones & Bartlett Learning, 2010: Print.

OECD. OECD Economic Surveys: Sloval Republic. Paris: OECD Publishing, 2010: Print.

Ulmer, Cheryl. Future Directions for the National Healthcare Quality and Disparities Reports. Washington DC: National Academies Press, 2010: Print.

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