Measuring the persistence of technical inefficiency among NZ District Health Boards

In this roundtable, Antony Andrews from Auckland University of Technology will present on Measuring the persistence of technical inefficiency among New Zealand District Health Boards.

New Zealand spends a significant amount of its budget on public healthcare every year. In the year 2017/18, approximately 75.6% of the total public healthcare budget of 12.7 billion was distributed to the 20 District Health Boards (DHBs) to meet the regional healthcare demand. In the healthcare literature, the most commonly measured short-run technical efficiency ignores any dependencies in inefficiency over time. However, the presence of high adjustment costs resulting from long-term structural and environmental constraints in the operating environment of the healthcare provider can cause inefficiency to persist through time.

Being the first application of Bayesian Dynamic Stochastic Frontier model in healthcare literature, this study shows that the majority of New Zealand DHBs performed exceptionally well relative to the short-run efficiency frontier between 2011 and 2018. However, in long-run, DHBs face high adjustment costs, and as a result, between 2011 and 2018, on average, used 32% more inputs than defined by the efficiency frontier. The findings of this study disclose the fact that significant long-run technical inefficiencies exist among New Zealand DHBs due to adjustment costs resulting from capacity constraints and lack of adequate clinical infrastructure. Therefore, policymakers need to formulate comprehensive strategies involving a longer time horizon that facilitates investments in critical infrastructure and capacity development to improve the long-run efficiency performance of DHBs. 

Antony Andrews, PhD Student, School of Economics, Auckland University of Technology

Antony is a PhD student in the School of Economics at AUT. He holds a Bachelor of Applied Economics and Bachelor of Business Studies (Honours) in Economics from Massey University. His PhD research is examining the application of Bayesian econometric methods in assessing productivity and efficiency of the New Zealand public health system. He is under the supervision of Dr Gregory Emvalomatis, Senior Lecturer at the University of Dundee and Dr Saten Kumar, Head of the School of Economics at AUT.