Estimating technical efficiency of Turkish hospitals: implications for hospital reform initiatives

Efficiency analysis in health care sector has attracted significant interest in recent decades due to escalating health care costs [1, 2]. Better understanding of health facility efficiency is important for ensuring effective use of health resources, especially in countries where public involvement in health care provision is high. Since public sector health facilities, in many cases, do not compete in the marketplace, alternative strategies must be devised for improving efficiency in resource use [2]. In modern health care system, health sector consists of many different types of facilities and organizations and system-wide efficiency measurement often requires estimation of efficiency for each of the major sectors like insurance providers, hospitals, nursing homes, primary care facilities, etc. [3].

Turkey’s health care system has gone through significant structural changes in the last few decades. In 2015, public expenditure was about 79% of total national health care expenditure of the country [4]. Greater involvement of the government in health sector allowed better coordination of service provision and improved access to services. Turkey also saw very rapid improvements in population health since 1980s. Significant improvements were reported in almost all health outcome measures. Life expectancy at birth has increased from about 65 years in 1990 to 78 years in 2013–15 [5]. However, these accomplishments have not been equally distributed geographically [6] and, despite the rapid improvements, Turkey still lags behind most of the Organization for Economic Cooperation and Development (OECD) countries in terms of health outcomes and health care resource availability (Tables 1 and 2).

In 2003, the Government of Turkey initiated a set of major health reforms, the Health Transformation Program (HTP), with an objective of increasing access to health care services and improving efficiency of hospitals through (i) implementation of General Health Insurance (GHI), (ii) establishing autonomous hospital structures, (iii) improving qualifications of health professionals and their work motivation, and (iv) deployment of an effective health information system [7]. The reforms integrated social security schemes under the Social Insurance Institution (SII), transferred public hospitals from the insurance agency to the Ministry of Health (MoH), instituted a performance-based supplementary payment system (P4P), and implemented family medicine model of health care delivery [8].

These reforms gave the Ministry and newly established Public Hospital Administration of Turkey (PHAT) the authority to align hospital mission, goals, and objectives with national priorities in health. Since the government became the major source of funding, the MoH could influence and manage use of resources (in both public and private hospitals) and implement more effectively health care service standards.

This research is an attempt to understand efficiency of hospital sector in the provision of services in Turkey. The analysis assumes that efficiency of any production unit is affected by its specific goal and objectives and therefore, factors affecting efficiency will be different for different hospital types. For empirical analysis, hospitals in Turkey were grouped into categories based on ownership (MoH, university, private) and teaching status/type (teaching, general, integrated). No single health policy can be equally effective in improving resource allocation in all these different hospital types. Therefore, it is important to understand the relative efficiency in healthcare resource utilization for each of the hospital types so that the MoH can develop targeted policy options.

The primary objective of this study is to estimate technical inefficiency of Turkish hospitals and to analyze the role of various hospital-specific and region-specific factors affecting the efficiency scores. The adoption of health care service standards and alignment of goals and objectives of all hospitals with national priorities should reduce variability of efficiency levels. For estimating the efficiency scores, this study uses hospital data of MoH Health Services General Directorate. Stochastic Frontier Analysis (SFA) approach of Aigner, Lovell, and Schmidt [9] and Meeusen and van der Broeck [10] were used for estimating the efficiency scores and single-step estimation approach suggested by Battese and Coelli [11, 12] (discussed in detail in section “Methods”) was applied to identify the factors affecting efficiency.

A number of studies have attempted to estimate efficiency of Turkish hospitals but most focused on either a single hospital category [13‐15] and/or a small subset of hospitals [16, 17], primarily utilizing Data Envelopment Analysis (DEA). For example, Sahin et al. [15] analyzed the operational performance of the MoH general public hospitals in the aftermath of HTP. Authors indicate that the HTP reforms improved hospital productivity during 2005–08. Narci et al. [18] examined the competition and technical efficiency among public and private general hospitals in Turkey. Results showed that only 17% of these hospitals were technically efficient, but they did not observe any statistically significant relationship between market competition and efficiency. None of the reviewed studies examined relative efficiency of hospitals by considering all the public and private facilities taken together. Moreover, recent health sector reform initiatives are supposed to improve hospital efficiency and the analysis with recent data should be able to indicate how the hospital efficiency has changed over the years.

The paper is structured as follows. Section “Health system in Turkey” provides a brief overview of the health system in Turkey. Section “Methods” describes the methodology, and model specification. Sources of data are presented in section “Results”. The results are presented in section “Discussion” and concluding remarks and policy recommendations are provided in Section “Conclusions”.

Turkish health system has gone through rapid changes since the adoption of Health Transformation Program (HTP) in 2003 which was designed to change delivery of services, financing of the system, organizational set-up, level of health expenditure, health infrastructure, and mechanism of resource allocation. The improvements in health outcomes and health facility performance in recent years are often attributed to the strategies and policies implemented under the HTP [19].

One principal objective of the HTP was to address the issues related to fragmentation of health care provision and financing. Two governmental agencies became responsible for provision and financing of health care. At the national level, General Health Insurance Scheme (GHIS) was introduced in 2008 which now covers 99.5% of population. Turkey had the second lowest private health insurance coverage (5.6% in 2013) among all the OECD countries [20]. Provision of healthcare services is primarily controlled by the MoH including the Ministry of Defense (MoD) health facilities that were recently transferred to the MoH management. Private providers are integrated into the system through contractual agreements with the social health insurers [6].

For empirical analysis, we have categorized hospitals in Turkey based on ownership, teaching status, size and scope of services rendered. If ownership is used for categorization, for 2012, hospitals in Turkey (1483 total) can be grouped into MoH hospitals (832 hospitals), university hospitals (65 hospitals), private hospitals (541 hospitals), MoD hospitals (42 hospitals), and local administration hospitals (3 hospitals). The scale and scope of services rendered are also different among the hospital types with significant geographic variability (Table 2) ([21], p., 143).

The MoH hospital category can further be subdivided into: MoH teaching hospitals, responsible for residency training and tertiary level care, the MoH general hospitals, providing secondary level care with intensive care units and emergency services and integrated hospitals which provide limited essential patient care services in low population-density rural areas in partnership with local general hospitals.

Private university hospitals primarily provide medical education and training for residents, while the private hospitals serve the secondary and tertiary level needs of population in their catchment areas. Public university hospitals also serve tertiary needs of the population in addition to medical training and teaching responsibilities. Specialty hospitals, both public and private, have specialized focus such as emergency and traumatology, physical therapy and rehabilitation, chest and cardiovascular diseases, ophthalmology, obstetric and child health, cardiology, etc.

A number of reform initiatives were adopted in Turkey since 2003 within the HTP framework. Since the beginning of HTP, the MoH has been successful in expanding health service delivery and quality [19] with significant investments in (i) new infrastructures for providing better quality health services (e.g. new hospitals), (ii) medical technologies (e.g. total number of computerized tomography and magnetic resonance devices), (iii) increasing number of beds and intensive care unit beds, (e.g. intensive care unit beds in MoH hospitals increased from 869 in 2002 to 10,321 in 2012), and (iv) increasing availability of medical personnel (e.g. number of Specialist Physicians increased from 45,457 to 70,103 and nurses increased from 72,393 to 134,906 over 2002 to 2012) [22].

As part of the wider health system reform, hospital service coordination was decentralized to give local authorities financial and administrative autonomy [23]. The reform has reorganized the MoH and rural hospital structure by uniting 843 MoH hospitals into 87 Public Hospital Unions (PHUs) and devolved important tasks to these PHUs in 2012. The PHAT was delegated the authority of establishing financial and administrative regulations for public hospitals and carrying out annual monitoring and assessment of public hospital and PHUs for improving effectiveness, quality, and efficiency [23].

As a result of this reorganization, the MoH assumed the responsibility of preparing and implementing hospital service delivery standards (public, university, and private hospitals) and human resource planning for the entire health system. In addition, MoH approves private hospital start-ups and determines quotas of doctors and their specialties for the private sector [23]. To better understand the effect of these policy changes on efficient use of resources, it is important to estimate relative efficiency of hospitals by ownership, size and geographic location.

Consistent with health sector reform policies, public health expenditure as share of national health expenditure increased from 68.1% in 2001 to 74.9% in 2011. Although the public funding for health care has not reached the OECD average yet, such a rapid increase in public funding reflects significant injection of new resources in the health sector. General government expenditure on health as a percentage of total government expenditure has increased from 9.5% in 2001 to 12.8% in 2011. Total expenditure on health as a percentage of Gross Domestic Product (GDP) has also increased from 5.2 to 6.7% over 2001 to 2011 (Table 3).

The maximum likelihood estimates (MLE) of the logarithmic modified translog stochastic production frontier and inefficiency effects are presented in Tables 6 and 8, respectively. Table 6 reports the set of parameters that explain the impact of production factors on healthcare output. Results show that the number of non-doctor health professionals (lnclinicians), ICU beds (lnicubeds), and administrative staff (lnadmin) are statistically significant at 5% level and have the expected positive sign. ICU beds had the largest impact on the output followed by clinicians and administrative staff. The dummy variable controlling for the ‘zero value’ problem in devices is statistically significant and negative implying that hospitals without “devices” exhibit lower outputs.

Only the second order coefficient for ICU beds was statistically significant and combined with statistically significant and positive first order ICU beds coefficient, implies that hospitals investing in additional ICU beds will be able to generate output at an increasing rate. Several interaction terms were statistically significant indicating that the usage levels of the inputs are inter-dependent on each other.

Output elasticities of each of the input variables at their mean values were calculated using Eq. 8 and reported in Table 7. The estimates were − 0.04, 0.20, 0.33, 0.12, 1.18, and 0.06 for beds, clinicians, doctors, devices, ICU beds, and staff, respectively. All, except beds were statistically significant at 1% level. ICU beds appear to be the most important factor in the hospital production and exhibits increasing returns to scale (RTS), while all other statistically significant inputs exhibit decreasing returns to scale. Next, in order of importance, are the doctors and clinicians (e.g. nurses). Overall, hospitals in the sample exhibit increasing RTS; a 1% increase in all inputs would increase hospital production by 1.9%.

Parameter estimates for the inefficiency term are presented in Table 8. Results indicate no statistically significant difference in the inefficiency of the hospitals by level of economic development (income) of the locality. Geographically (region), only two regions, West Anatolia and Central East Anatolia, show statistically different (lower) efficiencies compared to the reference group of the Istanbul region. Meanwhile, significant differences, as expected, are present for various hospital types. For example, the MoH General Hospitals are found to be the most efficient hospital type.

The statistical difference in the inefficiency among hospital types and higher efficiency of MoH General Hospitals can be explained by their high utilization rate (patient volume). Many of the public sector general hospitals are the only source of hospital care in relatively small districts. Moreover, central planning of resource allocation and use of human resources may have affected efficiency levels of these hospitals.

Reported value of γ (0.97) is close to 1 indicating that much of the variation in the composite error term is due to the inefficiency component ([26], p., 250) and only 3% is due to random errors. Hence, hospital inefficiency is highly important in explaining the variability of hospital output.

Figure 1 shows the frequency distribution of technical efficiency scores for all six types of hospitals. The efficiency scores of all three MoH Hospitals and Public University Hospitals are skewed towards the right indicating that a higher proportion of these hospitals are among the high efficiency groups. Distribution of efficiency scores for private hospital types show equal distribution along the efficiency plane. The distribution for Private Hospitals shows a distinctive bimodal pattern with wide variability of the scores. Therefore, some of the private hospitals are very efficient while others are very inefficient.

The public and private University hospitals focus significant amount of their resources towards clinical trainings and medical education. Educational mission often requires conducting additional clinical tests and diagnostics for the benefit of learners implying that teaching hospitals are likely to use higher level of resources than non-teaching hospitals for producing the same level of output. Therefore, university hospitals may become less efficient than other general hospitals. A number of research studies also found relatively low efficiency scores for teaching hospitals (e.g. (p. 116) [45‐47]). It is interesting that MoH Teaching hospitals show relative high efficiency scores even though teaching and learning functions are important for these hospitals. Unlike the university hospitals, the principal objective of MoH teaching hospitals is to provide hospital services rather than teaching. These hospitals are directly under financial and administrative oversight of the MoH and implementation of cost containment strategies, centralized resource reallocation approach, and other related policies probably helped in improving their efficiency scores.

Figure 2 illustrates the average technical efficiency (ATE) scores of various hospital types. The ATE score for all hospitals was 0.63 and ranged from 0.01 to 0.94 with a median of 0.73. About one third of these hospitals had a technical efficiency score between 0.80 and 1.00 and another one third had a score between 0.60 and 0.80. The MoH hospital types reported the highest ATE scores with the MoH Teaching Hospitals leading the group. Public university hospitals follow the MoH hospitals in ATE score. Private hospitals reported the lowest ATE score. Within the MoH hospitals, the Integrated hospitals serve low population density rural provinces. As can be seen from Fig. 2, the integrated hospitals exhibit lower ATE than the MoH Teaching hospitals. This is not surprising because the primary role of these hospitals is to provide basic health services and to function as the social safety net facility in relatively remote and rural areas. These hospitals regularly refer more serious cases to general or teaching hospitals after initial consultation or urgent care. They serve basic surgery needs and non-risk deliveries. They transfers higher risk patients to general hospitals after stabilizing their health condition. The MoH allocates a sufficient number of doctors to these hospitals. However, they are not as ‘busy’ as they would have been in other types of hospitals. Hence, we have a situation where fewer inpatient and outpatient patients are served by greater number of doctors and other healthcare professionals, thus, contributing towards lower efficiency.

Private hospitals report the lowest ATE scores and their technical efficiencies follow a bimodal distribution (Fig. 1). This is also consistent with the nature of private hospital market in Turkey. Private hospitals in Turkey can be subdivided into two types -- smaller hospitals with limited service availability and highly specialized large scale chain hospitals. The lower end of efficiency score distribution among private hospitals represents mainly the small hospitals while the higher efficiency hospitals are the larger comprehensive hospitals. Rural private hospitals tend to fill gaps in hospital services but metropolitan private hospitals serve customers from higher socioeconomic groups. With increasing income of the population, private hospitals are becoming more popular in urban areas and since these hospitals have to compete with MoH general hospitals for patients, remaining efficient is important to maintain or increase the market share.

The relative efficiency scores of hospital types indicate that overall efficiency of hospital sector of Turkey can be improved by encouraging more effective use of resources. In fact, increasing market share of public hospitals will also improve efficiency of resource use. Since the small private hospitals are the least efficient, policy makers should identify strategies to improve efficiency of these hospitals. The integrated public hospitals may be able to improve technical efficiency by becoming better integrated with local private clinics and other hospitals in rural communities.

Affiliation system, which was implemented by the MoH in 2011 [48], facilitates collaboration between University and MoH hospitals by utilizing each other’s resources. Newly established university hospitals have the opportunity to use MOH hospitals’ relatively better infrastructures while MoH hospitals benefit from the expertise and specialization of university hospitals. In the long-run, this approach may help improve efficiency of both Public University and MoH Teaching hospitals. Similar arrangements between MoH, private university, and private hospitals should also be useful in improving efficiency of both private university hospitals and other general private hospitals. Additional efficiency improvements are expected as a result of 2012 reform that established the PHUs through the unification of MoH hospitals of various categories. The unifications are accompanied by implementation of a set of common cost containment and quality control measures, implying that hospitals will become more homogeneous in terms of efficiency.

The reforms initiated by Government of Turkey aimed at improving technical efficiency of all hospitals, especially the secondary and tertiary hospitals. Our findings from 2012 indicate significant variability in the efficiency scores of hospitals. The expectation is that this variability in efficiency scores across hospitals will reduce over the years if the reform initiatives are successful. Our findings may be used as the baseline to evaluate the effect of these hospital sector reforms on hospital efficiency. Future research studies can re-estimate efficiency scores to see how the variability of scores changed over the years with an expectation that the range and variability of hospital efficiency scores will decline over time. The continued reforms are explicitly aiming at improving efficiency by encouraging sharing of resources to maximize hospital production and to improve operational efficiency. If reforms are successful, we should see improvements in overall efficiency scores and reductions in the variability of the scores across hospitals of different types and sizes.

This study has estimated the technical inefficiency scores for public and private hospitals using a recent and comprehensive hospital dataset available for Turkey. The estimation approach incorporates a number of new empirical aspects for deriving the efficiency scores for multi-product firms. The production and technical efficiency functions are estimated simultaneously and a modification has been introduced to account for zero-value inputs in the logarithmic production function. Assuming that relative prices of various hospital outputs remain more or less constant across hospitals, Hicksian aggregation principle can be used to derive the composite index of output. All significant estimates in the regression model had expected signs. Technical efficiency of hospitals varied across hospital types but not across level of economic development of the region in which the hospitals are located. The analysis also indicates that technical efficiency scores of MoH hospitals are better than those for other hospital types.

It is interesting to note that not all private hospitals are efficient and many are highly inefficient. Small private hospitals are the least efficient hospital category among all the hospital-types in Turkey. The MoH general hospitals were the most efficient hospital category, often better than the urban private hospitals. The efficiency scores of rural MoH hospitals are relatively low but these hospitals are designed as the safety net units in rural areas.

As expected, the University hospitals, both private and public, were less efficient than other non-university hospitals, except for Private General Hospitals. The university hospitals have the important social objective of training health professionals and specialists and therefore, unless the value of medical trainings is taken into account as additional output, these facilities will show low efficiency scores. In that sense, low efficiency scores of university hospitals may not necessarily be interpreted as indication of inefficient use of resources. The values these hospitals create in terms of training may more than offset the additional resources used. Interestingly, the MoH teaching hospitals turned out to be quite efficient in relative terms. The health sector reform in Turkey has emphasized better management of MoH hospitals and it is possible that improved management practices have enhanced relative efficiency scores of MoH teaching hospitals as well.

Turkey considers highly specialized private hospital sector an important component of overall health care system and the results suggest that encouraging establishment of private specialized hospitals will improve overall efficiency. To promote investments in large-scale private hospitals, the Government of Turkey will be creating “health zones” throughout the country to attract foreign direct investment [23, 49].