Resource allocation at the root of prevailing inefficiency
THERE is a search on for the witch that disturbs our healthcare system.
The disturbance that has led to the recent responses of Prime Minister John Howard and of Opposition Leader Kevin Rudd to health care is dubbed ‘‘ inefficiency’’.
This evil entity is said to be costing us at least $2 billion a year, or perhaps even 10 times that amount.
Public hospitals are already highly efficient as judged against any realistic standard. They do not exhibit zero inefficiency, but compared with many government and private enterprises, they are trim and run to time.
Efficiency budget cuts have been applied to them annually for decades, leading executives to dim hospital lighting, cut staffing levels, defer the replacement of worn carpets and remove free sandwiches from the tea rooms in operating suites where surgeons relax between cases.
Economists refer to this form of efficiency achieved within efficiency.
Anyone thinking that public hospitals can be milked for more technical efficiency is out of touch.
Similar efficiencies have been achieved in general practice, with solo doctors grouping together to achieve economy of scale.
The percentage of general practitioners with a computer in their office has leapt from 10 per cent a decade ago to nearly 100 per cent.
So where can efficiency savings now be made? They can be made in the system, not to the elements — by taking more care with
technical resource allocation service components.
Inefficiency at present in the health system is principally what is termed allocative inefficiency.
Allocative inefficiency is overcome by ensuring that the components of the health system mesh with one another and that the allocation of resources enables each component of the system to function as well as possible and to support the others.
While state-funded health services can be, and are, co-ordinated by the state, there is no managerial ability to co-ordinate these services with general practice and Commonwealth-funded services.
The lion’s share, perhaps 75 per cent, of the total health budget goes into managing people with chronic illnesses.
If these sufferers cannot receive adequate care in the community, and by default are admitted to hospital, then allocative ineffi-
the ciency follows. Only about one in eight people leaving hospital after a heart problem are enrolled into programs of continuing care.
These programs which help keep heart patients healthy and prevent readmission to hospital deserve a higher level of resource allocation.
How has this allocative inefficiency come about?
It has occurred because there is no overall management of the health system.
General practitioners receive their income from fee for service care through the commonwealth-funded Medicare, public hospitals are run by state governments using funds from both levels of government, private hospitals from private insurers and patients’ pockets, (and also Medicare and the PBS), and community services for the aged, mentally ill and disabled from both state and commonwealth. With so many payers it is no wonder that there is disharmony.
In addition, the micromanagement of the state hospitals and other government services has meant that competition and innovation have been suppressed: no new solutions have been ventured because in the bureaucratised environment, one must not take risks.
Health system allocative inefficiency might not have been noticed before the era of chronic illness, the chief characteristic of which is that it goes on and on, often over decades, and requires different modalities of care — general practice, hospital and community services — at different times.
If this care is not available because of cost or geography, is not coordinated, or if there is not enough of one element of care to match need and keep up with the other service components, then the overall service is inefficient.
It is here that the federal efforts must be applied.
The outcome would be a disaster if, in seeking a better deal for patients using the health service, we developed ever more internally efficient components of health care but neglected the need to link them in the best possible way.
This is where regional health governance, that responds to local needs and encourages innovation and experimentation, even competition, in meeting those needs is critical for success.
And it will be a disaster if the focus on the problems of public hospitals is so narrow that issues like the availability of a general practitioner after hours, the affordability of dental and specialist care and the need for aged care beds and residential mental health services are neglected and not seen as factors that contribute to healthcare efficiencies. Professor Stephen Leeder is director of the the Australian Health Policy Institute and codirector of the Menzies Centre for Health Policy at the University of Sydney