Measuring operational efficiency in a health care system: a case study from Thailand

This paper investigates the economic relationship among medical resources and efficiency of the health care system in a developing Asian country. The rapid growth in the use of limited resources and the escalating national health expenditure, raise the critical economic question of whether the use of health care resources are efficient. We estimated a four-factor production system, based on 1982-1997 annual operational data comprising five cross-sectional regions per year. The translog production function and three derived demand for factor input equations were jointly estimated using systems regression method. Results show that different types of medical care workers (doctors, nurses, pharmacists) influenced efficiency differently. The marginal products (MPs) of nurses and capital are the highest and they varied across the regions. Third, the estimates of factor substitution possibilities indicate difficult factor adjustments; these estimates differ in magnitudes and significance across regions but they similarly classify all but one (different) input pair as economic substitutes. Fourth, the regional variations in returns to scale estimates in live births tend to converge to that of the Bangkok metropolis. Finally, technical change is physician and pharmacist labor using, but capital and nursing labor saving. Policy implications of these findings touch on Article 78 of the Thailand Constitution.