Resource allocation in public hospitals: is it effective?

Area of Science:

• Health economics
• Public health policy
• Healthcare management

Background:

• Allocative inefficiency is a critical issue in public hospitals within developing countries, leading to the depletion of scarce healthcare resources.
• Sri Lanka's public health system is experiencing increasing budget constraints.
• Current resource allocation by the Ministry of Health prioritizes increasing hospital staff (human resources), which detracts from essential facility and equipment investments (capital).

Purpose of the Study:

• To evaluate the impact of resource allocation strategies on quality outcomes in tertiary-care public hospitals under Sri Lanka's Ministry of Health.
• To analyze how resource distribution between human resources and capital affects hospital quality, using inpatient mortality rate as the key indicator.
• To inform policy decisions regarding resource allocation to enhance healthcare efficiency and effectiveness.

Main Methods:

• The study employed a model assuming hospital managers aim to maximize quality, measured by inpatient mortality rate.
• Panel data fixed-effects and first-differencing estimation methods were utilized to analyze the relationship between resource allocation and mortality rates.
• Statistical significance was confirmed at the 0.1% level for the selected models.

Main Results:

• The impact of capital investment on patient servicing and quality improvement is significantly greater than that of human resources.
• Human resource utilization appears suboptimal, primarily due to insufficient capital resources, such as medical equipment.
• A notable disparity exists in the elasticity effects between capital and human resources in influencing patient outcomes.

Conclusions:

• Reorienting resource allocation towards capital investments, including medical equipment, holds greater potential for saving lives compared to solely increasing staff numbers.
• Addressing the inadequacy of capital is crucial for optimizing human resource utilization and improving overall hospital quality.
• Policy recommendations emphasize a shift in resource allocation priorities to enhance the effectiveness of public healthcare in Sri Lanka.