Investigating technical efficiency and its determinants: The Case of New Zealand District Health Boards

Abstract

This study investigates the technical efficiency of New Zealand's District Health Boards (DHBs) in providing hospital services, as well as the effect of certain environmental factors on efficiency. This study is the first to use quarterly data on New Zealand DHBs from 2011 to 2017 and apply the two-stage double-bootstrap methodology of Simar and Wilson. The bias-corrected technical efficiency estimates show that on average, DHBs in the areas with high socioeconomic deprivation operate with low technical efficiency. Furthermore, DHB providing secondary hospital services are less efficient than tertiary DHBs. The result from truncated regression indicates that a higher proportion of surgical, elderly, and acute inpatients is associated with increasing levels of technical efficiency. In contrast, the high average length of hospital stay negatively impacts technical efficiency levels. The findings of this study urge policymakers to adopt policies to address the shortages of healthcare staff, barriers to primary healthcare, lack of investment in hospital capacity, and technology to enhance healthcare sector's long-run technical efficiency. In addition, the existing DHB funding formula needs to be revisited as this tends to include perverse incentives for secondary DHBs where patients are kept longer in hospitals, leading to a higher average length of stays in hospitals and is associated with increasing levels of inefficiency.