The Effects of Performance Based Supplementary Payment System on the Efficiency of Public Hospitals

Turkey has implemented major health care reforms to improve the efficiency of the health care system since 2003. The objective of this study is to investigate the impact of these reforms, especially the performance-based payment system (P4P), on the efficiency and productivity of public hospitals. We employ the Data Envelopment Approach and the Malmquist index to comparatively examine before and after the reform years, 2001 and 2006 respectively. Our analyses compare the performances of public hospitals served in provincial markets. Inputs of number of beds, number of primary care physician, and number of specialists, and how they are used to produce outputs of inpatient discharges, outpatient visits, surgical operations are investigated. Indeed, as the quality inicators dead rate, hospital bed occupation rate and average length of stay are considered. As a result of the analysis, it is seen that the P4P was successful in boosting productivity due to advancements in technology and technical efficiency. Furthermore, it is found that the average technical efficiency gains took place because of the significantly improved scale efficiencies, but the average pure technical efficiency did not improve. The lower pure technical efficiencies compared to scale efficiencies affirms the lack adaptation of the hospital management to the renewed system. Additionally, our analysis indicates that in the socio-economically disadvantaged provinces productivity gains have not been achieved. Lastly, it is seen that the hospital quality indicators have not improved in the short run.