Introduction

In this chapter we discuss four of the most important issues that arise when seeking to use efficiency models in the health care sector: the weights used to indicate the values of different outputs; how the efficiency models are constructed; the treatment of environmental influences on performance; and dynamic aspects of efficiency.

Output weights

There are important questions relating to the objectives encompassed by any index of efficiency, particularly when the analysis is to be used for regulatory purposes. Is it legitimate for the central policy maker to attach a uniform set of objectives to all organisations? If so, is it further legitimate to apply a uniform set of weights to these objectives? If so, how should they be chosen? If not, what is the extent of legitimate variation, and who should choose? These are fundamental issues, the answers to which determine whether or not creating a single measure of organisational performance is warranted. In our view, organisations can be ranked on efficiency only if the policy maker may legitimately (i) set objectives and (ii) attach weights to those objectives.

When comparing organizations that are charged with meeting social objectives, the set of output weights ought to reflect societal values. However, it is not a simple matter to derive such weights, particularly when organisations face multiple objectives and there is disagreement as to organisational priorities. Ultimately the selection of objectives in the public services is a job for the politicians charged with reconciling conflicting claims on public resources.