Understanding efficiency and the effect of pay-for-performance across health facilities in Tanzania

BACKGROUND: Ensuring efficient use and allocation of limited resources is crucial to achieving the UHC goal. Performance-based financing that provides financial incentives for health providers reaching predefined targets would be expected to enhance technical efficiency across facilities by promoting an output-oriented payment system. However, there is no study which has systematically assessed efficiency scores across facilities before and after the introduction of pay-for-performance (P4P). This paper seeks to fill this knowledge gap. METHODS: We used data of P4P evaluation related to healthcare inputs (staff, equipment, medicines) and outputs (outpatient consultations and institutional deliveries) from 75 health facilities implementing P4P in Pwani region, and 75 from comparison districts in Tanzania. We measured technical efficiency using Data Envelopment Analysis and obtained efficiency scores across facilities before and after P4P scheme. We analysed which factors influence technical efficiency by regressing the efficiency scores over a number of contextual factors. We also tested the impact of P4P on efficiency through a difference-in-differences regression analysis. RESULTS: The overall technical efficiency scores ranged between 0.40 and 0.65 for hospitals and health centres, and around 0.20 for dispensaries. Only 21% of hospitals and health centres were efficient when outpatient consultations and deliveries were considered as output, and <3% out of all facilities were efficient when outpatient consultations only were considered as outputs. Higher efficiency scores were significantly associated with the level of care (hospital and health centre) and wealthier catchment populations. Despite no evidence of P4P effect on efficiency on average, P4P might have improved efficiency marginally among public facilities. CONCLUSION: Most facilities were not operating at their full capacity indicating potential for improving resource usage. A better understanding of the production process at the facility level and of how different healthcare financing reforms affects efficiency is needed. Effective reforms should improve inputs, outputs but also efficiency.