Changes in productivity in healthcare services in the Kingdom of Saudi Arabia

BACKGROUND: Amid the rising demand for healthcare services in Saudi Arabia, there is a need to monitor, evaluate, and improve performance in the delivery of these services. In this regard, the aim of this study was to estimate changes in total factor productivity (TFP) in healthcare services across the health system administrative regions in Saudi Arabia from 2006 to 2018. The contributions of changes in efficiency and technology to the observed changes in TFP were further evaluated. METHODS: The data used for this study were extracted from annual Ministry of Health Statistical Yearbooks for the period of 2006–2018. TFP changes were estimated using the Malmquist Productivity Index, in which technology frontiers were constructed through data envelopment analysis. The changes in TFP were decomposed into changes in technology, changes in pure technical efficiency, and changes in scale efficiency following the Färe-Grosskopf-Norris-Zhang method. As robustness checks, we used bootstrapping to construct intervals and applied alternative decomposition methods. The changes in TFP and its sources were also compared between public and private hospitals. RESULTS: Over the period from 2006 to 2018, TFP for healthcare services has decreased on average by 5.6% per year solely on account of a technical regress. Public hospitals registered a higher deterioration in productivity (6.0% per year) than private hospitals (4.8% per year). CONCLUSION: Using the available resources, there is potential for realising gains in productivity of healthcare services by addressing existing technological challenges. Since the decline in TFP is entirely a problem of technical regress, the primary solution should focus on strategies for achieving technical progress (innovation) through investment in more or better machinery, equipment, and structures for healthcare service provision.