OPINION: Our health care system is inefficient. What can we do about it?

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What drives inefficiency in Canada’s health system? New study helps put a number on the efficiency gap for the first time and looks at how we can become more efficient.

The Canadian health care system is inefficient. It will come to no one’s surprise. Most Canadians agree that we need to improve the efficiency of the health system and get better value from the dollars invested in health care. In fact, all countries struggle with this challenge.

We were interested in getting a better understanding of what drives inefficiency in Canada, and so we undertook a study that measured efficiency and its determinants across the Local Health Integration Networks (LHINs) and Regional Health Authorities. Through this work we were able to put a number on the efficiency gap for the first time – we estimated it to be between 18% and 35% which amounts every year to a potential 24,500 treatable deaths that could have been prevented.

So how can we become more efficient?

In the last few years, experts such as the Institute of Medicine (IOM), Drummond Commission, and the Institute for Competitiveness and Prosperity have made several recommendations for reducing waste and improving efficiency in health care. Mostly the discussion has been centered on improving the way services are organized and delivered, for example by reducing duplication of tests, expanding scopes of professional practice, and reducing medical errors. All of these are valuable initiatives dealing with the supply of health services.

But what about the demand for health services? Could it not be the case that a population with less healthy behaviours is more complex to treat, even for problems not directly related to their behaviours? For instance, colon cancer may be more costly to treat among smokers than non-smokers.

In our study we confirmed that inefficiency relates to the well-known organizational challenges in our system. For instance, regions are more inefficient when they have higher rates of hospital readmissions, and when their hospitals are being used to treat patients who would be better treated elsewhere.

But more interestingly, we found that the demand side can’t be ignored. Efficient regions were also those that were able to keep their populations healthy and to prevent them from becoming ill and needing health care in the first place. For example, regions with a lower prevalence of smoking and physical inactivity were more efficient. Also, regions with healthier populations on average, as measured by lower prevalence of multiple chronic conditions, were more efficient.

Overall, we found that reducing inefficiency in the health system will depend both on improving the ways services are organized and delivered, but perhaps even more so on taking initiatives targeting population health. In other words, the efficiency gap cannot be closed without acting both on the delivery of health care services and on improving the health of populations through public health efforts.

While both are very challenging tasks, there is plenty of evidence available for decision makers to draw on. In particular, there are interesting examples of health system leaders shifting their resources into areas outside the acute sector to better meet the needs of high users of health care services – thereby improving outcomes without increasing the overall costs of services. For example, the work done at The Ottawa Hospital to better integrate health and social care services for the homeless population seems to have reduced use of hospital emergency rooms and improved outcomes.

But there is much more research that needs to be done. The importance of investing in broader determinants of health is well established. However there is little evidence to help make decisions in how to spend the next dollar available. Should it be spent in early childhood development, for example, as opposed to the next breakthrough cancer drug? These types of cost-effectiveness studies that compare the efficiency of spending on interventions tackling the important risk factors for ill-health with more traditional acute care interventions are difficult to do and rare – but they are needed to tackle the efficiency gap.

Sara Allin is Senior Researcher at the Canadian Institute for Health Information. Jeremy Veillard is Vice President, Research and Analysis at the Canadian Institute for Health Information. Michel Grignon is an associate professor with the departments of Economics and Health, Aging & Society at McMaster University and Director of the Centre for Health Economics and Policy Analysis (CHEPA).

Editor’s Note: This article first appeared in Healthy Debate on April 28, 2014 and is reproduced here in full. The article was authored by CIHI’s Sara Allin and Jeremy Veillard & by Michel Grignon.