Alberta Health Services’ Step-Wise Approach to
Improving Allocative Efficiency in Health Care
Dr. Stephen Duckett, President and CEO,
Alberta Health Services
Presented to the Institute of Health Economics
May 25, 2009
ISSUES
• Allocative efficiency involves consideration of
technical efficiency.

The latter is a boring and neglected aspect of
health economics – but not health policy.
• There is considerable work to do on technical
efficiency in Alberta.
• Allocative efficiency also involves a focus on
improving effectiveness.
2
ALLOCATIVE EFFICIENCY
• A focus on what (health) outcomes you gain for
the inputs you provide (OUTCOME / INPUT).
• Aim that last unit of input yields better outcomes
than investing that input elsewhere (or at least
as good).
• But
Outcome/Input = f (input/output ,output/output )
Technical
Efficiency
Effectiveness
• As technical efficiency improves (cost per patient
treated goes down) so does allocative efficiency.
3
Cost per Weighted ED Visit,
2007-08
$400
$350
$300
$250
$200
$150
$100
$50
$0
1 5 9 13 17 21 25 29 33 37 41 45 49 53 57 61 65 69 73 77 81 85 89 93 97
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Cost per Weighted Case vs. Number
of Weighted Cases, Alberta EDs,
2007-08
$400
$350
$300
$250
$200
$150
$100
$50
$0
0
20,000
40,000
60,000
80,000
100,000
120,000
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Cost per Weighted Case vs. Mean
Complexity, Alberta EDs, 2007-08
$400
$350
$300
$250
$200
$150
$100
$50
$0
0.5
0.7
0.9
1.1
1.3
1.5
1.7
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Improving Technical Efficiency
Activity based funding
• Addresses “overfunding”, fairness
• Reduces likelihood of service reductions as budget
strategy
• Applies to acute and continuing care
• Needs to be accompanied by focus on quality
Feasibility assessment
• Consistency of financial allocation practices
• Recording and coding of activity
• Audit systems
• CMG+, RUGS III
7
Policy Levers
• Financial incentives/markets/quasi-markets
• Legal structure, hierarchies, organizational
incentives
• Culture
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Improving Effectiveness
• Guidance

‘Alberta Service Models’

Care Paths

Enhancing patient choice
• Measurement of outcomes

Providing feedback

Clinical Measures

Patient reported outcome measures
• Technology Assessment
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Summary
Addressing allocative efficiency requires
• Addressing technical efficiency

Activity based funding
• Improving effectiveness

Alberta Service Models

Care Paths
• Ensuring dynamic efficiency

Technology assessment
[email protected]
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Making Difficult Decisions
IHE Innovation Forum II
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