Financial incentives and productive efficiency in Finnish health centres

Abstract

This paper examines the productive efficiency of Finnish health centres by applying data envelopment analysis (DEA) and econometric methods. The Tobit model was used in an attempt to find out how various economic, structural and demographic factors affect efficiency. The dependent variable of the model, the coefficient of inefficiency, was obtained by deducting the DEA efficiency score from one. According to the results, a high percentage of funding coming from central government matching grants and high taxable income per inhabitant are significant predictors of inefficiency. The results suggest that more generous resources tend to increase inefficiency since they may lessen incentives for tight cost and performance control. A high share of doctors and a low share of administrative, maintenance and support personnel promote efficiency. A low population share of the elderly and a long distance to the nearest hospital are positively associated with inefficiency.