Improving Allocative Efficiency from Network Consolidation: A Solution for the Health Workforce Shortage

Public hospitals are facing a critical shortage of health workers. The area-based network consolidations could be the solution to increase the system capacity for human resources by improving local allocative efficiency. This study develops counterfactual simulations for area-based network allocations for the health workforce in 10,500 public hospitals in Thailand and examines improvements in allocative efficiency from the health workforce redistribution at different administrative levels such as sub-districts, districts, provinces, and health service areas. The workload per worker is calculated from the output measured by numbers of outpatient and inpatient cases and the input measured by numbers of health workers. Both output and input are weighted with their economic values and controlled for heterogeneity through regression analysis. Finally, this study compares the workload per worker and economic valuation of the area-based networks or ex-ante scenarios with the hospital-level or status quo scenario. Network consolidations of the sub-district primary-level hospitals within the same district could reduce workload per worker by seven percentage points. Another practical policy option is to consolidate similar hospital levels such as primary, first-level secondary, and mid-level secondary hospitals altogether within the same province which could result in the reduction of the workload per worker by 6-7 percentage points. The total economic value gained from consolidating similar hospital levels within the same province is about 15-18 percentage points of total labor cost in the primary hospitals. In conclusion, this study illustrates the improvement in allocative efficiency of the health workforce in public hospitals from the area-based network consolidations. The results provide an insightful example of economic gains from efficiently reallocating the medical workforce within the same local areas. Major reforms are required such that the health care delivery units can automate their resources in corresponding to the population’s health needs through a strengthening gatekeeping system.