Allocative efficiency

Project theme: Methods development

For the purposes of resource allocation decisions, it is important to consider allocative efficiency in addition to technical efficiency. 

Whereas technical efficiency seeks to evaluate whether inputs are efficiently transformed into outputs (such as low length of stay of inpatient visits), allocative efficiency is concerned with the value of each of these outputs and can be evaluated by consideration of the rate at which inputs are transformed into relevant outcomes (such as quality-adjusted life years, QALYs).

1. Estimating marginal productivity

Decision-making is more directly informed by estimates of productivity at the margin than average productivity. 

Take for example a new health care intervention that is effective but requires additional resource in order for it to be approved and implemented. Whether an effective intervention will improve health outcomes overall requires a comparison with the likely health opportunity costs, ie the improvement in health that would have been possible if any additional resources required had, instead, been made available for other health care activities.

These health opportunity costs are the amount of health that a health care system currently delivers with more or less resources, so what is required are estimates of the health effects of changes in health expenditure. Such estimates are available for 2006–07 and 2008–09 from previous work and, if used appropriately, ensure that decisions improve rather than reduce health outcomes overall.

Our work, funded by EEPRU, seeks to estimate marginal productivity to inform decision-making around resource allocation. As with any estimate it is important to understand the associated uncertainty and much of our work considers sensitivity analyses of base case estimates. The base case estimates are summarised in figures and tables available at the link below. 

More information on the underlying methodology is on our CHE webpage.

Summary figures and tables 2003–04 to 2012–13 (PDF, 426KB)

Project team

James Lomas, Karl Claxton and Mark Sculpher.


James Lomas

2. Health opportunity costs: assessing the implications of uncertainty using elicitation methods with experts

Recent research in the UK has evaluated the evidence available and the methods required to estimate the expected health opportunity costs for the National Health Service (NHS). 

Due to the absence of sufficiently broad-ranging data on health related quality of life (HRQoL) outcomes, this research was only able to empirically estimate the effects of changes to NHS expenditure on mortality for the year of expenditure.

A number of assumptions and alternative data sources were additionally used to evaluate health opportunity costs in a broader measure of health (quality adjusted life-years, or QALYs), more relevant for policy.

The assumptions required for this last stage of analyses, however, constitute important sources of uncertainty. To best inform these uncertainties, the judgements of key individuals, such as those with substantive clinical or policy expertise, are important. 

This work develops a protocol for the structured elicitation of the judgements of key individuals about these uncertain quantities, and reports on an application involving 28 clinical experts and 25 policy-related individuals.

Project team

Marta Soares, Mark Sculpher and Karl Claxton.


Marta Soares


Soares, M., Sculpher, M. and Claxton, K. (2018) Health opportunity costs: assessing the implications of uncertainty using elicitation methods with experts (PDF, 3.2MB). Policy Research Unit in Economic Evaluation of Health and Care Interventions. Universities of Sheffield and York. EEPRU Report 058. DOI: 

Lomas, J., Martin, S. and Claxton, K. (2018) Estimating the marginal productivity of the English National Health Service from 2003–04 to 2012–13 (PDF, 4.4MB). Policy Research Unit in Economic Evaluation of Health and Care Interventions. Universities of Sheffield and York. Report 061. DOI: 

Elicitation project protocol (PDF, 425KB)


Soares MO, Sculpher MJ, Claxton K. Health Opportunity Costs: Assessing the Implications of Uncertainty Using Elicitation Methods with Experts. Med Decis Making. 2020;40(4):448-59. DOI: 10.1177/0272989X20916450

Lomas J, Martin S, Claxton K. Estimating the Marginal Productivity of the English National Health Service From 2003 to 2012. Value Health. 2019;22(9):995-1002. DOI: 10.1016/j.jval.2019.04.1926

Lomas, J., Claxton, K., Martin, S. and Soares, M. (2018) Resolving the “cost-effective but unaffordable” paradox: estimating the health opportunity costs of nonmarginal budget impacts, Value in Health, 21(3), pp. 266-275, ISSN 1098-3015.

Claxton, K., Lomas, J. and Martin, S. (2018) The impact of NHS expenditure on health outcomes in England: alternative approaches to identification in all‐cause and disease specific models of mortality, Health Economics, 1–7.