Plain English Summary

To ensure that limited NHS resources are used to the greatest benefit, it is important to consider “allocative efficiency” in addition to “technical efficiency”.  Technical efficiency considers whether inputs such as staff time and use of equipment are efficiently transformed into outputs such as low length of stay of inpatient visits or the greatest number of elective surgical procedures.  Allocative efficiency is concerned with the “value” of each of these outputs in terms of the health outcomes patients experience. These outcomes can be expressed in terms of measures like quality-adjusted life years (QALYs) which incorporate changes in patients’ mortality risks and in their health-related quality of life.

This research estimates the NHS’ marginal productivity, which is the change in QALYs across all patients in the NHS for a relatively small change in NHS expenditure. This is important because it helps NHS decision makers to understand whether new treatments that the NHS could pay for represent value for money.  Take, for example, a new treatment that is effective in improving the health outcomes of those who receive it but costs more for the NHS. Whether an effective intervention will improve health outcomes for the entire population of NHS patients requires a comparison of the outcomes achieved with the new treatment and the “health opportunity cost”, which is improvement in health outcome that would have been possible if the additional cost of the new treatment had, instead, been made available for other health care activities.  Our work seeks to estimate marginal productivity which can provide a measure of opportunity cost.