Turkey has implemented major health care reforms to improve the efficiency of the health care system since 2003. The objective of this study is to investigate the impact of these reforms, especially the performance-based payment system (P4P), on the efficiency of public hospitals. We employ the Data Envelopment Approach and the Malmquist index to comparatively examine before and after the reform years, 2001 and 2006 respectively. Our analyses compare the performances of public hospitals served in provincial markets. Inputs of number of beds, number of primary care physician, and number of specialists, and how they are used to produce outputs of inpatient discharges, outpatient visits, surgical operations are investigated. Indeed, as the quality indicators dead rate, hospital bed occupation rate and average length of stay are considered. We found that the P4P was successful in boosting productivity due to advancements in technology and technical efficiency. It is seen that the average technical efficiency gains took place because of the significantly improved scale efficiencies, but the average pure technical efficiency did not improve. The lower pure technical efficiencies compared to scale efficiencies affirms the lack adaptation of the hospital management to the renewed system. Additionally, our analysis indicates that in the socio-economically disadvantaged provinces productivity gains have not been achieved. Lastly, it is seen that the hospital quality indicators have not improved in the short run. In the international literature, P4P has been examined extensively for the developed countries. However there are a limited number of studies on developing countries. As it has been noted in the OECD health system review of Turkey: “Turkey is closing the performance gap with other OECD countries and, on a number of measures including overall costs, performs well relative to other comparable upper middle-income countries. Indeed, there may be much that other countries can learn from the recent health reforms in Turkey, especially in the use of performance-related pay to raise staff productivity”. Thus, our study would contribute to the existing literature with a comprehensive analysis of the health system efficiency in Turkey.
