Background   of the Study

Health is one of the most important services provided by the government in  every country of the world. In both the developed and developing nations, a significant proportion of the nation’s wealth is devoted to health. For example, the World Health Reports (2006) gave Nigerian government’s expenditure on health as a percentage of the nation’s Gross Domestic Product (GDP) for year 2001, 2002, and 2003 as 5.3 percent, 5 percent, and 4.7 percent respectively. This is to show the fact that Nigerian government health care expenditures are not only significant in absolute terms but also relative to the Gross Domestic Product.


Developing nations’ expenditure on health, however, ought to be more substantial than that of the developed nations. This is because in developing countries like Nigeria, with relatively low level of mechanization and automation, health assumes additional dimension of importance in terms of implications for economic activities. The Federal Ministry of Health in Nigeria (1998) noted that the health of the people not only contributes to better quality of life, it was also essential for sustained economic and social development of the country as a whole. Hence, health is regarded as a critical resource in the process of economic development.


Consequently, spending on health is not only consumption expenditure, but a productive investment both at individual and national levels. On the enterprise scale, for example, a healthy workforce reduce the cost of building slacks into the production schedules; enhance investment in staff training and exploitation of the benefits of specialization (Nwaobi, undated). At the national level, a healthy population is potentially a more productive population. This reasoning   justifies national resource deployment to health and the increased campaign to use organized healthcare. It is assumed that increased access and use of health services will improve the health status of the population.


It is the quest for increased access to health care so as to ensure that Nigerians attain a level of health that would make it possible for the people to lead socially and economically productive life that informed the health sector reform. The reform made primary healthcare the cornerstone of the nation’s health system with responsibilities for health shared among the three tiers of government. Thus, the Nigerian health system based on the national administrative structure is vertically divided into three tiers of primary, secondary and tertiary levels each being the responsibility of Local, State and the Federal Government respectively.


In terms of institution, the primary health care level is made up of public health care centres and clinics, dispensaries, private clinics and maternity centres. The secondary care level consists of general, cottage and mission hospitals, while teaching and specialist hospitals exist at the tertiary level. These tiers, by design, are closely related to one another with the higher tier designed to assist the lower care levels by handling referral cases from the lower facilities. Responsibilities for health at the primary level reside with the local government while the Federal government has responsibility for policy formulation, monitoring and evaluation of the nation’s health system. The states manage secondary facilities and provide logistic support for the local government in form of personnel training, financial assistance, planning and operations (Federal Ministry of Health, 2000).


However, this segregation of responsibilities for health has inherent problems of coordination. In effect, the organizational structure of the Nigerian health system has significantly affected managerial decisions, financing and incentive structure. This has altered the operation of healthcare facilities, hospitals and health centres in terms of medical inputs and service provisions. Chang (1998) and Rosko (1999) indicated that changes in financial mechanism of public hospitals can increase financial pressures and point to the need for performance improvement.


This highlights the need for prudential principles of healthcare management in the Nigerian health system especially in the nation’s hospitals and health centres. This is because hospitals are the prime resource consuming units in any national health care system and it is the dominant sector of the health care system (Rosko, Chiligerian, Zin and Aaronson, 1995; Mckee and Healy, 2002). Though direct evidence is difficult, it is however reasonable to assume that hospitals can contribute to overall populations care health status by providing care to the people. In addition, hospital services can reduce poverty levels and promote economic developments through minimizing mortality in the population (Mackee and Henley, 2000). Besides, hospitals as a dominant sector and prime resource consuming agent in the health system, their performances and resource utilization are a key determinant of the overall performance of the health care system. It is intuitively compelling to reason that health centres and hospital functions can improve population well being and meet social needs.


The performance of these critical institutions in the health care sector must be assessed if health and development goals are to be met. According to Sowlati (2001), there has been an increasing emphasis on measuring and comparing efficiency of organizational units such as banks and healthcare facilities where there are relatively similar sets of unit. In the light of apparent resource constraints in the Nigerian health care sector, social pressures that demand greater accountability from public organizations and research evidences indicating that private and public sector organizations do not always use resource efficiently (Yaisawarng and Puthucheary, 1997) interest in performance evaluation of public organization has increased. These and the increased demand to provide justification for resource allocation seem to have increased motivations for performance measurement efforts.


Furthermore, performance metric for public sector assumes important dimensions in terms of its implication for service expansion and justification of public expenditures. Dash, Vaishnari, Muraleedharan and Acharya (2007) observed that performance measurement constitutes a rational framework for the distribution of human and other resources between and within health care facilities. And, efficiency measurement by monitoring performance of individual hospital and comparing them with one another is a useful tool for improving management, rationalizing resource allocation, and mobilizing additional inputs (Afzali, 2007).


Higher efficiency can allow greater production and better quality of services often without consuming additional financial and real resources. Therefore, a key question to ask is; are Nigerian health care facilities efficient? If there is need for improvement, by how much can they be improved? A deliberate focus on how well the production process transforms resources into output should prove useful for addressing such questions for public allocation decisions.