The third leg of this series on getting more bang for bucks from the public health system requires raising the efficiency of delivery.

Let's briefly recap the messages so far: there aren't enough resources to meet our insatiable demand for treatment, so we have to ration who gets treated according to need and ability to benefit. This may be unpalatable for some but the harsh reality is that our health system already rations treatment, although irrationally.

Too often treatment goes to those who squawk loudest. Just take a look at the street marches in Otago and Southland about local neurosurgery resources. If ever there was a non-informed public knee-jerk reaction this is it.

If they knew what a unit in Dunedin, that was not as slick as a fully-resourced one in Christchurch, would do to their chances of survival, I wonder whether they'd be so easily duped by parochial politicians and superficially informed media.

This typifies the downside of our politicised public health system - it keeps providing results that are inefficient and unfair on any evidence-based rationale.

The second line of attack in arresting an exponential escalation of health costs - outlined last week - is to arrest the growth in demand for health services. As discussed, this would be particularly beneficial if the explosive growth in chronic conditions could be stopped. We did a good job with smoking, we've been lousy with booze and just as negligent with the mass exposure to crap food.

The scope for giving the public an incentive to exercise self-discipline and self-education and reduce their chances of becoming recidivist ambulance cases is huge. Taxes, regulation, education, and stigmatising worked for smokes - this "magic four" can work elsewhere.

A third way to reduce the dependence on rationing is to give health professionals the incentives and means to deliver healthcare more efficiently.

You may have noticed that as we keep getting richer, healthcare keeps getting more expensive. Thankfully most of our economy doesn't work this way; as we get better at producing stuff it gets cheaper. Why is healthcare different? Some lay the blame on the fact our health sector is predominantly State-owned and operated.

But that's a red herring - the problem is the same in the private sector health system of the United States.

Our resistance to any healthcare decision "tainted" by considerations of limiting costs or step improvements in efficiency, is endemic.

Rather our predilection to ensure people "deserve the best treatment possible" too easily leads us towards responses that just cost more money. This is the political lightning rod that leads to politicians, sensitive to public criticism, throwing more and more money at the system, in ways that provide no more than a short-term fix.

That the extra money could achieve far more if it were used elsewhere, such as preventing illnesses, just doesn't register on the political radar.

In the last 10 years an unprecedented amount of money sloshed into the health sector, and we have seen very little as a result apart from wage and salary rises among doctors and nurses.

Despite the drum Health Minister Tony Ryall is beating, naff-all of this money went into wasteful administration that can just as easily be recovered through waving a stick and demanding "savings". Most money already goes to the front line, and is spent by health professionals trying to help their patients.

But it doesn't follow that it is spent wisely. There are a number of examples of this. Doctors have little incentive to save money, and lots of incentives to spend it. There are several safety committees that will jump on a doc's back if something goes wrong, so the priority for a professional medic is to do everything themselves and when in doubt, operate.

That this resistance to delegation keeps the medical profession indispensable across far too wide a range of health services, is not a totally unrelated downside either.

But having the most qualified person intervene can be a long way from being the most cost-effective way to get a procedure done.

Even when new technology makes a procedure as simple as a video game, doctors will not let go. Because no one else understands what doctors do, they have a natural monopoly over the regulation of health professionals and, to boot, actively resist any sort of performance monitoring. Holding the sector hostage to this monopoly costs a lot of money.

But the public are just as averse to change. We all want to see a doctor when a nurse would often do a better job. We want a personalised package of treatment for our condition, even if it is the same as everyone else's. Only 15 per cent of GP visits result in the discovery of a diagnosable condition, but all hell would break loose if the hypochondriacs among us were told to just "get over it". We want a prescription. But the real money-burner is our obsession with having a hospital on every street corner.

We see our local hospital as the symbol of healthcare - without one in our town our perception is we're worse off. Truth be known, if anything really seriously goes wrong you will probably be shipped off to the city anyway, so that perception is pure delusion.

Most local facilities long ago became less than hospitals - they may look like hospitals, smell like hospitals, but they are a farce. The penny just hasn't dropped for the public.

Technological progress thank goodness means hospitals aren't what they used to be. They are becoming more advanced, and require more specialist staff. There are real efficiencies able to be extracted from this progress but it means that keeping a provincial hospital ticking over is more and more difficult, unbelievably expensive and the delivery of effective services from such obsolete institutions is becoming rare.

They are a nostalgia trip, little else. These places also struggle to get staff because there is no one around to learn from or be mentored by and not much to do.

From a professional perspective they are an intellectual desert. So they end up paying health sector mercenaries called "locums" exorbitant rates to keep the hospital "open". They have to drag people in off the street for minor operations to keep the staff busy.

This trend toward fewer, larger hospitals is happening all over the world. It just seems the good folk of Otago and Southland are the last to find out.

So what should we do about it? One way forward is being quietly tried in some DHBs.

They are encouraging health professionals - including nurses and even GPs and physios - to get together and work out how to deliver treatments better in their region. They start by monitoring and measuring what they do, and finding ways to continuously improve. They are given the power to change how they do things, shift resources around, and in some areas they are allowed to reinvest the savings.

This "freedom to improve" is a great incentive for health professionals to work together and be innovative. With the right incentives you might start to see health professionals championing further change in the sector, such as merging 20 DHBs into four, and rethinking how we deliver healthcare in the regions.

If the public see health professionals leading the way, they may be more likely to get in behind progress.

But the prerequisite is that the politicians have to step back and encourage this "revolution from within".

Every time a politician plays God and commands that Herceptin should be deployed or taxes raised to keep an olde worlde model of delivering neurological services in the Deep South, they set back overdue health sector reform and stoke the fires of irrational allocation of the health dollar, where street protests and TV minutes determine who gets what.

Lest you think the scope for efficiency in delivery is trivial, let me end with an anecdote. I fund a hospital in Bangladesh that has one trained doctor and 80 medical and nursing staff - none of whom have any qualifications whatsoever. But the doctor has trained them all in specialist tasks.

That hospital provides 11,000 bed nights a year - in an environment where the grim alternative would be no healthcare at all.

The scope for efficiency gains in health delivery is immense. There are lots of fantastic things we could invest in if we delivered healthcare more efficiently such as technology to give better care away from the cities: telemedicine and even machines that remotely monitor people's vital signs within their own home, for example.

If we don't change then more and more of us will have our first experience of hospital care at the A&E department, arriving in an ambulance that's picked us up from the bottom of a cliff.

* Gareth Morgan is director of Gareth Morgan Investments, and, with Geoff Simmons, author of Health Cheque, a study of the NZ health system.