Health professionals and policymakers are placing increasing emphasis on efficiency in the health sector. Efficiency considerations have been central to health system reforms in many countries, including the US, the UK, the Netherlands and Australia. However, discussion of efficiency in the literature is sometimes unclear, with several different definitions of efficiency in the health sector appearing in different contexts. The task for the analyst is to precisely define the production process of interest, the relevant output for that process and the efficiency question to be addressed.