Parallel Session IARIW 2014

1. OUTPUT AND PRODUCTIVITY GROWTH IN THE
HEALTHCARE SECTOR:
A STUDY OF FOUR EUROPEAN COUNTRIES
Authors: Matilde Mas, Agnes Nagy, Mary O’Mahony
Erika Schulz and Lucy Stokes
Discussant: D.S. Prasada Rao

2. The main objectives are:
 To measure output and labour productivity in health sector
 To compare output and productivity growth
 in Germany, Hungary, Spain and the UK
 over the period 2004-2009
Objectives

3.  In the UK, total (NHS + private) expenditure on health
increased from £104.595 billion in 2004/05 to £ 151.700 billion
in 2011/12.
 Does this represent a 50% increase in the provision of health
services?
 What part of this is due to price increase?
 UK health expenditure statistics show that expenditure on
hospitals increased four-fold from £ 14.032 billion to £57,726.
 What is the increase in hospital output during the same period?
 Quality of hospital care would have changed over this period?
What can be said about quality adjusted output of hospitals?
 What are the implications for productivity growth?
 Are the levels and trends in output and productivity similar
in other countries in the region? This study focuses on
Germany, Hungary and Spain.
Motivation

4.  Measures of output of health sector
 The paper focuses on in- and out patient services
provided by hospitals
- Identify different types of outputs
- Aggregation of the outputs to derive a volume
measure
 Adjustment for quality change over time
 Identify suitable measures of quality
 Methodology to incorporate quality change into health
sector output
 Measures of inputs used in health sector
 Types of inputs (labour, capital, materials)
 Aggregation of inputs
 Focus of the paper is on labour productivity
Main Steps

5. Following the OECD handbook on measuring Education
and health output, output is measured using complete and
quality adjusted treatments.
A treatment is a “pathway that an individual takes through
heterogeneous institutions in the health industry in order to
receive full and final treatment for a disease or condition”
The focus of the paper is on treatments provided in
hospitals.
What exactly is the output of health sector?

6.  Inpatient care
 Treatment consisting of some procedure administered
to the patient or drug treatment that requires
monitoring of the patient in hospital
 Outpatient care
 Specialist consultations, pre-procedure and follow up
appointments
 Mental health services
 Community services
 Primary care
 Other activities – such as accident and emergency and
dialysis services
Types of health service

7.  The Diagnosis Related Groups (DRGs) are the main basis for
output measurement.
 Treatments are classified into different DRGs
 Classifications used in different countries may be
different
 Need to map the DRGs across countries and over time
to maintain comparability.
 The paper uses the number of episodes classified by DRGs as
the output measure.
 Need to derive a weighted output measure as different DRGs
involve different levels of input use and command different
prices in the case of marketed hospital services.
Output measurement

8. DRG Migrations - Germany
DRG 2008 DRG2009 DRG 2008 DRG2009
A07A A07A A09C A09C
A07A A07B A09C A09E
A07A A07C A09C A09F
A07A A07D A09C A09G
A07A A07E A09C B36A
A09C F36A
A09C G36Z
A09C R36Z

9.  In order to analyse trends in output and productivity in the sector, it is
necessary to aggregate outputs of different treatments.
 In the case of marketed activities, it is possible to use prices charged for
different treatments for aggregation.
 In the case of health sector, particularly in the case of hospitals, these
services are not always marketed.
 In some countries, patients pay nothing for the services they
receive.
 It is common practice to use unit costs to aggregate volumes of different
treatments.
 A Laspeyres index is used in the paper to measure output growth.
Output aggregation
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10.  The strategy here is to obtain a measure of quality of service provided:
 Waiting times
 Courtesy of health service staff
 Quality of food and cleanliness
 In-hospital mortality rates
 The measure used in the paper is:
Quality adjusted output index
1
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11.  Focus of the paper is on labour productivity
 Labour is classified into difference categories, UK NHS
 Doctor and other medical staff
 Qualified nurses
 Qualified scientific, therapeutic & technical staff
 Qualified ambulance staff
 Support to clinical staff
 NHS infrastructure support
 Other non-medical staff
 Different countries have slightly different classifications
 Growth is measured by category and then weighted by the earnings share
or shared in the total salary costs in the sector
Input Growth

12. Hospital inpatient growth: Germany
-1
0
1
2
3
4
5
6
7
8
2004/05 2005/06 2006/07 2007/08
Activities
CWAI
CWOI

13. Hospital inpatient growth: UK
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Activities
CWAI
CWOI

14. Hospital inpatient growth: Spain
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
7.00
8.00
2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Activities
CWAI
CWOI

15. Hospital inpatient growth: Hungary
-16.00
-14.00
-12.00
-10.00
-8.00
-6.00
-4.00
-2.00
0.00
2.00
4.00
6.00
2003/04 2004/05 2005/06 2006/07 2007/08 2008/09
Activities
CWAI
CWAI*

16. Growth in Output, Labour Input and Labour
Productivity, 2003-09
-4.00
-3.00
-2.00
-1.00
0.00
1.00
2.00
3.00
4.00
5.00
6.00
Germany Hungary Spain UK
output
Labour
Labour
productivity

17. Main findings
 In three of the four countries, similar labour productivity growth
was achieved through different channels
 significant output growth in Germany with no increase in labour input
 very high output growth in the UK but also relatively high growth in
labour input
 low output growth in Hungary accompanied by a significant reduction in
labour input
 Labour productivity growth in Spain significantly lags the other
countries
 Relatively high growth in labour input

18. Discussion
■ The paper represents a major empirical exercise spanning four countries
and the period 2004 to 2009.
■ Measurement issues had to be resolved
■ Changes to DRG specifications
■ Changes in accounting practices
■ Developing measures for non-hospital output
■ The paper also offers:
■ explanations for the results reported - big declines in output and
productivity in Hungary
■ results for difficult to compare activities of rehabilitation, mental
health and out-patient activities
■ The paper makes a significant contribution in shifting from an input-
based approach to an output-based approach to measure growth

19. Discussion
■ Index number formula: The paper makes use of the Laspeyres index to measure output
growth. Given that the paper reports year-on-year growth in output, it should be
feasible to compute Fisher or Tornqvist indices which are superlative.
■ Quality adjustment: Paper uses mortality rates as an indicator of quality.
■ This indicator would be relevant only for a small subset of DRGs covered in the
study.
■ A more relevant quality indicator would be the re-admission rates.
■ Sensitivity to the use of alternative quality indicators
■ Computation of quality adjusted output index
■ Use of cost shares as weights: As the authors point out use of cost shares is based on
technical and allocative efficiency of hospital operations
■ There are a number of studies measuring hospital inefficiency which means that use
of cost shares may not be appropriate
■ Are the results reported consistent with measures of performance of the health sector.
For example, are the output growth figures comparable to increases in “real
expenditure” in hospitals.
■ Finally, is it possible to use the OECD-Eurostat procedures developed for making cross
country comparisons in health and education sector? (e.g. paper by Koechlin, Konijn,
Lorenzoni and Schreyer to be discussed in Session 6A)