1. Chapter 9.
Productivity
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 1

2. Productivity Definitions and Measurements
• Productivity is one measure of the effective
use of resources within an organization,
industry, or nation.
• The classical productivity definition
measures outputs relative to the inputs
needed to produce them. That is,
productivity is defined as the number of
output units per unit of input
Output
Pr oductivity =
Input
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 2

3. Productivity Definitions and Measurements
• Sometimes, an inverse calculation is used
that measures inputs per unit of output. Care
must be taken to interpret this inverse
calculation appropriately; the greater the
number of units of input per unit of output,
the lower the productivity.
• For example, traditionally productivity in
hospital nursing units has been measured by
hours per patient day (HPPD). That requires
an inversion of the typical calculations:
meaning total hours are divided by total
patient days.
Total Hours
HPPD =
Patient Days
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 3

4. Example 9.1
Nurses in Unit A worked collectively a total of 25 hours to
treat a patient who stayed 5 days, and nurses in Unit B
worked a total of 16 hours to treat a patient who stayed 4
days. Calculate which of the two similar hospital nursing
units is more productive.
Solution:
First, define the inputs and the outputs for the analysis. Is
the proper measure of inputs the number of nurses or of
hours worked? In this case the definition of the input would
be total nursing hours. When the total number of nursing
hours worked per nurse is used as the input measure, then
the productivity measures for the two units are:
Total Hours 25
HPPD A = = =5
Patient Days 5
Total Hours 16
HPPDB = = =4
Chapter 9: Quantitatve
Patient Days 4
Methods in Health Care
Management Yasar A. Ozcan 4

5. Productivity Definitions and Measurements
• Productivity Benchmarking. Productivity must be considered
as a relative measure; the calculated ratio should be either
compared to a similar unit, or compared to the productivity
ratio of the same unit in previous years. Such comparisons
characterize benchmarking. Many organizations use
benchmarking to help set the direction for change.
• Historical Benchmarking is monitoring an operational units’
own productivity or performance over the last few years.
Another way of benchmarking is to identify the best practices
(best productivity ratios of similar units) across health
organizations and incorporate them in one’s own.
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 5

6. Productivity Definitions and Measurements
Multifactor Productivity. Example 9.1 demonstrated a
measure of labor productivity. Because it looks at only
one input, nursing hours, it is example of a partial
productivity measure. Looking only at labor
productivity may not yield an accurate picture.
Newer productivity measures tend to include not only
labor inputs, but the other operating costs for the product
or service as well.
Service Item * Pr ice
Multifactor Pr oductivity =
Labor + Material + Overhead
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 6

7. Example 9.2
A specialty laboratory performs lab tests for the area
hospitals. During its first two years of operation the
following measurements were gathered:
Measurement Year 1 Year 2
Price per test ($) 50 50
Annual tests 10,000 10,700
Total labor costs($) 150,000 158,000
Material costs ($) 8,000 8,400
. Overhead ($) 12,000 12,200
Determine and compare the multifactor productivity for
historical benchmarking.
Solution:
10,000 * 50
Multifactor Pr oductivityYear −1 = = 2.9
150,000 + 8,000 + 12,000
10,700 * 50
Multifactor Pr oductivityYear − 2 = = 3.0
158,000 + 8,400 + 12,200
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 7

8. Commonly Used Productivity Ratios
• Hours Per Patient Day (or Visit)
Hours Worked
Hours per Patient Day = inpatient
Patients Days
Hours Worked
Hours per Patient Visit = outpatient
Patient Visits
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 8

9. Commonly Used Productivity Ratios
Example 9.3:
Annual statistical data for two nursing units in Memorial Hospital
are as follows:
Measurements Unit A Unit B
Annual Patient Days 14,000 10,000
Annual Hours Worked 210,000 180,000
Calculate and compare hours per patient day for two units of this
hospital.
Solution:
210,000
Hours per Patient DayUnit A = = 15 hours
14,000
180,000
Hours per Patient DayUnit B = = 18 hours
10,000
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 9

10. Commonly Used Productivity Ratios
Example 9.4:
Performsbetter Associates – a two-site group practice,
requires productivity monitoring. The following initial data
are provided for both sites of the practice:
Measurements Suburban Downtown
Annual Visits 135,000 97,000
Annual Paid Hours 115,000 112,000
Calculate and compare the hours per patient visit for the
suburban and the downtown locations of this practice.
Solution:
115,000
Hours per Patient Visit Suburb = = .85 hours or 51 minutes.
135,000
112,000
Hours per Patient Visit Downtown = = 1.15 hours or 69 minutes.
97,000
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 10

11. Figure 9.1 Productivity and Quality Tradeoff
Quality of Output
Hospital A
QA A
QA” Q
QB A ’’ Hospital B
A’
B
I
Quantity of Inputs
I2 IA” I1 (Staffing Level)
Source: Shukla, R.K. Theories and Strategies of Healthcare: Technology-Strategy-Performance,
Chapter 4, Unpublished Manuscript, 1991. Printed with permission.
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 11

12. Productivity Wall?
 Quality is difficult to measure,
and its definition is
ambiguous
 The relationships between
quantity of care provided and
quality are often uncertain
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 12

13. Many people confuse. . .
The concepts of
productivity, efficiency,
and effectiveness.
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 13

14. It’s quite simple really!
 Efficiency-- using the minimum
number of inputs for a given
number of outputs
 Effectiveness-- refers to outputs;
are the proper inputs being used
to produce the appropriate
outcomes?
 Productivity-- a broader concept
than efficiency; refers to effective
use of a given set of resources
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 14

15. But efficiency has varying dimensions..
 Technical Efficiency-- relationship
between various inputs and related
outputs; use minimum combination
of resources for a given level of
quantity or level of care.
 Allocative (Economic)
efficiency-- adds cost to the
measure of technical efficiency.
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 15

16. Iso-cost Graphically,
MDs
Isoquant Assume NPs and MDs can
4
be substituted. The hospital
C
3 can either use 3 MDs and
A
2
2 NPs (pt. A), or 1 MD and
B 5 NPs (pt. B). Both result
1 in the same level of quality
Nurse and can produce the same
0 1 2 3 4 5 Practitioners quantity of output.
(NPs)
Are points A and B both technically efficient?
Is point C technically efficient, why or why not?
Remember what an isoquant is? Are all points on an
isoquant technically efficient? economically efficient?
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 16

17. The End
Chapter 9: Quantitatve
Methods in Health Care
Management Yasar A. Ozcan 17