Experimental Measures of Output and Productivity in the Canadian Hospital Sec... - 0 views
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Recent discussions about health care spending have focused on two issues: 1) the extent to which the increase in heath care spending is due to an increase in the quantity as opposed to the price of health care services, and 2) the efficiency and productivity of health care providers (e.g., hospital sectors, office of physicians, and long-term care).
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The key to addressing both issues is a direct output measure of health care services—a measure that does not currently exist.
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The main objective of this paper is to develop an experimental direct output measure for the Canadian hospital sector
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Measurement of direct output starts with a definition of the unit of output and weights used for aggregation. Ideally, the unit of output should capture the complete treatment, encompassing the path a patient takes through heterogeneous health care institutions to receive full and final treatment. This is known as disease-based approach.
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But implementation of this ideal definition requires tracking individual patients across health care institutions; existing data rarely allow such linkages.
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The Atkinson Report (Atkinson, 2005) and Dawson et al. (2005) recommend that the marginal value of a treatment be used to derive a value-weighted activity index as the ideal output measure, where the marginal value is based on the effect of the treatment on the patient’s health outcome.
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A cost-weighted activity index, when inappropriately constructed, might introduce a substitution bias. Substitution bias arises when a shift in the composition of treatments (from inpatient to outpatient treatment) occurs, and inpatient treatment and outpatient treatment are assigned to different case types and are aggregated with their respective unit costs even though they both have the same effect on outcome. If outpatient treatment is less expensive, a cost-weighted activity index will indicate a decline in the hospital sector’s volume of output. This is counterintuitive, since the volume of hospital service under the above assumption does not change when outpatient and inpatient treatments have the same effect on health outcomes and are valued equally by patients.
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A value-weighted activity index captures such quality changes and does not suffer from substitution bias. For a value-added activity index, weights for aggregating treatments are based on the effect of treatments on health outcomes. To the extent that shifts from inpatient treatment to less expensive outpatient treatment have no effect on health outcomes, a value-weighted index will show a decline in the price of the hospital output but no change in the volume of hospital output.
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The preferred estimate is the cost-weighted activity index based on the detailed case type aggregation and corrected for substitution bias. This “quality” adjusted estimate of hospital sector output over the 2002-to-2010 period rose 4.3% per year.
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The price index of hospital sector output derived from the quality-adjusted volume index measure increased 2.7% per year. Growth in the price of the hospital sector is slightly higher than growth in the price of gross domestic product over that period (2.5% per year). Labour productivity calculated as the ratio of output to hours worked in the Canadian hospital sector is estimated to have increased 2.6% per year over the 2002-to-2010 period. This represents annual growth of 4.3% for output and 1.7% for hours worked.
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The analysis reveals a large substitution bias in the cost-weighted volume index of output of the hospital sector when inpatient and outpatient cases are aggregated using their respective unit costs as weights. The bias is estimated to be about 2.6% to 3.3% annual growth in the volume index of the output of hospital sector for the period 2002 to 2010.