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Measuring Productivity in Health Services

The concept of productivity offers a widely accepted framework for four major health system functions: setting health service priorities, choosing and monitoring providers, managing health service resources, and securing the accountability of the health system to citizens for the money it spends. Yet, for a concept that is supposed to play such a central role in steering the health system, productivity remains surprisingly elusive. Most people intuitively understand it as a ratio of some valued output (or outputs) to the resources consumed. But making that simple notion operational in a useful fashion has proved remarkably challenging. There are of course many well-established but partial insights into productivity, for example in the form of unit costs or hospital length of stay. However, these rarely address all the needs of those interested in how well health service resources are being used, and can often be seriously misleading and lead to perverse provider incentives. The most advanced application of productivity measurement in the health sector takes the form of costeffectiveness analysis, a central pillar of health technology assessment agencies such as the National Institute for Health and Clinical Excellence (NICE) in England. There remain many unresolved methodological issues in cost-effectiveness analysis, not least how to incorporate benefits beyond health into the set of valued outputs. Despite this, there have been few convincing challenges to the principle that, whenever collectively provided, a prime criterion for allocating health service resources should be to maximize some measure of health gain in relation to the resources consumed. So, if the principle of maximizing the productive use of resources is accepted for priority setting, should it not also form the basis for retrospective assessment of health system performance? The World Health Organization certainly believed it should when it published its World Health Report 2000. Indeed the terminology adopted by the report implied that health system ‘performance’ was synonymous with productivity, as measured by an index of valued outcomes in relation to health system expenditure. The WHO report was one of the earliest attempts to move beyond piecemeal, partial indicators to secure a comprehensive measure of whole system productivity. It exposed countless philosophical and methodological complexities. Most fundamentally, is it legitimate to impose one set of values when defining what is meant by ‘valued outcomes’? Sovereign nations, localities and individuals may hold very different views on what the health system should be seeking to achieve. Whilst most agree that gains in health should always be included in any productivity measure, there are major variations in people’s attitude towards (say) the reduction in health inequalities, considered by many to be an important health system objective. And how much weight should be attached to patients’ experience, the quality of the patient’s interaction with health services independent of any health gain? The measurement of productivity has been a central concern of national accounts for decades, but publicly provided healthcare has traditionally been treated in a very rudimentary fashion. In 2005, a report by Sir Tony Atkinson recommended changes in the way that public service outcomes are treated in the national accounts. The UK Office for National Statistics and the OECD are now seeking to develop time series of productivity change in health services based on the principles set out in the report. The general approach is to assume that (with the notable exception of the preventive area, the handling of which remains underdeveloped) the outcome of publicly funded healthcare can be represented byaggregating hundreds of different types of activity, such as a specific hospital treatment, a physician encounter, or a nurse visit. In aggregating such activities, a crucial issue is then how to attach a value to each activity. Hitherto this has been done using the cost of the activity as a proxy for its value. This is patently misleading because, for example, some very costly interventions might yield very low patient benefits. It is therefore acknowledged that adoption of what are known as ‘value’ weights is desirable, under which the activities are weighted according to the benefits they confer on patients. However, the lack of research evidence on the benefits of many treatments precludes any such move in the foreseeable future. Even when there is agreement on what concept of productivity should be employed, there are fierce methodological challenges associated with making the concept operational. The first, rather obvious but often overlooked problem, is to identify the ‘inputs’ to be used in the productivity analysis. These can be readily identified if the units are discrete organizations, such as hospitals. However, it is frequently much more difficult to identify inputs if the unit of analysis is smaller (such as a hospital department) or larger (such as the health system). For example, existing costing methods can make it very difficult to estimate what fraction of the hospital’s resources are devoted to producing the outputs of a specific department.