Measuring the productivity of the health care system

Abstract

Measuring health care productivity is important as health is a large sector of the economy and with the majority of funding coming from public sources, the outlook for productivity growth is a critical factor in the debate about fiscal sustainability. The UK has over 20 years’ experience of measuring health care productivity. The UK measure of productivity is relatively comprehensive; measuring hospital, mental health and primary care services. It compares changes in the volume of quality-adjusted output with changes in the volume of quality-adjusted inputs. The productivity measure plays a role in budget setting, fiscal risk assessment and within the health system, hospital reimbursement. The UK experience has considerable strengths but also highlights some of the challenges of health care productivity measurement. Robust productivity measurement requires high quality, comprehensive data collected on a consistent basis over time. Even in a national health service this is challenging. The emerging evidence on allocative efficiency also highlights the importance of shifting the focus from the outputs of healthcare to outcomes. But, however productivity is measured, for fiscal sustainability the critical issue is how to realise potential productivity gains within the healthcare system and the mix of policy and managerial support needed to help the system optimise the trend rate of efficiency growth.