Annex 1
AN ASSESSMENT OF PRODUCTIVITY AND INTERNATIONAL
COMPARISONS
How is productivity measured?
1.1 Productivity is difficult to measure
in a consistent way that can be tracked internationally given
the different measuring systems. Healthcare expenditure in the
UK has traditionally been lower than other leading countries and
there is some evidence that when Canada applied a productivity
model used in the NHS that their productivity was shown to be
reducing whilst the NHS was fairly level despite rising input
costs.
1.2 Productivity is measured as the change
in the outputs produced by the NHS divided by the change in the
inputs used to produce these outputs.
1.3 The change in NHS inputs is based on
the resources used by the NHS, eg labour (number of staff employed)
and land (amount of land used). These different inputs are weighted
by their costs to give overall change in inputs used, but as with
the output calculation, changes in the costs of different inputs
do not affect the changes in inputs, eg wages of doctors and nurses
are held constant.
1.4 NHS output is calculated using a cost-weighted
activity index. This output index contains over two thousand items
of NHS activity, and applies the average cost of each type of
activity to obtain a financial value for NHS output. Data on Primary
Care Consultations, Primary Care Prescriptions and new types of
activity such as NHS Direct and NHS Walk-in Centres are also included
in the index.
1.5 The change in output over time is expressed
as a percentage and is not affected by changes in costs of the
units of activity (by holding prices constant the true change
in output is calculated).
1.6 Using this process, however, would take
no account of improvements in quality or patient experience. In
2004 DH jointly commissioned the University of York/the National
Institute of Economic and Social Research (NIESR) to determine
if quality could be included in the NHS output index. York/NIESR
built on the DH output index and recommended the inclusion of
three quality variables:
— an adjustment to take account of
the improved health patients have following hospital treatment;
and
1.7 These quality adjustments added on average
0.17% a year to NHS output over the five years to 2003-04. In
their report, York/NIESR stressed that a better approach would
be based on systematic collection by the NHS of information on
outcomes from treatment.
1.8 DH published a summary of the York/NIESR
research, together with other measures of quality change (eg lives
saved from statins, improved blood pressure control, and longer
survival following heart attacks), in "Accounting for
Quality Change" in December 2005, with the aim of encouraging
further discussion about quality measures. The methods on quality
adjustment in "Accounting for Quality Change"
added an average of 2.7% a year to output growth and productivity.
.
1.9 In their most recent article on NHS
productivity, published 27 February 2006, ONS take account of
the different methods of calculating productivity by presenting
their independent analysis of NHS productivity with and without
quality. Without any quality adjustments ONS estimate that NHS
productivity fell on average by between 0.6% and 1.3% a year between
1995 and 2004.
1.10 ONS therefore present further quality
adjusted productivity estimates, using the York/NIESR and DH figures
in two stages:
— Including York/NIESR and DH adjustments
for quality change (hospital mortality, estimated benefits from
hospital treatment, waiting times, improved blood pressure control,
lives saved from statins), NHS productivity changed on average
by between -0.5% and +0.2% a year from 1999 to 2004, the period
over which quality data are available;
— Using the argument that health and
NHS output become increasingly valuable over time, in an increasingly
prosperous economy, by an estimated 1.5% a year, NHS productivity
increased on average by between 0.9% and 1.6% over the same period
(1999-2004).[21]
1.11 Regardless of which methodology is
used it is clear that there is potential for improvements to be
made in productivity in the NHS. We have published the quality
and value indicators which provide hospital trust by hospital
trust bench marking for the first time ever so that people can
see much more clearly the real scope of productivity improvements
that they have.
How can we improve productivity?
1.12 NHS organisations will be able to make
improvements to productivity in a number of different ways.
1.13 DH can improve productivity through
policy making (eg White Paper, Agenda for Change) and through
providing the information and guidance to help local organisations
improve productivity. DH, working with NHS bodies such as the
Modernisation Agency and NHS Institute, have made steps to provide
information on areas that provide the greatest opportunities for
productivity improvements and by identifying and sharing best
practice.
1.14 The High Impact Changes and Delivering
Quality and Value publications have identified a number of ways
to deliver service improvements, for example:
— To reduce Length of Stay (LOS) by
improving discharge and admission processes, queuing systems and
patient flows by improving access to diagnostic tests.
— To treat patients as day cases rather
than inpatients where appropriate.
— To reduce the number of emergency
bed days through improved management of patients with long term
conditions. Improved community care can reduce admissions, and
therefore, overall costs to the NHS.
— To reduce inappropriate outpatient
attendances and inpatient admissions.
— To improve staff sickness absence
and turnover rates . . . thereby increasing the capacity of NHS
staff.
1.15 The Productive Time Programme was designed
as a collection of indicators based on these high impact changes
to ensure that the Gershon efficiency savings were translated
to something meaningful and useful to the NHS. The Productive
Time Programme has worked closely with the NHS Integrated Service
Improvement Programme and the NHS Institute to raise the profile
of these service improvement possibilities within the NHS, to
ensure that the efficiency savings are achieved and services provided
to patients are improved.
To date,
— approximately 1.5 million bed days
have been saved by reducing LOS for Elective Inpatients, providing
an efficiency saving in the region of £500 million;
— the day case rate has increased to
72%, providing an efficiency saving of over £40 million;
— over 2 million emergency bed days
have been saved, providing an efficiency saving of £650 million;
and
— approximately 100 million outpatient
appointments have been saved, providing an efficiency saving of
£90 million.
1.16 DH has now launched the Better Care
Better Value benchmarking tool, in association with NHS Institute.
This tool allows Trusts and PCTs to compare their performance
in these key areas with other organisations to identify the areas
which provide the greatest opportunity for delivering efficiency
and productivity gains through service improvements.
21 The ONS make clear that this principle was recommended
by the Atkinson Review into the measurement of government output
and productivity for the National Accounts, published in January
2005, and as such should be used cautiously pending further debate. Back
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