November 2013

Measure productivity to maximise use of resources and make health care sustainable.

It is a daunting and difficult task, but measuring the productivity of health care systems is critical to dispelling perceptions that money is badly spent and to improving efficiency, says Peter C. Smith

Increasing the efficiency of health care systems provides a boost to sustainability in two ways. First, an efficient system is squeezing maximum value from the available resources. Second, if the system is efficient, citizens, ministers and governments are happier to invest. “If you can demonstrate good levels of efficiency in a system, it predisposes payers to support it,” says Peter C. Smith, Professor of Health Policy at Imperial College London Business School and Centre for Health Policy.

Some of the most influential research in the field shows that taken as whole, health spending provides good value for money. However, there is also a huge amount of unexplained variation in the return on investment in health. “Given this, there has to be an attempt to measure the level of efficiency. But doing so is terribly hard,” Smith says.

A number of European Union-funded projects have looked at comparative efficiency across Europe. While these comparisons are important for singling out best practice, they leave many unanswered questions about what to measure. “You could take the whole population and look at what you get in terms of health improvement. Or you could take a tiny bit of the care pathway, say length of stay in hospital. So there’s a trade-off; the first is probably fundamentally the most important measure, but the second is easier to do,” says Smith.

And while there may be general agreement that increasing efficiency is an important goal, talking about productivity in the context of healthcare is antithetical to many. Many common indicators of efficiency, for example, average length of stay, unit costs and labour hours per episode of care ignore the variation between individual patients. “This is not about time and motion,” Smith says, “Every patient is different, things crop up, you cannot mechanise treatment.”

But if it is impossible to adopt efficiency measures at an individual patient level, there are broad areas where it is possible to promote efficiencies. These are at the overall level of how systems and services are structured and configured, within individual health institutions, in how health practitioners do their work, and in how patients use the service.

Reconfiguration of structures is one of the big areas that many countries are grappling with in attempts to improve efficiency. “They are confronting the hospital system from 50 years ago, when every town had a hospital. However with modern medicine, it’s better to have a smaller number of specialised centres,” Smith says.

At present there are huge variations in costs and use of resources in different tiers of health systems, and hence scope for efficiency improvements. But understanding where the inefficiencies lie requires detailed diagnosis - and leadership to drive through change.

To underpin this, better information systems are a prerequisite. In particular, clinical guidelines are needed that embrace the principles of efficiency and are used to provide comparative effectiveness data on individual providers and alternative treatments.

The paucity of information in many health care systems is akin to trying to fly an aircraft without navigation aids, Smith says. “Other industries invest far more in information: indeed it is difficult to envisage any service industry that doesn’t have comprehensive information systems. There is a lot of scope for efficiencies if health care systems had better information to act on.”

Another lever for driving efficiency lies in funding mechanisms, with the traditional pay for activity approach known to be inadequate. One alternative is to pay for performance. Although this is “a good way to go” because it makes purchases think about what they want to buy, Smith says results of pilot studies to date “are not overwhelmingly exciting.”

A fourth area for efficiency lies in encouraging citizens to be more thoughtful users of services. This can range from turning up for appointments and adhering to prescribed medicines, to schemes where patients with chronic conditions are given personal healthcare budgets, through to moves to encourage behavioural and lifestyle changes.

Finally, efforts to implement efficiency measures will be wasted if there is no accountability. “There are a huge number of accountability relationships within health services, between patient and clinician, purchaser and provider, government and citizens, government and insurers,” Smith notes. There need to be accountability mechanisms to ensure objective scrutiny. “Performance measurement is a pre-requisite, and the most important factor for showing organisations and practitioners are doing as well as they could be.”

In any health care system there are funding limits. Measuring productivity may be difficult, but it is an essential tool for identifying inefficiencies and extracting the maximum value from resources. “If you don’t spend the money wisely, then somewhere in the system, you are denying people services they need,” Smith concluded.