Existing Productivity Measurements
The vast majority of metrics that have been used to gauge health care productivity do not look at the right output. A
systematic review conducted by Hussey, et al. of the RAND Corporation found that nearly every health care
productivity metric tracks the provision of medical services, either per dollar (of total cost or labor cost) or per worker
(or worker-hour, etc.).4
Their study found that over 97 percent of productivity measures tracked only the utilization
of health care services as the output from hospitals and other medical institutions. Those measures include cost per
hospital discharge, cost per outpatient visit, relative value units (RVUs) per physician per month, patient visits per
physician per month, average length of stay per discharge, and similar metrics.5
(See Table 1.) The vast majority of
measures use some form of risk-adjustment to ensure that patients are comparable.
Throughput-based metrics, such as patient visits per physician per month, make sense in most industries. A car
factory is intended to make cars, and the more cars workers can turn out in a day, the greater the productivity. But
while medical institutions are intended to provide medical services, productivity measurements that only consider
throughput are fundamentally flawed. There are two primary problems: medical services do not, in themselves,
constitute valuable medical care, and not all medical services are created equal.
There’s a clear difference between health care and most other goods that people buy. When someone buys a
cheesecake or a pair of pants, they make that purchase because they want to eat the cheesecake or wear the pants. By
contrast, nobody gets an MRI just because they want an MRI – rather, people consume medical care because it’s
supposed to make them healthy. In economic terms, that means health care is not a consumption good: it doesn’t
directly contribute to making anyone better off, but only contributes by increasing another output, in this case by
improving health.