Diane Dawson

A New Approach To Measuring Health System Output and Productivity

This paper considers methods to measure output and productivity in the delivery of health services, with an application to NHS hospital sector. It first develops a theoretical framework for measuring quality adjusted outputs and then considers how this might be implemented given available data. Measures of input use are discussed and productivity growth estimates are presented for the period 1998/9-2003/4. The paper concludes that available data are unlikely fully to capture quality improvements.

Is patient choice an effective mechanism to reduce waiting times

In many countries, patient choice is a routine part of the normal healthcare system. However, many choice initiatives in secondary care are part of policies aimed at reducing waiting times. This article provides evidence on the effectiveness of patient choice as a mechanism to reduce waiting times within a metropolitan area. The London Patient Choice Project was a large-scale pilot offering patients on hospital waiting lists a choice of alternative hospitals with shorter waiting times. A total of 22 500 patients were offered choice and 15 000 accepted. The acceptance rate of 66% was very high by international standards. In this article we address two questions. First, did the introduction of choice significantly reduce waiting times in London relative to the rest of the country where there was no choice? Second, how were the waiting times of London patients not offered choice affected by the choice regime? We examine the evidence on these issues for one specialty, orthopaedics. A difference-in-difference analysis is used to compare waiting times for hospitals within London before and after the introduction of choice. Although there was a small but significant reduction in waiting times in London relative to other areas where there was no patient choice, the main effect of the choice regime was to produce convergence of mean waiting times within London. Convergence was achieved by bringing down waiting times at the hospitals with high waiting times to the levels that prevailed in hospitals with low waiting times. This represented a clear improvement in equity of access, an important objective of the English National Health Service.

Costing hospital activity: the experience with healthcare resource groups in England

Development of an English measure of hospital casemix can be traced back to the early 1980s and has resulted in the creation of healthcare resource groups (HRGs). Despite the availability of this casemix classification system, less use has been made of HRG costs than might be expected, primarily because hospitals are not funded on the basis of their casemix adjusted activity. Instead, the main use of casemix information has been in benchmarking exercises, such as the recent example of the governments use of HRG costs to set hospital efficiency targets. This paper outlines the historical context in which HRGs were developed, the data used for classification purposes and the calculation of HRG costs. The responses of hospitals to efficiency targets based on HRG costs are considered, including the options of improving data quality, reducing costs, and ignoring the targets. It is argued that the latter strategy is most evident in England.

Long-term contracts in the NHS: a solution in search of a problem?

Purchasers and providers in the National Health Service (NHS) are now required to move from annual contracting cycles to longer-term contracts. The benefits are expected to include more efficient investment and improved sharing of financial risk. This paper argues that the economic analysis of longer-term contracts has assumed implicitly that agents operate in the private sector. Once the constraints of the public sector are introduced, the apparent economic benefits of longer-term contracts become doubtful. The paper explores these issues using evidence collected from analysis of the contracts of a sample of Health Authorities and from semi-structured interviews with individuals involved in the contracting process. We conclude that with the property rights and financial structure of the public sector, the move from short- to long-term contracts is unlikely to produce the improvements in performance expected by the government.

The impact of patient choice and waiting time on the demand for health care: results from the London Patient Choice project

In a number of countries where health care is publicly funded, policies to introduce greater patient choice are being implemented. In most cases patient choice is seen as an instrument to reduce waiting times for elective (non-emergency) hospital services. An important issue is whether facilitating greater patient choice will increase the demand for health care and thereby undermine the achievement of reduced waiting times. A large scale pilot of choice in the London metropolitan area permits a test of the hypothesis that choice will affect demand. This paper estimates a model of the demand for elective surgery using a panel of 150 English acute hospitals over the period 1995 to 2004 for three surgical specialties. It examines whether demand shifted following the introduction of the London Patient Choice Project in 2002. The results suggest that the choice project only shifted NHS inpatient demand in orthopaedics and that this shift was inwards.

The Role of Competition in Health Care: A Western European Perspective

The Federal Trade Commission and Department of Justice 2004 report Improving Health Care: A Dose of Competition expresses a clear allegiance to competition as the organizing principle for health care. In Europe, by contrast, the key organizing principle of health care systems is solidarity. Solidarity means that all have access to health care based on medical needs, regardless of ability to pay. This is not to say that competition is not important in Europe, but competition must take place within the context of solidarity. This article critiques the report from a European perspective, describes the role of competition in Europe (focusing in particular on European Union law), and suggests that the United States could learn from the European perspective.

Comparing NHS Hospital Unit Costs

Efforts to improve the efficiency of the hospital sector in the National Health Service (NHS) have concentrated on measuring the unit costs of service provision. Hospitals identified as having high unit costs are considered poor performers. Several indices have been constructed to measure unit costs. These produce conflicting messages: hospitals with relatively high unit costs as measured using one index may have low unit costs according to another index. Furthermore, the publication of cost information may lead to unintended consequences and perverse behaviour, rather than genuine performance improvements. To get a more accurate picture of performance, cost information should be included within a broader performance assessment framework for hospitals.

Variation in unit costs of hospitals in the English National Health Service.

Objectives: In England, the Department of Health places high priority on reducing the variation in unit costs of National Health Service (NHS) hospitals. Efficiency targets are set for hospitals to create incentives for relatively high cost hospitals to reduce their costs and shift performance closer to that of their lower cost counterparts. We examine empirically the dispersion in unit costs to assess the extent of variation in the productivity of hospitals and trends over time. Methods: We use econometric panel data techniques on data from 235 NHS acute hospital trusts over a six-year period, 1994/95 to 1999/00, supplemented with information from semi-structured interviews with key individuals in hospitals and purchasing bodies. Results: There appears to have been no reduction in variation during this period. Relative unit costs for individual trusts also appear stable, with little movement from relatively high cost to low cost. Judging from limited quantitative evidence outside health care, the variation in costs between NHS hospitals may be comparatively low. Conclusions: Given all the other aspects of hospital performance that government is seeking to change, reduction in the dispersion of unit costs per se should not be a major policy objective. It is far more important to examine variation in quality-adjusted unit costs.

Contracting for quality: does length matter?

Objectives: To examine whether longer-term contracts for health services will shift attention away from concern for finance and activity levels and towards the achievement of better quality services. Methods: Analysis of 288 contracts from the British National Health Service (NHS) and 12 semi-structured interviews with staff from provider (NHS hospital trusts) and purchaser (health authorities) organisations. Results: No relationship was found between the duration of a contract and the duration of service specifications or quality frameworks. The annual contracting cycle is concerned largely with ensuring that all parties stay within activity targets and financial constraints, and this is unlikely to be affected by a shift to longer-term contracts. The setting of standards and initiatives to improve quality is largely independent of the contracting process and the duration of contracts, and relies on relationships rather than contracts. Conclusions: It is optimistic to expect longer-term contracts automatically to produce a greater focus on quality and the incentives needed to ensure that improvements in quality are delivered. However, this may not matter as issues of quality are being addressed more appropriately in the British NHS through a variety of other routes.

Do We Have a Redundant Set of Cost-Efficiency Targets in the Nhs?

There has been a long history of hospital trust cost-efficiency targets being used in the National Health Service (NHS), but there is little evidence about whether they are effective in reducing hospital unit costs and reducing the dispersion of unit costs between trusts. In 1997, the new Labour government announced that it would replace the purchaser efficiency index with a new approach to securing cost-efficiency gains from trusts. Since 1999/2000 trust efficiency targets have been based on reference costs. This article presents evidence to suggest that efficiency targets have not been effective and that the new reference cost based system of targets is irrelevant. The efficiency gains that trusts seek to achieve are those that emerge from the purchaser funding formula and the contracting process.