Chapter 1

Output of the Health Care Sector

1.1 INTRODUCTION

1.2 HEALTH CARE

Much of the difficulty in measuring the health care process stems from the issue of quality. It should be stressed that quality is a very broad term and its meaning is elusive. For example, organizations providing health care differ in the amount and type of training of the care providers and type of medical equipment used. Further, differences in structure are associated with the use of different techniques in the provision of care. For example, a computerized axial tomography (CAT) scan machine that takes cross-sectional radiographs is generally considered to provide a higher-quality product than a standard radiology machine (Sisk et al. 1990). A second aspect of the quality of care involves the process of providing care, in particular, the amount of personal attention providers devote to consumers. Examples include the volume of services performed per individual and patient evaluations of physician performance.

Another set of characteristics is associated with outcomes, that is, with the accuracy of diagnoses and the effectiveness of treatments in producing health. Examples include hospital mortality rates adjusted for patient condition and the rates of other adverse events in hospitals, such as postsurgical infections.

Health care output can be measured at three sources:

1. Providers can be surveyed to determine how much health care they have produced.

2. Payers for health care can be surveyed to determine how much health care they have paid for.

3. Consumers can be surveyed to determine the quantity of consumption.

1.3 RISK SHIFTING AND HEALTH INSURANCE

Illnesses are often unexpected and are often accompanied by monetary losses in the form of medical expenses, lost earnings from work, and other expenses. Individuals can be said to face a risk of losing some of their wealth, which means that the existence of the loss and its amount are uncertain.

One way of dealing with the risk is to shift it to someone else. When an insurer accepts a large amount of risk, the average loss to the insurer becomes predictable. Costs of operating such a risk-sharing organization include administrative expenses associated with determining probabilities, setting prices, selling policies, and adjudicating claims. The owners also expect a return on their investment (profits). These expenses and profits are included in the fee (called a premium) that each individual must pay to obtain insurance.

1.4 HEALTH STATUS

1.4.1 Concepts

The World Health Organization has defined health as “a complete state of physical, mental and social well-being, and not merely the absence of illness or disease.” Utilization is defined as the amount of services consumed.

1.4.2 Measures of Individual Health

Despite the considerable difficulties in arriving at widely acceptable indexes of health status, the importance of the topic ensures that researchers will keep trying. One widely used measure is the 15-D (for 15 health dimensions), which categorized health status into 15 groups, as shown in Table 1-2, p. 24.

Investigators can use instruments such as the 15-D to provide measures of an individual’s quality of life. Further, a time dimension can be added to provide a measure of quality adjusted life years, or QALYs. Investigators often standardize these measures, with a score of 1.0000 being the highest level of health, and 0.0000 being the lowest (or perhaps even death). By evaluating death as 0.0000, one can compare interventions some of which result in death. For example, if one person lived for 5 years at a QALY value of 0.5 rather than being dead (QALY value of 0.0000), then the difference in QALYs would be 2.5000-0.0000, or 2.5 QALYs. Of course, there are conceptual problems with placing 0.0000 value on death; death is beyond the conscious experience of people, and so they may have great difficulty comparing different levels of health with death.

1.4.3 Population Health Measures

The most commonly used population health measures have been mortality rates and morbidity (usually hospitalization) rates. Increasingly, analysts have been focusing on survival time as an indicator of health status. They choose survival-time indicators because these place emphasis on the duration component of health status; a person’s well-being is a function of the time spent in each health state, not merely the health state at a given moment in time. Measures that look at survival time adopt this important dimension of health. One such measure is that of potential years of life lost (PYLL) before a target age.

Of course, mortality rates do not take quality of life into account. In an effort to incorporate both mortality and quality of life into a single index, analysts at the WHO have developed an index called disability adjusted life expectancy (DALE).

1.4.4 Outcome

The final output of the health care sector is health. If there is a close relationship between health and medical care, then indicators of health care output can be used as indicators of the true output of the health care sector.

Output is measured, not by the level of the health index (e.g., by the infant mortality rate), but rather by the change in the index due to the medical care—in other words, the effects of the care.

It has been contended that, in general, there is a limit to how much good medical care can do; as more medical care is provided (to the same individuals), the additional output becomes less. This is illustrated in Fig 1-3, p. 29, where health is shown on the vertical axis and the quantity of medical care on the horizontal axis. The additional output is expressed as ΔH/ΔM, where ΔM is the additional medical care and ΔH is the additional health. Because of the way the curve is drawn, ΔH/ΔM declines in value as more medical care (M) is provided. This eventual flattening of the output curve has given rise to the expression “flat-of-the-curve medicine” (Enthoven 1980). As medical care provision is increased, the additional effectiveness of medical care declines.

1.5 CONSUMPTION AND INVESTMENT OUTPUT

The totality of resources at any point in time is called a stock. In contrast, the amount of activity that occurs during a given time period is called a flow.

An output is measured over a given period of time, such as a year. The use of output for current wants is called consumption activity. In health care, much of the output is used up as soon as it is produced. Curing a common cold using drugs is a consumption activity because the treatment is brief. The production of capital resources is called investment activity; the effects themselves are designed to last for several years to come.