Productivity Growth in Health-Care Delivery

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Abstract
The authors compute and compare productivity growth in the health-care sectors for a sample of Organization for Economic Cooperation and Development countries over the period from 1974 to 1989. The authors compute Malmquist productivity indexes, which allow productivity growth to be decomposed into efficiency changes and technical change. These indexes also allow the use of primary quantity data (recently available from the Organization for Economic Cooperation and Development), rather than expenditure data, which the authors argue reduces bias resulting from distorted prices. The authors specify two models. The first model focuses on the hospital sector; inputs include physicians and medical care beds, whereas outputs are the "intermediate" type used in hospital efficiency studies, namely, inpatient days and discharges. For the 19 countries with complete data, the authors found little productivity growth based on this model (with the exception of Denmark, with 15.4% cumulated growth, and the United States, with about 5% from 1974 to 1989). The authors did find, however, that the highest productivity levels are found in the United States (Italy and Finland were also on the frontier of technology in the base period, 1974). The second model uses the same inputs as the first (but in per capita terms), but it specifies simple proxies of health outcomes as outputs: life expectancy of women at age 40 and the reciprocal of the infant mortality rate. For the 10 countries with complete data for this model, the authors found evidence of much more widespread and rapid productivity growth: Denmark's cumulated growth was close to 33%, with the United States close behind. In both these countries, this growth was due solely to technical change over this period.