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.