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Decline in Public Hospital Productivity

WEDNESDAY OCTOBER 29 2008

Report Reveals Substantial Decline in Public Hospital Productivity

"A new study on the performance of New Zealand's public hospitals produced for the New Zealand Business Roundtable reveals a substantial decline in productivity. Despite large additional expenditure on health in recent years, it appears that taxpayers have not received commensurate value for money", Roger Kerr, executive director of the Business Roundtable, said today.

"The study updates and reinforces the findings of a 2005 Treasury report on the sector and reveals some clear trends (see attached graphs):

· the real (ie inflation adjusted) cost per unit of public hospital outputs increased by approximately 18 percent over the five years from 2000/01 to 2005/06

· overall productivity of personnel in public hospitals decreased 8 percent over the same period (this compares with a decrease in productivity for medical personnel of 15 percent and 11 percent for nursing personnel), and

· the overall real average personnel costs for hospital services increased approximately 16 percent over the same period.

The 2005 Treasury report (obtained under the Official Information Act) showed a fall in hospital efficiency of 7.7 percent in the period 2000/01 to 2003/04.

Productivity Performance of New Zealand Public Hospitals 1998/99 to 2005/06 was written by specialist public sector analyst Mani Maniparathy of Bakker Maniparathy Claridge Ltd. Dr Graham Scott, former Secretary to the Treasury and former chair of the Health Funding Authority, arranged for the study to be conducted with partial funding from the Business Roundtable and wrote a foreword.

Mr Kerr said the purpose of the study was not to draw policy conclusions but to stimulate research and discussion. Nevertheless, the main findings suggested serious grounds for concern.

"In essence, it appears that, in spite of continuing substantial - and possibly unsustainable - increases in funding each year, productivity in the public hospital system is actually deteriorating.

"This raises a number of important questions, not the least being why what amounts to almost a fifth of government expenditure and 8 percent of the total economy has received so little attention in respect of productivity and value for money."

Mr Kerr said that the data on hospital performance were very difficult to obtain from the Ministry of Health. Moreover, they are not routinely collected or consistently assembled, and are further compromised by weaknesses such as the lack of consistent definitions about even such simple concepts as full-time equivalents. This makes the task of evaluating performance in the sector extremely difficult.

"The findings raise another important question: what exactly would the full slate of public health services actually cost if all the undertakings about access were met effectively and safely?", Mr Kerr said.

"Understanding the true value of spending in the public hospitals sector is not only critical for meeting health sector goals but also for fiscal policy and improvements in the wider economy."

Mr Kerr said that Bakker Maniparathy Claridge Ltd intends to update the study periodically and make it available to researchers. The report also suggests that Statistics New Zealand could be mandated to produce performance information to high and consistent standards across the health sector to support a drive for performance improvement.

"Besides stimulating further research, it is hoped that the report will help refocus public debate on problems with the performance of the health system and alternative policy approaches rather than be confined to calls for more health spending, some of which may represent poor value for money", Mr Kerr concluded.

ENDS

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