National Accounts Working Party 3-5 October 2007 Paris

1. National Accounts Working Party3-5 October 2007Paris OECD handbook on the measurement of volume output of health and education Paul Schreyer, OECD/STDSandra Hopkins, OECD/ELS

2. Contents • Background • General concepts • Education • Health • Way forward

3. Background: OECD Project • Strong and continueddemand for output measures of education and health by policy-makers • EuropeanRegulation • Project started in 2005, endorsement by CSTAT • Builds on previouswork: Eurostat Handbook on Volume and Prices, Atkinson Report, country experiences • Cooperationwith the UKCeMGA and Eurostat • Financial support by INSEE (France), Government of Norway, United Kingdom • Workshops in London (2006) and Paris (2007) • Objectives: • OECD Handbookby end 2008 • Data development

4. Background: An old question – what is new? 1. Joint work with sector specialists • Elaborated jointly with OECD’s specialised networks • Network of education experts • Network of health experts • Both networks have strong interest in measuring appropriate volume output

5. Background: An old question – what is new? 2: Joint treatment of temporal and spatial dimensions • Education and health PPPs are of great importance to analysts • PPPs and national accounts have to be consistent • Handbook deals with both dimensions in parallel

6. Background: An old question – what is new? 3: Joint treatment of non-market and market production • Even for marketproducers of education and health services, price-volume splits are not obvious • In particular, qualityadjustmentisdifficult in both cases • Handbookemphasises non-market production and volume indicators but not exclusively – the principlesshouldbe the same for market and non-market production

7. Concepts and terminology • Distinction must be made between inputs, outputs, outcomes - • Best explained by way of a graph

9. If outcome indicators are used for quality adjustment, they: • Should control for any other factors that affect outcome for consumers (e.g. socio-economic background of pupils, environmental impact on health) • Should only capture marginal effect of process on outcome

10. Quality adjustment • First step towards capturing quality change is the correct stratification, i.e., the comparison of products with the same or at least similar characteristics. • However, matching of services has its limits. • Also, stratification should be able to capture effects of substitution • However, avoid treating goods or services as substitutes that are in fact different products • Explicit quality adjustment may make it necessary to invoke outcomes

11. Cost and value weights: principles • In a market context, changes in the price or quantity of products are weighted by their expenditure share  reflecting relative valuation by consumers/producers • In a non-market context, only cost observations are available and there is no guarantee that cost weights reflect relative valuation by consumers

12. Cost and value weights: principles • 2 possibilities to deal with this problem: • Assume that on average, cost shares reflect also relative valuation by consumers • Impute relative valuation by consumer but • total value of non-market output ≠ costs; • difficult measurement issues; • asymmetry with regard to treatment of other products • not within the scope of national accounts although value weights are useful for welfare analysis • Handbook recommends use of cost weights

13. Cost and value weights: practice • Note: • Compiling cost or value information in the required classification is not a trivial task • Example: no data may be available on the cost or value of medical care by disease because pricing mechanisms, or cost accounting are not defined over episodes of treatment

14. Education Scope of education services Handbook covers only formal education services Focus is on secondary education

16. Summary of proposed measures:1) Stratification

17. Summary of proposed measures:1) Stratification (contd)

18. Summary of proposed measures for education services: 2) variables

19. Education services: conclusions and questions • Stratification can go a long way towards constructing volume indices – but are process measures an acceptable proxy for a full quality adjustment? • A mix of quality-adjustment approaches is suggested in the Handbook – e.g., scores for secondary education, degrees or a human capital approach for tertiary education. Would a single approach be preferable?

20. Health services

21. Aggregation of quantities of services: Health volume output can be measured at 2 levels: disease or institution 1. Aggregation by disease or illness Ideally, health volume output should be measured by complete treatments by disease as this is the product which an individual purchases from a health provider. Complete treatment refers to the pathway that an individual takes through heterogeneous institutions – offices of doctors, hospitals, medical laboratories etc. – in order to receive full and final treatment for a disease or condition. 1. Aggregation by disease or illness

22. 1. Aggregation by disease or illness Benefits: • “Our concern should be not where the money comes from and where it goes but what it buys.” (Triplett 2001) • The summing of points of contact with the health system to estimate a complete treatment means that if clinical practice changes over time, and is associated with a change in the cost of providing the service, this will be reflected in the output measure e.g movement to day-only surgery and non-invasive types of surgery.

23. 1. Aggregation by disease or illness Problems: • In SNA, total output of an activity is based on summing up outputs of various service providers. Principle is directly applicable only if the service provider is the same during the whole treatment. • Demanding data requirements e.g. linking patient treatment across providers, ability to determine the beginning & end point of treatment • Cost of illness studies require disease specific price indexes for conversion into volumes. Difficult in a nonmarket system

24. 2. Aggregation by institutions Diagnosis Related Groups (DRGs) aggregate across a hospital treatment, usually acute episodes only • There is no international DRG system • Aggregation across other providers is problematic e.g. doctors, psychiatric hospitals etc.

25. 2. Aggregation by institutions • Development and harmonisation of classification systems is required to ensure improvements in compatibility and comparability of health volume output both temporally and spatially. Developments proposed include a classification of health care products and international harmonisation of DRG systems for both inpatients and outpatients.

26. 2. Aggregation by institutions • In the shorter run, it is possible to aggregate health volume output using currently existing DRG systems for hospital outputs, Resource Utilisation Groups for nursing home outputs and summing up activities in outpatient services.

27. Quality adjustment • Ideally, health volume output should be adjusted for the improvement in health outcomes which are due to the introduction into the health industry of new treatments as well as improvements in the existing practices. • Wealth of outcome measures and an ‘industry of quality measurement’ which compiles and records health outcomes, but at this stage the quality indicators which could be applied for adjustment to health volume output are rudimentary and under development • Developments should include consensus on what indicators should be used for quality adjustment and the role of some quality issues, e.g. waiting times, on health outcomes. Choice of quality indicators should emphasise internationally comparable and consistent measurement.

28. Way forward • Presentation of draft report to health experts next week • Possible input to Eurostat seminar November 2007 • Revision of report, and inclusion of education PPPs • During 2007/08: work of Taskforce on Health PPPs (supported by European Commission) • End 2008: complete draft report • 2009 and beyond: OECD will seek mandate to begin empirical implementation