Enhancing Output Measures of the Health Care Industry

By Qinghuan Luo, Economic Research Section


The health care industry is characterised by rapid innovation and advances in medical technologies, such as the development of new drugs, or new procedures, that are less invasive and achieve better outcomes for patients. These changes pose major challenges for national accountants and health economists in measuring price change or volume change in health care output. Measurement of health care output is further complicated by a general lack of market transaction prices for the non-market sector of health care.

The Australian Bureau of Statistics (ABS) currently uses the direct quantity index method for estimating volume change in health care output, in line with international practice in national accounting. The current method was developed in early 2000s, where a quantity index is constructed using activity-based quantities (such as the number of hospital separations), weighted by costs.

There has been some progress in this field internationally, notably the development of output measures based on disease treatment, and adjustment to output for quality of health care, to better address the challenge of accounting for quality change. The US Bureau of Economic Analysis (BEA) and the Bureau of Labour Statistics (BLS) have recently developed experimental disease based price indexes. BEA has constructed a disease based Health Care Satellite Account. The UK’s Office for National Statistics (ONS) has developed an explicit quality adjustment approach, and applied it for productivity estimates.

The recent progress in this field presents opportunities for enhancements to the ABS’s current approach for measuring health care output. The ABS has reviewed the international experiences, and has examined various options for improving output measures for Australia.

This paper describes the options for improving health care output measures for Australia, and outlines the proposed developments. In the medium term, the ABS will focus on developing a partial disease based approach, where an output volume measure is constructed based on disease treatment by type of providers (such as hospitals and primary care providers) classified by the Australian and New Zealand Standard Industrial Classification (ANZSIC) Class or Subdivision. The improved output volume measure will be used to construct improved productivity estimates of the health care industry.

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