Measuring the Output of Health in the United States Workshop on Measurement of Non-Market Output in Education and Health Michael S. Christian U.S. Bureau of Economic Analysis October 4, 2006

2 Two Projects in Health Economics  Home and volunteer production  Direct volume measurement

3 Direct Volume Measurement  Real health care services measured in U.S. GDP accounts by price deflation  CPI, PPI, input price indexes  Based on prices of procedures  Direct volume measurement is an interesting alternative

4 Inpatient Hospital Services (1)  Volume of inpatient hospital services  Simple count of discharges  Fisher index of discharges by condition  Fisher index adjusted by survival rate  Measuring by condition measures some cost savings as price decreases  Substitution to less expensive procedures

5 Inpatient Hospital Services (2)  Survival rate adjustment adapted from Dawson et al (2006)  Two sources on volume, survival rates  Nationwide Inpatient Sample (NIS)  National Hospital Discharge Survey (NHDS)  Fisher weights are mean charges by condition from NIS

6 Inpatient Hospital Services (3) Annual volume growth, NISNHDS Simple count1.1%1.2% Fisher index1.3%1.6% Survival adjustment2.1%2.5%

7 NIS Inpatient Discharges

8 NHDS Inpatient Discharges

9 Aggregate Survival Adjustment

10 Inpatient Hospital Services (4)  Large effects from survival adjustment  Indexes only account for cost-saving substitutions within inpatient services  Ignores potentially important substitutions across service categories  Aizcorbe and Nestoriak (2006)