Recent discussions about health care spending have focused on two issues: 1) the extent to which the increase in heath care spending is due to an increase in the quantity as opposed to the price of health care services, and 2) the efficiency and productivity of health care providers (e.g., hospital sectors, office of physicians, and long-term care).
The key to addressing both issues is a direct output measure of health care services-a measure that does not currently exist. In the National Accounts, output of the health care sector is measured by the volume of inputs, which includes labour costs for physicians, nurses and administrative staff, consumption of capital, and intermediate inputs. An input-based output measure assumes that there are no productivity gains in the health care sector. As a result, it does not provide a measure of productivity performance, nor does it allow a decomposition of total health care expenditures into price and output quantity components.
The main objective of this paper is to develop an experimental direct output measure for the Canadian hospital sector that can be used to address those issues. A large number of countries have already constructed a direct output measure of the hospital sector and other healthcare sectors.
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