Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 11

Chapter 9.Productivity

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 22

• Productivity is one measure of the effective use of resources within an organization, industry, or nation.

• The classical productivity definition measures outputs relative to the inputs needed to produce them. That is, productivity is defined as the number of output units per unit of input

Productivity Definitions and Measurements

Input

Outputoductivity Pr

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 33

• Sometimes, an inverse calculation is used that measures inputs per unit of output. Care must be taken to interpret this inverse calculation appropriately; the greater the number of units of input per unit of output,

the lower the productivity.

• For example, traditionally productivity in hospital nursing units has been measured by hours per patient day (HPPD). That requires an inversion of the typical calculations: meaning total hours are divided by total patient days.

Productivity Definitions and Measurements

DaysPatient

HoursTotalHPPD

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 44

Example 9.1

Nurses in Unit A worked collectively a total of 25 hours to treat a patient who stayed 5 days, and nurses in Unit B worked a total of 16 hours to treat a patient who stayed 4 days. Calculate which of the two similar hospital nursing units is more productive.

55

25

DaysPatient

HoursTotalHPPDA

44

16

DaysPatient

HoursTotalHPPDB

First, define the inputs and the outputs for the analysis. Is the proper measure of inputs the number of nurses or of hours worked? In this case the definition of the input would be total nursing hours. When the total number of nursing hours worked per nurse is used as the input measure, then the productivity measures for the two units are:

Solution:

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 55

Productivity Definitions and Measurements

• Productivity Benchmarking. Productivity must be considered as a relative measure; the calculated ratio should be either compared to a similar unit, or compared to the productivity ratio of the same unit in previous years. Such comparisons characterize benchmarking. Many organizations use benchmarking to help set the direction for change.

• Historical Benchmarking is monitoring an operational units’ own productivity or performance over the last few years. Another way of benchmarking is to identify the best practices (best productivity ratios of similar units) across health organizations and incorporate them in one’s own.

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 66

Productivity Definitions and Measurements

Multifactor Productivity. Example 9.1 demonstrated a measure of labor productivity. Because it looks at only one input, nursing hours, it is example of a partial productivity measure. Looking only at labor productivity may not yield an accurate picture.

Newer productivity measures tend to include not onlylabor inputs, but the other operating costs for the productor service as well.

OverheadMaterialLabor

iceItemServiceoductivityrMultifacto

Pr*Pr

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 77

Example 9.2A specialty laboratory performs lab tests for the area hospitals. During its first two years of operation the following measurements were gathered:

Measurement Year 1 Year 2Price per test ($) 50 50Annual tests 10,000 10,700Total labor costs($) 150,000 158,000 Material costs ($) 8,000 8,400Overhead ($) 12,000 12,200

Determine and compare the multifactor productivity for historical benchmarking.

Solution:

9.2000,12000,8000,150

50*000,10Pr 1

YearoductivityrMultifacto

.

0.3200,12400,8000,158

50*700,10Pr 2

YearoductivityrMultifacto

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 88

Commonly Used Productivity Ratios

• Hours Per Patient Day (or Visit)

DaysPatients

WorkedHoursDayPatientperHours

VisitsPatient

WorkedHoursVisitPatientperHours

inpatient

outpatient

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 99

Commonly Used Productivity Ratios

Annual statistical data for two nursing units in Memorial Hospital are as follows:Measurements Unit A Unit BAnnual Patient Days 14,000 10,000Annual Hours Worked 210,000 180,000

Calculate and compare hours per patient day for two units of this hospital.

15000,14

000,210AUnitDayPatientperHours hours

18000,10

000,180BUnitDayPatientperHours

Example 9.3:

Solution:

hours

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 1010

Commonly Used Productivity Ratios

Performsbetter Associates – a two-site group practice, requires productivity monitoring. The following initial data are provided for both sites of the practice:

Measurements Suburban DowntownAnnual Visits 135,000 97,000Annual Paid Hours 115,000 112,000

Calculate and compare the hours per patient visit for the suburban and the downtown locations of this practice.

Example 9.4:

Solution:

85.000,135

000,115SuburbVisitPatientperHours

hours or 69 minutes.15.1000,97

000,112DowntownVisitPatientperHours

hours or 51 minutes.

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 1111

Hospital A

Hospital B

Quantity of Inputs(Staffing Level)

Quality of Output

I2 I1

QA

QB

Figure 9.1 Productivity and Quality Tradeoff

A

BA’

I

QA’’

QA”

IA”

Source: Shukla, R.K. Theories and Strategies of Healthcare: Technology-Strategy-Performance, Chapter 4, Unpublished Manuscript, 1991. Printed with permission.

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 1212

Productivity Wall?Productivity Wall?

Quality is difficult to measure, and its definition is ambiguous

The relationships between quantity of care provided and quality are often uncertain

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 1313

Many people confuse. . .Many people confuse. . .Many people confuse. . .Many people confuse. . .

The concepts of productivity, efficiency, and effectiveness.

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 1414

It’s quite simple really!It’s quite simple really!It’s quite simple really!It’s quite simple really!Efficiency-- using the minimum

number of inputs for a given number of outputs

Effectiveness-- refers to outputs; are the proper inputs being used to produce the appropriate outcomes?

Productivity-- a broader concept than efficiency; refers to effective use of a given set of resources

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 1515

But efficiency has varying dimensions..But efficiency has varying dimensions..But efficiency has varying dimensions..But efficiency has varying dimensions..

Technical Efficiency-- relationship between various inputs and related outputs; use minimum combination of resources for a given level of quantity or level of care.

Allocative (Economic) efficiency-- adds cost to the measure of technical efficiency.

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 1616

Graphically,Graphically, Graphically,Graphically,

NursePractitioners

(NPs)

MDs

0 1 2 3 4 5

4

3

2

1

C

B

A

Assume NPs and MDs canbe substituted. The hospitalcan either use 3 MDs and 2 NPs (pt. A), or 1 MD and 5 NPs (pt. B). Both resultin the same level of qualityand can produce the samequantity of output.

Are points A and B both technically efficient?Is point C technically efficient, why or why not?Remember what an isoquant is? Are all points on anisoquant technically efficient? economically efficient?

Iso-cost

Isoquant

Chapter 9: Quantitatve Chapter 9: Quantitatve Methods in Health Care Methods in Health Care ManagementManagement Yasar A. OzcanYasar A. Ozcan 1717

The End