Measuring hospital productivity and output: the omission of outpatient services

A common measure of hospital productivity is the "cost per patient day". This measure, however, has a variety of drawbacks, one of which is its omission of outpatient care in the measure of hospital output, since a patient day is merely a measure of the volume of patient services, while the cost of outpatient services is included in the input. This study uses information from the Statistics Canada Annual Return of Hospitals to examine the volume of inpatient, outpatient and total patient services, to separate inpatient and outpatient costs and to study hospital productivity from 1976 to 1987-88 using both inpatient cost per patient day and outpatient cost per outpatient visit. Operating costs for Canadian public hospitals, in constant dollars, increased by 38.5% from 1976 to 1987-88. A large increase in hospital costs is not cause for concern unless costs are rising faster than hospital output. There does seem to be some indication that this is the case. The productivity of public hospitals in Canada, measured by "cost per patient day," has fallen by 19.8% from 1976 to 987-88. However, a major drawback to this measure of hospital productivity is that outpatient services were not included in the measure of output and therefore the productivity of hospitals is underestimated. When inpatient costs and services are separated from outpatient costs and services, inpatient services productivity as measured by inpatient cost per patient day still declines but only by 16.3%. On the other hand, outpatient cost per outpatient visit decreased by 2.3%, indicating an increase in productivity.