If you’re reading along in Dave Chase’s The CEO’s Guide to Restoring the American Dream with the KBGH book club, you know that in our upcoming discussion of Section II of the book the issue of “productivity” in health care becomes central. Dave says that “...health care hasn’t had a productivity gain in 20 years.” He cites a 2011 paper (paywall) from the New England Journal of Medicine, typically a very reliable source, that posits that output per worker, defined as volume of activity--”encounters, tests, treatments, and surgeries”--has not changed over time per unit of cost:

 This assertion that health care is not gaining productivity seems counterintuitive. After all, we’ve had several huge advances in the science of medicine in the last 20 years, ranging from the adoption of findings of basic, bench research like mRNA vaccines and immunotherapies for cancer to the incorporation of social science research findings like team-based care and checklists. The trouble is that health care doesn’t fit neatly into our notion of productivity the way other industries might. Patients aren’t widgets to be cranked out on an assembly line or miles of pipe to be laid down or even billable hours for a consultancy. And all those “encounters, tests, treatments, and surgeries,” as we’ve discussed ad infinitum in this very blog, don’t necessarily lead to improved health. The authors of the NEJM paper concede that “it is possible that some gains in quality have been achieved that are not reflected in productivity gains.”

 This discrepancy led me down a rabbit hole that ultimately landed on a working paper published on the National Bureau of Economic Research’s website in September of 2020. Investigators applied a deceptively simple methodology to health care that might look familiar to many readers: they constructed a “satellite account” for medical care. Satellite accounts are a theoretical framework that allows focus on a specific field of economics or social life within the larger context of national accounts. Other examples might include studies of environment, tourism, or unpaid household work.

 And instead of using the providers of care as the “industry,” the investigators used the medical conditions themselves. “For example, there is an industry for heart disease and a second one for lung cancer,” the authors say. “Our accounts make no distinction based on the type of care provided; all that matters to people is how much they spend on care and their resulting health.”

That is to say, the primary “input” of the system was medical care, or all those “encounters, tests, treatments, and surgeries” that were considered the “output” of other studies. The “output” of the satellite account was simply health. They looked at 80 conditions in an elderly population between 1999 and 2012, roughly the same time period as Dave Chase’s 20 years of purported productivity stagnation in health care. And their findings conflicted with prior findings:

The figure above indicates that the most productive part of medical care, in spite of the heroic amounts of money we spend on it, was treatment for cardiovascular disease, which grew by nine percent. Cardiovascular care alone accounted for ~79% of the total increase in this new definition of health care productivity from 1999 to 2012. [Note: KBGH receives CDC funding for improved prevention, detection, and management of cardiovascular risk factors like diabetes, high blood pressure, and high blood cholesterol]

But in case you think I’m patting myself and the health care industry on the back, note that very little productivity was observed in mental health, and that we may have even regressed in productivity around infectious diseases (and all this nearly a decade before COVID-19!). Medical care, even under this new definition, did not compare positively to other industries; an overall increase in productivity of ~0.7% per year is hardly an inspiring number. But it is an increase nonetheless, and a more meaningful metric than simply the number of “encounters, tests, treatments, and surgeries.”

My purpose in writing this blog post isn’t to dazzle you with numbers, or even to convince you that American health care works well, since even a casual observer can see its dysfunction. My purpose, and one of the purposes of our book club, is to continue to encourage people to rethink their definition of what “good” health care is. Too many of us fall back on the fact that American health care is relatively fast, since we have more CT scanners and MRI machines than anywhere else in the world, and we ignore the fact that all those CT scanners don’t seem to lead to Americans living longer or having better lives. The real, meaningful output of our medical system should be health, not the number of procedures performed.

If you’re not part of our book club yet, it’s not too late!

As the Medical Director of the Kansas Business Group on Health I’m sometimes asked to weigh in on hot topics that might affect employers or employees. This is a reprint of a blog post from KBGH.