Satellite Accounts - Health Care

Recent assessments of acute episodes of care point to productivity growth stemming from improvements in patient outcomes. This study assesses productivity growth in the treatment of a major chronic condition, specifically, type 2 diabetes. Analyzing traditional Medicare beneficiaries with new diagnoses over 2004-2012, we find that the productivity of health care improved at an annualized rate of 2.2%. In this context productivity growth translated into only modest improvement in patient outcomes; most of the growth was realized in the form of lower treatment costs. These findings are robust to a range of sensitivity analyses.

We assess changes in multifactor productivity in delivering acute episodes of care (including services received after initial discharge from a hospital) for elderly Medicare beneficiaries over 2002-2014. For a majority of the eight episode types studied, productivity improved, exceeding an annualized growth rate of 1.0% in some cases. There is some evidence of negative productivity growth for heart failure episodes over this period. Our estimates reflect ─ and are meaningfully affected by the measurement of ─ trends in the quality of care, with patients experiencing improved outcomes for most episode types.