National Accounts Working Party
3-5 October 2007
Paris
OECD handbook on the measurement of
volume output of health and education
Paul Schreyer, OECD/STD
Sandra Hopkins, OECD/ELS
Contents
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Background
General concepts
Education
Health
Way forward
Background: OECD Project
• Strong and continued demand for output measures of
education and health by policy-makers
• European Regulation
• Project started in 2005, endorsement by CSTAT
• Builds on previous work: Eurostat Handbook on Volume
and Prices, Atkinson Report, country experiences
• Cooperation with the UKCeMGA and Eurostat
• Financial support by INSEE (France), Government of
Norway, United Kingdom
• Workshops in London (2006) and Paris (2007)
• Objectives:
– OECD Handbook by end 2008
– Data development
Background: An old question – what is new?
1. Joint work with sector specialists
• Elaborated jointly with OECD’s specialised
networks
– Network of education experts
– Network of health experts
• Both networks have strong interest in
measuring appropriate volume output
Background: An old question – what is new?
2: Joint treatment of temporal and spatial
dimensions
• Education and health PPPs are of great
importance to analysts
• PPPs and national accounts have to be
consistent
• Handbook deals with both dimensions in parallel
Background: An old question – what is new?
3: Joint treatment of non-market and market
production
• Even for market producers of education and health
services, price-volume splits are not obvious
• In particular, quality adjustment is difficult in both
cases
• Handbook emphasises non-market production and
volume indicators but not exclusively – the principles
should be the same for market and non-market
production
Concepts and terminology
• Distinction must be made between inputs, outputs,
outcomes • Best explained by way of a graph
Inputs
Outputs
Process without
explicit quality
adjustment
Labour, capital,
intermediate
inputs
Environmental
factors
Information about
outcome is a
possible tool for
quality adjustment
Process with
explicit quality
adjustment
Information about
outcome is a
possible tool for
quality adjustment
Outcomes
Direct
outcome
Example
Example
education:
education: qualitynumber of
adjusted number
pupils/pupil hours
of pupils/pupil
by level of
hours by level of
education
education
Knowledge
and skills as
measured by
scores
Example health:
Example health:
quality-adjusted
number of
number of
complete
complete
treatments by
treatments by type
type of disease
of disease
Health status
of population
Indirect
outcome
Future real
earnings,
growth rate
of GDP,
wellrounded
citizens
etc.
Inhereted skills, socio-economic
background, etc.
Hygene, lifestyle, infrastructure
etc.
Inputs
Outputs
Process without
explicit quality
adjustment
Labour, capital,
intermediate
inputs
Process with
explicit quality
adjustment
Information about
outcome is a
possible tool for
quality adjustment
Outcomes
Direct
outcome
If outcome indicators are used for
quality adjustment, they:
•ShouldExample
control for any other
Example
Knowledge
education:
education:
qualityfactors
that
affect
outcome
for
and
skills as
number of
adjusted number
measured by
pupils/pupil
hours
of pupils/pupil
consumers
(e.g. socio-economic
scores
by level of
hours by level of
background
of
pupils,
education
education
environmental impact on health)
Example
health:
•Should
only
capture marginal
Example health:
quality-adjusted
number
of
effect
ofnumber
process
on outcome
Health status
of
complete
treatments by
type of disease
Environmental
factors
Information about
outcome is a
possible tool for
quality adjustment
complete
treatments by type
of disease
Indirect
outcome
Future real
earnings,
growth rate
of GDP,
wellrounded
citizens
etc.
of population
Inhereted skills, socio-economic
background, etc.
Hygene, lifestyle, infrastructure
etc.
Quality adjustment
• First step towards capturing quality change is the correct
stratification, i.e., the comparison of products with the
same or at least similar characteristics.
• However, matching of services has its limits.
• Also, stratification should be able to capture effects of
substitution
• However, avoid treating goods or services as substitutes
that are in fact different products
• Explicit quality adjustment may make it necessary to
invoke outcomes
Cost and value weights: principles
• In a market context, changes in the price
or quantity of products are weighted by
their expenditure share  reflecting
relative valuation by consumers/producers
• In a non-market context, only cost
observations are available and there is no
guarantee that cost weights reflect relative
valuation by consumers
Cost and value weights: principles
• 2 possibilities to deal with this problem:
– Assume that on average, cost shares reflect also
relative valuation by consumers
– Impute relative valuation by consumer but
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total value of non-market output ≠ costs;
difficult measurement issues;
asymmetry with regard to treatment of other products
not within the scope of national accounts although value
weights are useful for welfare analysis
• Handbook recommends use of cost weights
Cost and value weights: practice
• Note:
– Compiling cost or value information in the
required classification is not a trivial task
– Example: no data may be available on the
cost or value of medical care by disease
because pricing mechanisms, or cost
accounting are not defined over episodes of
treatment
Education
Support Informal
Formal
Scope of education services
ISIC rev 4 classes
8510 Pre-primary and primary education
8521 General secondary education
8522 Technical and vocational secondary education
8530 Higher education
8541 Sports and recreation education
8542 Cultural education
8549 Other education n.e.c.
8550 Educational support activities
ISCED-97 levels of education
Levels 0 and 1
Levels 2 and 3 oriented general
Levels 2 and 3 oriented vocational and technical
Levels 4, 5 and 6
Not classified in ISCED-97 levels of education
Not explicitly mentioned in ISCED-97 levels of
education
Handbook covers only formal education services
Focus is on secondary education
Summary of proposed measures:
1) Stratification
Level 0
Minimum stratification
Preferred stratification
Pre-primary education
All classes
Normal classes or pupils
Level 1
Primary education or first stage of
Special
classes
basic education
handicapped pupils
or
Normal classes or pupils
Level 2
Lower secondary or second stage
Special
classes
of basic education
handicapped pupils
or
General + pre-vocational
Level 3
Upper secondary education
Vocational
Level 4
Post-secondary
education
non-tertiary General /
available
vocational
if
Summary of proposed measures:
1) Stratification (contd)
Level 5B
Level 5A + 6
Minimum stratification
More practical and occupationspecific programmes tertiary
education
More theoretically-based
programmes tertiary education
Preferred stratification
All classes or by professional
purpose
By fields of education and/or
prestige of education unit, or
by equivalences of degrees
Adult general education
Adult vocational education
Computer training
Adult and other informal
education
Adult and other education,
anticipating extension of
“education” content in ISIC rev 4,
class 8540.
Driving lessons
Music lessons
Other cultural and artistic
lessons
Sport lessons
Recreational lessons
Education support activities
According to what will be retained
Other education activities
in class 8550 of ISIC rev.4
Summary of proposed measures for education
services: 2) variables
Stratum
Pre-primary education
Primary education: normal
Primary education: special or
handicapped pupils
Lower secondary: normal
Lower secondary: special or
handicapped pupils
Upper secondary education:
general + pre-technical or prevocational
Upper secondary education:
vocational
Post-secondary non-tertiary
education
More practical and
occupationally specific
programmes tertiary education
More theoretically based
programmes tertiary education
Quantity
Pupil-hours
Pupils
Quality (educational)
None
Contribution to scores
Relative future real
earnings and
employment rate if no
scores available
Credits (ECTS) as
1st best
Combination of
time-lagged degrees
as 2nd best
Enrolled tudents as
3rd best
Differentiation by field
of education
Relative “value” of level
of degrees could be
estimated from labour
market
Comment
The sub-stratification
normal / special could be
replaced by coefficients
reflecting the extra costs for
social services provided to
handicapped pupils
Entry education status has to
be controlled for, this can be
with the help of a model
Only incremental revenues
must be considered - real
earnings and employment
rate “without teaching” have
to be subtracted from total
earnings or employment
Different concepts but close
figures in practice.
Education services: conclusions and questions
•
Stratification can go a long way towards
constructing volume indices – but are process
measures an acceptable proxy for a full quality
adjustment?
•
A mix of quality-adjustment approaches is
suggested in the Handbook – e.g., scores for
secondary education, degrees or a human capital
approach for tertiary education. Would a single
approach be preferable?
Health services
1. Aggregation by disease or illness
Aggregation of quantities of services:
• Health volume output can be measured at 2 levels:
disease or institution
1. Aggregation by disease or illness
• Ideally, health volume output should be measured by
complete treatments by disease as this is the product
which an individual purchases from a health provider.
• Complete treatment refers to the pathway that an
individual takes through heterogeneous institutions –
offices of doctors, hospitals, medical laboratories etc. –
in order to receive full and final treatment for a disease
or condition.
1. Aggregation by disease or illness
Benefits:
– “Our concern should be not where the money comes
from and where it goes but what it buys.” (Triplett
2001)
– The summing of points of contact with the health
system to estimate a complete treatment means that
if clinical practice changes over time, and is
associated with a change in the cost of providing the
service, this will be reflected in the output measure
e.g movement to day-only surgery and non-invasive
types of surgery.
1. Aggregation by disease or illness
Problems:
– In SNA, total output of an activity is based on
summing up outputs of various service providers.
Principle is directly applicable only if the service
provider is the same during the whole treatment.
– Demanding data requirements e.g. linking patient
treatment across providers, ability to determine the
beginning & end point of treatment
– Cost of illness studies require disease specific price
indexes for conversion into volumes. Difficult in a
nonmarket system
2. Aggregation by institutions
Diagnosis Related Groups (DRGs)
aggregate across a hospital treatment,
usually acute episodes only
– There is no international DRG system
– Aggregation across other providers is
problematic e.g. doctors, psychiatric
hospitals etc.
2. Aggregation by institutions
• Development and harmonisation of
classification systems is required to
ensure improvements in compatibility and
comparability of health volume output both
temporally and spatially. Developments
proposed include a classification of health
care products and international
harmonisation of DRG systems for both
inpatients and outpatients.
2. Aggregation by institutions
• In the shorter run, it is possible to
aggregate health volume output using
currently existing DRG systems for
hospital outputs, Resource Utilisation
Groups for nursing home outputs and
summing up activities in outpatient
services.
Quality adjustment
• Ideally, health volume output should be adjusted for the
improvement in health outcomes which are due to the
introduction into the health industry of new treatments as
well as improvements in the existing practices.
• Wealth of outcome measures and an ‘industry of quality
measurement’ which compiles and records health
outcomes, but at this stage the quality indicators which
could be applied for adjustment to health volume output
are rudimentary and under development
• Developments should include consensus on what
indicators should be used for quality adjustment and the
role of some quality issues, e.g. waiting times, on health
outcomes. Choice of quality indicators should
emphasise internationally comparable and consistent
measurement.
Way forward
•Presentation of draft report to health experts next week
•Possible input to Eurostat seminar November 2007
•Revision of report, and inclusion of education PPPs
•During 2007/08: work of Taskforce on Health PPPs
(supported by European Commission)
•End 2008: complete draft report
•2009 and beyond: OECD will seek mandate to begin
empirical implementation