Written Answers. - Acute Hospital Costs.

John Bruton

Question:

95 Mr. J. Bruton asked the Minister for Health and Children if he will distinguish between pay and non-pay costs in his explanation in view of the fact that acute hospital costs increased by 46 per cent between 1993 and 1998, whereas inflation was 12.5 per cent; and if he will statistically distinguish the cost increase attributable to increased quality and activity levels from those as a result of medical inflation. [1051/99]

The figures for acute hospital spending quoted by the Deputy are compiled on a global basis and are not broken down between pay and non-pay costs. There are pay and non-pay figures available in respect of voluntary hospitals which are published annually in the Revised Estimates for the public service. It should be noted that these do not include regional and county hospitals administered by the health boards. Over the period 1993 to 1998 the total increase for these hospitals was 51 per cent which was made up of a 48 per cent increase in pay, including superannuation and PRSI costs, and a 73 per cent increase in non-pay costs.

These are overall increases and do not distinguish between the increases in pay and non-pay which went towards maintaining existing services and standards of service and the increases which went towards developing new services and improving the quality of services. This is the key distinction required if the costs associated with medical inflation are to be separated from costs attributable to service improvements, as requested by the Deputy.

Unfortunately, reliable estimates tracking medical inflation in the Irish public health system do not exist. In a previous reply, I gave the figures quoted by the Deputy in his question and I explained the particular measurement difficulties which arise in calculated medical inflation. It is a feature of all health systems that it is extremely difficult to disentangle cost increases attributable to medical inflation from increases in cost associated with improvements in the level or quality of service. To take an example, the cost of treating a particular disease may increase but this may, in part, be driven by the adoption of new technologies which bring about improvements in patient outcomes and/or increased activity levels. If account is only taken of the increase in cost and no allowance is made for the improvement in service the impression will be created that the cost of delivering existing services has increased whereas the introduction of this new treatment has actually changed the level and quality of service received by patients.

I would stress that these difficulties are not unique to the Irish health services. The OECD, the recognised international experts in this field, have commented that:
. . . . the largest part of productivity gains in hospitals goes statistically unrecorded. It is therefore not surprising that measured prices of health services steadfastly increase, notwithstanding the impressive pace of innovation resulting, for example, in new products enabling surgeons to save more lives, in reduced mortality rates in intensive-care units, and in unit cost reductions, such as shorter stays in hospital.
Since the development of modern health services a belief has grown up that these services are capable of consuming huge amounts of extra resources with little or no appreciable gain in terms of increased output and improvements in health. This belief is not backed up by the evidence which is available but it partly arises because of genuine difficulties in precisely measuring increases in output and, to an even greater extent, improvements in the health status of patients. This underlines the importance of continuing to develop more precise measures of performance in the health sector.
In this regard last year four major voluntary hospitals – Beaumont, the Mater, St. James's and St. Vincent's – did an initial review which sheds some light on the very real achievements of our hospitals over recent years. The allocations of these hospitals were examined between 1994 and 1997 and on average allocations were seen to have increased by 34 per cent. However, when factors such as pay increases, non-pay inflation, the impact of new legislation for example, health and safety legislation, and staff training were excluded the overall increase in funding was just over 4 per cent. While there might be some change in the precise figures following further refinement and incorporation of other hospitals I think they clearly highlight the efficiencies and service improvements being achieved by hospitals against a background of limited resources and growing demands from the public.
The evidence available on the productivity of these four hospitals during the period in question confirms this point. Against a background of an increase in funding, having excluded certain items, of 4 per cent the activity of these four hospitals showed significant change. The number of in-patients treated showed a 5 per cent reduction but the complexity of these cases increased by 7.5 per cent; the number of daycases treated increased by 25 per cent; the number of attendances at out-patient clinics showed a 5 per cent increase; and the number of laboratory and radiology tests increased by approximately 18 per cent.
These productivity gains are indicative of the efficiencies being achieved throughout the hospital services. The OECD in its economic sur vey of Ireland published in 1997 compiled a special report on the health services. The report noted that there had been very significant improvement in the productivity achieved in Irish hospitals. Average length of stay was seen to have been reduced by 26 per cent since 1980 and there was a 3 per cent annual increase in overall cases treated since 1987 driven by a quadrupling in day cases. The overall verdict of the OECD was that the Irish health service has resulted in good provision of health care at a relatively low cost to the tax payer.