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CHPI: New Research Suggests That the Solution to Healthcare Sustainability in Canada is Improving Productivity, Not Rationing Access to Medical Goods, Services and Technologies

TORONTO, CANADA -- (Marketwired) -- 04/07/14 -- A research paper published by the Canadian Health Policy Institute (CHPI) suggests that the solution to the sustainability challenge in healthcare is productivity gains - not rationing access to medical goods and services.

The research compared productivity growth in healthcare relative to other economic sectors in Canada. It observed that between 1987 and 2006, productivity for total industry grew at an annual rate of approximately 1.1%, with a slight acceleration in the latter decade. By contrast, over the same period, healthcare showed average annual productivity declines of 0.4%, with the declining trend accelerating in the latter decade.

The paper also examined health outcomes over the same period of time. It found that paradoxically, lagging economic productivity in health care has coincided with continually improving health outcomes for Canadians.

The analysis was based on data from the Centre for the Study of Living Standards, the Canadian Institute for Health Information and Statistics Canada.

The main conclusion of the paper is that rationing access to medical goods and services is not the right approach to managing increasing healthcare costs. Most of the costs of the health system are accounted for by labour, so the solution to efficiency challenges is to improve labour productivity. Economic theory suggests that increasing the substitution of technology for labour and more efficient organization of production are the way to achieve productivity gains. A successful policy-framework should align incentives to favour the adoption of technology and to create constant pressure to improve the organization of production.

Competition in the delivery of medical services, removal of barriers to the supply of medical services, the introduction of real price mechanisms to regulate demand and supply, and encouraging investment in technologies that more efficiently achieve desired health outcomes and/or lead to labour savings are approaches that can unleash productivity growth in health care and improve the sustainability of the health care system while realizing the full economic potential of the health care sector.

The paper, Canada's lagging healthcare productivity: Lost efficiencies and missed economic opportunities, was authored by Ms. Shahzia Teja (M.A., B.Comm.) an Economist with the Ontario Ministry of Finance and an affiliated scholar with CHPI. It was published at CHPI's free access online journal, Canadian Health Policy and can be downloaded at: http://www.canadianhealthpolicy.com/research/full-text/canada---s-lagging-healthcare-productivity--lost-efficiencies-and-missed-economic-opportunities-.html.

About CHPI

Canadian Health Policy Institute (CHPI) is a non-profit think-tank funded by independent research grants and unrestricted operating grants from public sector, private sector and non-profit sector sources. CHPI is dedicated to conducting, publishing and communicating evidence-based socio-economic research on health system performance and health policy issues that are important to Canadians.

Open Access Permission

CHPI grants open access permission to republish this news release in whole or in part for use in news articles including a reference to Canadian Health Policy Institute (CHPI) as the publisher.

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