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  • Brendan Shaw

Ghosts in the Machine: the search for productivity measures in health technology assessment

Brendan Shaw


"If Nature abhors the void, the mind abhors what is meaningless. Show a person an inkblot, and he will start at once to organise it into a hierarchy of shapes, tentacles, wheels, masks, a dance of figures."

Arthur Koestler, The Ghost in the Machine, 1967

“An increasing number of guidelines recommend the inclusion of productivity loss in the base case or additional analyses of economic evaluation.”

Jiang S, Wang Y, Si L, et al. “Incorporating productivity loss in health economic valuations: a review of guidelines and practices worldwide for research agenda in China”, British Medical Journal, 2022.

“Indeed, the biggest contribution to productivity growth has come from advances in saving lives.”

Productivity Commission, Advances in Measuring Health Care Productivity, April 2024.


The inclusion of productivity and societal benefits into the value assessment of medicines, vaccines and other medical technologies has been a contentious issue in health technology assessment (HTA) for a long time.


Does productivity really exist?

Whether it’s a truck driver who can still drive and earn income because her arthritis is cured, an office worker who can go back to the office and pay taxes because he doesn't die from cancer, or parents who can work because their kid isn’t home sick with influenza or RSV, medical technologies have various productivity benefits for the economy.

But this isn't always accepted in HTA circles.

This is partly because for some the concept of productivity in health care has been otherworldly, ethereal almost. For some non-believers, not being able to see it, touch it or measure it has meant that it’s not really there.

It might also be because by acknowledging the broader productivity benefits of medical technologies, funders may worry they have to start paying more for these technologies.

If funders can deny the existence of these ethereal productivity numbers and concepts floating out there, if they don’t look at them, they won’t have to deal with them.

In Australia, economists, patients, doctors and the pharmaceutical industry have tried to convince public sector payers and HTA evaluators that productivity benefits from medical technology exist and that these should be valued as a real thing, but with limited success.


Delivering value or hiding ghosts in the machine?

In some countries, the evaluations of health systems and their technologies do include some sort of recognition of their broader productivity benefits.

The Dutch system of HTA has recently been updated to include better consideration of productivity societal costs and benefits of medical interventions, analyses in the United States in the last few years have shone a light on the productivity benefits of medicines, the Office of National Statistics in the UK is reporting the productivity of the National Health Service, and recent Chinese research has shown that productivity benefits are increasingly being considered in evaluations of medical technologies in a range of countries, although not in Australia.

In Australia, one of the first countries in the world to introduce HTA, the debate has been torturous at times.

Some of us have spent many hours of our lives sitting in rooms listening to public sector officials downplay the importance of productivity or its value to healthcare.

In scenes reminiscent of Peter Venkman being questioned by EPA official Walter Peck in Ghostbusters, (you can watch the clip here), for decades Australian Government officials and experts have routinely questioned productivity claims and the credentials of those putting them forward to the point of suspecting the pharmaceutical industry of some sort of conspiracy to defraud the government. Of making up dodgy data about unrealised societal benefits.

Of hiding ghosts that aren't real inside some machine.

People can talk about ghosts, out-of-body experiences and the spirit world all they like, but the PBAC Guidelines haven't changed much on this in 30 years. Versions of the Guidelines have evolved at glacial pace on this topic, with bureaucrats and experts refusing to budge on their belief that anything real-world will come from claims of productivity benefits.

The argument has been that productivity benefits don’t exist, or don’t matter or, if they do matter, that they can’t be measured. There’s no data with any reliability to justify their consideration.

That is, until now.


Productivity Commission plays the ‘Ghostbuster’

In a simple, stunning, relatively short research report, the Australian Government’s Productivity Commission has blown the lid on this. Its new research demonstrates that the Australian health system generates productivity benefits, and a lot of it has to do with the development of new medical technologies.

The brilliance in the report is that it starts to link Quality Adjusted Life Years (QALYs) gained with multi-factor productivity in the Australian health and economic context.

The research paper, Advances in Measuring Healthcare Productivity released last month argues that while Australia’s healthcare costs have been growing, this additional spending has been worth it.

The productivity ghosts are real. They can be seen, they can be measured, and they're beneficial.

The paper found that:

“Quality-adjusted multifactor productivity grew by about 3% per year between 2011-12 and 2017-18 for the subset of the sector we studied, healthcare used to treat: cancers, cardiovascular diseases, blood and metabolic disorders, endocrine disorders and kidney and urinary diseases. Together, treatment of these diseases accounts for around one third of healthcare spending. To put this in perspective, multifactor productivity growth in the market sector was estimated to be around 0.8% per year over the same period.” (p. 2).

To be clear, the Productivity Commission is saying that in the period and diseases they examined, productivity growth in healthcare was 3% per annum, while productivity growth in the wider economy was 0.8% per annum.

Just stop and think about that for a minute.

At a time when Australia and many other developed countries are facing long-term structural economic problems from poor productivity growth, the health sector has generated productivity growth almost 4 times higher than the broader economy can muster.

And why did this happen?

The Commission found that:

“Productivity grew particularly strongly in the treatment of cancers, suggesting that advances in treatments, rather than across-the-board healthcare reforms, have been the major drivers of growth. Studies from abroad likewise find that diffusion of new treatments is a big contributor to productivity.” (p. 3).

The Commission goes on to say that improved quality, better understanding of ways to treat patients, better science, and new medical technologies have been the reason for major productivity growth in healthcare. Not cost reductions.

Moreover, the Commission found:

“Indeed, the biggest contribution to productivity growth has come from advances in saving lives.” (p. 3).

This statement might seem unremarkable to the average punter in the street – the more lives you save the better society is – but in the context of several decades of argument within health and economic policy circles, this is earthshattering.

Mind you, there’s a long history of the Productivity Commission going head-to-head against the Health Department on productivity issues. The Commission has in the past highlighted the role of medical technology in improvements in the economy and criticised the Health Department for downplaying the importance of improving labour market productivity through healthcare.

The report also has a number of other interesting findings, including that Australia’s health system has a high level of productivity compared to 28 other high-income countries - but only once adjustments are made for Australia’s high levels of obesity, high alcohol consumption and low consumption of fruit and vegetables. The report found that Australia’s high obesity rates had the biggest adverse impacts on the productivity of our health system.

You can watch the PC's webinar on the report here.


Is it time to start believing in the productivity ghosts?

The Productivity Commission findings are timely, given the Australian Government is currently considering the long-awaited final report of the HTA Review and preparing its response. This is Australia’s version of the NICE Methods Review that occurred in the UK a few years ago.

At the time of writing, the Australian Government is still considering the HTA Review outcomes.

With better data on the productivity payoffs from health expenditure, and the Government’s adoption of its Wellbeing Framework which starts to measure the societal benefits of government spending, there’s an opportunity for the HTA Review to encourage Australia’s evaluation system to better recognise the productivity benefits the health system and medical technologies bring to Australia.

Rather than just trying to reform the administrative processes, timelines, submission procedures and the like, one hopes the HTA Review comes out with some positive recommendations on these deeper concepts in the economics of healthcare in Australia.

The health system has the potential to drive Australia’s economic growth and redress the country’s poor long-term productivity performance. One would therefore hope the HTA Review had identified ways to better consider all of this the next time a new cancer drug, a new vaccine, a breakthrough medical device, or the latest diagnostic test is being considered for funding.

Rather than being ghosts in the machine, productivity improvements from health technologies and health systems deserve better consideration for the benefit they bring to patients, society and the economy.

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