Productivity of the English NHS: 2012/13 update

Productivity is one of the key measures against which NHS achievements can be judged and is the focus of this report. We update our previous analyses of NHS productivity growth since 2004/05, focussing on the change in NHS productivity between 2011/12 and 2012/13, the latter financial year being the latest for which data have been made available. NHS productivity growth is measured as the rate of change in outputs over the rate of change of inputs. Positive productivity growth occurs when the relative growth in outputs exceeds the relative growth in inputs. NHS output captures all activity for NHS patients using data from the Hospital Episode Statistics (HES), Reference Cost returns and primary care use survey data. Quality is captured by waiting times, 30-day survival rates, and blood pressure management in primary care. Output growth amounted to 2.34% between 2011/12 and 2012/13, this being the lowest year-on-year growth rate over the full period since 2004/05. This is the first time over the full series in which quality-adjusted output growth has been lower than cost-weighted growth, which amounted to 2.58%. This is because some aspects of quality deteriorated between 2011/12 and 2012/13, with a reduction in survival rates for non-elective patients and further increases in waiting times. NHS inputs include of NHS and agency staff, intermediates and capital. NHS staff input is measured using staff numbers as recorded in the Electronic Staff Record and also from expenditure data. All other inputs are measured by deflating expenditure data by relevant price indices to capture changes in the volume of resource use. We construct two overall measures of NHS inputs, with our preferred mixed index using NHS staff numbers and an indirect index, which uses expenditure data to calculate NHS staff input. NHS input growth between 2011/12 and 2012/13 was 1.98% if labour input is calculated using NHS staff numbers or 2.63% if using expenditure data. This rate of input growth is relatively low for the series as a whole but it is the largest year-on-year increase since 2009/10. Productivity growth between 2011/12 and 2012/13 is estimated to have been 0.36% based on the mixed input index but -0.28% if based on the indirect input index. If measured using the preferred mixed index, the NHS has delivered overall total factor productivity growth of 10.4% since 2004/05, with 2011/12-2012/13 being the third consecutive period of year-on-year productivity growth.