KEY POINTS:
Public hospitals' productivity has slumped and their costs have risen above general inflation since 2000, according to a controversial study paid for largely by the Business Roundtable.
Roger Kerr, executive director of the free-market lobby group, said the study, by a former Ministry of Health official, revealed a "substantial decline" in productivity.
"Despite large additional expenditure on health in recent years, it appears that taxpayers have not received commensurate value for money," he said.
But the study has been slammed by the senior doctors' union as a pitch for a lurch back to free-market health, and by Labour as an alignment of National with big business.
The study, initiated by former Treasury secretary Graham Scott, a former chairman of the Health Funding Authority - which was scrapped by Labour - has been released into an election campaign in which National is attacking Labour over hospital productivity and efficiency.
Labour has doubled Vote Health to more than $12 billion since it came to office. The study, by analyst Mani Maniparathy, shows the inflation-adjusted cost for each operation, consultation and other "outputs" declined by around 8 per cent in Labour's first two years. It then rose by 12 per cent - or 18 per cent if outpatients and several other patient groupings are included.
But the study is complicated by gaps in data and by its use of general inflation - the consumer price index - rather than health inflation, which is typically three- or four-fold greater. This means that rapidly increasing international prices for health supplies like medicines are included in the cost-per-output (efficiency) figures.
Mr Maniparathy acknowledged this but said his approach was justified because public hospitals themselves were responsible for more than half of health inflation.
A ministry study last year found "significant variation" in efficiency and productivity between the surgical and medical divisions of hospitals. This was partly due to staff "mix" and greater use of senior doctors and registered nurses increased output.
Health Minister David Cunliffe highlighted that the new study did not look at quality nor what was needed to retain health workers.
National's health spokesman Tony Ryall said the new study seemed consistent with earlier findings. The key to improving productivity was National's plan to give doctors and nurses more say in running services.
Senior doctors' union executive director Ian Powell said the study was a statement of ideology "to promote a free-market policy base".
REPORT CARD
* The cost per unit of output decreased at public hospitals by around 8 per cent from 1998/99 to 2000/01, after removing inflation from the figures.
* Cost increased by 11 to 18 per cent from 2000/01 to 2005/06.
* Staff productivity increased by 9 per cent initially, but most of the gain was gradually lost by 2005/6.
* Average staff costs increased by 20 per cent on top of inflation.
Source: Analysts Bakker Maniparathy Claridge Ltd.
