May 21, 2021

Healthcare productivity is the (second) worst


Between 1990 and 2007 healthcare was the second worst sector of the USA economy in productivity improvement. In fact it had become less productive with time.

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From McKinsey 2014

Another factor to consider when evaluating the long-term sustainability of a healthcare system is the change in productivity over time.

Sometime in the middle 2010s, I first came across a change in productivity over time graphic that was published in the New England Journal of Medicine. Unfortunately, I have been unable to find that original article again.

However, I came across data published in a 2014 McKinsey report (How US healthcare companies can thrive amid disruption June 1, 2014) on productivity changes by sector of the economy from 1990 to 2007 in the United States.

Healthcare as a sector has rated the second-worst productive of 18 different sectors of the economy.

13 of the 18 sectors reported productivity improvements. These sectors included computers and semiconductors leading the way, internet and data processing, telecom, broadcasting, retail, other information technologies, wholesale trade, utilities, finance, manufacturing, transportation, real estate, professional and business services, and recreation, hotels, and restaurants. They all demonstrated a productivity improvement of up to 7% over the two decades.

The five sectors that showed a productivity decline during this time were mining, other services,  education, healthcare, and construction.

In addition to becoming 0.8% less productive, healthcare also saw an increase in its average employment by 3%. This is tied with education, as the two highest growth in employment sectors. (Which from a cost sustainability perspective is not a good trend).

In short: between 1990 and 2007 in the USA, healthcare was ranked as one of the worst sectors for productivity, in fact becoming less productive with time.

The report itself does not go into details regarding the methodology they used to compile this.  We must also realize that since 2008 there have been changes to information technology systems.

I'd love to find a more updated table. Nonetheless, I suspect that healthcare as a sector will continue to lag behind the rest of the economy in its ability to get up-to-speed with what patients and consumers demand and the information systems and management systems required to deliver services in a higher quality and more productive way.

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