# 9.1. Finding the multi-factor productivity ratios and determination of productivity trends

7

9.1. Finding the multi-factor productivity ratios and determinationof productivity trends

 Measurement Year 1 Year 2 Year 3 Price (\$) 880 883 886 Volume 5,583 6,312 6,129 Total Output Value 4,913,040 5,573,496 5,430,294 Labor (\$) 75,000 77,000 80,000 Materials (\$) 2,750 2,900 3,100 Overhead (\$) 6,500 6,700 7,000 Total Input value 84,250 86,600 90,100 Multifactor Productivity Index 58.32 64.36 60.27

Value of output = Volume x Price

Value of input: Labor + Material + Overhead

Productivity ratio:

Multifactor Productivity Ratio

In the first year the productivity ratio was 58.32, in the secondyear, the productivity ratio increased to by 6.04 to 64.36, which isequivalent to 11 percent increase. Nevertheless, in the third year,the productivity reduced to 60.27, a decrease of 4.09, whichtranslates to 6.4 percent decrease.

9.4. Calculating case mix index using the same patient classificationsystem

Case Mix Index (CMI) represents the relative cost or the resourcesrequired in treating a certain mix of patients. The process ofcalculating CMI uses Diagnosis Related Group (DRG) numbers andnumeric weights that reflect the average resource consumption. Belowtale presents the CMI for low level, medium level, high level andextreme care patients.

 Patient classification Direct care hours   Hospital 1 H1 Case Mix Index* Hospital 2 H2 Case Mix Index* Hospital 3 H3 Case Mix Index* Hospital 4 H4 Case Mix Index* Low level care 3 0.4 0.5 0.2 0.35 0.14 0.3 0.12 0.2 0.08 Medium level care 6 0.8 0.35 0.28 0.4 0.32 0.3 0.24 0.25 0.2 High level care 9 1.2 0.1 0.12 0.15 0.18 0.22 0.264 0.3 0.36 Extreme care 12 1.6 0.05 0.08 0.1 0.16 0.18 0.288 0.25 0.4 Average 7.5     0.680   0.800   0.912   1.040

9.7. Case Study of PERMORMSBETTER MEDICAL CENTRE’s productivitymonitoring

   Location 1   Location 2   Location 3 Annual Visits 135,000   94,000   101000 Annual Paid Hours (Work Hours) 115000   112000   125000
 Patient Classification (CPT) Location 1 Distribution Case Mix Index Location 1 Location 2 Distribution Case Mix Index Location 2 Location 3 Distribution Case Mix Index Location 3 Case-mix   0.82   1.09   1.14 Adjusted Visits 110,531   102,813   114,888   Adjusted Work Hours 94,156   122,500   142,188   Total Salary Expense \$ 8,426,984   \$10,351,250   \$14,574,219 Hours of Direct Care 72,398   89,961   104,548 Adjusted Work hours in direct care 59,275.84   98,394.78   118,922.92
   Location 1 Location 2 Location 3 a. Work hours/visits 0.852 1.191 1.238 b. Adjusted work hours/visits 0.697 1.303 1.408 c. Work hours/adjusted visits 1.040 1.089 1.088 d. Adjusted work hours/adjusted visits 0.852 1.191 1.238 e. Total salary expense/visits 62.422 110.120 144.299 f. Total salary expense/adjusted visits 76.241 100.681 126.856 g. Percent of hours in direct patient care 27.1% 33.7% 39.2% h. Percent of adjusted work hours in direct patient care* 21.4% 35.6% 43.0% i. Total salary expense/hours of direct patient care* 142.166 105.201 122.552

j. The analysis above reveals that location 1 overpays its staff by42.166%, location 2 overpays its staff by 5.201%, while location 3overpays its staff by 22.552% per the number of hours worked. This isan indication that, either the healthcare professionals areovercharged in comparison to the number of hours worked, or, thenumber of hours allocated to each practitioner is relatively lowcompared to the amount of money paid. Nevertheless, for this case,since we are dealing with the adjusted hours, which are relativelylower than hours allocated initially, it can be concluded that thehealthcare practitoners are not working appropriately as per thehours allocated. Therefore, measures should be put into place toensure that all the healthcare practitioners work as per the hoursallocated, or the amount of salary per hour be reduced substantially.

Reference

Richards, T. (1987). Measuring case mix and quality of care: Ratertraining and reliability in the graduate medical education study.Santa Monica, CA: Rand.

.