An OECD Task Force on Health PPPs was set up in 2007 and established the methodological principles for the project. Since then, five pilot studies have been carried out between 2008 and 2012 which have confirmed the feasibility and the general suitability of the methodology.
The main novel feature is the collection of comparable and output-based prices for hospital services that can then be applied to matching health accounts expenditure data so as to derive consistent price and volume comparisons of health and hospital goods and services consumed. The data is novel in that it reflects “quasi prices” (negotiated or administrative prices or tariffs) of hospital products, instead of prices of inputs such as wages of medical personnel. The new methodology moves away from the traditional input perspective, thereby relaxing the assumption that hospital productivity is the same across countries.
WHAT ARE PURCHASING POWER PARITIES
Numerous studies have shown substantial variation in hospital expenditure across OECD countries. However, there is only limited understanding of the potential sources of this variation. Explaining hospital (or more broadly health care) expenditure in terms of volumes and prices requires expenditure data to be converted using a common currency. Purchasing Power Parities (PPPs) are commonly used to convert national currencies to a common unit. One of the main advantages of using PPPs is that they are both currency converters and price deflators. Therefore, when PPPs are used to convert expenditure to a common unit, the results are valued at a uniform price level and should reflect only differences in the volumes of goods and services consumed in countries.
By end 2013, this new methodology has become an integral part of the Eurostat-OECD Purchasing Power Parity comparison, and hospital price levels for 2017 are publicly available for all OECD countries.
Hospital price levels, 2017 (OECD average=100)
Note: (1) Based on different calculation methodology.
Source: OECD Health Statistics 2019.
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