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Challenges in hospital reform
Barbara McPake
London School of Hygiene and Tropical Medicine
Why reform hospitals?
Over-funded or under-funded?Failure to play designated role in the
health system?Political importance, especially of national
referral hospitalsDominance of medical professional
interests in hospital policy, combined with inappropriate incentives
Why reform hospitals?
Over-crowding, staff attrition, waiting and waiting lists?
Long neglect in public health debateNecessary adaptation to greater emphasis
on PHCAdaptation to new technical opportunitiesHIV/AIDS
What are the options for hospital arrangements?
Markets/Private sector
Broader public sector
Core public sector
PCAB
Source: Harding and Preker: 1998• Budgetary unit• Autonomy• Corporatization• Privatization
Important dimensions of these options
Source: Harding and Preker, 1998
Decision rights
Market exposure
Residual claimant
Accountability
Social functions
Public purse
Unspecified, unfunded mandate
Vertical hierarchy Management autonomy
Direct budget allocation Nonbudgetary revenues
Private owner
Direct hierarchicalcontrol
Rules, regulations and contracts
Specified, funded andregulated
Budgetary unitB
AutonomisedunitA
CorporatizedunitC
PrivatizedunitP
Alternative interpretations
Contract incompleteness and opportunism Are strengthened incentives compatible with
public objectives for hospitals? Access for patients who do not offer surplus
generating possibilities? Quality
Hospital objective function Alternative possibilities to surplus – what
implications for hospital behaviour?Are market forces allowed to work?
Hospital reform in the UK (1991)
Hospitals could apply for trust status Board of directors Determine management structure and profile of services
(with some provisos) Directly accountable to centre Employ own staff and set employment terms and
conditions Income determined by contracts with health authorities,
GP fundholders and private sector (also introduced for non-trust hospitals)
Retain surplus for following year Constraints on prices, and borrowing on capital markets
Trend in cost per episode by hospital group
-150
-100
-50
0
50
100
150
200
1991/2 1992/3 1993/4
1st wave trust
2nd wave trust
3rd wave trust
DMU
Source: Soderlund et al., (1997)
Hospitals’ competitive strategies
Competitive pressures not allowed much rein
Environment implied little scope for competition for main DHA contracts
More energetic competition for ‘extra-contractual referrals’, GP fund-holder contracts, pay beds 1990-1 81,366 patients treated in pay-beds 1994-5 99,399 = +22%
Median waiting times to elective admission, 1994-5
Operation
Operation on coronary artery
Excision of breast
Operation on inguinal hernia
Prosthesis of lens
All patients with surgical operation
Pay beds (days)
13
7
13
17
10
All beds days
76
15
86
175
46
Source Williams (1997) in Keene et al., (2001)
Health sector reform in Zambia
Separate policy making and purchasing from service delivery Creation of ‘Central Board of Health’,
implementing agency of MoH Commission services from public and private
(PNFP) tertiary hospital, and district boards. Contracts negotiated each year: set out
services which district and hospital boards commit to provide for catchment population
Position of tertiary hospitals in reformed system
Ministry of Health
Central Board of Health
Autonomous Hospital Boards
Tertiary hospital
Contract
Direct management
‘Implementing agency’ of the MoH
Features of implementation
3 changes of leadership of MoH between 1994 and 2000, stop-go cycle
Structures put in place but not used ‘Block contracts’ did not evolve Difficulties in de-linking staff from PSC (but some direct
recruitment) Direct interference by MoH continued
Background to reform implementation was economic decline and shrinking resource availability for health sector
Financing
Cost sharing fees for essential package, cost recovery fees for additional services
Package for tertiary hospitals only defined 2001
Interpretation: cost recovery fees for ‘high-cost’, ‘fast-track’, ‘private’ wards and clinics
Zambian hospitals could not gain by competing for ordinary patients – this became their main strategy
Implications of financing strategies
Major use of increased managerial discretion at hospital level
‘High-cost’ fees quite considerable when ‘bundled’ for an episode of care eg. Cerebral malaria, adult – price bundle = Kw
11,000, low cost; 294,980, high cost at one government hospital
What are the implications of these fees for hospital behaviour and the services received by low cost users?
Cost and revenue by ward (1998, Kwacha)
Unit cost % cost = staff
Unit revenue Revenue: cost ratio
High cost wardsMed, Surg, MMed, Surg, FPaediatricsMaternityLow cost wardsMedicalSurgicalPaediatricsMaternity
31,46932,43224,346113,885
16,68111,5799,92185,162
56554969
71656271
12,46112,4629,86115,181
358921,101
0.40.380.410.13
0.000.000.000.24
NB DATA PROVISIONAL
Quality differences between the two services extend to clinical QoC components
05
1015202530354045
HIGH C
OST WARDS A B C D
LOW
COST W
ARDS E F G H
For example: % Items purchased from the list of drugs prescribedPublic hospital X
Clinical staff presence per patient on ward, hospital X.
0123456789
HIGH C
OST WARDS A B C D
LOW
COST W
ARDS E F G H
Clinical staff presence per patient on ward, Hospital Y
0
0.5
1
1.5
2
2.5
3
Indonesia
Major objective of hospital autonomy programme (‘Swadana’) was to encourage hospitals to recover costs
Hospitals granted Swadana status in waves Autonomy circumscribed, but less so than in Zambia Hospital directors have greater control over own-
generated resources Hospitals set fees except for ‘class III’ beds (for the
poor) Hospital can determine service pattern subject to class
III beds constituting a minimum of 50% Favourable financial environment – subsidies increasing
throughout period
Own revenue as % total income
Source: Bossert et al. Hospital autonomy in Indonesia, 1996
0
10
20
30
40
50
60
70
80
90
1991/2 1992/3 1993/4 1994/5 1995/6
RSUP Persahabatan
RSU Tegalyoso
RSU Pasar Rebo
RSUP dr. Kariadi
RUS Tangerang
Trends in fee levels: RSUP dr. Kariadi
Source: Bossert et al. Hospital autonomy in Indonesia, 1996
0
10
20
30
40
50
60
70
80
90
100
1991/2 1992/3 1993/4 1994/5 1995/6
VIP
Class I
Class II
Class III a
Class III b
Numbers of Class III beds
Source: Bossert et al. Hospital autonomy in Indonesia, 1996
% change 1991-1996
-25 -20 -15 -10 -5 0 5 10 15 20
RSUP Persahabatan
RSU Tegalyoso
RSU Pasar Rebo
RSUP dr. Kariadi
RUS Tangerang
Vertical managementDistrict management Provincial management
Room charges per unit cost per class
Hospital
RSUP Persahabatan
RSU Tegalyoso
Small private hospital
ClassVIP
1.11
0.66
3.58
I
0.49
0.90
2.21
II
0.31
0.94
1.86
IIIa
0.20
1.57
0.52
IIIb
0.10
0.63
-
Source: Bossert et al., 1996
Efficiency effects?
Bossert et al.: no marked change in LOS and BOR or
differences Swadana, non-Swadana Management systems deemed to have
improved Physician absenteeism reduced due to
incentive paymentsLieberman and Alkatiri:
Similar conclusions Also, increases in BOR in both types of hospital
Colombia
Law 100, 1993 – framework for national health insurance system Contributory regime: contribution = 12% income Subsidised regime: reduced rate on sliding scale for
those judged unable to pay Cross-subsidy from contributory to subsidised
regimeAll insured entitled to package of care defined
separately for contributory and subsidised members
Insurance market in Colombia
Insurance regulation liberalised – market opened to ‘EPS’ organisations to sell insurance packages and contract with networks of provider institutions
‘Equalisation fund’: Each EPS collects according to the national schedule, remits to equalisation fund and receives back standard sum per patient =1X for each member of compulsory regime =0.5X for each member of subsidised regime
Changed role of hospitals
Previously directly managed by state Secretariats of Health or mandatory insurance agencies (eg. CISS), or private
Now providing services on the basis of contracts with EPSs, and while non-insurance persists, state Secretariats of Health
Key differences from Zambia and Indonesia
Avoids user fees at the point of use No ‘two-tier’ or multi-tier charging systems
Redistributes entitlements to hospital services by enforcing cross-subsidies within insurance system
Remaining inequities in the differences between contributory and subsidised packages of care
Background to reform has been considerably increased health funding (cf. Zambia)
Colombian reforms – evidence of impact
Study of Bogota hospitals: Admission rates
Source: McPake et al. Is the Colombian health system reform improving the performance of public hospitals in Bogota? 2002
0
50
100
150
200Hospital 1
Hospital 2
Hospital 3
Hospital 4
Hospital 5
Bogota hospitals: bed occupancy rates
020406080
100120140
1990
1991
1992
1993
1994
1995
1996
1997
1998
Hospital 1
Hospital 2
Hospital 3
Hospital 4
Hospital 5
Source: McPake et al. Is the Colombian health system reform improving the performance of public hospitals in Bogota? 2002
Some evidence of growing activity and productivity
No evidence of falling patient satisfaction or quality
No evidence or expressed concerns about equity impacts
Comparison of World Bank and ECLAC data 1992 and 1997 indicates slightly increased progressivity of government subsidy over period
Equity?
Jaramillo (2002) Hospitals increased coverage from 35% of population in 1990 to 63% (MoH data, no basis given)
0
5
10
15
20
25
30
1 2 3 4 5
Quintile
% s
ha
re
Weighted average, 1992
1997
Source: 1992: Molina et al. in (1993) World Bank (1993) and ECLAC (1997)
Incidence of public expenditure 1992 and 1997
Conclusions for market forces model
Limited scope for optimism with respect to equity gains
Clearer evidence that incomplete contracts carry risks of disadvantage for particular patients
Gap for political rather than market forces to dominate – in UK and Zambia, constraints to competition may have exacerbated equity effects – ordinary patients’ business can be taken for granted
Colombian model may protect equity but may not be feasible in low income countries
Indications for policy
Recognise that impact depends on context and policy detail
Role to be played by competition needs to be clear and enabled in context of realistic political analysis
Incomplete contracts: increase completeness; apply regulation external to contracts; allow perverse incentives to prevail?