Private Wards in Public Hospitals: What Are the Policy and Governance Implications?
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PRIVATE WARDS IN PUBLIC HOSPITALS: WHAT ARE THE POLICY AND GOVERNANCE IMPLICATIONS? A case study of Tygerberg Academic Hospital Haroon Wadee and Lucy Gilson Centre for Health Policy, University of Witwatersand, Johannesburg November 2007 Tygerberg Academic Hospital Private Ward Study Tygerberg Academic Hospital Private Ward Study Acknowledgements This study would not have been possible without funding from the Alliance for Health Policy and Systems Research (under project grant GEH ID06). In addition the following people played an integral role in supporting the study: x Dr Craig Househam of the Provincial Government of the Western Cape (PGWC) who granted permission for the study to be undertaken; and x Dr Japie Du Toit, Ms Kim Lowenherz and Mr Andries Van Niekerk of the PGWC who provided support throughout the process Without the constant support of the following staff at Tygerberg Hospital the study would not have been possible: x Dr Terence Carter; x Dr Japie ‘Koos’ Muller; x Dr Paul Ciaparelli; x the TEXCO who supported the study; x Pam Macgregor who showed endless patience in providing vital data; x Louise Lahner who shared insights into the financial management systems; x all members of staff who assisted in interviews and provided data and support throughout the research process; x Professor Barbara McPake and Dr Kara Hanson of the London School of Hygiene for technical input provided during the proposal development and data analysis stages of the project. x Dr Jonathan Broomberg for technical assistance provided at various stages of the project. x Dr Nika Raphaely for assisting in the design of the resource use data-collection tool; x Dr Muir and Dr Mokete of Johannesburg hospital who assisted in the design of the data-collection tool for cardio-thoracic and orthopaedics respectively; Tygerberg Academic Hospital Private Ward Study x colleagues at the Centre for Health Policy for providing support and critical input throughout the research process; and x Jane Doherty for her relevant, timely and critical comments made in the finalisation of this document. Tygerberg Academic Hospital Private Ward Study Tygerberg Academic Hospital Private Ward Study TABLE OF CONTENTS Table of contents i Acronyms ii EXECUTIVE SUMMARY iii 1. Introduction 1 2. Aims and objectives of the study 2 3. Literature review and conceptual framework 3 4. Private wards at Tygerberg Academic Hospital 7 4.1 Background information 7 4.2 The decision to introduce private wards at TBH 8 4.3 The implementation of private wards 10 4.4 Admission to private wards 11 4.5 The organisation of private wards 12 4.6 Capturing private patient data 14 5. Methods 15 5.1 Cost analysis 15 Step-down cost analysis 15 Bottom-up cost analysis 22 5.2 Revenue analysis 24 5.3 Cost-recovery analysis 24 5.4 Resource-use analysis 25 5.5 Interviews and document reviews 28 6. Ethical issues 28 7. Limitations 29 8. Do private wards raise sufficient revenue to generate a surplus and subsidy 29 flow to public wards? 9. Do public ward patients benefit from any use of surplus revenue generated 32 through private wards? 10. Are hospital resources diverted from public to private wards, and does this 35 affect the quality of care offered in public wards? 11. Understanding the design and governance factors influencing private ward 39 operations and impacts 12. Conclusions 46 References 48 i Tygerberg Academic Hospital Private Ward Study ACRONYMS BAS The accounting software package used at Tygerberg Hospital CABG Coronary by-pass surger CEO Chief Executive Officer CLINICOM System capturing patient administration data at Tygerberg Hospital CPIX Consumer Price Index D3/D4 The names of the two private wards at Tygerberg Hospital DSP Designated service provider GEMS Government Employee Medical Scheme HO Coding for indigent patients in UPFS ICD-10 International Classification of Diseases (10th revision) ICU Intensive Care Unit JAC The pharmacy management system used at Tygerberg Hospital LIMS Low-income medical schemes NHLS National Health Laboratory Service OPD Outpatient Department PERSAL The personnel information system PGWC Provincial Government of the Western Cape PMBs Prescribed minimum benefits PPI Public-private interaction RWOPS Remunerated work outside of the public sector SYSPRO System capturing procurement by different cost-centres at Tygerberg Hospital TBH Tygerberg Academic Hospital TEXCO Tygerberg Executive Committee UEC Urea, Electrolytes and Creatine UPFS Uniform Patient Fee Schedule WCBTS Western Cape Blood Transfusion Services ii Tygerberg Academic Hospital Private Ward Study EXECUTIVE SUMMARY INTRODUCTION Over the last few years, private wards have been implemented on a small scale within South African public hospitals. In the main, these ‘differentiated amenities’ involve the provision of better hotel services to higher-income patients who, under a fee-for-service reimbursement menchanism, pay out-of-pocket or through medical insurance. The public sector objectives for these wards include revenue generation as well as wider benefits to the public health system, leading to better access for disadvantaged population groups, retention of health personnel and development of new models of service delivery. There has been little evaluation of the impacts of this type of public-private interaction and so it is unclear how well private wards are working and what factors influence their performance. Unfortunately, the limited international experience of private ward arrangements in public hospitals suggests that there is a strong potential for these wards to promote inequity. Two key problems are the failure to generate sufficient revenue to sustain hospital-wide quality improvements, and the skewing of resource allocations towards private wards. These problems are driven by a series of policy design and governance weaknesses. AIM AND OBJECTIVES The aim of this study is, through the use of a case study approach, to assess the equity impacts of market-led public hospital reform in South Africa, and the design and governance factors influencing these impacts. The specific objectives are to: 1. determine whether private wards raise sufficient revenue to generate a surplus and subsidy flow to public wards; 2. assess whether, and why, public ward patients benefit from any use of surplus revenue generated through private wards; 3. determine whether, and why, hospital resources are diverted from public to private wards, and whether this affects the quality of care offered in public wards; iii Tygerberg Academic Hospital Private Ward Study 4. identify the main actors whose actions might undermine the attainment of equity objectives, and the factors influencing their actions; 5. assess the operation of existing governance mechanisms in terms of their potential to prevent inequity resulting from the private ward operation; and 6. assist policy-makers in developing appropriate governance mechanisms to ensure that private wards achieve their revenue generation and equity goals. The hospital selected as the case study was Tygerberg Hospital, an academic, tertiary facility in the Western Cape that implemented the first of what eventually became two private wards in 2003/04. METHODS Existing hospital information systems do not allow the costs of individual private patients to be tracked directly. The study therefore adopted a step-down approach whereby costs falling under different cost centres were allocated downwards towards the private wards and selected private patients, using appropriate allocation criteria. This step-down analysis was complemented by a ‘bottom-up’ estimation of the costs of some inputs for which information derived from patient records was required. Given data limitations as well as the complexity of both the step-down and bottom-up analyses, cost information could only be calculated for two tracer interventions, namely coronary by-pass and hip replacement surgery, of which there were 46 and 18 respectively during the year of interest (2003/04). Revenue collected from these patients was also calculated. Lastly, some simple indicators of service quality, for these patients as well as for a comparable sample of public patients, were assessed. Qualitative information was derived through interviews with key actors. FINDINGS Do private wards raise sufficient revenue to generate a surplus and subsidy flow to public wards? On average, each coronary by-pass and hip replacement in the private wards cost R37,980 and R51,091 respectively in 2003/04. Private bypass surgery has the potential to generate a surplus for the hospital as, in 2003/04, the average invoice was around R6,000 iv Tygerberg Academic Hospital Private Ward Study (or 16 percent) higher than the average cost of the intervention. In fact, fees raised from bypass surgery represented 11 percent of total fees raised from private wards, although these patients account for only 3.7 percent of patient days in the private ward. However, only 88 percent of the value billed for this type of surgery was actually received. This reduced the surplus raised per intervention to around R650 (which is only 2 percent of the cost). This percentage could be even lower, given that some costs are missing from the costing analysis. The potential to generate a surplus with hip replacements is much lower with the average invoice in 2003/04 only around R1,400 (or 3 percent) higher than the average cost of the intervention. As there were similar problems around ensuring that bills for this intervention were actually paid, it transpires that the hospital did not recover costs for this intervention: on average there was a deficit of around R4,200 (or 8 percent) per intervention. The data support the views of management officials that some surgical interventions have surplus-generating potential. This surplus is not necessarily large, however, and problems with collecting revenue can turn a potential surplus into an actual deficit, leading to the cross-subsidy of private wards by the public sector. A major limitation of the study was the inability to conduct a cost-recovery analysis for the entire D3/D4 set of private activities at TBH.