Vol. 8 • Special Issue • 2007
HealthcarePapers New Models for the New Healthcare
Strategic Levers for a High-Performing Health System
Commentary from Gwyn Bevan, Adalsteinn D. Brown, Reinhard Busse, Anthony J. Culyer, Raisa Deber, Josep Figueras, Richard H. Glazier, Ida Goodreau, Elke Jakubowski, Louise Lemieux-Charles, David Levine, Steven Lewis, Gerry McSorley, Joe Murphy, Richard Prial, Ray Robinson, Jeremy Veillard, A. Paul Williams
PM 40069375 www.healthcarepapers.com
HealthcarePapers New Models for the New Healthcare • Vol. 8 Special Issue • 2007
IN THIS ISSUE
INTRODUCTION 6 Strategic Levers for a High-Performing Health System Louise Lemieux-Charles
EQUITY 12 Equity of What in Healthcare? Why the Traditional Answers Don’t Help Policy – and What to Do in the Future Anthony J. Culyer 27 Cost Control, Equity and Efficiency: Can We Have It All? Gwyn Bevan 35 Balancing Equity Issues in Health Systems: Perspectives of Primary Healthcare Richard H. Glazier 46 The Reform of Health and Social Services in Quebec David Levine 55 Balancing Equity Issues in Health Systems: The Example of Vancouver Coastal Health Ida Goodreau
STRATEGIC PURCHASING 62 Strategic Purchasing to Improve Health System Performance: Key Issues and International Trends Reinhard Busse, Josep Figueras, Ray Robinson, Elke Jakubowski 77 Strategic Purchasing: The Experience in England Gerry McSorley 93 Strategic Purchasing in Home and Community Care across Canada: Coming to Grips with “What” to Purchase A. Paul Williams 104 Strategic Outsourcing by a Regional Health Authority: The Experience of the Vancouver Island Health Authority Joe Murphy
1 HealthcarePapers Vol. 8 Special Issue
ALL THINGS CONSIDERED 114 Thoughts on the Day: Strategic Purchasing and Equity Raisa Deber and Steven Lewis 124 The Next Step on the Road to High Efficiency: Finding Common Ground between Equity and Performance Adalsteinn D. Brown, Jeremy Veillard, Richard Prial
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Photo collage of DaVinci sketches. Illustration by Santiago Ku.
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HealthcarePapers Volume 8 • Special Issue
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4 INTRODUCTION HealthcarePapers
5 Strategic Levers for a High-Performing Health System
Louise Lemieux-Charles, PhD Chair and Professor, Department of Health Policy, Management and Evaluation, University of Toronto
Origin of this Collection • Provision or change of funding to health Over the past four years the Ontario Ministry service providers of Health and Long-Term Care (MOHLTC) • Facilitating and negotiating health serv- has been engaged in transforming the prov- ices integration ince’s health system, a process that includes • Issuing integration decisions decentralizing decisions pertaining to the delivery of services. This decentralization is Ontario’s LHINs have embarked on their occurring through the devolution of decision- strategic planning journeys; however, the making to the newly created Local Health extent to which decisions will be decentralized Integration Networks (LHINs). The LHINs’ is still under discussion. mandate is described in the Local Health Acknowledging the need to explore System Integration Act (Government of challenges arising from such a fundamental Ontario 2006) and includes the following key transformation, MOHLTC policy-makers, elements: members of the University of Toronto’s
6 Strategic Levers for a High-Performing Health System
Department of Health Policy, Management cal allocation of healthcare resources ought and Evaluation (HPME) and senior-level to be allocated in proportion to the popula- health system decision-makers developed tion’s need in each area; access/utilization of a conference program that would showcase healthcare ought to be equal for all members national and international experiences in of society; and equity and efficiency in health decentralizing decision-making as it pertains and healthcare usually conflict and, when they to equity and strategic purchasing, two areas do, equity trumps efficiency. Culyer argues that that are especially challenging from a policy perspective. The symposium that resulted – Strategic Levers for a High-Performing Health System – was held in Toronto on … showcase national and 1 November 20 and 21, 2006. It afforded a international experiences in wide-ranging opportunity for the airing of many perspectives on these topics, includ- decentralizing decision-making ing the views and experiences of practitioners as it pertains to equity and from various Canadian and international juris- strategic purchasing, two areas dictions who have encountered challenges in providing an equitable approach to healthcare that are especially challenging while seeking efficiencies in care delivery. from a policy perspective. This special issue of Healthcare Papers brings together most of the Strategic Levers symposium proceedings. We believe that the these propositions are impractical because it is concepts, approaches and solutions explored unclear what policy steps follow for those who and analyzed in this collection will serve as wish to embody them. He presents an alterna- valuable references and models for people tive set of principles for equity in health and engaged in policy-making and service delivery healthcare, together with some of the steps decision-making as they relate to equity and required to address them that are in tune with strategic purchasing. contemporary moves toward greater transpar- ency and participative policy decision-making. Collection Outline Moving from the theoretical to the prac- The papers in this collection are grouped tical, Gwyn Bevan describes the search for together in three sections: the first is dedicated equity of access and efficiency by England’s to a discussion of equity, the second addresses National Health Service (NHS). Although strategic purchasing and the third offers a the NHS has always achieved cost control by synthesis of the concepts and reflections on using a budgetary cap, there have been serious the challenges policy-makers and practition- difficulties in the design and implementation ers face and lessons that can be gleaned from of policy instruments intended to achieve a diverse jurisdictions. more equitable distribution of resources and improved hospital performance. Extending Equity his gaze beyond equity, Bevan raises probing Leading off the section on equity, Anthony questions about the current models of strategic Culyer challenges the following ubiquitous purchasing in England and Ontario, questions propositions: healthcare ought to be allocated that are intended to help policy-makers find in proportion to a person’s need; geographi- ways to achieve equitable resource distribution.
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The next three papers turn our atten- an important component in addressing the tion to equity as it is experienced in Canada. imbalance between demand and supply in Richard Glazier argues that even though healthcare delivery, it is not, in itself, the primary healthcare is associated with better solution. In Goodreau’s analysis, equitable population health at lower cost and should be healthcare delivery entails a quest to define considered the cornerstone of Canada’s health the need for healthcare services and a rigorous system, serious challenges remain. He is improvement of the efficiency of how those particularly concerned that there is no coor- services are delivered. dinated national plan for evaluating primary care reform and that most primary care efforts Strategic Purchasing do not address the needs of disadvantaged and Strategic purchasing goes beyond the mere vulnerable populations. contracting of providers by emphasizing the From a regional system perspective, active involvement of funders and consum- David Levine describes how Quebec’s ers in decision-making around healthcare recent healthcare reforms – which are aimed planning, funding and delivery. In their at improving the population’s health and paper, Reinhard Busse, Josep Figueras, Ray well-being, distributing services equitably, Robinson and Elke Jakubowski support this definition and note that the various approaches undertaken across Europe reveal that reform efforts must focus on strengthen- … seeking and attaining ing purchasers’ ability to respond to consumer needs and to establish more cost-effective system-wide improvement contracts with providers. Concurrently, they depends on the goals that are argue, strategic purchasing is destined to fail set and the methods employed in the absence of capable government stew- to achieve them given local ardship. Busse et al. also show that the high complexity of strategic purchasing requires conditions. putting in place a comprehensive regulatory framework that integrates and coordinates purchasing’s various components. This frame- facilitating the use of services and manag- work must achieve a fine balance between ing vulnerable patients’ care – are being regulations that favour and limit entrepre- implemented. Levine’s analysis focuses in neurial behaviour, so as to ensure the attain- particular on Montreal’s criteria for a high- ment of health system objectives. performing healthcare system. The strategic The next three papers shed valuable levers being used to accomplish these goals light on the application of strategic purchas- include managed care (with its constituent ing approaches in the healthcare sector. elements) and performance measurement. Ida Dovetailing with Bevan’s discussion, Gerry Goodreau next presents the challenges faced McSorley describes the new commission- by Vancouver Coastal Health, whose region ing approach implemented by England’s includes both Canada’s highest per-capita NHS. The Organising Framework for NHS income postal code and the country’s lowest Reforms is based on the devolution of political per-capita income postal code. Goodreau power and the introduction of market-style argues that while the regional structure is incentives. In order to provide a better balance
8 Strategic Levers for a High-Performing Health System of commissioning skills, the Department of tiate between the roles of the MOHLTC and Health committed itself to passing 75% of the LHINs and ponder whether the tension the NHS budget directly to primary care that exists between what might appear to trusts, with a further level of devolution to be competing policy goals can be resolved. individual practices in the form of practice- Brown et al. conclude that attaining equity based commissioning. As McSorley contends, and fulfilling strategic purchasing require the success of these innovations depends on conscious and regular rebalancing of central the full development of requisite leadership and local control as performance and equity skills and the integration of clinical and public issues change. This conclusion coincides with participation in decision-making. the observation made by Lewis and Deber Based on his review of practices in the that seeking and attaining system-wide home care and community care sector across improvement depends on the goals that are set Canada, A. Paul Williams argues that no and the methods employed to achieve them single approach to funding and purchasing given local conditions. fits all and that a mix of approaches is now Strategic Levers for a High-Performing being used at the regional level throughout Health System was designed as a unique the country to fund and purchase services. opportunity for “cross-learning” between Challenges arise in particular because services academic researchers and on-the-ground are located outside the medicare mainstream policy- and decision-makers. I believe that the of medically necessary hospital and physi- symposium achieved our goal of interdiscipli- cian care and encompass a wide range of nary knowledge exchange that was far richer professional and non-professional health and than it would have been had it been restricted social services. Joe Murphy next describes the simply to one of those two groups. I know experience and results of the Vancouver Island that my co-organizers share my hope that this Health Authority’s outsourcing initiatives for collection will be a valuable resource of ideas select support services as well as residential and examples during the momentous trans- care and assisted living. He has also provided formations now unfolding here in Ontario’s an addendum addressing the recent Supreme health system and many other locales around Court decision upholding the right to collec- the country and throughout the world. tive bargaining in the workplace. Endnote All Things Considered 1 Strategic Levers for a High-Performing Health System was funded by the MOHLTC and organ- In the collection’s final section, Raisa Deber ized by members of the University of Toronto's and Steven Lewis draw the connection Department of Health Policy, Management and between what, at the outset of the sympo- Evaluation in collaboration with senior health system managers. sium, some might have regarded as dispa- rate concepts. They synthesize the main ideas presented throughout the two days Reference Government of Ontario. 2006. Local Health System and discuss the many links between equity Integration Act, 2006. Toronto: The Queen’s Printer. and strategic purchasing. In the final paper, Retrieved June 25, 2007.
9
EQUITY HealthcarePapers
11 Equity of What in Healthcare? Why the Traditional Answers Don’t Help Policy – and What to Do in the Future
EQUITY
Anthony J. Culyer Visiting Professor, Department of Health Policy, Management and Evaluation, University of Toronto Professor Economics, University of York, UK
Introduction explicitly as a foundation of policies for equity There are many deep philosophical issues in health and healthcare policy, then I doubt regarding equity that I will slide over in order we can do it anywhere else. A second reason to address some practicalities of equity policy is that I think there is a chance, if we can be (see, for deeper material, Olsen 1997; Wikler more explicit about our ethics, that we might and Murray forthcoming). However, I do manage to translate them into policy action in want to try to link theory and policy rather reasonable and doable ways. Another reason than keep them in their usual silos. This is is that I am fairly confident that the reason- a dangerous plan. My amateur ethics will able and doable ways will be different from strike serious philosophers as gravely defi- the current ways. A fourth is that leaving the cient, while my amateur policy strategizing ethics largely implicit means that the huge will strike decision-makers as distantly up in differences between us that might otherwise the clouds. However, in the spirit of “nothing remain submerged could become underwater ventured …” I am going to try to link the two reefs with the potential to rip the bottoms out more directly than is usual. One reason for of well-meaning policies for equity in practice doing this is that, if we cannot discuss ethics – as soon as it becomes clear that one person’s
12 Equity of What in Healthcare? notion of equity is not also another’s. We need These slogans do not help policy for four to be clearer about what we mean and where main reasons: we might differ in what we mean. So I shall say what I mean and what I think we all ought • They are not good ethics. to agree to mean and then, from that, say what • Even if they were better ethics, they would follows for policy. still be confused and confusing. In this paper I assume that we are discuss- • Following these precepts can easily gener- ing equity at the highest level of policy ate situations that we would all agree are – distributive fairness in healthcare, its financ- more inequitable than what we have now. ing and the terms of access to it. I am also • The principles are not practical – it is assuming that we care about distributive unclear what policy steps follow for those fairness in terms both of the outcomes of our who wish to embody them in practical decision-making processes and of the proc- actions such as measuring the size of a esses themselves. problem, the outcomes of doing some- I chose my title in order to provoke thing about it or managing a process rethinking of some conventional ethical plati- intended to deliver a solution. tudes. I am not against platitudes in general – just these ones – and, indeed, I’ll be offer- I have already argued against the bogus ing some of my own shortly. The “answers” I claim that there is conflict between equity and am describing as “traditional,” at least among efficiency (Culyer 2006) and therefore I do not health service researchers, are these: propose to discuss that topic here. However, there does exist a big conflict – or rather a whole Healthcare ought to be allocated in proportion to a suite of conflicts – between rival notions of person’s need equity. These rival notions hardly ever receive explicit discussion in policy frameworks. The together with its group or regional geographic common presupposition that equity in general companion: trumps efficiency is a considerable irritant and dealing with it distracts attention from the Geographical allocation of healthcare resources more important trade-offs. Of course, outra- (generally, purchasing budgets) ought to be allo- geous inequity might rightly dominate any cated in proportion to the population’s need in each concern we may have about mild inefficiency; area however, I do not think that concern about mild inequity ought to dominate over outra- and this: geous inefficiency. To try to convince you that I am right about the status of the other slogans, Access/utilization of healthcare ought to be equal let us go back to first principles. for all members of society Equity as Fairness and this: It seems attractive to treat equity as a matter of fairness.1 It pervades all aspects of health Equity and efficiency in health and healthcare and healthcare. It is significant at a high level usually conflict and, when they do, equity trumps of resource allocation (what is a fair distribu- efficiency. tion of money to Local Health Integration Networks [LHINs]?) and at the individual
13 HealthcarePapers Vol. 8 Special Issue level (is it fair that Canadians Phyllis Thomas accruing to people with chronic, disabling and Gladys Lawless have each lived with and painful conditions be valued the same as rheumatoid arthritis for more than 20 years a similar benefit accruing to someone without and reside only two kilometres apart, divided those disadvantages when making formulary by a provincial border, yet Gladys receives decisions or, more generally, deciding what etanercept [Enbrel] via medicare virtually services shall be available?). It applies at the free while Phyllis would have had to find margin of what is available as well as at the around $20,000 a year from her own pocket totality (should people who are willing to pay and so has gone without? [Abraham 2004]). be able to purchase drugs that are judged to Is it fair that Dr. Putter has closed his office be insufficiently effective to be made avail- this afternoon to play golf (it was all right able in public programs?). It raises questions for those who could easily get there in morn- about the similarities and differences between ings but no good for me who could get there people having different ethnic, religious and linguistic characteristics or living at different levels of prosperity and in different locations (which similarities and differences matter and The common presupposition which do not?). Health equity is also every- one’s business, not just that of the Ministry of that equity in general trumps Health and Long-Term Care (MOHLTC). efficiency is a considerable After all, many of the key determinants of irritant and dealing with it health lie well outside the MOHLTC’s remit.
distracts attention from the Health or Healthcare? more important trade-offs. Underlying all issues regarding equity in health are a distinction and a concern. The distinction is between health and healthcare: only in the afternoon)? It applies not only to they are not the same and, in general, individuals like Phyllis and Gladys but also to the latter is there to improve the former. groups of individuals (is it fair that the infant Healthcare is not an end in itself; health is. mortality rate in Nunavut in 2004 was 16.1 In particular, there is no reason to expect that per 1,000 live births compared with 4.3 in the equality in healthcare will generate equality two best Canadian provinces: New Brunswick in health. The concern arises from the fact and Prince Edward Island? [Statistics Canada that wealth and health are inversely related. 2007]). It applies to the outcomes of processes As we all know, there is a social-class gradi- and also to the processes themselves (is it fair ent: in the case of almost every disease, the that the well-to-do on average have longer higher the socio-economic group to which general practitioner [GP] interviews under you belong, the longer your life expectancy medicare than poorer, less-well-educated and the better your health state at each stage people?). It applies to healthcare financing as of life.2 This generally means that those well as healthcare delivery (is it fair that many who are most in need of healthcare are also employed Canadians get subsidized insurance those who are worst placed to buy it in the for drug bills but other citizens, similar in all marketplace either directly or through insur- other respects, do not?). It applies in not-so- ance. To all the other concerns about equity, obvious policy choices (should the benefit therefore, we need to add a concern that the
14 Equity of What in Healthcare?
financing of healthcare is fair; unfair financing trumps the issue of fairness so that the street both enhances any existing unfairness in the people still ought to get the resource even if distribution of health and compounds it by it would generate more health gain for the making the poor multiply deprived. However, suburbanites. I suggest that this is, as a general it is not just a question of rich vs poor. The presumption, wrong. gradient implies that at every socio-economic My argument is necessarily abstract. level those further down the ladder die sooner Consider the proposition that “more health is and suffer more ill health than those imme- a good thing, ethically speaking.” The primi- diately above them. Although this argument tive ethical proposition is the Aristotelian one suggests strongly that the distribution of the that the ultimate human goal for which our costs of healthcare financing interacts with the society might aim is to be a society of flour- distribution of health, I shall set aside issues ishing individuals.3 I will not define “flourish- of financial equity here (a good empirical ing”; however, I mean it to imply something discussion of the subject can be found in van more than the enjoyment of mere goods Doorslaer et al. 1999). and services or the economic-cum-utilitar- ian satisfaction of “preferences” often termed Efficiency and Equity “welfarism” (e.g., Sen 1977; Boadway and Why don’t we come clean about the reasons Bruce 1984). I also do not wish flourishing why equity in health – and healthcare – is of to be restricted to the Aristotelian notion of deep ethical concern? At root, I suggest that an active life ruled by reason. This flourishing there are two principal aspects that demand postulate is plainly a social value judgement, our attention. They are sometimes incorrectly and if you and I differ fundamentally on it we seen as being in conflict and they both have are unlikely to agree on what is to follow. The a common grounding in ethical importance. next proposition is not a value judgement; One is the principle that says, “more health is it is factual. There is a range of concepts of a good thing, ethically speaking.” The other “flourishing,” all of which have in common is the principle that says, “fairly distributed that (a) they are ethically compelling and (b) health is a good thing.” Ethically speaking, they require – or usually require – good health the first underlies the rationale for evidence- for their full realization. Note the two factual informed practice. It is an efficiency argu- and empirically rebuttable statements here: an ment: we should get the most we can out of assertion about there being a range of persua- our limited healthcare resources. The second sive meanings for flourishing and an assertion underlies, ethically speaking, most issues in that good health is a necessary condition for decisions about the allocation of resources to having a flourishing life. Now add a third defined groups: classically regions, although factual assertion: healthcare is one of the territorial distributive fairness is far from means through which health is promoted. being the only dimension that challenges So the extended syllogism goes like us here. Suppose that a given expenditure this: Flourishing lives are the ultimate good could generate a gain in health for downtown (a social value judgement). Good health is dropouts equal to that generated for prosper- necessary for one to have a flourishing life ous dwellers in leafy suburbs. Who ought to (an empirically rebuttable statement, given an get it? Many (though not all) would say the acceptable concept of flourishing). This factual downtown street people. And many would proposition is true for a range of concepts of go further and say that the issue of justice flourishing (another empirically rebuttable
15 HealthcarePapers Vol. 8 Special Issue statement, because we can ask people what flourishing, the burden of proof lies with those they have in mind by flourishing). Healthcare who wish to depart from a presumption that is often a necessary condition for health (yet so necessary a human characteristic ought to another empirically rebuttable statement). be equally distributed. From this combination of ethical and factual A powerful implication of this line of thought on the efficiency side is that healthcare that does not contribute to health has no place in the system. It also implies that Resources devoted to morally cost-ineffective healthcare has no place in compelling causes ought to be such a system – even if it is effective – because providing cost-ineffective care would imply used so as to have maximum that resources that could be put to achiev- impact on the cause served – ing better health for at least one person were in this case, health. in fact being put to no apparent use at all. In short, the ethical reasons for caring about the distribution of health are also reasons for caring about the efficient production of health. propositions comes the deep ethical signifi- It is insufficiently recognized that the case for cance of arrangements for the finance and cost-effectiveness is, at root, an ethical case. delivery of healthcare (see, e.g., Culyer 1997, Another implication, this time on the 2001). In general, if it is ethically good to distributional side, is that inequalities in flourish, it becomes good to have the things, health ought not to be manufactured with- such as health, that contribute to flourishing. out compelling reasons and ought not to be And if it is ethically good to have health, it is allowed to continue if they can be removed good to have healthcare. And if, moreover, so using reasonable means. By “compelling fundamental a characteristic as health ought reasons” I mean countervailing ethical argu- in principle to be equally experienced, then ments that carry moral weight. By “reason- ought not healthcare to be distributed so as to able means” I mean actions and policies that bring this about? Enter the “fairly distributed do not have costs or undesirable downstream health is a good thing” proposition. consequences that might outweigh their equi- From here it takes but two further steps table gain. Pursuing greater equality of health to get closer to the policy issues that motivate does not always imply, however, that we must this discussion. First, if it is good to encour- pursue greater equality of healthcare or access age flourishing it is also good to be efficient to it, or that we should match it to need. at it. For example, if we were using more Let me give an illustration. Figure 1 shows healthcare resources than were necessary to the quality-adjusted life years (QALYs) to be achieve a given health gain, that would be had from spending a given sum on healthcare inefficient. Resources devoted to morally for the poor and the rich in a given commu- compelling causes ought to be used so as to nity. The light-shaded bars indicate the have maximum impact on the cause served existing expectation of QALYs for an average – in this case, health (Culyer 1992). Second, person, aged 50, in each of these equal-sized the burden of proof lies with those who would groups. For the rich, QALYs are twice that of depart from equality regarding opportunities the poor. The best estimates indicate that, if to flourish. Because health is necessary for the given sum were spent entirely on the poor,
16 Equity of What in Healthcare?
their expected health gain (in QALYs) would received by people who have low expecta- be 3 while the gain to the rich, if the sum were tions of future QALYs (for whatever reason, spent on them, would be 2. Supposing one including that they are poor) are to be more were forced to choose which is the better way highly valued than those going to others. In of spending the sum? You might say funds that case, the argument for spending the sum would be better spent on the poor because on the poor is even stronger. Third, one could the gain would be 3 compared to 2, and this say that the fair distribution is a more equal approach is therefore more efficient. However, one. In that case, spending the money on the that conclusion would be wrong because it poor generates a 13:20 distribution, which entails an assumption that a QALY gain for is plainly more equal than 10:20 (let alone the poor counts the same as a QALY gain 10:22). In this example, all three distributional for the rich. In fact, both dark bars indicate arguments go in favour of the poor. But both efficiency because we assume that maximum of the possible new distributions (13:20 or health gain is to be had for each group from 10:22) are efficient and the test of fairness is spending the sum on them. Both are efficient. not the relative sizes of potential health gain To answer the fair distribution ques- or the initial distribution of health, but the tion one needs to make explicit interpersonal final (expected) distribution of health.
Equity vs Equality Figure 1. Quality-adjusted life years in relation to Equity is not the same as equality, healthcare expenditures for poor and rich people although they are often carelessly taken to be the same. However, �� they are connected. Equity often �� involves the equality of something. ������ The critical question is “equality of ����� �� what?” But sometimes equity also deals with just inequalities, and the �� question then is “what is the crite- � rion for deciding which inequalities are fair or unfair?” Equity means � ���� ���� treating likes alike and unalikes appropriately differently. Equity requires not only that relevantly similar cases be treated in similar comparisons. There are three obvious ways of ways but also that relevantly different cases be doing this in the above example. One could treated in different ways. These two concepts say that a health gain is of equal value to are as old as Aristotle and are known as hori- whomever gets it (in effect, we do not care if zontal and vertical equity: the recipient is either poor or rich). In that case, 3 outweighs 2 and the resource goes to • Horizontal equity: The equal treatment of the poor. This is straightforward QALY maxi- people who are equal in a relevant respect mization coupled with the distributional value • Vertical equity: The unequal treatment judgement that all QALYs are equal. Another of people who are unequal in a relevant possibility would be to say that QALYs respect
17 HealthcarePapers Vol. 8 Special Issue
By “treatment” I shall follow the conven- one will need healthcare and, moreover, tion of talking about healthcare resources that might reduce the chances that the care generally denominated in terms of dollars. But will be effective. These are mutually rein- what might be the “relevant” respects? There forcing grounds for giving such individuals are seven commonly adopted ones. I shall and groups a low priority. This view suffers state each respect and the principle to which from the problem that it is virtually impos- it seems to be connected, and then make some sible empirically to distinguish lifestyle comments on it. effects from other effects, that it assumes that lifestyle differences are avoidable, not Rival Relevant Respects socially conditioned and, if deleterious to • Need: Populations with equal needs should health, that the patients in question are receive equal treatment and populations with culpable. Another, more positive, argument greater needs should receive more favourable holds that groups with higher productivity treatment. (e.g., people with higher earnings or more A disadvantage of this principle is that dependent children or who do more public it is far from clear what “need” means. It service work) deserve a higher priority. might mean one or more of the “respects” This argument suffers from the problem that follow. that the claim of desert rests heavily on • Ill health: Populations that are equally ill ought a claimed contribution to the welfare of to be treated the same; those that are sickest other people, which is hard to measure ought to get more. without arbitrariness and is, at best, a A disadvantage of this principle is that partial measure of deservingness. it seems to assume what might not be • Resources themselves: This is usually presented the case – that the conditions in ques- as a purely horizontal equity argument – since tion are effectively treatable by healthcare all people are fundamentally to be regarded and that all conditions are equally costly as equal, each ought to have equally available to treat. Unfortunately, the effectiveness resources; the per capita distribution ought to be of healthcare can vary widely (in cases of everywhere the same in a jurisdiction. iatrogenesis, for example, it is negative4). It A disadvantage of this principle is that, surely cannot make much sense to require like the previous one, it ignores the a population to have the same amount productivity of resources. It is difficult to regardless of their morbidity characteris- see why, for example, there should be any tics, the effectiveness of relevant preven- concern for the equitable distribution of tive and restorative medical care and the ineffective care or why people whose needs cost, whether high or low, of delivering are different ought to have the same care. that care. • Capacity to benefit5: People with equal ability • Desert: Populations of equal desert ought to to benefit from healthcare ought to be treated be treated the same and those of greater desert the same and those with high capacities to ought to receive more. benefit ought to receive more. Common elements that advocates of this This principle addresses the productivity view have in mind are lifestyle choices issue. However, if it turns out that popula- (e.g., smoking, drug abuse, poor diet, tions with the greatest ability to benefit dangerous sports, careless and promiscuous are normally also initially relatively healthy sex) that increase the chances that some- then the application of the principle will
18 Equity of What in Healthcare?
lead to greater health inequalities and, mortality are two of the most frequently met because such people are also likely to be arguments of resource allocation formulae in relatively wealthy, they will be made still all jurisdictions. For much the same reason, healthier as well. the so-called “burden of disease” is a poor • Health: This principle aims at greater equality indicator of the likely productivity of research of health not, usually, through reducing anyone’s (Mooney and Wiseman 2000). health but by giving priority to those with It is health inequality that is inequitable, relatively low health or who are furthest from not inequality of healthcare. We therefore the average. need quantitative and qualitative measures of A disadvantage of this principle is that health outcomes to determine the fair distri- it might imply the use of enormous bution of purchasing budgets and the extent amounts of resources for the very sick to which the current distribution falls short (but for whom medical care is not at all of the ideal, just as we need them to make effective), resources that would generate comparisons among interventions in health much greater health gains if others were to technology assessment (HTA). In HTA, a receive them. generic outcome measure is needed so that • Equality of access: This principle is perhaps the most frequently encountered type of equity in healthcare. A disadvantage of this principle is that it It is health inequality that is can be satisfied at very high levels of cost inequitable, not inequality of of accessing – just so long as they are equal (e.g., an equal $1,000 co-payment each healthcare. per GP visit).
Things a priori and Algorithmic one can make comparisons across technolo- I prefer “health” as the distribuendum gies of different types (e.g., drugs, imaging compared to any of the other candidates for and other diagnostic aids, devices, surgical being a relevant respect. One – and only one procedures). In equity policy, one likewise – of seven candidates really addresses the needs to make systematic comparisons – in heart of the ethical problem. None of the this case, not between technologies but across others is even a reliable tracker of health and population groups. it is easy to conceive of occasions when there It must be recognized that the selection might be a considerable divergence between of the dimensions of any generic measure them. For example, to use current ill health entails social value judgements, as do their as a driver (inverse, of course) for healthcare scaling and combining. It is natural to reach resource allocation will, in situations where for a formula, and there are lots of candidates. healthcare is of no avail, cause an unambigu- Formulaic or algorithmic approaches to health ous waste of resources – resources that could outcome measurement have many advantages, have been used to improve the health of those provided the variables embodied in them have with poorest health whose condition can be sufficient construct validity and provided they are improved through healthcare. The princi- applied in an appropriate context. These advan- ple leads to both inefficiency and increased tages include their transparency, the fact that inequity. Despite this, current morbidity and once their construction has been completed
19 HealthcarePapers Vol. 8 Special Issue the business of using them is relatively The thoughtful integration of this knowledge straightforward and low cost and the fact that, also requires social value judgements to be used in appropriate contexts, they usually made and, to give the process credibility in the deliver precise solutions (e.g., a specific incre- public imagination, probably some lay partici- mental [or average] cost-effectiveness ratio or pation too. a given budget allocation to a given LHIN). The decision-making process will almost Until one of these constructs, or a satisfactory certainly also involve what Lomas et al. (2005) have called “colloquial” evidence: evidence that is not scientific at all, but professional recol- lections, experience, case studies and other Judging the impact that a knowledge that, although scientifically weak, changing resource pattern has might be all there is on a particular aspect of a problem. Sifting this evidence cannot be done on health requires multiple skills using only an algorithmic approach. Here the and the exercise of judgement. essence of the problem is that the knowledge needed to determine equitable distribution is incomplete and fragmented across disciplines, substitute, is chosen, “health” ought always medical specialties and professions. It is also to be surrounded by scare quotes.6 However, (probably) controversial and it cannot escape once selected and despite their virtues, these being intimately interwoven with values algorithmic approaches are not enough. and the making of interpersonal compari- sons of benefit and cost. It therefore requires Things Deliberative synthesis, quality assessment, discussion of its Judging the impact that a changing resource relevance and applicability in the context of pattern has on health requires multiple skills proposed application, the calling and inter- and the exercise of judgement. A scientific rogation of experts, the explicit confronting clinical epidemiological knowledge base will of possible trade-offs, the possibility of deci- sometimes be available. If it is, this is what sion-makers changing their minds during the Lomas et al. (2005) have called “context- course of the deliberations as new knowledge free scientific evidence.” But its use requires is acquired and the making of an overall interpretation and judgement – practical clini- judgement informed, but not determined cal voices capable of expressing professional solely, by the evidence. opinions about the applicability of the scien- This is what I call a deliberative process. It tific knowledge in the social and professional is founded on the propositions that the facts contexts to hand – together with any available do not speak for themselves, that decisions context-sensitive scientific research. One also can never be solely evidence-based and the needs economic estimates of what health (un-evidenced) belief that evidence-informed outcomes might be achievable from different decisions – using whatever is available – are levels of resourcing, as well as the evidence better decisions.7 and experience of social scientists that relate to the possibly distinctive cultural and ethnic Health circumstances that might affect the produc- It is not possible to have a practical policy tivity of various ways of deploying resources. about equity in health without a measure of
20 Equity of What in Healthcare? it. It is ludicrous that we are celebrating 50+ populations whose health is being measured. years of equitable medicare in Canada and So that is an algorithm we need – or at least most of the developed world and we still have something like it. no proper measure. Mortality data will not do: they tell us about the numbers of dead Combining an Algorithm and Other people but nothing of the quality of life of Elements in Deliberative Processes the living. In the United Kingdom, National The act of using an algorithm requires two Health Service (NHS) hospital data used to important further steps that are not them- include a throughput measure called “deaths selves well suited to algorithmic solution. and discharges” – as though the difference did The first addresses the way in which algo- not matter. Choosing an appropriate measure rithmic measures are to be combined, not of health is not, however, a matter requiring across attributes of health as discussed before us to strain at gnats while swallowing camels. but across groups of people: young or old, male The literature on health measurement has or female, different ethnicities, different attention-riveting properties for health serv- geographical locations, different histories of ice researchers delving into the minutiae of chronic or congenital disease and disability measurement methodology. These experts and so on. How health is combined across have developed a welter of candidates for the people amounts to determining the weights role of health-as-an-outcomes measure (e.g., attaching to those with disadvantages or Assessment Quality of Life; DALYs; DASH; other vertical equity claims for favourable EuroQol [EQ-5D], Health Utilities Index; treatment compared with others. Only if Healthy Year Equivalents; QALYs; short- there are no ethically relevant differences form health surveys such as SF-6D, SF-8, between people can we assume that the SF-12, SF-36). issue is one of horizontal equity and that a The need in empirical equity policy is QALY=QALY=QALY, whoever gets it. for a practical, low-cost instrument that has Making interpersonal comparisons also reasonable construct validity – i.e., one that crops up in less conspicuous ways. For exam- takes account of the most important dimen- ple, the seemingly technical field of HTA is sions of population-level health – and is as loaded with interpersonal value judgements, sensitive as it needs to be (and no more). My as are all decision processes that involve the own inclination is to select the EQ-5D, using measurement of individuals’ health and their Canadian weights, on grounds of simplic- adding up across individuals. So is the priori- ity, ease of use and its having well-under- tization of people’s claims (e.g., on waiting stood virtues and vices – so that, should the lists, for treatment in a treatment room, for latter prove to be important in any particular research into new treatments). Typical equity- context, the need for a considered judgement related questions raised by outcome measures that goes beyond the QALY becomes clear. in HTA include the following: The EQ-5D essentially interprets health in terms of five dimensions: mobility, ability to • Ought the fact that older people have self-care, ability to perform usual activities shorter life expectancies than the young, of daily living, level of pain/discomfort and and hence on average a shorter period level of anxiety/depression. These are scored of time in which to enjoy any benefits of and combined using weights derived from the healthcare, be reflected in benefit calcula-
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tions? If so, how? might be scientifically controversial. These • Ought the fact that some people have elements are likely to be even more prominent lived extremely painful and restricted in public health research and research on the lives for many years or have had multiple impact of healthcare on the distribution of handicaps than others affect the social health. If similar resource allocations seem to valuation of their respective future health produce different outcomes in different loca- benefits? If so, how? tions and between different cultural groups, • Should the fact that some people might then we had better understand the reasons stand to make major gains in health bene- why – and even involve those who understand fits while others might gain only some the local or ethnic cultures in the decision- reduction in the speed of their health making process – at least as commentators deterioration affect the relative valuation or consultees8 and, possibly, as participants in of any additional future health benefit? If the decisions themselves. Both of these issues so, how? (making appropriate interpersonal compari- sons and judging the cost-effectiveness of The same issues crop up in making judge- interventions) involve the use of both algo- ments about distributions of healthcare rithmic and deliberative methods. Decisions resources across social groups and between about equitable resource allocation seem to Ontario regions. In England and Wales, meet most of the conditions conjectured to questions such as these have been put to a characterize the appropriate use of deliberative Citizens’ Council (University of Toronto methods and decisions that are “accountable Priority Setting in Health Care Research for reasonableness” (Daniels 2000a, 2000b). Group 2006). As reported in Culyer and Lomas (2006), The second step is even less well suited a deliberative process is more likely to an algorithmic approach. This is the deter- mination of the kinds of health-affecting • to generate guidance that is consistent interventions that would promote greater with the context-free scientific evidence equality in the distribution of health. It would set in a relevant context; be highly desirable for the set of interven- • to identify relevant clinical, social and tions to be taken as broader than those under political contexts for interpreting context- the control of the MOHLTC and, in any free scientific evidence; event, to include public health interven- • to command wide credibility in profes- tions. Experience with attempts to develop sional circles and beyond; evidence-informed formulary decisions • to generate recommendations whose teaches that the formal scientific knowledge implementation will be speedy; and base is commonly fairly unsatisfactory – the • to identify impediments to the implemen- research might simply not have been done, tation of guidance and to propose solu- the technologies investigated might have had tions. policy-irrelevant comparators, the published work might be of poor general quality, it One might also expect that the reasonableness might be of high quality but unknown of a process will depend upon the following: generalizability, it might be incomplete (e.g., with respect to long-term consequences or • The quality of chairperson economic consequences of any kind) and it • The clarity and openness of process
22 Equity of What in Healthcare?
• The reasonableness of timelines for • Taking a policy decision regarding the evidence submission and consideration entity whose equitable distribution is the • The use of colloquial evidence to chal- focus of concern (this distribuendum is lenge context-free evidence, set contexts conjectured here to be health) and plug gaps in science (but not to • Setting up a mechanism to select a prag- supplant scientific evidence of either kind) matic empirical measure (the algorithm) • The possibility of interaction between of health (suggested here to be EQ-5D decision-makers and non-participant with Canadian weights) stakeholders through consultation and • Setting up a province-wide deliberative commentary process (e.g., a healthcare distribution • The availability of time for study, discus- commission) whose tasks would be as sion and reflection before, during and after follows: meetings • Annually to determine the allocation • The scope for decision-makers to request of non-tertiary and non-experimen- further information and take face-to-face tal personal healthcare and public oral evidence healthcare resources (and, preferably, • The opportunity to appeal a decision not other resources affecting health) to because an appellant disagrees with the the regional commissioners (LHINs) decision but on the following grounds: with as wide a range of commissioning • Decision-makers failed to act fairly power as possible and in accordance with their published • To give advice to LHINs on the intra- procedures. LHIN distribution of resources for • Their decision was perverse in the equity between social groups light of the evidence submitted. • Setting quantitative and qualitative • They exceeded their powers. annual targets for the commission and the LHINs for greater equality in the distri- In essence, I am recommending the bution of health (not healthcare) creation of a new institution tasked with the blending of an algorithmic approach (the Slogans for Health Equity in Ontario health measure) with a deliberative approach Having frowned on some common slogans (determining the patterns of resource distribu- purporting to be guides for policy, it is incum- tion to deliver changes in the outcome health bent on me to suggest replacements: indicator of choice and thereby to move the overall allocation of health in a more equal All needed healthcare ought to be direction). The contribution of non-healthcare provided free. Healthcare that is not determinants of population health is also needed must be paid for privately. best considered in a deliberative process, one Equity is a factor in determining resource that requires the consent and collaboration of allocation decisions only in respect of ministries other than the MOHLTC. healthcare that is needed; i.e., of the healthcare that it would be technically possi- Need for New Mechanisms ble to provide, only that which is (a) necessary The implementation of the policy for equity for a person’s timely health improvement and implied by the foregoing entails the following (b) cost effective may be said to be needed. necessary key steps for the MOHLTC:
23 HealthcarePapers Vol. 8 Special Issue
Access should be as cheap as is necessary Let the largest differentials between to enable utilization of needed healthcare. persons and groups command the highest Equality of access is not specifically equitable priority. but policies should seek to ensure that access In seeking to promote the health of all is cheap by lowering barriers – whether finan- Ontarians through cost-effective healthcare, cial, geographic, ethnic, cultural, linguistic or policy should address the biggest disparities in social – to service use. This is because diag- people’s lifetime experiences of health through nosis is a necessary condition for establishing selective resource allocation and specific poli- whether there is a need for healthcare. The cies aimed at having maximum impact on the greater the barriers to the receipt of care, the health of the least healthy. more likely it is that genuine healthcare needs will go undetected and untreated, to the detri- Unavoidable gross inequalities ought to be ment of both efficiency and equity. Without accompanied by generous palliative provi- cheap access, the community’s need for sions and other compensating variations. healthcare goes unassessed. How cheap access Avoidable gross inequities ought to be ought to be will depend on the elasticity of avoided. Although unavoidable inequali- demand for care and the impact of healthcare ties may not be fully compensable through co-payments and other costs of access and use other policies, other policy opportunities for on a person’s overall purchasing power (this is promoting more equal flourishing ought to required if other forms of inequity are not to be considered. This is but one policy element be generated by healthcare policy). requiring inter-ministry collaboration.
The main inequity is inequality of health. Achieving equity in health requires a policy Addressing other inequalities (e.g., of implementation process that is deliberative. resources per head) is a distraction and can Achieving the equitable allocation of resources lead to greater health inequality. requires a combination of judgements about social values and judgements about the contri- Equity in health is impossible without an bution that various interventions and types of empirical measure of health. care are likely to have on population health. The measure required does not have to be Interventions ought ideally to include public perfect nor suited for all decision contexts. It health interventions and other non-healthcare must, however, have construct validity and determinants of population health. A delib- enable the making of politically acceptable erative process is more likely to deliver well- comparisons between differing population informed and politically acceptable decisions groups. than other methods.
Avoidable gross inequalities in health are Equity in health is impossible without an intolerable moral outrages. information database. Good health is normally necessary for people A policy for the thoughtful distribution of to flourish as human beings. Gross inequalities health-affecting resources routinely requires in health imply gross inequalities in people’s the following: flourishing. Policy targets for reducing health • Information about the current distribution inequalities should be set by the MOHLTC. of resources • Information about the current distribution of health across relevant social groups
24 Equity of What in Healthcare?
of mothers thus: “There are two disadvantages to a • Information about the technical potential baby’s sleeping on his back. If he vomits, he’s more of health and other services to improve likely to choke on the vomitus. Also he tends to keep health – incremental impact ratios of his head turned towards the same side, this may resources on health flatten the side of his head … I think it is preferable to accustom a baby to sleeping on his stomach from the start” (cited in Chalmers 2003: 23). Millions of From Talk to Action Spock’s readers followed this apparently rational, For the past 75 years healthcare policy has theory-based and authoritative advice. “We now know from the dramatic effects of the ‘Back to Sleep’ rarely been discussed without reference to campaigns in several countries that the practice prom- equity and it is undoubtedly equity that drives ulgated by well-intentioned experts like Spock led to four of the principles of the Canada Health tens of thousands of avoidable sudden infant deaths” Act (comprehensiveness, universality, port- (Chalmers 2005: 229). ability and accessibility). Despite this long- 5 Capacity to benefit is similar to Sen’s (1980) idea of standing concern, Canada, both federally and capabilities. provincially, along with most other jurisdic- 6 For the sake of readability, however, I have resisted the temptation to pepper my article with such devices. tions, has failed to develop 7 An example of the sort of process I have in mind is Program Budgeting and Marginal Analysis (PBMA); • clear definitions of terms such as equity see Ruta et al. (2007). and inequity; 8 The difference in the practice of the National • routine databases for measuring inequity Institute for Health and Clinical Excellence (NICE) or inequality; in England and Wales is that commentators are not • policy targets for achieving equity; and those invited to make explicit submissions in connec- tion with a technology appraisal: manufacturers of • mechanisms, beyond the health system’s comparator technologies, specific agencies such as the broad structural characteristics, for NHS Quality Improvement Scotland, the relevant promoting greater equity. NICE National Collaborating Centre, other related research groups and “other groups where appropriate.” Consultees, by contrast, can participate in the consul- In my contribution to this collection I tation on the draft scope and the other documents have tried to present a coherent set of prin- used in the appraisals process. Consultee organizations ciples for equity in health and healthcare, representing patient/carers and healthcare profes- sionals may nominate clinical specialists and patient together with some of the steps required to experts to present their personal views to the appraisal address what has hitherto been lacking. I committee. All consultees are given the opportunity to believe these actions are in broad sympathy appeal against the NICE conclusions before they are published. with the historic roots of Ontario’s healthcare policy and are in tune with contemporary moves toward greater transparency and more References Abraham, C. 2004, September 18. “Health Talks participative policy decision-making. Offer No Remedy for Disparities in Drug Policies.” Globe and Mail A4. Endnotes 1 An idea most recently introduced and developed in Boadway, R. and N. Bruce. 1984. Welfare Economics. Rawls (1971). Oxford: Basil Blackwell. 2 For a modern review of the evidence, see Ross et al. Chalmers, I. 2003. “Trying to Do More Good in Policy (2006). and Practice: The Role of Rigorous, Transparent, Up- to-Date Evaluations.” Annals of the American Academy 3 The Greek concept of eudaimonia is often translated of Political and Social Science 589: 22–40. as “happiness,” which seems to me somewhat to trivi- alize it. I prefer “flourishing.” Chalmers, I. 2005. “If Evidence-Informed Policy Works in Practice, Does it Matter if it Doesn’t Work 4 The famous Dr. Spock advised countless thousands in Theory?” Evidence & Policy 1: 227–42.
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Culyer, A.J. 1992. “The Morality of Efficiency in Sen, A.K. 1977. “Social Choice Theory: A Re-exami- Health Care – Some Uncomfortable Implications.” nation.” Econometrica 45: 53–89. Health Economics 1: 7–18. Rpt. in A. King, T. Hyclak, Sen, A.K. 1980. “Equality of What?” In S. McMurrin, S. McMahon and R. Thornton, eds., North American ed., The Tanner Lectures on Human Values. Cambridge: Health Care Policy in the 1990s. Chichester: Wiley, Cambridge University Press. 197–220. 1993. 1–24. Statistics Canada. 2007. “Infant Mortality Rates by Culyer, A.J. 1997. “The Principal Objective of the Province and Territory (Both Sexes).” Ottawa: Author. NHS Ought to Be to Maximise the Aggregate Retrieved April 3, 2007.
26 Cost Control, Equity and Efficiency: Can We Have It All?1
EQUITY
Gwyn Bevan Professor of Management Science, Department of Management and LSE Health and Social Care, London School of Economics and Political Science
Introduction province-wide priorities (Ministry of Health On March 1, 2006, the Government of and Long-Term Care 2006b). Ontario’s Ontario enacted the Local Health System Ministry of Health and Long-Term Care Integration Act, which created 14 Local (MOHLTC) (2006c) emphasized that Health Integration Networks (LHINs) (2005, the goal of LHINs is to “restore equity to 2006). These organizations are charged with Ontario’s health care system, ensuring qual- strategic purchasing; they will not directly ity care for every patient, in every commu- provide services. Each LHIN is respon- nity, in the province.” The Ontario Hospital sible for planning, integrating and fund- Association (2005), meanwhile, identified ing healthcare services in its region. About achieving efficiency and equity in hospital two thirds of Ontario’s healthcare budget funding to be the crucial issue. is allocated to LHINs (Ministry of Health The health systems of Ontario and and Long-Term Care 2006a), which are England are becoming increasingly similar required to achieve cost control and promote in seeking cost control, equity and efficiency. equity and efficiency (Canadian Health Care The acts that created the National Health Manager 2005). LHINs must also respond Service (NHS) in the United Kingdom (UK) to local needs and priorities and implement in 1948 and medicare in Canada in 1966
27 HealthcarePapers Vol. 8 Special Issue aimed to provide equity of access to healthcare instruments intended to achieve two other according to need through universal cover- desiderata: a more equitable distribution of age that is financed by taxation and free at the resources and improved hospital perform- point of delivery (Klein 2006; Tuohy 1999a; ance. I conclude by raising questions about Marchildon 2005). There were, however, the current models of strategic purchasing two key structural differences between the in England and Ontario, questions that are creation of the NHS in the UK and medi- intended to help policy-makers find ways to care in Canada. In the UK the government achieve these objectives. nationalized independent hospitals, brought local authority hospitals within a national The Search for Equity of Access system and revolutionized arrangements for Although there is consensus that the underly- paying hospital specialists by making them ing purpose of publicly financed healthcare salaried employees of the NHS (but not is to improve equity, there is a lack of clarity direct employees of hospitals) (Klein 2006; over what kinds of equity ought to be sought Webster 1988; Forsyth 1975). In Canada the (Mooney 1994). In practice, policies seek to federal government limited its role to being correct identified inequities, beginning with an insurer. It also did not change hospitals’ the removal of the ability to pay as a barrier independent status nor did it alter arrange- to access. In 1946, Aneurin Bevan (1991) ments governing the paying of hospital identified two other inequities that character- specialists on a fee-for-service basis (Tuohy ized healthcare in the UK at the time: the 1999a). From 1991, however, the Thatcher inequitable distributions of general practi- government in the UK (Department of tioners (GPs) and hospital services. The first Health 1989) and – following devolution, was tackled from the start of the NHS by which created a different NHS in each of creating medical practice committees, which the countries of the UK (Greer 2004) – the were given limited powers of “negative direc- Blair government in England (Department tion” – for example, the right to refuse to of Health 2002a) have sought to move the allow GPs to work in “over-doctored” areas NHS toward the Canadian model. Under this (Webster 1988: 354–57). Nothing was done revised framework, ministers are responsible until 1976, however, to tackle the second only for insurance by giving NHS hospitals problem (Rivett 1998: 26). Up to that point, greater independence from central controls NHS hospitals had been financed by a proc- and encouraging pluralism (Klein 2006; ess of incremental budgeting and exceptional Department of Health 1989, 2002a). A report arrangements were made for England’s élite from the Ontario Hospital Association (2005: teaching hospitals so that they remained ii) recommended England’s current regional outside the state hierarchy of regional hospital form of regional health authority – Strategic boards and hospital management committees. Health Authorities (SHAs), which were These arrangements undermined attempts to created in 2002 – as a model for Ontario’s promote equity through the program of new LHINs. capital development in the 1960s (Bevan et In the next two sections of this paper I al. 1980: 22–24). Julian Hart (1971) observed show that, although the English NHS has that the NHS operated an “inverse care law,” always achieved cost control by using a budg- by which the availability of good medical care etary cap, there have been serious difficulties tended to vary inversely with the need for it in the design and implementation of policy in the population served. A study published
28 Cost Control, Equity and Efficiency the same year by Cooper and Culyer (1971) modifications remain contentious (Asthana et provided empirical evidence of variations in al. 2004; Stone and Galbraith 2006; Health ratios of supply to populations. Select Committee 1996, 2006).2 Two key developments provided the bases The RAWP Report interpreted the under- for correcting these inequalities. The first lying objective of its terms of reference to be was the reorganization in 1974 of the NHS “to secure through resource allocation equal in England, a change that brought teach- opportunity of access for people at equal risk” ing hospitals into the regional structure and (Department of Health and Social Security created new health authorities responsible for 1976: 7). Although this objective has since populations defined in terms of geographi- been stated to be the bedrock principle on cal areas. Fourteen regional health authorities which all subsequent methods of develop- were created, and they were responsible for ing capitation formulas were developed, all planning and resource allocation. Ninety area methods have sought to equalize resource use health authorities were also launched; these per capita. These methods have not, of them- were responsible for planning and running selves, corrected problems of access inequities healthcare services for their areas (Bevan et caused by variations across groups by age, al. 1980: 43–68). In 1979, the area health social class or ethnic group or discrimination authorities were succeeded by 200 district by providers on grounds other than clinical health authorities (hereafter simply referred to need (Asthana et al. 2004). Hence there are as districts) (Department of Health and Social two different kinds of access inequities, ones Security 1979). The second major develop- that both are and are not tackled by changes ment was spearheaded by the landmark in the distribution of supply. In 1999, the UK Report of the Resource Allocation Working Party government promulgated a new objective for (RAWP Report) (Department of Health and resource allocation intended “to contribute Social Security 1976), which recommended to the reduction in avoidable health inequali- a method for deriving a weighted capitation ties” (Hauck et al. 2002: 668). This initiative formula to develop equitable target alloca- resulted, however, in just a small sum allocated tions for each health authority, based on their as a health inequality adjustment for 2001/02 unique population sizes, demographics and and 2002/03 only (Department of Health estimated additional needs. This report estab- 2003a: 11). lished the policy of allocating resources in England so as to move slowly toward equita- The Search for Equity of Access and ble target allocations derived from a weighted Efficiency capitation formula. Although the RAWP Report’s terms of refer- Since then, there have been various modi- ence required its authors to recommend “a fications of the formulas used in resource allo- method of distribution to health authorities cation. These changes have sought to derive responsive objectively, equitably and efficiently estimates of additional need by conducting to relative need,” their methods were not small-area analyses of variations in the utiliza- designed to promote efficiency (Department tion of hospital services and of unavoidable of Health and Social Security 1976: 5). They cost variations, which mainly involve staff, recognized that achieving equity in terms of by undertaking analyses of general labour expenditure per capita, which took account markets (Smith 2007: 92–99, 55–57). Despite only of variations in risk, would not achieve developments in methods and data, these equity of access because of variations in costs
29 HealthcarePapers Vol. 8 Special Issue per unit of service. They also saw that, while which included London’s teaching districts, formulas ought to account for unavoidable experienced such severe budget reductions that variations in costs, variations in efficiency they had to make cuts in services. The cuts required other policy instruments. in, and not developments of, services made From 1977, the policy of achieving more the news, so that in the winter of 1987–88 equitable resource allocation was sought it appeared that the NHS was in a financial through a process of “levelling up.” That is crisis. The Thatcher government’s response to to say, the NHS’s real growth money was that crisis was a wide-ranging review of the directed at authorities with below-target NHS, the outcome of which was the policy of allocations; with the rest – above target reforming the NHS by introducing an “inter- – experiencing no real growth. This phase nal market” that aimed to introduce financial began under a Labour government in 1977 incentives to treat patients through a system and continued, following the election of a in which “money would follow the patient” Conservative government in 1979, until 1982 (Webster 1998: 182–205; Klein 2006: 146–52; (Bevan 1989). From 1982, the Thatcher Department of Health 1989). The key structural change made in order to enable the internal market to function was the creation of two kinds of purchasers The separation of purchasers (Department of Health 1989). The dominant from providers meant that, for purchasers were districts, which were stripped the first time, the NHS had of their provider functions. A radical innova- tion of the internal market was the creation three policy instruments with of the scheme of GP fundholding for GPs which to pursue three policy who opted to act as small-scale purchasers objectives … of hospital services for their patients. GP fundholders became responsible for manag- ing their costs of prescribing and referrals government sought to achieve three objec- to hospitals for diagnoses and elective care tives: cost control, efficiency and equitable (Glennerster et al. 1994). Providers became allocations to health authorities. The govern- independent NHS trusts, which were required ment undertook the first two by applying to compete for contracts from purchasers with fiscal constraint (from 1982 to 1988 there was each other and the private sector. The separa- no real growth in total NHS expenditure) tion of purchasers from providers meant that, (Webster 1998: 149–53; Klein 2006: 140–46). for the first time, the NHS had three policy It sought to implement equitable allocations instruments with which to pursue three policy by moving these toward targets derived from a objectives: cost control and equity by distrib- weighted capitation formula (see discussion of uting a fixed budget for total NHS spending the RAWP Report above). using a weighted capitation formula, and The combination of these policies efficiency achieved through provider compe- produced very different outcomes at the tition. The separation of purchasers from district level. The majority of districts were providers also meant that NHS trusts located below target, experienced varying growth, and within above-target districts could seek extra were under no financial pressure to achieve work from below-target districts (Bevan and efficiency. The minority that were above target, Robinson 2005).
30 Cost Control, Equity and Efficiency
As Tuohy (1999a, 1999b) argued, compete for new business. however, the idea of provider competition Following its election in 1997, the Labour was in conflict with the political logic of government implemented three waves of the NHS as a state hierarchical system, one system reform in England (Stevens 2004; in which decisions on patients were made Klein 2006: 187–208, 222–25, 232–38). collegially by GPs who acted as gatekeepers From 1997 to 2000, the government sought for hospital specialists and in which ministers a “third way” as an alternative to centralized were accountable for local failings. Contracts command and control and the internal market between districts as purchasers and trusts as (Department of Health 1997). From 2000 providers had to be designed to capture, rather to 2005, it instituted a system of targets and than determine, collegial decision-making on terror through a system of “star rating” NHS patient care by GPs and hospital specialists. organizations (Department of Health 2000; These contracts had all the characteris- Bevan and Hood 2006). In 2006, the govern- tics Williamson (1975: 20–40, 1985: 43–67) ment introduced a second internal market identified as causing high transaction costs. (Department of Health 2002a). These reforms Districts had become essentially pure insur- were accompanied by successive reorganiza- ers and were remote from the knowledge of tions from 1997 on (Klein 2006: 241–44). The hospital-based care. They had limited infor- key differences between the first and second mation on needs assessment (Hollinghurst internal markets are that in the second et al. 2000) and were unable to develop “managed care” by integrating into the • the emphasis is on patient choice demand side (Robinson and Steiner 1998) (Department of Health 2003b); because GPs contracted independently with • purchasers are primary care trusts (PCTs), a different body (family practitioner commit- which replaced districts and contracts with tees, which had been created in the 1974 reor- both GPs and providers of secondary care; ganization to be coterminous with area health • providers are paid at a centrally deter- authorities). Ministerial accountability meant mined standard tariff based on estimated that the market had to be constrained so as to national average costs using an English avoid hospitals being destabilized through loss version of diagnosis-related groups of contractual income in the internal market. (Department of Health 2002b); and A function of contracts is to share risk • providers with costs below the standard between purchasers and providers. In the tariff are allowed to retain a financial internal market, however, purchasers had fixed surplus and trusts that fail are subject to budgets and they therefore could not afford measures to improve performance (with the risk of providers increasing volumes and the ultimate threat of sacking the chief requiring payment at average costs. Providers, executive). meanwhile, could not afford the risk of desta- bilization from losing contracted volumes of Discussion cases at average costs. As a result, contracts In Canada regional health authorities have evolved into a system of block payments, with traditionally acted as both purchasers and adjustments for volumes at marginal costs. providers (Marchildon 2005: 51). The experi- This meant that not much money followed ence in England of combining these roles was the patient and the market therefore lacked that the more urgent problems associated with high-powered incentives for providers to running services took priority over strate-
31 HealthcarePapers Vol. 8 Special Issue gies for delivering healthcare to populations. reasonable access to health services without The separation of purchasers from providers, financial or other barriers, Canadian resource however, offers a way of resolving this tension allocation methods have perpetuated historic and supplies the policy instruments required inequalities. To solve this problem, Birch et for seeking efficiency and equity within a al. recommend the use of a capitation formula global budget. In light of these benefits, I as deployed in England. It is also important wish now to raise a series of questions, the to consider whether the creation of LHINs answers to which, I believe, have direct bear- will lead to the identification of inequities ing on models of strategic purchasing in both in the geographical distribution of resources England and Ontario. within Ontario and policies to reduce them. In England two main sets of questions If so, how would a funding formula be devel- hover over the second internal market. First, oped to account for differences in need and given the emphasis on patient choice, who unavoidable variations in costs? If a formula is supposed to manage initial demand: the were developed, how would it be used to move GP, the practice or the PCT? And who is budgetary allocations toward the equitable supposed to manage demand following refer- distribution indicated by the formula? And ral to specialists: the trust, the GP or prac- how would LHINs manage demand and tice or the PCT? Second, to what extent is develop a fair system of funding hospitals for responsibility for managing local failures seen the work they do? Would LHINs also seek as a local matter? The tradition of ministe- to correct other inequities in access (e.g., by rial accountability for resolving local failures social class, ethnicity or linguistic group), fundamentally undermined the first internal which can persist alongside an equitable market; as a result, it developed a payment geographical distribution of resources? Would system that lacked high-powered incentives. LHINs seek to reduce inequities in outcomes? The second internal market can be seen as In this paper I have tried to illuminate the a technical fix, which imposes on the NHS main tensions between economic and politi- a payment system that has high-powered cal logics found in the healthcare systems incentives but that threatens to destabilize under discussion. The systems currently found providers. It is difficult to see how ministers in the UK and Canada arose out of a desire can be insulated from threats to services on to introduce universal coverage as a means which local populations depend. An interest- of removing the ability to pay as a barrier to ing consideration for England is how hospital accessing care. Both countries are now seek- closures are managed in Ontario, which has ing to develop systems that can control total always had a pluralistic hospital system inde- costs as well as improve equity and efficiency. pendent of government. It would also be valu- In the past, British governments have found able to consider the case law that has emerged it politically problematic to correct inequities over the kinds of issues in which ministers are in supply through limiting growth in total and are not expected to become involved. expenditure and imposing financial penalties In Ontario what policies are being devel- on inefficient providers. Difficulties arose in oped to follow through on the MOHLTC’s large part because each tactic worsened access pledge to “restore equity to Ontario’s health to healthcare for some local populations. care system”? Birch et al. (1993) point out Going forward, political logic suggests the that, while the primary objectives of the realistic options for healthcare reform to be Canada Health Act (1984) include facilitating either incremental budgeting while ignoring
32 Cost Control, Equity and Efficiency
Department of Health. n.d. Revenue Allocations. inequities and/or inefficiencies or implemen- Retrieved March 30, 2007.
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Department of Health and Social Security. 1979. Ministry of Health and Long-Term Care. 2006b. Patients First. London: HMSO. The Plan for Health Care. Toronto: Author. Retrieved March 30, 2007.
34 Balancing Equity Issues in Health Systems: Perspectives of Primary Healthcare
EQUITY
Richard H. Glazier, MD, MPH, CCFP, FCFP Senior Scientist and Leader, Primary Care and Population Health Program, Institute for Clinical Evaluative Sciences, Toronto
Importance and Impact of Primary ance in 10 industrialized countries between Healthcare the extent of primary health service, health Primary healthcare is usually considered the indicators (including life expectancy and first level of contact with the health system. infant mortality) and the satisfaction of their In Organisation for Economic Co-opera- populations in relation to the systems’ overall tion and Development (OECD) countries, costs. A systematic review found evidence that strong primary healthcare system and practice increased accessibility to physicians working characteristics are associated with improved in primary healthcare contributes to better population health. The strength of a coun- health and lower total healthcare-system costs try’s primary healthcare system has been (Engstrom et al. 2001). Primary healthcare shown to be negatively associated with all- has also been shown to be associated with cause mortality, all-cause premature mortal- reduced socio-economic disparities in over- ity and cause-specific premature mortality all mortality, infant mortality and low birth from asthma and bronchitis, emphysema and weight, stroke mortality, self-reported health pneumonia, cardiovascular disease and heart and avoidable hospitalizations (Starfield, Shi disease (Macinko et al. 2003). Starfield (1991) and Macinko 2005). demonstrated that there was strong concord- Studies of individual access to care provide
35 HealthcarePapers Vol. 8 Special Issue evidence supporting the effectiveness of FP/GP (Statistics Canada 2003). Among primary healthcare at the country or regional physicians, FPs/GPs play the largest role in level. Lack of access to a regular source of the care of children, adults and seniors and care has been associated with excess emer- of people with respiratory conditions, heart gency department visits (Oster and Bindman failure, mental health problems and cancer 2003), while having a regular source of care ( Jaakkimainen et al. 2006). has been associated with increased preven- Compared with physicians, less is known tive healthcare (Bindman et al. 1996) and about the supply or practice patterns of other improved glycemic control for people with primary healthcare professionals. Although diabetes (O’Connor et al. 1998). Continuity the supply of nurses in Canada has been of primary healthcare has been associated with extensively documented, with almost 250,000 increased preventive care (Gill et al. 2003), in total, the number working in primary decreased hospitalization (Saultz and Lochner healthcare and their roles are not well under- 2005), improved glycemic control for people stood. The majority of nurses (76%) work with diabetes (Gill and Mainous 1998) and in hospitals or long-term care settings and decreased rates of emergency department less than 10% work in industry, private agen- visits (Gill et al. 2000) and hospitalization cies, self-employment and physicians’ offices (Gill and Mainous 1998). combined. While many work in primary The evidence for primary healthcare’s care settings, Canada has fewer than 1,000 positive contributions to population health nurse practitioners. The majority of Canada’s is observational in nature (and therefore 28,000 pharmacists are employed in retail not necessarily causal) and there are minor settings, where they provide first-contact care; inconsistencies about specific outcomes. however, coordination with other primary Nonetheless, the overall findings are strong care providers is limited in many of these and consistent across ecological and individ- environments. Canada has over 28,000 social ual-level studies, they appear to have dose- workers but their roles and interactions with response relationships and they are specific other primary care providers are not well to primary healthcare (Starfield, Shi, Grover documented. Primary healthcare reform and Macinko 2005). Experimental evidence efforts in Canada are attempting to bridge will always be lacking about the organization gaps between providers in order to expand of healthcare at the national or regional levels; access to care and to improve the compre- therefore, the current evidence should be hensiveness and quality of care. As these considered consistent and moderately strong efforts move forward, all providers can expect within the realm of feasibility. changes in their current roles and interactions as members of teams (Canadian Institute for Health Provider Roles Health Information 2006). Among health providers, family physicians (FPs) and general practitioners (GPs) are the Declining Access to Primary Healthcare health professionals most often contacted Canada’s physician workforce declined during at least once by Canadians (80% in 2003), the 1990s, with a large decrease in the avail- followed by dentists (64%) (Canadian ability of FPs/GPs. Provider factors related Institute for Health Information 2005). A to these declines include a decrease in the large majority of Canadians (85%) have a proportion of FP/GP physicians, a decrease regular medical doctor, most commonly an in the average hours worked (attributed to
36 Balancing Equity Issues in Health Systems the profession’s changing demographics), an ing in rural areas as well as in cities with and increase in time spent in training, a decrease without medical schools (Chan 2002). Along in foreign-trained doctors, more physicians with a widespread withdrawal from hospital- retiring and medical school enrolment cuts. based care, many FPs/GPs have developed Patient factors include an aging population that uses healthcare more intensively. In 2003, 5% (1.2 million) of Canadians age 12 and over were unable to find a regular doctor and an There is also remarkably little additional 9% (2.4 million) had not looked for one (Statistics Canada 2003). Across the evidence or consensus about country, only about 20% of FPs/GPs were whether patient outcomes are accepting new patients, and this proportion improved under any particular declined between 2001 and 2004. In many communities, walk-in and special clinics system of reimbursement. staffed on a rotating basis are the only source of care for thousands of people. These clin- ics cannot provide care continuity and are not specialty areas of practice, such as psychother- geared to provide ongoing chronic disease apy, sports medicine and palliative care. While management or preventive healthcare. Lack of these services are needed, and often fill seri- interest in family medicine among new medi- ous gaps in care, such specialization further cal school graduates, low professional satisfac- decreases the availability of comprehensive tion and rapid aging of the current workforce primary care services at the community level. in the face of a growing and aging population generate a worsening crisis in access to basic The Policy Response: Primary healthcare in Canada. Healthcare Reform in Canada’s The overall supply of FPs/GPs is not Provinces the only concern. Uneven distribution and Access to care has been an important focus of reduced care comprehensiveness also greatly primary healthcare policy-making in Canada. compromise the availability of primary care. The 2003 First Ministers’ Accord on Health There were 96 FPs/GPs per 100,000 people in Care Renewal committed federal and provin- Canada in 2002, with large variations – rang- cial governments to accelerating primary ing from 35 (Nunavut) to 172 (Vancouver) healthcare renewal so that citizens routinely – among the country’s health regions. Even receive needed healthcare from an appropriate these variations do not fully account for severe provider. This accord set a goal that by 2011 “at shortages within certain sub-regions, part- least 50 per cent of their residents have access time practices and limited and changing scope to an appropriate health care provider, 24 hours of practice over time. From 1989 to 1999, a day, seven days a week” (Health Canada there were significant decreases in hospital 2003). In 2004’s 10-Year Plan to Strengthen in-patient care, surgical assistance, surgery, Health Care, this target was described as “50 obstetrics and anaesthesia by Canadian FPs/ per cent of Canadians having 24/7 access to GPs. There is evidence that this decline in the multidisciplinary teams by 2011.” The 2004 comprehensiveness of care offered by FP/GPs plan also committed governments to continue has occurred across all physician age groups to work with Health Canada’s Infoway to for males and females, and that it is happen- realize the vision of an electronic health record
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(Health Canada 2004). cized as potentially difficult and disruptive to According to a 2006 report (Health implement on a population-wide level given Council of Canada 2006), nine Canadian the current dispersion of care, especially in jurisdictions now provide access to a province- urban areas. The majority of Canadian FPs/ or territory-wide telephone service. Only five GPs favour blended payment reimbursement of those jurisdictions have a mechanism to over straight fee-for-service. Nonetheless, inform a patient’s primary care provider about the large-scale implementation of capitation- telephone encounters. Interprofessional teams, based blended models has also been criticized another main policy response to improve and has generated a high degree of contro- access to primary healthcare, vary a great versy among Canadian FPs/GPs. A chief deal in composition and are not rolling out concern raised about capitation models is their as quickly as expected. The same report also inherent incentive to underprovide services. gives information about team care for several Few Canadian capitation models have incor- provinces in 2005: porated adjustment for patient characteristics beyond age and sex, raising concerns about • British Columbia had more than preferential selection (aka “cream skimming”) 1,000 clinicians providing team care; of the least complex and least demanding Saskatchewan had 34 primary care teams patients. The main concern is that, without covering approximately 23% of the popu- adjustment for morbidity, physicians might lation. continue to care for a range of patients but • Ontario had 75 interdisciplinary teams, selectively enrol only the healthiest onto their was adding community health centres and capitation rosters. had plans to establish 150 family health There is also remarkably little evidence or teams by 2007. consensus about whether patient outcomes • Quebec had an estimated 104 family are improved under any particular system of medicine groups providing services to 1.55 reimbursement. A 2001 systematic review million people. concluded that, while the funding method • New Brunswick had eight community in place influenced some aspects of physi- health centres and one collaborative prac- cian behaviour, the authors were “unable tice model. to make conclusions as to whether these • Prince Edward Island had established five changes are beneficial to patients” (Gosden et family health centres. al. 2001: 53). Even less evidence is available • Newfoundland and Labrador had eight from Canadian settings where reimburse- teams in various stages of implementation. ment and system issues are different from settings in the United States (US). Attention Several other aspects of primary to care quality in primary healthcare reform is healthcare policy are relevant to improving critical because funding appears to influence access and quality. Rostering of patients with service delivery and there are concerns over primary healthcare providers or teams has the ability of primary healthcare providers to been promoted as a way to define practice deliver evidence-based preventive care and populations, to increase accountability, to chronic disease-management care as well as to reduce duplication and to implement blended, communicate effectively with patients. capitated and other non-fee-for-service reim- Dimensions of performance that have bursement models. Rostering has been criti- been proposed for primary healthcare reform
38 Balancing Equity Issues in Health Systems include effectiveness, continuity, quality, cost integrated community model. reduction, decline in total use, responsive- Electronic health records (EHRs) are ness, accessibility and equal access (Canadian another policy response, one aimed more Health Services Research Foundation 2003). at quality of care and coordination than at No single model of care was found to approach access. An international comparison found optimal performance in all these dimen- that Canada lagged well behind many other sions; two models, however, were closest: the nations in the uptake of EHRs in primary integrated community model and the profes- care, with only 20% of providers using sional coordination model. The former is most computers for clinical purposes, compared characteristic of community health centres with over 90% in 10 other countries (Protti (CHCs) and Quebec’s centres locaux des 2005). Most Canadian FPs/GPs had some services communautaires (CLSC) and centres computer familiarity and already had compu- de santé et des services sociaux (CSSS), with ter systems in their offices for billing purposes good performance reported in all dimensions – these were seen as positive steps toward except accessibility and responsiveness. The clinical use. The most common functions latter is best represented by Ontario’s health in primary care offices internationally were service organizations (HSOs) and by managed prescription writing and accessing labora- care models such as health maintenance tory results. Both of these applications have organizations (HMOs) in the US, which been associated with practice benefits. Use of receive better ratings for accessibility and EHRs has also been associated with improved responsiveness than the integrated community preventive care. A policy conference spon- model but worse ones in other dimensions. sored by Canada Health Infoway and the The professional contact model, which is most Health Council of Canada in June 2006 characteristic of fee-for-service care, also has reported on evidence of positive impacts of strengths in accessibility and responsiveness EHRs on patient care in Canada and interna- but was not found to perform well in other tionally. It also reported on financial benefits dimensions. A commentary in the same report from e-health generally, but the return on noted that the evidence on these issues is not investment of the EHR specifically remains to strong and that funding and payment – two be determined (Canada Health Infoway and related but separate issues – need to be consid- Health Council of Canada 2006). EHRs are ered separately. A US analysis of domains of increasingly being used in research and evalu- primary healthcare quality came to similar ation because they have numerous advantages conclusions, based on the finding that CHC over review of paper-based charts. users are more likely than HMO users to rate their primary healthcare providers highly, Policy Response: Ontario except in the area of ease of first contact (Shi Along with other Canadian jurisdictions, et al. 2003). Most Canadian jurisdictions have Ontario is struggling with the increasing chal- a mix of these models. In Canada, there is a lenges facing access to and quality of primary current policy shift away from fee-for-serv- healthcare. The 2005 Canadian Community ice (professional contact model) and toward Health Survey (CCHS) (Statistics Canada other organizational and payment arrange- 2005) indicates that more than 900,000 ments, with most resembling the professional people in Ontario aged 12 and over (8.8%) coordination model. In areas where CHCs are did not have a regular medical doctor, rang- being expanded, this entails a move toward the ing – by Local Health Integration Network
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(LHIN) – from 6.4% in Hamilton Niagara and requires expanded after-hours coverage. Haldimand Brant to 15.4% in the Northwest. An earlier version, the Comprehensive Care The proportion of FPs/GPs accepting new Model (CCM), involved a small number of patients in Ontario is only 11%, with levels as practices. Blended capitation is the domi- low as 5% in Eastern Ontario and Southwest nant reimbursement mechanism for two Ontario. The province is pursuing policy initi- older models: HSOs, which had 145 physi- atives on several fronts, including increased cians in January 2006, and Group Health medical school enrolment, increased licensure Centres (GHCs), which had 38 physicians of international medical graduates, telehealth in January 2006. It is also the dominant and enhanced incentives for physicians to reimbursement mechanism for three newer work in under-serviced areas. models: Family Health Networks (FHNs), A key strategy to overcome shortfalls in which had 648 physicians in January 2006; primary medical care is primary healthcare Primary Care Networks (PCNs), which had reform. In Ontario these efforts include re- 1,919 physicians in January 2006; and Family organization of payment mechanisms and Health Teams (FHTs). The major distinction financial incentives to reward comprehensive between the newer blended capitation models care, continuity of care and delivery of preven- is that FHTs support interprofessional team tive services; increased access to after-hours members. An initial round of 31 FHTs was care; payments to subsidize EHR implemen- announced in December 2005, along with an tation and payments to add non-medical application process for 50 more FHTs and a health personnel to healthcare teams, espe- plan to establish 150 in total by 2007. All of cially nurses, nurse practitioners, pharmacists the newer patient-enrolment models (CCM, and social workers. New models have become FHG, FHN, PCN, FHT) require after-hours available at different times and, due to the coverage, provide financial support for EHRs voluntary nature of the rollout and histori- and have incentives for preventive healthcare cal patterns of care, the uptake has not been and diabetes comprehensive care. uniform in all areas of the province. Ontario’s new care models all involve patient enrolment, so that most people in Figure 1. Ontario’s patient enrolment the province are becoming associated with models with types of physician primary healthcare providers or teams. There compensation is, however, considerable variation in mecha- Patient Enrolment Model Physician nisms of physician compensation (see Figure Compensation 1). Straight fee-for-service remains a common Comprehensive Care Model (CCM) Blended fee- for-service method but there has been a rapid increase in Family Health Group (FHG) a blended fee-for-service model, the Family Family Health Network (FHN) Blended Health Group (FHG), with more than 4,000 capitation physicians representing more than 4 million Family Health Team (FHT) patients enrolled from July 2003 to January Primary Care Network (PCN) 2006. That model includes higher fees for Health Service Organization (HSO) comprehensive care claims (comprising a large proportion of most physicians’ practices), has Group Health Centre (CHG) incentives for reaching preventive care targets
40 Balancing Equity Issues in Health Systems
Figure 2. Ontario’s salaried models of primary healthcare showing physician- compensation types Model Physician-Compensation Types
Rural and Northern Physicians Group (RNPG) Blended complement (payments to a group based upon the number of designated physicians)
Community Health Centre (CHC) Blended salary
Aboriginal Health Access Centre (AHAC)
Various specific organizations Specialized models
Ontario has salaried models in primary immunizations, blood pressure checks and healthcare (see Figure 2), including CHCs dental visits. (54 in January 2006) and Aboriginal Health Equity in primary care can be considered Access Centres (AHACs) (10 in January in terms of the Equity Effectiveness Loop 2006). It also has alternative payment plans as framework (Tugwell 2006). In that frame- the major form of payment in rural and north- work, community effectiveness of care is seen ern areas (49 physicians in January 2006), at as the product of efficacy, access, diagnostic Queen’s University and at Toronto’s Hospital accuracy, provider compliance and consumer for Sick Children, as well as in many hospi- adherence. With the possible exception of tal emergency departments. The variety of efficacy, disadvantaged populations might do models being implemented in Ontario, with worse than more advantaged ones at every rollout occurring at different times and places, step. Access to care and consumer adherence provides a unique opportunity to study the are particular concerns for disadvantaged effects of primary healthcare reform in Canada, populations that may experience barriers to one that is applicable across the country. scheduling appointments, obtaining transpor- tation and affording medications and devices. Equity Considerations in Primary Care Lower levels of health literacy have also The population burden of illness is not shared been linked to lower levels of disease control equally among all people, even within the (Schillinger et al. 2002). same age and sex groups. People with lower educational attainment, less income, unem- Attending to Equity ployment and food insecurity report more Health system innovation that is meant to fair and poor health, disability, depression improve access to care has the potential to and chronic diseases than more advantaged improve equity. That outcome is not certain, populations (Glazier et al. 2006). For exam- however, because more advantaged popula- ple, three times as many low-income men tions are often adept at learning about and and women aged 45–64 report poor and fair using innovations. To be sure that primary health compared to those with high income. healthcare reform does not worsen equity, Despite greater healthcare needs, disadvan- equity will need to be articulated as a goal taged populations do not make greater use of that is attended to during implementation primary care or specialist care and have much and measured during evaluation. lower levels of preventive healthcare, includ- Measurement of primary healthcare provi- ing Pap smears, mammograms, influenza sion is challenging, however, due to incomplete
41 HealthcarePapers Vol. 8 Special Issue and fragmentary datasets and poor data qual- ment for these factors, providers who care for ity. For example, data about the care provided disadvantaged populations under capitation at CHCs in Ontario are not available for will be under-paid due to the higher burden of evaluation and have not been linked to other illness in these populations. This constitutes aspects of primary healthcare utilization. Part a moral hazard for physicians who face finan- of the CHC mandate is to look after under- cial penalties for looking after disadvantaged served populations; therefore, this evidentiary groups. gap is especially problematic for understanding equity. Residential addresses in Ontario are up Evaluation of Primary Healthcare to 15 years out of date in Ontario’s healthcare The current level of innovations being intro- registry, a shortcoming that greatly reduces duced into Canada’s health system at the the validity of data pertaining to geographical provider level is virtually unprecedented. The rates of primary healthcare. degree to which these reforms will successfully address access and quality challenges, however, remains unclear. Each province is developing its own approaches to research and evaluation … there is no pan-Canadian but there is no pan-Canadian approach to approach to understanding understanding which innovations are success- ful; nor is there a way to compare the impact which innovations are of reform models across different provinces. successful; nor is there a way Without a coordinated national approach to to compare the impact of evaluating primary healthcare per se, there will be no cross-jurisdictional lessons learned reform models across different and no external information available to provinces. policy-makers concerning the need for mid- course corrections or guiding the adoption of the most promising innovations. As new models of interprofessional care At the national level, support for and are rapidly adopted in Ontario, ways to track organization of primary healthcare research the care provided by non-physicians will be has been fragmentary and uncoordinated. increasingly needed. Currently, it is impossible Researchers from different health disciplines to measure the care provided by nurses, nurse have no common research community within practitioners, social workers, pharmacists, which to network and no formal mechanism psychologists, dieticians and others work- through which to interact. Some national ing on primary healthcare teams. Available research-funding agencies, including Health data also lack measures of socio-economic or Canada and the Canadian Health Services immigration status. Adding these measures to Research Foundation, have had major primary routinely collected data will greatly enable the healthcare initiatives; other key health measurement of equity in primary healthcare research funders, however, have had none. The utilization. large initiatives have now ended, leaving the Capitation rates in Ontario are based on future direction of primary healthcare research age and sex and do not take morbidity or co- unclear. Canada’s national research-fund- morbidity into consideration. Without adjust- ing agencies have no history of collaborative
42 Balancing Equity Issues in Health Systems initiatives or strategies in primary healthcare Fostering a Set of Interdisciplinary Teams research. The Canadian situation contrasts and Centres starkly with those found in the United Research foci for primary healthcare studies Kingdom, Australia, New Zealand, the US should include the following: and other countries that have established major national primary healthcare research • Access to care initiatives, including appropriately focused • Quality of care research funding. • Interdisciplinary practice A national, coordinated plan to evaluate • Application of information technology innovation in primary healthcare is essen- • Health human resources tial. The first step must involve inter-agency • Organization of care agreement that primary healthcare is a shared • Health economics and policy analysis research priority. Second, inter-agency action must be taken to develop a national primary A network of interdisciplinary teams and healthcare research strategy. Elements of such centres, each focused on one or more of these a national strategy could include the following topics, is one potential model for addressing elements: national research needs in these critical areas.
Building Research Capacity Data Initiatives to Facilitate Cross- While Canada has successful primary Model, Cross-Provincial and International healthcare researchers, research is under- Comparisons developed in relation to service provision. Data sources for primary healthcare research Targeted support for research training are incomplete, fragmented and split across and ongoing career support are needed. jurisdictions. While a set of performance Alternative models of outreach and mentor- measures for primary healthcare has been ship, later career re-entry positions, support proposed, current data systems are entirely for teams and networks and attention to the inadequate for measuring most of the needs of clinician scientists are especially proposed indicators within and across juris- needed in primary healthcare research. dictions. Investments in harmonizing, linking and continually updating datasets are needed. Developing and Supporting an Interdisciplinary Research Community Supporting Practice-Based Research Family medicine, nursing, pharmacy, social Networks work, psychology and other disciplines are The most valuable data for primary healthcare working together in new models of primary research arise in the clinical setting, includ- healthcare and should be conducting research ing clinical-encounter data, the functioning of together as well. Methodologists in biostatis- interdisciplinary teams and the satisfaction of tics, qualitative methods, program evaluation, those using the health system. Canada already epidemiology, health services and systems has a number of functioning, practice-based research, health economics and policy analy- research networks; however, these networks sis are also needed. National structures that work mostly in isolation from one another foster interdisciplinary research and interac- and lack interdisciplinarity, the ability to tion are required to create a cohesive research network with each other and, in many cases, community. the resources for long-term sustainability.
43 HealthcarePapers Vol. 8 Special Issue
Such networks are an essential laboratory for primary care reform is appropriately evaluated primary healthcare research, have worked and that mid-course corrections can be made extremely well internationally and are ideally to ensure effectiveness and equity. suited for research comparing models of healthcare. References Bindman, A.B., K. Grumbach, D. Osmond, K. Vranizan and A.L. Stewart. 1996. “Primary Care and Building Capacity to Link and Use EHRs for Receipt of Preventive Services.” Journal of General Research Internal Medicine 11: 269–76. EHRs are a feature of most primary Canada Health Infoway and Health Council of healthcare reform efforts. They are usually Canada. 2006. Beyond Good Intentions: Accelerating the introduced to enhance information coordina- Electronic Health Record in Canada. A Policy Conference Held on June 11-13, 2006. Montebello, QC. Summary of tion and to improve the delivery of clinical Main Themes and Insights. Toronto: Author. Retrieved care. Unfortunately, many EHR systems are September 4, 2006.
44 Balancing Equity Issues in Health Systems
Department Use.” Archives of Family Medicine 9: Saultz, J.W. and J. Lochner. 2005. “Interpersonal 333–38. Continuity of Care and Care Outcomes: A Critical Review.” Annals of Family Medicine 3: 159–66. Glazier, R., J. Tepper, M.M. Agha and R. Moineddin. 2006. “Primary Care in Disadvantaged Populations.” Schillinger, D., K. Grumbach, J. Piette, F. Wang, D. In L. Jaakkimainen, R. Upshur, J. Klein-Geltink, Osmond, C. Daher, J. Palacios, G.D. Sullivan and A. Leong, S. Maaten, S. Schultz and L. Wang, eds., A.B. Bindman. 2002. “Association of Health Literacy Primary Care: A Practice Atlas. Toronto: Institute for with Diabetes Outcomes.” Journal of the American Clinical Evaluative Sciences. Medical Association 88: 475–82. Gosden, T., F. Forland, I.S. Kristiansen, M. Sutton, Shi, L., B. Starfield, J. Xu, R. Politzer and J. Regan. B. Leese, A. Giuffrida, M. Sergison and L. Pedersen. 2003. “Primary Care Quality: Community Health 2001. “Impact of Payment Method on Behaviour Center and Health Maintenance Organization.” of Primary Care Physicians: A Systematic Review.” Southern Medical Journal 96: 787–95. Journal of Health Services Research and Policy 6: 44–55. Starfield, B. 1991. “Primary Care and Health: A Health Canada. 2003. 2003 First Ministers’ Accord Cross-National Comparison.” Journal of the American on Health Care Renewal. Ottawa: Author. Retrieved Medical Association 266: 2268–71. September 4, 2006.
45 The Reform of Health and Social Services in Quebec
EQUITY
David Levine, BEng, MPhil, MAS President and Chief Executive, Agence de la santé et des services sociaux de Montréal
Introduction • Facilitating the use of services Quebec is undergoing a healthcare revolution • Managing vulnerable patients’ care (Levine 2005). With the passage of Bill 25 in 2003 and Bill 83 in 2005, the Government Two principles guide the reforms: popula- of Quebec introduced potentially profound tion-based responsibility and the hierarchical reforms to the province’s healthcare system. In provision of services. this paper I examine these changes and iden- tify some of the strategic levers that support Population-Based Responsibility them and increase the probability of their Quebec is divided into 17 healthcare regions. success. Each one has an agency responsible for ensur- ing the health and well-being of its population The Reforms and for managing the primary and second- Quebec’s healthcare reform has four main ary health and social services delivered in its objectives: jurisdiction (regional or national organizations provide tertiary care and specialized services). • Improving the population’s health and Each regional agency is also responsible for well-being ensuring patient access to care, no matter • Distributing services equitably where that care is delivered.
46 The Reform of Health and Social Services in Quebec
Hierarchical Provision of Services • To evaluate the health and well-being The Quebec system distinguishes between of their populations and determine their primary and secondary care services and the healthcare service needs more specialized services offered in regional or • To coordinate the use of healthcare serv- tertiary care centres. This distinction is essen- ices by their populations tial for determining which services will be • To manage the healthcare services they provided close to the population being served offered and which will be provided in more resource- • To develop integrated local care networks intense specialized centres. It also underlies the concept of corridors of service, which are Figure 1 illustrates the local care network defined so that local, region-based centres can form (Ministère de la santé et des services directly access more complex services without sociaux 2004). These networks connect care the random shopping around by physicians providers as well as other health and social that presently occurs. service partners (e.g., local pharmacies, schools, community groups and social clubs). Structural Changes They are the cornerstone of efforts to ensure Adhering to the principles of population-based access to, and continuity of, services. responsibility and the hierarchical provision of services, the Quebec government created a new Strategic Levers organizational form: the Health and Social Between 2004 and 2006, Quebec’s HSSCs Services Centre (HSSC). While variations established a new organizational structure exist, especially in Montreal, the basic HSSC by integrating activities and developing an structure entails the merger of one or more appropriate management model. In Montreal, local community service centres, long-term we designated the following criteria as essen- care facilities and an acute care hospital. Across tial for a high-performing healthcare system: the province there are 95 HSSCs, each respon- sible for a specific territory and population • Timely access to the different levels of (there are 12 centres on the island of Montreal care required – see http://www.cmis.mtl.rtss.qc.ca). • Continuity in the provision of services Bill 25 changed the mandate of regional • Optimal use of available human, techno- health boards from being planning organiza- logical and financial resources tions to assuming responsibility for manag- • Application of evidence-based practices, ing, coordinating and delivering healthcare both clinical and managerial in their regions. Each new regional health agency (e.g., Montreal Health and Social Managed care (with its constituent Service Agency) has a board nominated by the elements) and performance measurement are provincial minister of health and a president our main strategic levers necessary for accom- and chief executive officer (CEO) appointed plishing these goals. by an order in council. The first mandate of these agencies was to determine the HSSCs Managed Care that were needed in their regions and to make Montreal’s approach to managed care was recommendations to the minister of health. informed by models from Kaiser Permanente The mandate of each HSSC reflected (2005); the United States Veterans Health their new responsibilities: Administration (Petzel 2006; Jha et al.,
47 HealthcarePapers Vol. 8 Special Issue
Figure 1. Integrated local care networks
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2003); the Puget Sound Project (Davis 2006, socio-economic status, education level, and 2007; The Commonwealth Fund 2006; service consumption, as well as information Puget Sound Center); primary care trusts in on housing, immigration, and community England (British Medical Association 2006; organizations. Lifestyle data are also available Roland et al. 2005; National Health Service); for each area, including, for example, tobacco and primary care teams in Barcelona, Spain consumption, levels of physical activity and (Deuxième Colloque 2006). It has three major obesity rates. The data also define at-risk components: populations and highlight critical social issues such as homelessness and prostitution. These • A population-based model data are updated every two years and health- • A chronic care model improvement targets are set for each HSSC • Service management redeployment and the Montreal agency as a whole. This information is also used to ensure equitable Population-Based Model funding according to the specific needs of Knowing the state of health of a given popula- each population. tion is an essential part of a population-based model. Significant effort was therefore made Chronic Care Model to help each of Montreal’s HSSCs learn about Ed Wagner’s Chronic Care Model (Wagner their populations. Using Statistics Canada 1995, 1998; Wagner et al. 1996a, 1996b; census data as well as information obtained Wagner et al. 1999) was adopted in order to through local sources (e.g., http://www.cmis. manage the care of chronically ill patients and mlt.rtss.qc.ca), the agency’s public health team those at risk of developing a chronic illness. prepared a portrait of each HSSC population This model comprises four main components: in the region. These portraits provide data on
48 The Reform of Health and Social Services in Quebec
1. Chronic care protocols for each disease be offered in collaboration with primary care and involvement of family physicians in physicians in each territory. Similar reorgani- their application and follow-up zations are being implemented for long-term 2. Patient self-management through educa- care admissions, rehabilitation and subacute tion and support networks necessary to care services, public health programs and serv- accomplish that goal ices for the intellectually handicapped. 3. Multidisciplinary primary care teams or Montreal’s regional agency has also joined access to such teams by family physicians, with its hospitals to study whether the imple- including seamless access to secondary mentation of a citywide laboratory service with and tertiary services as well as all corridors a single dedicated specimen transport system of service for diagnosis and treatment and a single information system would improve 4. Information systems that support elec- accessibility and lower costs. Under such an tronic medical records, chronic disease arrangement, specialized analyses would be registers and diagnostic and treatment regrouped while ensuring hospitals’ capacity to decision-support tools undertake immediate diagnostic work.
The Montreal agency also established a Performance Measurement close working relationship with the research Performance measurement, which includes team at the University of Montreal involved the ability to adjust practices when targets in chronic disease treatment. The agency also are not reached, is a second critical strate- created a consortium that includes the CEOs gic lever for developing and maintaining a of the 12 HSSCs and the agency’s public high-performing health system. This is true health team. Four projects are now being at the levels of both population health and examined for possible implementation. professional activity. An example of the latter is the Quality and Outcomes Framework Service Management Redeployment used by the United Kingdom’s (UK’s) health Under the new integrated approach, it is system and the British Medical Association necessary to ensure that the management of to measure and pay physicians for the work primary- and secondary-level services falls as they do (Department of Health 2004). Under much as possible under each HSSC’s juris- this system, physicians are awarded points for diction and that each centre also coordinates achieving clinical and operational targets and access to tertiary and other specialized services. are then remunerated for the points accu- In this respect, the first major reorganiza- mulated. These measurements help to orient tion of services undertaken by the Montreal the model of managed care in the UK and to agency dealt with the provision of primary maintain a certain uniformity of practice. mental health services (Trépannier 2006). In addition to clinical performance Almost 95% of the $325 million spent annu- measurements, there are the administra- ally on mental health in Montreal is managed tive measurements designed to ensure, for by five psychiatric hospitals and four psychia- example, timely access, appropriate surgical try departments based in teaching hospitals. wait times and emergency room efficiency. The plan currently being executed involves These measurements allow for better alloca- the transfer of $48 million worth of mental tion of resources to services that require more health services to the city’s 12 HSSCs. support. Likewise, quality measurements – at Primary mental health services will thereupon both the clinical and administrative levels
49 HealthcarePapers Vol. 8 Special Issue
– must also become part of an organization’s healthcare needs, a new primary care model culture. Such measurements, which include was proposed. The Quebec government patient satisfaction, are critical for ensuring offered financial incentives to physicians who standards are met and that feedback informa- were willing to create new family medicine tion can be integrated into reform initiatives. groups (FMGs), new organizational forms The Montreal agency signs performance that exemplify the government’s integrative contracts with its regional HSSCs. These approach to health services. FMGs regis- contracts are monitored throughout the year ter 1,500 patients per full-time equivalent to ensure compliance. (FTE) physician (between 8 and 12 physi- cians belong to each one). FMG physicians Primary Care commit to providing a full array of medical Montreal has over 2,000 general practi- case management services to clients who tioners (GPs) operating out of 400 private have chosen to register with them. Services offices. As increasing numbers of walk-in are provided with or without an appoint- clinics appeared, many physicians decided ment, seven days a week. FMGs also include to work one or more shifts in these clin- extended nursing services totalling 70 hours of availability a week (Émond et al. 2005). In Montreal, network clinics were also supported by the Montreal agency, which … measurements, which include provided financial support to physicians who formed FMGs, agreed to provide services patient satisfaction, are critical seven days a week and offered as many hours for ensuring standards are met of services for patients with appointments and that feedback information as for those without (Agence de Santé de Montréal 2006). can be integrated into reform To date, 33 new FMGs have been estab- initiatives. lished in Montreal, and it is now necessary to move to the next stage in the development of primary care. This involves creating primary ics, which provide little or no follow-up care care multidisciplinary teams – or integrated to the patients they see. As a result, many network clinics – that will be capable of regis- Montrealers report they do not have a family tering 2,000 patients per FTE physician and physician; indeed, it is almost impossible today ensuring availability of a team of profession- to find a GP willing to accept new patients. als and support staff to manage each patient’s Compounding this problem, GPs’ difficulty healthcare needs ( Jodoin 2007). Within 10 accessing timely diagnostic services for their years, it is anticipated that Montreal will patients or obtaining specialist consultations have developed 60 such multidisciplinary for them has also led to high degrees of dissat- teams, each covering the healthcare needs isfaction among both patients and physicians. of 30,000 people. These teams will sign In a comparison with Kaiser Permanente, funding contracts with their local HSSCs. Montreal was found to have twice the number The contracts will also encompass guaran- of emergency room visits per capita. To correct teed access to diagnostic services, specialist this situation and provide the medical support consultation, subacute care and rehabilitation and coverage needed to manage Montrealers’ services, access to home care and treatments
50 The Reform of Health and Social Services in Quebec
Figure 2. The programs through which funding is provided Program Types Programs
Population programs Public health
Service programs General (clinical and assistance) and front-line medical services
Programs designed to address • Loss of autonomy due to aging specific problems • Physical impairment • Intellectual impairment and pervasive developmental disorders • Troubled youth • Addiction • Mental health • Physical health
Support programs • Administration and support for services • Building and equipment management required by patients that the teams themselves tions, and they can be used to track produc- are unable to provide. tion levels as well as the extent to which new orientations and policies are implemented. Management Contracts Contracts can also be used as platforms One of the most important elements of for discussion between a regional agency and healthcare reform in Quebec has been the the organizations providing services to it. A introduction of management contracts (i.e., contract allows each organization to identify accountability agreements) between the health the projects and programs that an agency ministry and the province’s regional agencies agrees to support, while allowing an agency to and the contracts signed between each agency define performance measures. and the organizations providing services in To succeed, Quebec’s health system refor- their jurisdictions. This contractualization has mation – including the development of popu- legitimized the regional agencies’ authority lation-based responsibility – requires a shared and has defined the management responsi- and sustained effort. Management contracts, bilities of the partner organizations in terms for example, must be regarded as genuinely of clear objectives. Indeed, these mandatory two-party agreements that benefit both sides. agency–organization contracts, which enable Equal partners make the best agreements and, the regional agencies to honour their own while the situation does not allow for absolute management contracts with the provincial equality, the contract negotiation process must government, are the most important health attempt to provide all opportunities possible system management tools in Quebec. for objective exchange and discussion. Contracts provide a formal method to monitor development on an annual basis Conditions for Success and to measure the performance of regional services. In addition, they serve as an agreed- Equity Funding upon checklist of objectives, and it is hoped Ensuring equitable resource allocation or they eventually will include population- equity funding requires a population-based health outcomes. Contracts also provide a funding formula. Each of Quebec’s 17 regions more uniform and equitable way for regional is evaluated using population-based criteria to authorities to manage provider organiza- determine its particular health needs. Funding
51 HealthcarePapers Vol. 8 Special Issue is provided through 11 programs (Figure 2) to five hours to see a GP for a five-minute and resource allocation is determined accord- consultation, access to one’s family physi- ing to each region’s population; the services cian is frequently much more limited and provided to people from outside a region are often requires setting an appointment months also considered. Data include socio-economic in advance. The Kaiser Permanente model statistics and historical consumption patterns. ensures a scheduled visit within 48 hours The provincial government’s introduction and an urgent scheduled visit the same day. of a new funding formula in 2003 proposed This is achieved though the use of a multi- a reduction in funding of $221 million for disciplinary team responsible for a group of Montreal. Other regions, mainly urban areas, patients (although each patient has his or her likewise saw their funding decrease, while in own family physician on the team). Access more rural areas funding increased. In order to to diagnostic services is arranged by the team implement this new formula gradually, it was through a central booking system. decided that all transfers would be made exclu- In Montreal, access to family physicians is sively from new development money and that being addressed by financially supporting the any regions transferring funds outside of their development of the FMGs I discussed earlier. jurisdictions would have to achieve greater The number of admissions to medical schools productivity in order to ensure their own devel- has also been increased and new curricula opment. Given that the long-term collection of based on a team approach are in development. population-health data is needed to guarantee Recently, negotiated fee-for-service formulas equitable funding among a region’s HSSCs, all have included bonuses for registering patients, parties agree that it will be a number of years registering and treating vulnerable patients, before the formula will be finalized. taking on management tasks and spending time discussing cases with other professionals. Purchasing Access Access to timely surgical intervention Access has become one of the most visible is receiving a lot of public and government measures of a high-performing healthcare attention, and the government made new system and the one that is most talked about money available to reduce wait times using in the media and by government. Wait times a two-pronged approach. The first method for surgery, emergency room consultation, involved designing a wait list system that diagnostic tests, specialist consultation and ensures such lists are appropriate and central- radiation therapy are just some of the issues ized. Each hospital named a person responsi- making the headlines. The Supreme Court ble for managing its wait list and contacting of Canada recently ruled that Quebec could patients and, when the guaranteed wait time not prevent private insurers from offering could not be met, helping patients find alter- healthcare services if public institutions were natives. The wait time management program unable to provide timely care in response to is administered by each regional agency with medically necessary services. This ruling has the support of the hospitals’ information led Quebec to offer wait time guarantees and systems. The second step involves increasing to allow the private purchase of medical serv- the number of surgical interventions in those ices if wait times are not respected. areas where wait times are beyond the norm. The most important, yet often least Regional agencies are responsible for this mentioned, form of access is the ability to see initiative. In Montreal, we issued a request for a family physician. While one might wait up proposals and awarded new surgical volumes
52 The Reform of Health and Social Services in Quebec to those hospitals that offered the highest provide services that, under the Canada quality, lowest-cost service. We encouraged Health Act, are not allowed outside the high volumes and regrouped services such as organized care system. These private centres cataract surgery and hip and knee replacement will not be allowed to charge patients for into high-volume services. These endeavours interventions but must negotiate a volume of have proven successful: in some cases wait activity from their local HSSCs. Each centre times have been cut in half, while costs have will need to be accredited by its regional dropped significantly. agency and its affiliated hospital(s) will be Family physicians frequently complain of responsible for quality of care. lack of access to diagnostic services, a prob- lem that is frustrating for patients as well. Conclusion – The Key Ingredients of Important investments have recently been Success made in increasing the system’s capacity, I have attempted to illuminate some of the especially for MRI and CT scans; however, levers that the Quebec government and the Montreal Health and Social Service Agency are using to develop a high-performing healthcare system. The reform process began In an effort to create more with a system-wide set of changes that reor- efficient, easily accessible, ganized services on a population basis. This step was followed by an integration of serv- and comfortable healthcare ices aimed at providing more efficient care environments, Quebec passed delivery. Last, steps were taken to focus on a new law that would allow the the health and well-being of individuals and communities by giving specific mandates to creation of private affiliated HSSCs across the province. medical centres The success of these reforms depends upon physicians and other healthcare profes- sionals making a significant cultural shift. It there are many other areas, such as ultrasound, also requires strong health system leadership that are not easily accessible. Establishing a to promote the vision of this widespread trans- strong link between GPs and access to diag- formation and to guide its implementation. nostic services is key to successful healthcare management. As FMGs are established, they References are linked to diagnostic centres that must Agence de Santé de Montréal. 2006. Cadre de Référence pour l’Implantation des Cliniques-Résaux. ensure services in a timely manner. Retrieved February 28, 2007. 53 HealthcarePapers Vol. 8 Special Issue org/publications/publications_show.htm?doc_ Ministère de la santé et des services sociaux. 2004. id=410531#puget> L’Intégration des Services de Santé et des Sociaux: Le Projet Organisationnel et Clinique et les Balises Associées Davis, K. 2006. “President’s Message: The Best Health à la Mise en Oeuvre des Réseaux Locaux des Services de System in the World.” 2006 Annual Report of The Santé et de Services Sociaux. Quebec: Author. Commonwealth Fund. New York: The Commonwealth Fund. Retrieved February 28, 2007. 54 Balancing Equity Issues in Health Systems: The Example of Vancouver Coastal Health EQUITY Ida Goodreau President and Chief Executive Officer, Vancouver Coastal Health Introduction drama is played out every day – nowhere Canada’s public health system is committed more so than in the territory overseen by to providing necessary healthcare services to Vancouver Coastal Health (VCH). In this all Canadians. This principle is so simple – as region, Canada’s highest per-capita income well as morally and practically appealing – that postal code lies within a few kilometres of the it has become embedded as a fundamental Downtown Eastside, the country’s lowest per- part of what it means to be Canadian. It is, of capita income postal code. VCH staff deci- course, much more complex to follow through sions about who receives care and how much, on the principle than to support its philosophy. and – perhaps more importantly – who does An ideal world would be one in which the not, are in constant and stark relief. need or demand for health services were fully matched by resources and the system’s capac- British Columbia’s Health Authorities ity to deliver desired activities. However, as In 2001, the British Columbia (BC) govern- we all know this ideal state does not exist in ment created a regional healthcare delivery any public healthcare system in the developed structure by forming six health authorities world. This gap between ideals and reality across the province. This restructuring was gives rise to the challenge of allocating scarce motivated by the belief that integrating public resources so as to fulfill “most-needed” services. healthcare services would result in improved At the health system delivery level, this quality outcomes and greater efficiencies. 55 HealthcarePapers Vol. 8 Special Issue Rather than focusing on just hospitals, resi- between demand and supply in healthcare dential care beds or community clinics, policy- delivery. In itself, however, it clearly is not the makers argued that a regional system would solution. Given that there are two elements to break down silos and allow a continuum-of- the equity challenge (i.e., too much demand care approach. Under this new system, early and/or too little supply), finding a balance detection, treatment and ongoing disease implies adjusting or rationing one or the other management would be coordinated across element – or, more usually, both. The strategy for on-the-ground healthcare deliverers, then, involves both a quest to define and optimize the need for healthcare services and a rigor- VCH staff decisions about who ous improving of the efficiency of how those services are delivered. receives care and how much, The demand for healthcare services contin- and – perhaps more importantly ues to grow at a rate that exceeds the expecta- – who does not, are in constant tions of Canadian governments and the public. Wait lists, delays and access issues are sympto- and stark relief. matic of demand not being fully met, despite growth in funding levels in excess of 6% per annum in most jurisdictions. The following a continuum supported by evidence-based factors influence demand for services: practices, accepted protocols and pathways and multidisciplinary teams. The intent was to • Population growth bring a more holistic approach focusing on the • Population aging “whole” human being rather than fragmented • New treatments and technologies care characterized by redundancy and the • The health status of the populations hand-off of patients between practitioners. served As one of BC’s health authorities, VCH’s • Other non-medical factors: mandate is “To improve health outcomes for • Economy the people we serve through appropriate care, • Employment education and research.” Particular emphasis • Housing is placed on three objectives: • Education • Culture • Increasing quality of life and longevity through high-quality medical and clinical Across Canada the expanding and aging care population can be predicted with relative • Improving the patient experience through accuracy and represents an annual growth increased access, responsiveness and factor of between approximately 1.5% and support 2.5%. It has proven much more difficult to • Promoting informed choice, self-care and make accurate forecasts for new treatments self-responsibility and technologies – areas that have seen much greater increases. In BC, for example, the Demand and Supply number of hip and knee replacements rose The regional structure is an important from 2,430 procedures in 1991 to 4,775 in component in addressing the imbalance 2005. Less than 15% of that increase can be 56 Balancing Equity Issues in Health Systems attributed directly to population growth and adopted private sector best practices aimed aging. Improvements in outcomes, length at delivering more services for the funding of stay, technology/treatment and surgeon provided. Among the most important and proficiency were the biggest growth drivers frequent measures undertaken, hospitals and (Ministry of Health, Health Economics and health authorities have consolidated sites Analysis, Information and Modernization and activities, altered supply-chain logistics, Branch 2007). adopted “lean” and “quality” redesign tech- In a system in which demand exceeds niques, introduced patient-flow modelling and supply, rationing becomes a time-honoured scenarios, outsourced to the private sector and and sometimes desperate response. All health improved costing and performance systems. authorities and healthcare providers put enor- Despite these efforts, the reality for most mous effort into initiatives that will avoid the public health providers is that the demand for need to ration services. On the demand side, services still outstrips the capacity to deliver. strategies include the following: Therefore, decisions must be made regarding how and where to allocate funds and resources • Continuum-of-care design, including more effectively. chronic disease management, prevention, early detection, appropriate primary care Resource Allocation Decision-Making and community-based care, including Resource allocation decisions are usually rehabilitation and home support made at two levels. The first is at the level of • Evidence-based practices guided by government policy, where regulations, legisla- outcomes tion and political directives determine public • Adoption of new discoveries, therapies priorities and, frequently, where funds are and treatments directed. Federal–provincial agreements on • Individual self-care and self-responsibility waitlist times for selected surgeries and other • Initiatives to reduce hospital admissions procedures, and decisions regarding approvals and re-admissions of – and funding for – new, experimental and • Timely access to diagnosis and assessment often high-cost drugs are recent high-profile • Streamlined navigation through the examples of such resource allocation decisions. healthcare system From a broader perspective, healthcare • Partnerships with other organizations provider structures and governance systems that entail housing, income assistance and constitute the second level at which resource education allocation decisions are made. In BC, fund- ing for health authorities is largely based on These strategies must accompany improved a population needs-based funding (PNBF) efficiencies and optimization of the supply or formula. The strategic intent of this type of delivery side of the healthcare system. funding, as opposed to activity-based funding, is to create incentives for health authorities to Resource Allocation provide the most appropriate and cost-effec- Over the past decade, a concerted effort has tive services. The PNBF formula incorporates been made across Canada to create a public a per-capita dollar amount, with adjust- healthcare system that is more efficient, costs ments for age and socio-economic status. In less and is more effective. To achieve these many cases, it promotes greater investment goals, many public health providers have in prevention, chronic disease management 57 HealthcarePapers Vol. 8 Special Issue and community-based services. The formula organizations in a process of continuous fosters a continuum-of-care approach and improvement. Figure 1 shows that at VCH a penalizes higher per-capita hospitalizations, continuum-of-care strategy has guided plan- re-admissions as well as in-patient and in- ning and investment since its creation in 2001. hospital procedures. The main elements of this strategy are: PNBF challenges policy-makers to find ways to generate incentives and discipline in • A focus on health outcomes by providing order to bring about more efficient and lower- the most appropriate services/treatments cost procedures. For example, it raises the designed to ensure optimal quality of life issue of whether it is even possible to foster and longevity competition between hospitals and clinics • Optimal healthcare delivery that crosses that are likely to be awarded larger volumes traditional boundaries of surgeries or diagnostic procedures on the basis Figure 1. VCH continuum of care of lower costs and greater productivity. Performance ���������������������������� ��������������� Measurement ������� The other side of the ���������� funding picture is deciding ��������������� �������������������������������������������������������������������������������������������� which services or outcomes ����� will be delivered. In BC, ���������������������������������� the Ministry of Health ������������������������������� and health authorities are ���������������� governed by a structure of ������� ��������� contracts and agreements ������ ����� ���� ���� ������� ������� that spell out the provincial ������� government’s expectations for the performance to be delivered. The agree- ments include performance metrics that address quality, access, outcomes • Timely evidence-based care and best prac- and improvement targets as well as a require- tices ment for balanced budgets. Within these • Focus on the health of whole population parameters, health authorities must develop groups strategies and plans that encompass health • A multidisciplinary team approach outcomes for the populations they serve and • Patient involvement in care and preven- efficiencies that optimize available resources. tion Benchmarks and comparative stand- ards are important tools for making resource Performance indicators and measures allocation decisions. These instruments help that provide discipline and rigour across the health system planners decide where resources organization support VCH’s plans and initia- should be focused and support healthcare tives related to the continuum of care. These 58 Balancing Equity Issues in Health Systems indicators and measures are captured in a • Acute beds per capita balanced scorecard system that is reviewed at • Number of surgical cases per capita all levels, including VCH’s board and senior • Residential care days per capita executive team. They are presented at quar- • Alternate level of care days in hospitals terly public board meetings and posted on our • Average length of stay (acute and rehabili- tation) • Number of cancellations • Operating room and post-anaesthetic … it raises the issue of whether recovery productivity • Cost per case/activity it is even possible to foster competition between hospitals Access is another key issue that can nega- and clinics that are likely to tively impact health outcomes, workflow and costs. Waittime measures include the follow- be awarded larger volumes ing: of surgeries or diagnostic procedures on the basis of lower • Emergency department measures, includ- costs and greater productivity. ing the Canadian Triage and Acuity Scale (CTAS) measures and decision to admit • Wait times for key surgical procedures, including hips, knees, oncology and Web site (www.vch.ca). Most importantly, cardiac care they are used to provide direction and support • Wait times for diagnostic procedures for prioritization and improvement across the • Community care placements in residential care continuum. care facilities Given that the impact of interventions on • Mental-health clients receiving follow-up outcomes often occurs years or even decades within 30 days of discharge after an investment has been made, measures that focus on outcomes are the most challeng- Indicators also encompass the following ing. Outcome measures considered by VCH public health and primary care effectiveness include the following: measures: • Potential years of life lost for target popu- • The proportion of people experiencing lations difficulties in obtaining care • Post-neonatal mortality rate • The proportion of chronic diabetes • Re-admissions for target populations (e.g., patients receiving appropriate care (e.g., mental health, congestive heart failure) diabetes patients with HbA1C <7.0) • The percentage of the population that is Other indicators and measures focus on overweight or obese efficiencies and resource utilization. They • The percentage of the population that include comparative measures designed to smokes identify opportunities to exchange best prac- tices among health providers in other parts of These indicators and measures help VCH BC, Canada or the world. These include: to determine priorities, which then drive 59 HealthcarePapers Vol. 8 Special Issue resource allocation decisions. Within our opment are required to define what the public health authority, a population health approach healthcare system can – and will – provide, supports the goal of equity. Appropriate as well as how services will be funded. The indicators and measures provide guidance and dual questions of “what will be provided?” direction to support investments in services and “who will pay?” must be addressed in the and activities. They also highlight areas of coming new world of geriatric baby boomers. opportunity for improved efficiency and best- Even in the shorter term, critical issues practice transfer. pertaining to sustainability require higher priority than they currently receive in most Sustainability Canadian jurisdictions. Human resource While supply and demand pressures in the shortages and lack of investment in informa- public health system are well recognized and tion technology and infrastructure threaten much work is underway to find a balance the future viability of our health system. More and more frequently, particularly in larger centres, key issues are a lack of beds and surgi- cal capacity. These issues are driven not by a Public debate and policy shortage of funds but by a shortage of nurses and other healthcare professionals. development are required As we look toward the decades ahead, to define what the public there appear to be many opportunities for healthcare system can – and vastly improved health outcomes. It behooves us to ensure that the policy and strategy will – provide, as well as how decisions we make today will not only create services will be funded. a health system that will provide Canadians with the best healthcare possible but also create a system in which we will want to work. between the needs of the population and the system’s capacity to meet them, a third Reference – equally critical – element must also be Ministry of Health, Health Economics and Analysis, Information and Modernization Branch. Discharge addressed. That element is sustainability. The Abstract Database (DAD). Victoria: Author. Consulted demands on the healthcare system in the April 2007. future – driven primarily by an aging popula- tion and new technologies and treatments – will outstrip the potential for efficiencies and improvements to absorb these additional requirements. Public debate and policy devel- 60 STRATEGIC PURCHASING HealthcarePapers 61 Strategic Purchasing to Improve Health System Performance: Key Issues and International Trends1 PURCHASING Reinhard Busse, MD, MPH Professor and Chair, Department of Health Care Management, Berlin University of Technology Associate Head for Research, European Observatory on Health Systems and Policies Josep Figueras, MD, MSc Director, European Observatory on Health Systems and Policies Ray Robinson, PhD Professor of Health Policy, London School of Economics and Political Science Elke Jakubowski, MD, MSc World Health Organization – Regional Office for Europe Introduction all performance. However, no single organi- All health systems exercise some form of zational model of purchasing can, or should, purchasing, which, in its most basic form, be applied to all health systems. Purchasing constitutes the allocation of funds to provider arrangements must be determined chiefly by organizations. When purchasing goes beyond each country’s main form of healthcare fund- the simple reimbursement of products and ing and provision. services and is aligned to societal healthcare Purchasing goes well beyond the mere needs and wishes, it has the potential to play a contracting of providers. It includes the key role in determining a health system’s over- central role played by citizens and their 62 Strategic Purchasing to Improve Health System Performance governments as well as by providers’ organi- planners: bridging the gap between plans and zational forms. A central lesson derived from the budgetary allocation of resources. For our analysis is that if policy-makers are to instance, in many tax-funded systems of the achieve their desired results, they need to national-health-service (NHS) type, separate take a broad systems approach to purchas- departments carry out these functions, with ing and act upon all the various components national health plans having little influence of the purchasing function. If purchasing is over the historical and incremental budgetary narrowly focused on individual elements such processes.3 Purchasing theory thus underlies as contracts, payment systems or provider the potential of this function when it is closely competition, it will not reach its full poten- linked to the planning process. tial. For instance, the introduction of a new This was one of the most important case mix–based payment system to improve considerations when, in the United Kingdom efficiency will succeed only if providers can (UK), Spain, Sweden and other tax-funded count on the managerial and organizational systems, the purchaser–provider split was ability to respond to these new financial developed and introduced in the early 1990s. incentives and if the health interventions Until then, these systems were regarded as financed through the new payment system are integrated systems in which a single organi- informed by cost and effectiveness evidence zation filled both the third-party payer and and respond to the health needs and priorities provider roles (e.g., the NHS in the UK). If of the specific population being served. organized at the national level (rather than at A definition of strategic purchasing should the regional level as, for example, in Sweden), reflect this systemic approach. Strategic these two functions were also intertwined purchasing aims to increase health system with the ministry of health’s regulatory role. performance through the effective allocation Financial resources were typically allocated of financial resources to providers. This proc- down the health service hierarchy and provid- ess involves three sets of explicit decisions: ers were under NHS command and control. The purchaser–provider split not only sepa- • Which interventions should be purchased rated the two functions but also made both in response to population needs and sides independent of direct (national) govern- wishes, taking into account national health ment control. The purchasing role was given priorities and evidence on cost-effective- to regional governments (e.g., in Spain and ness Italy) or to separate institutions (e.g., in the • How they should be purchased, includ- UK), while providers were transformed into ing contractual mechanisms and payment autonomous public entities (“trusts” in the systems UK). Somewhat later in most of these coun- • From whom they ought to be purchased tries, purchasers also entered into purchas- in light of providers’ relative levels of qual- ing relationships with other providers, both ity and efficiency2 private not-for-profit and for-profit ones. The basic NHS relationship between Strategic purchasing should lead to a purchasers, providers and the government as maximization of overall health gain from steward and regulator has thus become similar available resources (i.e., increased alloca- to the traditional arrangement of actors in tive efficiency). It addresses one of the main countries with a social health insurance (SHI) problems traditionally encountered by health system, often termed Bismarckian after the 63 HealthcarePapers Vol. 8 Special Issue German chancellor at the time when the first Citizen Empowerment SHI system was introduced by law in 1883. In A central element in purchasing theory is that SHI countries, the role of third-party payers a purchaser agent represents the wishes and has been delegated to “sickness funds,” which needs of its citizenry. Strategies for citizen are separate from providers – be they public empowerment in purchasing can be grouped (typically owned by regional or local govern- under the following four strategies: ments), private not-for-profit or for-profit. To a varying degree, national (and partly regional) • Assessing population health needs governments regulate and supervise sickness • Ascertaining citizens’ views and values funds and providers, both of which are organi- • Enforcing purchasers’ accountability zationally separate from the regulating level • Increasing citizens’ choices government (Busse et al. 2004). As to the question of whether the separa- It should be noted at the outset that these tion of purchasing and providing will bring strategies are aimed primarily at increasing net gains, at least in terms of economic health systems’ responsiveness but also, to the efficiency, organization theory highlights a extent they reflect population health needs, number of important factors. Markets appear at improving health, equity and allocative to perform well when there is a potential for efficiency. However, as we note below, this is high competition, when investments do not not always the case and trade-offs between tie providers to specific purchasers, when these objectives are usually necessary. One complexity and uncertainty are relatively low other preliminary consideration here is that, in and when few scale economies apply. The addition to these mechanisms that strengthen absence of these conditions in healthcare, downward accountability to the popula- however, has led attention to shift toward tion, patient empowerment is also achieved network models. These can involve partner- through upward accountability of purchasers ship models, which retain purchaser–provider and providers to health systems’ stewards (i.e., separation but encourage long-term relation- democratically elected governments). ships and integrated decision-making. The relational contracts that are used in most Assessing Population Health Needs network models rely on trust in order to econ- In spite of its widely recognized importance, omize on transaction costs. Network models health needs assessment is not routinely resonate closely with the political ideas of the carried out in many health systems; when “third way,” which has been described as an it exists, it is not always incorporated into explicit rejection of both the old centralized purchasing decisions. These shortcomings command-and-control systems and of divisive are due to a variety of reasons, including the market systems. The third way seeks to find general deficiency of the public health func- a middle path that combines a commitment tion in many countries, the non-geographi- to social values with some of the benefits cally delimited coverage of many purchasers believed to flow from an entrepreneurial (e.g., sickness funds in many SHI countries) approach. The obvious question arising from and the scarcity of public health skills in third-way approaches in the healthcare arena purchasing organizations, particularly those is whether the practice of purchasing meets with small population coverage. Above all, these theoretical expectations. they reflect the lack of structural or functional 64 Strategic Purchasing to Improve Health System Performance integration of the public health function The formal representation of consumers in within purchasing. This function seems to purchasing organizations is commonplace in work better in NHS systems in which coor- many European countries. The challenge lies dination or integration between public health in determining which group best represents and purchasing is more straightforward; consumers on purchasing boards. Another however, in some NHS countries there is still major strategy for enforcing purchasers’ a virtual absence of health needs assessment. accountability is the statutory establishment In spite of the inherent difficulties in SHI of packages of care with formal coverage guar- systems that, for instance, compartmentalize antees. This is very much the practice in most preventive and curative activities, the intro- Western European SHI systems (Gibis et al. duction of some innovative structures (e.g., 2004) but less so in the more recently devel- in France) allowing for formal coordination oped SHI systems in Eastern Europe and in between actors has met with positive results many of the NHS systems in northern and (Sandier et al. 2004). southern Europe. A key means of enhancing the role of consumers in purchasers’ deci- Ascertaining Citizens’ Views and Values sion-making and ensuring accountability is to Purchasers’ decisions often do not reflect their stipulate purchasers’ rights and responsibili- societies’ values. There are, however, a number ties. In recent years there has been a flurry of innovative experiences in Norway, Sweden, of national and international patients’ rights the Netherlands and the UK on which one conventions and declarations. Most countries can draw in order to include citizens’ views have also developed patients’ rights legislation, when deciding which services to provide while others have developed patients’ char- (Mossialos and Maynard 1999). These exam- ters or ethical codes. One last mechanism to ples are not exempt from complexity. For enforce purchasers’ accountability and respon- instance, citizens’ participation in determining siveness to consumers is the use of complaint packages of care has proven to be problematic. mechanisms to influence individual purchaser Citizens are frequently averse to reducing care decisions. This is particularly so in many priorities and their views often lack consist- SHI systems where, due to the contractual ency. In addition, we should take into account relationships involved, complaints are raised the fact that the influence of social values before civil or administrative courts or made on purchasing priorities does not necessarily to quasi-judicial bodies. Most NHS systems increase equity and allocative efficiency; as a have also put in place complaint systems; consequence, trade-offs are at times necessary.4 however, the absence of legally enforceable entitlements in many of them reduces the Enforcing Purchasers’ Accountability scope for consumers to assert whether the There are four ways in which purchasers can provision – or, more likely, the non-provision be made accountable to their populations: – of a particular service was appropriate. • Formal representation Increasing Citizens’ Choice • Statutory establishment of packages of The strategies for citizen empowerment care outlined above correspond, in Hirschman’s • Patients’ rights legislation (1970) terminology, to “voice” mechanisms. • Complaint mechanisms Health systems also increasingly rely on exit 65 HealthcarePapers Vol. 8 Special Issue mechanisms, notably the choice of purchaser of purchasing is necessary but how to put it in and/or provider, as the ultimate strategy to place. A preliminary consideration is the level empower individuals. Consumers in most of government at which purchasing steward- countries have the right to choose their ship should occur (i.e., central government’s primary care providers. In SHI systems, role vis-à-vis regional or local levels and consumers may also choose ambulatory accountability mechanisms). On the whole, specialists and hospitals (albeit in some devolution to lower levels of government countries – such as the Netherlands – through tends to increase responsiveness to local needs. a gate-keeper). Choices are more restricted It can, however, decrease equity of access in NHS systems; however, this is rapidly – especially for some minority groups – and changing in many countries. Swedish and efficiency due to lack of economies of scale Norwegian patients, for example, are allowed and duplication of facilities. to choose any hospital outside their county of residence. Patients under the jurisdiction Translating Health Policy into Purchasing of the English NHS have also seen their Decisions hospital choices increased. While increased Formulating health policy is a key function consumer choice of providers clearly increases of government stewardship but one that is responsiveness, there is debate over its nega- either absent or poorly carried out in many tive impact on other social objectives, notably countries. As a result, it has tended to have equity, cost containment and allocative effi- minimal influence over purchasing decisions. ciency. There is evidence that choice tends The following five policy lessons can be drawn to benefit the higher (and usually better- from the analysis of the failures, as well as informed) social classes and thus may lead successes, in implementing health targets: to increasing health inequalities. The policy response, however, should not necessarily be • Targets should be realistic but challenging to reduce choice in line with the “equity in (not the mere projection of trends), trans- poverty” argument but, rather, to focus efforts parent, technically and politically plausi- to ensure wider access to information and to ble, evidence-based, selective and reflective support choice among the underprivileged. both of health needs and priorities. • Key stakeholders, particularly the profes- Strengthening Government sionals involved in implementation, Stewardship should be included in setting targets. There is broad consensus among analysts • Targets should be supported with evidence and policy-makers about the central role of for effective implementation policies. government stewardship in ensuring health • Sub-national development of targets in system effectiveness. Stewardship’s main combination with national formulation functions include formulating strategic policy increases the likelihood of their imple- directions, generating intelligence, exerting mentation. influence through regulation and ensuring • Building targets into performance- accountability (Saltman and Ferroussier-Davis management systems, including financial 2000; Travis et al. 2003). incentives and performance reviews, also The central question for policy-makers is facilitates their implementation. no longer whether strengthening stewardship 66 Strategic Purchasing to Improve Health System Performance Establishing an Integrated Regulatory various aspects of cost-effective purchasing Framework and deals with multiple objectives. Regulation takes centre stage in health The main regulatory mechanisms that systems’ adoption of purchasing structures. should be part of such a framework are These structures typically involve the substi- grouped into four main categories. First, there tution of hierarchical managerial relationships are regulations to ensure citizens’ participa- with contracts, management decentralization tion and purchasers’ accountability. Such and a plurality of public and private provid- regulations provide for the availability of ers, all of which require increased regulation. information from purchasers about access to There is a wide array of regulatory mecha- health services, formal participation of citizen nisms available to decision-makers to ensure representatives on purchasing boards, patients’ purchasing’s effective functioning. rights legislation stipulating what citizens can The first lesson for policy-makers is to expect from purchasers and complaint mecha- achieve an appropriate balance between pro- nisms, including an ombudsperson (den Exter entrepreneurial regulation and regulation that 2005; Hunter et al. 2005). sets boundaries to individual entrepreneurial Second, certain regulatory mechanisms are behaviour. Sometimes the development of aimed at monitoring purchasers’ performance. purchasing is stifled by a host of constraining One set of regulations focuses on their insur- regulations that lack mechanisms to facilitate ance role, guaranteeing equitable and efficient entrepreneurship (e.g., enabling independent behaviour and including mandatory insur- purchasing organizations and self-governance ance with open enrolment, income-related of public providers or introducing perform- contributions or community-rated premiums ance-based payment systems). The oppo- and the transfer of funds between purchasers site has also been true in countries where (applying redistribution formulae to compen- command-and-control mechanisms have sate for differences in the risk structure) (Rice quickly been dismantled without an appro- and Smith 2002). Another set of regulations priate regulatory framework in place. This relates to purchasing and aims to ensure has caused opportunistic behaviour by both operation within a fixed budget, a standard- providers and purchasers, to the detriment ized package of benefits and government of social objectives. A complementary policy participation on purchasing boards. lesson is, therefore, that deregulation should The third type of regulation addresses not occur without simultaneous re-regulation the contractual relationships between provid- (Saltman and Busse 2002). ers and purchasers. This entails setting up a Purchasing’s intricate components require framework and rules for collective contract- a multi-level effort to achieve policy objec- ing; specifying the roles of the various part- tives. Perverse consequences result from ners, including purchasers, associations of narrow regulatory efforts focused on single providers, professional organizations and the purchasing components (e.g., payment government; and establishing the details of systems) or on economic concerns (e.g., cost the contracting process, including negotiation control). Another general lesson is, therefore, and litigation rules. Specific rules and proce- that one ought to be able to regulate complex- dures for contracting include requirements ity by setting out a broad framework of for access to information for purchasers and regulations that integrates and coordinates the providers as well as the right of purchasers to 67 HealthcarePapers Vol. 8 Special Issue evaluate the implementation of contractual ing stewardship. Among these are the exist- provisions, quality standards, payment-system ence of closed social networks between requirements and price regulation via national government officials, purchasers and provid- tariffs by unit of output, such as a diagnosis- ers, alliances that might prevent the enforce- related group (DRG), or by requiring specific ment of legal agreements. Moreover, in some costing and pricing procedures. countries the former management culture of A fourth set of regulatory mechanisms is officials accustomed to command-and-control directed mainly at providers. It includes meas- functions might prevent them from adapting ures affecting strategic planning, technology to their new stewardship role. and licensing, certification and accreditation. Ensuring Cost-Effective Contracting Strengthening Government’s Capacity and Contracts are the main vehicle by which Credibility purchasers translate their populations’ health Governments face a series of technical, needs and desires into the provision of health economic, political and cultural barriers that services. impinge on their ability and credibility to carry out effective purchasing stewardship Linking Contracting with Planning (Hunter et al. 2005). First of all, the techni- Establishing a purchasing strategy is the start- cal and administrative abilities required are ing point of the contracting process (Duran lacking, particularly in some of the countries et al. 2005). More emphasis should be paid in Central and Eastern Europe (CCEE). to requiring purchasers to develop strategic When regulatory departments exist, they are (long-term) and operational (annual) purchas- often understaffed and have poor informa- ing plans. These will signal purchasers’ inten- tion about the behaviour of purchasers and tions by setting out service requirements, providers. Moreover, there are substantial budget constraints and performance targets. transaction costs involved in formulating They will also enable providers to produce health policies and, particularly, in setting a their own business plans. The contracting regulatory framework, collecting information cycle continues with purchasers identifying and monitoring purchasers. Although these and selecting providers, followed by negotiat- costs should be offset by the efficiency gains ing contracts, reaching agreement and then derived from a well-functioning purchasing managing and monitoring those contracts. system, they still pose an economic obstacle The way this process is conducted depends on for some governments. the degree of competition involved. The gap between the public guarantees An appropriate balance must also be of healthcare delivery and the public funding maintained between government stewardship available poses a larger economic and political and the roles of purchasers and providers in obstacle. For instance, the violation by govern- negotiating contracts’ main parameters, such ments of their own obligations to finance as activities (e.g., number of patients treated, healthcare services weakens their control surgeries performed), payment methods and over purchasers. Political obstacles are further selection of providers. In some countries increased by the inability of some governments government determines these parameters. As to enforce statutes and by the divergence of a result, the contracting parties are left with policies among different government bodies. a merely symbolic role, making contracting a Many countries also face cultural and bureaucratic process. organizational difficulties in realizing purchas- 68 Strategic Purchasing to Improve Health System Performance Ensuring Evidence-Based Contracts paramount in their decisions. On the whole, Part of the rationale for introducing contracts however, there seems to be a common trend is to implement evidence-based healthcare by toward service (cost-and-volume) and incorporating best-practice guidelines. In real- performance-based contracts. SHI countries ity, however, this potential is far from realized in Western Europe are increasingly adopt- and contracts often make little or no reference ing more complex forms of cost-and-volume to evidence-based practices. contracts, particularly ones that define prod- The first step in evidence-based contract- ucts and include performance indicators. ing is to ensure that the actual evidence European NHS systems, at the start of the is available to purchasers. Most Western purchaser–provider split reforms, adopted European governments have some form of block contracts that have become progres- health technology assessment (HTA) in the sively sophisticated by incorporating better form of national agencies, although this is definitions of volume and product. Many of less the case in the CCEE, where HTA is less the CCEE, when they introduced SHI based common (Borowitz et al. 2004). These initia- on contracts, began with retrospective forms tives have yielded many valuable insights; of cost-per-case contracts aimed at increas- however, they often focus on individual ing activity; given upward cost pressures, technologies and interventions rather than however, they have also been increasingly on the overall organizational framework moving toward cost-and-volume contracting. of care within which the interventions are Such contracts seem to have the most poten- used. Overall, there is still little research tial for signalling the appropriate incentives that can provide the information purchasers to providers because they allow purchasers to need, despite its availability and good quality decide the volume of care required, to define (McKee and Brand 2005). the product and to determine cost-effective The second step is to incorporate evidence forms of intervention. At present, however, on interventions and methods of service deliv- most of these contracts are still relatively ery into workable contracts for specific disease unsophisticated. and client groups. This step entails developing treatment guidelines that account for exist- Paying for Performance ing practices, the potential for change and the A system of payment, with its built-in finan- resources required and a broad view of health cial incentives, is the main mechanism for improvement, including both prevention and contract implementation, to the extent that treatment options. This is an area of major often there is little difference between a potential but it is manifestly underdeveloped contract and the payment system it involves. in most countries. One exception is the UK’s An optimal payment system should induce NHS frameworks, which provide a compre- providers to deliver top-quality treatments hensive approach to building health strategy, that respond to patients’ needs with a high priority interventions, treatment guidelines degree of technical efficiency. However, no and performance targets into contracts. single payment system seems to achieve all of them and trade-offs frequently become Moving toward Cost-and-Volume Contracts necessary. Retrospective methods of reimburs- Decision-makers often face the question of ing providers by fee-for-service and/or per what type of contract is the most appropri- diems increase service productivity as well as ate. Issues of capacity and feasibility are responsiveness but can have a negative impact 69 HealthcarePapers Vol. 8 Special Issue on cost containment and efficiency. When measures such as DRGs, patient-management providers are reimbursed for finished cases categories (PMCs) and disease staging. A more through some case-mix measure, the incen- complex methodological challenge is how to tive is to treat cases more efficiently; however, pay for the treatment of diseases that require problems with allocative efficiency and cost various episodes of care at different levels. containment remain. This is not to say, Another area that requires further empha- however, that the answer lies simply in intro- sis and methodological innovation is linking ducing prospective global budgets. payment incentives to quality indicators set Many Western European countries have out in contracts; for instance, providers’ adher- adopted a form of global budget based on ence to standards of care or fulfilling a series of prospective levels of activity and adjusted for health outcome and responsiveness targets. severity through some case-mix measure such In sum, there is broad convergence toward as DRG or one of its variants. Most countries global budgets based on activity levels, which are adjusted by the severity of patients’ health status, and on performance targets. In other words, such budgets incorporate inputs Policy-makers, therefore, (severity), processes (activity) and outcomes might prefer to opt for more (performance). However, a number of unre- solved methodological issues require further transparent and easy-to- innovation and development. A note of implement systems rather than caution about the limits of payment systems more sophisticated systems that is also pertinent here. Incentives often act have greater potential but that as a double-edged sword: they can be easily “gamed” by providers who invariably have face greater implementation and better information than purchasers (Rochaix monitoring challenges. et al. 1998). In addition, excessive reliance on payment systems can detract from investing efforts in other possibly effective strategies. also have an additional payment component Moreover, there are important trade-offs in based on retrospective cost-per-case reim- terms of the transaction costs and manage- bursement, usually for particularly expensive ment skills required to implement complex treatments or for cases handled by providers payment systems. Policy-makers, therefore, that lack contractual agreements with their might prefer to opt for more transparent and purchasers. easy-to-implement systems rather than more Within this broad convergence in payment sophisticated systems that have greater poten- models, there is still much diversity involving tial but that face greater implementation and aspects such as the choice of case-mix measure monitoring challenges. to adjust for severity and the use of financial incentives to reach target levels of efficiency Promoting Quality through Contracts and quality. Many methodological aspects also Quality strategies can be examined in rela- remain unresolved. A main methodological tion to the stages in the contracting process, debate concerns the definition and measure- including negotiating (specifying appropriate ment of the healthcare product, which has quality requirements); monitoring (requir- led to the development of a host of case-mix ing and checking provider quality reports or 70 Strategic Purchasing to Improve Health System Performance getting feedback from the public); and review- In addition to specifying quality require- ing (agreeing on changes to improve quality ments in contracts, performance monitoring is via the contract) (Velasco-Garrido et al. 2005). central to achieving improved quality. There is Prior to entering into a contract, a a need for regionally or nationally coordinated purchaser can establish a series of qual- schemes, particularly when there is competi- ity requirements and pre-select only those tion between purchasers and providers and providers who fulfill them. At a minimum, a provider is likely to contract with several purchasers should contract only with licensed purchasers at the same time. facilities and personnel; purchasers might also set higher standards and contract only with With or without Provider Competition? certified personnel and accredited providers. Most countries that discussed or introduced Accreditation measures have been devel- new forms of purchaser–provider separa- oped mostly in the United States (US) and, tion during the 1990s did so on the basis although they have attracted interest in that there would be supply-side competition. Europe, have been implemented there on a Competition was to be the market-based relatively small scale and with limited impact. lever for improved performance. In practice, In the CCEE, requiring provider accreditation however, competition did not always material- and certification as preconditions for contracts ize as theorists and policy-makers intended. has resulted in significant improvements in In some ways this was entirely predictable. For the quality of hospital infrastructure and care. one thing, healthcare markets are character- A more effective approach is to specify ized by strong elements of spatial monopoly a series of quality requirements in contracts. (resulting from patients’ inability or unwilling- These can be enforced through regulations, ness to travel), making competition difficult sanctions and/or payment incentives. There to achieve. In addition, it became clear (e.g., are three main types of quality requirements with the advent of the internal market in the (Velasco-Garrido et al. 2005): UK in 1991) that the political consequences of market failure – resulting from supply-side • Standards of care: These (e.g., mandating competition – would be unacceptable. providers to use a particular set of clinical It also became clear that transaction costs guidelines) are particularly useful in cases could make supply-side competition expen- where evidence is sound and uncontro- sive; ways of economizing on these were, versial (e.g., adherence to diabetes care therefore, often sought. As a result, a number guidelines). of countries attempted to encourage longer- • Quality assurance initiatives: Clinical term collaborative arrangements between governance in the UK is an example. purchasers and providers. This raises the ques- • Quality targets (process and outcome): tion of whether contracting can operate effec- Process targets can entail levels of provi- tively when purchasers do not have a choice sion or wait times for certain interven- of providers. On one hand, the contracting tions. Outcome targets can use surrogate process in itself is a mechanism for purchas- measures such as blood pressure levels (if ers and providers to be more explicit about clearly correlated with patient-relevant mutual expectations than would otherwise be outcomes) or patient-relevant outcome the case. On the other hand, if a purchaser targets such as mortality from certain cannot, in a case of unsatisfactory service from conditions (e.g., myocardial infarction). an existing provider, move to an alternative 71 HealthcarePapers Vol. 8 Special Issue provider, the stimulus for provider efficiency is iments (Duran et al. 2005; Langenbrunner et seriously compromised. al. 2005). One possible way out of this conundrum Issues also arise involving design comple- is to rely on proxy competition. Regulators mentarity among different strategies that can benchmark provider performance and provide incongruent incentives (e.g., financial require change in the case of persistent fail- ones) that are inconsistent with the quality ure. Additionally, it is possible to draw on the indicators specified in a contract. Sometimes concept of contestability; that is, new entrants these problems apply to specific strategies (e.g., to a market (e.g., through franchising arrange- the adoption of payment mechanisms across ments) might pose a threat to existing provid- settings) that do not complement one another ers even if actual competition does not exist. and, therefore, undermine allocative efficiency. Inappropriate definition of purchasers’ Implementing Contracting functions is also likely to hinder contract A common set of political, financial, mana- implementation. In particular, there is much gerial and organizational obstacles can uncertainty about the roles of purchasers hinder contracting implementation. The in the implementation of strategies such first major obstacle is the high complexity as health needs assessment, health strategy of most contracting mechanisms. The major development, provider accreditation and complexities are the design of contracts, the development of specification guidelines for development of appropriate payment systems, quality indicators in contracts. the specification of quality requirements and Issues germane to organizational coher- the monitoring of performance. All of these ence also apply to provider organizations require a high level of managerial and techni- involved in contracts. For contracting to cal skill, together with wide-ranging informa- function properly, providers must have suffi- tion systems that are not available to some cient managerial and financial flexibility in purchaser organizations in several Western order to respond to a contract’s demands European countries, let alone in less devel- and incentives (discussed in the section on oped Eastern European countries. Moreover, providers below). Further organizational these mechanisms are very resource intensive, reform of purchasers and providers is often a factor that can pose an economic barrier blocked by institutional – legal or adminis- to their implementation. The establishment trative – impediments. Many new models of of a contracting system, therefore, needs to purchasing organizations (both for purchasers be preceded by an assessment of purchasing and providers) have no chance of taking root organizations’ capacities and, when required, unless they are preceded by a broader reform by investing in appropriate training programs of the civil service and the public sector in and information systems. which they are to be based. In some countries, the organizational Political and cultural issues comprise the design and roles of purchasers and providers third category of implementation obstacles. might also pose major obstacles to imple- For instance, ministries of health often have mentation. These include fragmentation of vested political interests in not delegating purchasing, poor complementarity of design decision-making to purchaser organizations, among strategies, inappropriate organizational particularly in areas such as the selection and definitions of purchaser and provider roles and contracting of providers. institutional (legal and administrative) imped- 72 Strategic Purchasing to Improve Health System Performance Developing Appropriate Purchasing Choosing between Multiple Purchasers Organizations One of the most powerful ideas to influence public policy during the 1980s and 1990s Finding the Right Purchaser was the belief that markets and competi- An important distinguishing feature of the tion have the capacity to improve efficiency. range of purchaser organizations found in In Europe, proposals to extend consumers’ different European countries is the nature of choices of insurer/purchaser and to allow their vertical organization (Robinson et al. greater competition among purchaser organi- 2005). This can involve macro, meso or micro zations have sought to avoid the excesses of levels of purchasing. Given this variety, the the US managed care system (Smith et al. obvious question is what level of purchasing 2005). In the Netherlands, for example, poli- is likely to be most effective? Methodological cies designed to increase competition between difficulties in tracing causes and effects, insurers and sickness funds have devoted coupled with the weakness of empirical considerable effort to the derivation of appro- evidence, make it difficult to offer an unam- priate risk-adjustment formulae in order to biguous answer. Moreover, the history of the avoid adverse risk selection. health service organizations in a given country Notwithstanding these developments and their current institutional structures act in the Netherlands (as well as in Germany as powerful constraints on feasible purchasing and Switzerland), the most striking finding models. Clearly, a one-size-fits-all recommen- to emerge from our study is that, despite the dation is untenable. considerable pro-competition rhetoric that has It is possible, however, to make some characterized health service debates in Europe observations that policy-makers should take in recent years, the overwhelming majority of into account, albeit with a clear eye to their purchasing organizations continue to operate own national and/or regional and local situ- in non-competitive environments. Sometimes ations. One is that devolution of decision- this occurs because macro-purchasers are, by making seems to be associated with a number definition, monopoly purchasers. In other of advantages. Macro-level purchasing rarely cases, effective competition is made difficult offers the managerial autonomy necessary because purchasers are territorially based. In to improve local decision-making. The new yet other cases, the requirement for purchasers public management seeks to give managers to make standard packages of care available the opportunity to manage rather than to reduces the dimensions over which competi- act as inflexible bureaucrats. This is far easier tion can operate. to achieve within lower-level organizations, Does the absence of demand-side compe- where entrepreneurship and innovation can be tition matter? To those who argue that choice expected to follow. Similarly, responsiveness to and competition are powerful stimulants patients and the public is likely to increase as for improved provider responsiveness and purchasing decisions are taken closer to users. increased efficiency, the absence of compe- Contracting also becomes a more effective tition is a cause for concern. However, if a mechanism because negotiations take place country’s institutional structure does not between local decision-makers. Nonetheless, lend itself to purchaser competition or if the it must be recognized that some functions downside of competition (e.g., reduced equity require a strong national focus (e.g., public and increased transactions costs) is considered health goals and the pursuit of equity targets). too great, alternative mechanisms can be used 73 HealthcarePapers Vol. 8 Special Issue to achieve similar ends. Overall, there does and, if the targets have not been achieved, not seem to be a strong case for relying on amend or terminate contractual agreements. demand-side competition as a mechanism for Public accountability means that provid- improving purchaser performance (Maarse et ers must also communicate the results of al. 2005). their performance to patients and the public. Information such as numbers of patients Improving Provider Performance treated, complication rates, wait times and Bearing in mind the timing of most purchas- procedures completed can be made acces- ing reforms, it is too early to make firm policy sible via media such as consumer journals, conclusions. Nonetheless, it is possible to Web sites, newspapers and/or hospital-based draw some general lessons about the main publications. Emphasis is growing on the factors and conditions that influence provid- systematic and independent measurement of ers’ responses to purchasing. provider performance. This is increasingly used in countries to benchmark performance Increasing Provider Autonomy across providers (e.g., via hospital leagues). Institutional providers in Europe vary Provider autonomy must be accompanied by greatly in their degree of autonomy. Limited increased transparency, and these efforts are autonomy and flexibility to respond to new likely to continue and grow. contracting incentives have been major causes of purchasing failure in many countries. Managing a New Power Balance To achieve greater hospital autonomy (see The introduction of purchasing – and its Harding and Preker 2000) and hence more subsequent increase in provider autonomy flexibility for providers to respond, policy- – results in a different balance of power and makers can extend decision-making rights incentives among purchasers, providers and over key areas such as hiring and firing; deter- consumers. Policy-makers need to be aware of mining the number of staff members and their the range of provider responses to these new skill mix; financial management (e.g., the abil- balances. These responses might be positive or ity to take loans); determining the level and negative depending on whether providers see scope of activities; and making decisions about the introduction of purchasing as an opportu- capital development, including ones related to nity or a threat. numbers of beds and technology. Moreover, Providers might respond to new power decision can increase market exposure by balances in a structural or a tactical manner. introducing some form of provider market An example of a structural response is a competition combined with a regulation of merger with other providers to increase residual claims in such a way that “leftover” market power. Tactical responses refer to how resources remain with providers (Saltman and a provider operates in a concrete contracting Busse 2002). process with a provider. Provider behaviour might be entirely opportunistic and contrary Making Providers More Accountable to system-wide objectives (e.g., by increas- There are several mechanisms to ensure ing activities in order not to miss out on managerial accountability linked to the extra resources) but can also be in line with a contracting process. Purchasers can negotiate system’s objectives of equity, effectiveness and performance targets with providers, monitor efficiency. Contracting out, creating integrated the extent to which these have been achieved healthcare delivery networks and developing 74 Strategic Purchasing to Improve Health System Performance initiatives to reduce wait times are examples of reviewed in this paper are complex and require such provider-driven responses. The strength a high level of technical and managerial skills, of provider-driven responses will depend on together with wide-ranging information each provider’s ambitions (in this regard, a systems that are lacking in many countries. distinction should be made between pioneers, In addition, strategic purchasing leads to new followers and conservatives). power balances among key stakeholders and, A final distinction resides among political, therefore, it might often face major political judicial and managerial responses. A political obstacles to implementation. This possibility response, in particular, has caused the failure calls for an incremental approach to imple- of purchasing in many European countries. menting strategic purchasing, one that uses Providers often mobilize political resources to pilot experiments to test the most complex increase pressure on a purchasing agency and strategies and limits, at the outset, the scope to influence the contracting process in their of purchasing to some services as well as favour. builds political consensus to ensure purchas- ing’s sustainability. Conclusions Analysis of many European countries shows, Endnotes not surprisingly, diverse approaches to 1 This chapter summarizes the topics developed in depth in Figueras et al. (2005). purchasing (Figueras et al. 2005). There are, 2 These explicit decisions are an expansion of the however, some clear common trends. discussion by the World Health Organization (2000). The various approaches undertaken 3 In this paper we distinguish between the upper- across Europe reveal that reform efforts must case National Health Service found in the UK and focus on strengthening purchasers’ ability to the similar lower-case national-health-service type of respond to consumer needs and to establish system found in several other countries. For conven- ience, we employ the initialism NHS to refer to both; more cost-effective contracts with providers. in every case, our meaning is readily apparent from the Concurrently, without capable government contexts. stewardship, strategic purchasing is bound 4 The results of citizen consultations and debate on to fail. Government needs to provide clear priorities in Sweden are reflected in a series of guide- leadership by formulating health policies and lines (McKee and Figueras 1996). establishing a set of health targets that can guide purchasing decisions and provide a References basis on which to evaluate its overall impact. Borowitz, M., R. Massoud and Martin McKee. 2004. The high complexity of strategic purchasing “Improving the Quality of Health Systems.” In J. Figueras, M. McKee, J. Cain and S. Lessof, eds., also requires putting in place a comprehen- Health Systems in Transition: Learning from Experience. sive regulatory framework that integrates and Copenhagen: WHO for the European Observatory coordinates purchasing’s various components. on Health Systems and Policies. This framework must achieve a fine balance Busse, R., R.B. Saltman and H.F.W. Dubois. 2004. between regulation that favours and limits “Organization and Financing of Social Health Insurance Systems: Current Status and Recent Policy entrepreneurial behaviour so as to ensure the Developments.” In R.B. Saltman, R. Busse and J. attainment of health system objectives. Figueras, eds., Social Health Insurance Systems in The political, technical and financial abil- Western Europe. Maidenhead: Open University Press. ity to implement strategic purchasing is the den Exter, A.P. 2005. “Purchasers as the Public’s most important factor determining its success. Agent.” In J. Figueras, E. Jakubowski and R. Robinson, eds., Purchasing to Improve Health Systems Most, if not all, of the strategies we have Performance. Maidenhead: Open University Press. 75 HealthcarePapers Vol. 8 Special Issue Duran, A., I. Sheiman, M. Schneider and J. Øvretveit. Rice, N. and P. Smith. 2002. “Strategic Resource 2005. “Purchasers, Providers and Contracts.” In Allocation and Funding Decisions.” In E. 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Geneva: Author. Mossialos, E. and A. Maynard. 1999. “Setting Health Care Priorities: To Whom and on What Basis?” Health Policy 49(1). 76 Strategic Purchasing: The Experience in England PURCHASING Gerry McSorley, DBA Director, Centre for Health Improvement and Leadership, University of Lincoln Visiting Professor in Healthcare Management and Leadership, University of Lincoln Introduction on the demands placed on those respon- Healthcare policy in the United Kingdom sible for health purchasing and the rela- (UK) is placing increasing emphasis on tive scope for health improvement that the innovation and creativity of healthcare improving or deteriorating levels of fund- purchasing for health improvement, as well ing create (Wanless 2002) as on the skills and competencies of those • The central government’s broader charged with its leadership and manage- approach to public services and public ment. In considering these developments, the services management known as the New current state of healthcare strategic purchasing Public Management, in which government in the UK must be framed within a number of should ‘‘steer” not “row” (Kelman 2005; key contextual issues: Pollitt 2002; Osborn and Gaebler 1992) • The divergent approaches to health policy Health Policy Implementation in the UK and its implementation being taken by With the advent of increased devolution of each of the four different government power to the devolved administrations of departments in England, Wales, Northern Scotland, Wales and Northern Ireland, the Ireland and Scotland (Greer 2004) UK has no single unified approach to health • The impact of the history of healthcare policy or its implementation. I have adapted funding and the current financial climate the following descriptions from Greer (2004): 77 HealthcarePapers Vol. 8 Special Issue • England has opted for markets, hoping and associated costs, both human and that competition between independ- financial ent trusts (similar to private firms) and • Finite resources to fund healthcare between trusts and privately run treat- • Potentially unlimited demand for ment centres will drive up standards and healthcare efficiency. It is hoped that this model will • The prevention of unnecessary hospital rescue the government from responsibility admission for every detail of health service delivery. • Correctly incentivizing the system so as • Scotland has bet on professionalism, to optimize the chance of achieving the reducing layers of management, plac- health system’s goals ing NHS trusts within integrated boards (along with clinical networks) and increas- In England, the overall spend on the ing the role of professionals in rationing National Health Service (NHS) has histori- and resource allocation. cally been below continental European levels. • Wales has relied on a professionalist and While many might argue that this comparator localist approach, integrating health and is inappropriate given the variations among local government to improve the coor- health systems – some of which are based on dination of different forms of care at the social insurance or mixtures of social insur- local level and to raise standards. It is ance and private care – the British govern- hoped that this will increase local partici- ment committed itself to achieving the target pation in healthcare. of matching continental European levels of • Northern Ireland has resorted to permis- healthcare spending by 2008. This commit- sive management, in and out of devolu- ment is coupled with the impact of the tion, concentrating on keeping services Treasury forecast of slowing growth in further going in tough conditions. investment in health services arising from Wanless’s Securing Our Future review (2002). The results of such policy divergence In this paper I place particular empha- among the four UK countries and the relative sis on the situation in England. This is not spend on healthcare might not lead to more because that country has the right or wrong activity being delivered, to better population solution to strategic purchasing. Rather, given health or to higher levels of public satisfac- that the majority of the British population tion. These outcomes might depend more on lives in England, that is the country in which how resources are deployed and how factors the greatest impact of health policy reforms outside the healthcare system influence health will fall. (Alvarez-Rosete et al. 2005). Background to the Current Situation in Notwithstanding the nature of this policy England divergence, the four countries still share a Since its election to power in 1997, the number of critical challenges: Labour government’s policy for the English NHS has moved through a number of initia- • Demographic changes – in particular the tives and positions. On election, the key proportional rise of the elderly population attribute was fiscal prudence, largely accept- • Increasing technological developments ing the previous Conservative government’s 78 Strategic Purchasing: The Experience in England somewhat constraining spending policy. • New investment and service delivery General practice fundholding, a major plank programs in cancer, coronary heart disease of the Conservative government’s reform and healthcare for older people program, was scrapped. A New Commission for Health Improvement was created to Over time, however, the sense at the enhance the drive for quality. Many have government level was that, while The NHS argued that these early reforms were merely Plan had considerable support, the NHS was stop-gap measures pending agreement on the not moving quickly enough to modernize and future ways forward (Klein 2001). meet patients’ and the public’s expectations of The first major directional vision was care and access. The NHS Plan was therefore therefore contained in The NHS Plan, which followed up with the NHS Improvement Plan was published with considerable professional in 2004 (Department of Health 2004), which support and laid out a 10-year strategy to added new reform components, including the modernize health services (Department of following: Health 2000). The key tenets of this plan were as follows: • Reforming both the supply side and the demand side • “Investment accompanied by reform” (the • Introducing patient choice of acute sector plan’s mission phrase) providers • Extra acute hospital beds • Revising the role of the New Commission • New hospitals funded through the Private for Health Improvement to an inspector- Finance Initiative ate role as the Commission for Healthcare • Extra staff members who were paid more Audit and Inspection money • Setting challenging new targets for access • Creation of the “earned autonomy” time for diagnosis and treatment concept for hospitals, which provided • Advocating the adoption of the triangle those hospitals judged to be successful of care, with self-management of health with greater scope to innovate by far the most potent proportion of care, • Creation of a Modernisation Agency to followed by disease management (i.e., spread best practices more proactive support) and, finally, case • Bringing together local municipal services management for the smallest group of and the NHS to pool resources (e.g., crea- patients with complex needs (i.e., active tion of care trusts to commission health and specialist care) and social care in a single organization) • Extended roles for nurses and allied health The recognition of the divergence professionals between the supply and demand sides embod- • Creation of patient advocacy and liaison ied by the purchaser–provider split indicated services in each healthcare organization the need for vision and skills on both sides if • A national patient survey major progress were to be made in healthcare • Reaching a concordat with private sector reform, efficiency and productivity. providers with a view to ending the The final piece of the reform jigsaw historical divide between private and – Creating a Patient-Led NHS (Department of public sector providers Health 2005) – saw the culmination of grow- • Setting new wait time targets ing concerns about the unbalanced nature 79 HealthcarePapers Vol. 8 Special Issue Figure 1. Organising Framework for NHS Reforms (Healthcare Financial Management Association 2006) ������������������������������������������� ����������������������������������������� ������������������������������� ����������������������� ����������������� ����������������������� ����������� ������������������� ����������������� ������������������������� ������������ ��������������� ���������������������� ��������������������� ���������������� ��������������������� �������������������������������������������� ����������������������������������������������� ��������������������������������������������� ��������������������������� of the power of the NHS supply side in the devolve power at the same time as introducing absence of assertive and skilled purchasing market-style incentives, which were stimu- (or “commissioning,” as it will be referred to lated by allowing patients to choose which in the rest of this paper). Creating a Patient- providers to visit (whether not-for-profit or Led NHS sprang from a recognition that the for-profit private hospitals, or public hospitals main focus since 1997 had been the acute care in the shape of foundation hospitals operat- sector, incentivizing it to reduce wait times ing in a quasi-commercial fashion). In order and to improve its services. In doing so, there to provide that better balance of skills on was a clear risk that a strong, vibrant, incentiv- the commissioning side of the equation, the ized hospital sector would suck all investment Department of Health committed itself to into hospital care unless it was balanced by devolving 75% of the NHS budget directly an equally strong and vibrant commissioning to primary care trusts (PCTs), with a further function. Creating a Patient-Led NHS focused level of devolution to individual practices specifically on the importance of expert, imag- in the form of practice-based commission- inative commissioning. It promoted the belief ing (PBC). The unit of currency in this that a revitalized commissioning function new model was the patient. The method of must represent patients, centre on prevention payment was the tariff: a fixed price for indi- and public health and ensure hospital provid- vidual procedures based on diagnostic-related ers deliver good value for money. groups (DRGs) but adapted to UK clinical Figure 1 captures the resulting model, practice and renamed healthcare resource based on the reforms of 2000, 2004 and groups (HRGs). 2005. The Organising Framework for NHS This combination of demand- and supply- Reforms was based on the political need to side reforms has resulted in NHS England 80 Strategic Purchasing: The Experience in England in 2007 being in a state of transition from of people – and PCTs – delivering services a public monopoly insurer and provider of to hundreds of thousands of people (see healthcare, governed from Whitehall, to an Department of Health 2006b). insurer with devolved commissioning from a mixed market of providers. The question follows, therefore, as to where on a spectrum Figure 2. The three main functions of SHAs of market models NHS England will rest? At one end is a wholly market-based health �������������������� system in which competition rules and regula- tion is light; at the other end is a system that is nationally planned, owned, provided and governed from the centre. One way to answer the question would be to consider the follow- ing criteria (Lewis and Dixon 2005): ������������������ ��������������������� • The government’s values and ideology • How the existing reform program is led and managed • The level of political support for changes • Public perceptions of the reform program • Evidence of improvements in patient care ���������������������� • Public satisfaction with local health serv- ����������������������� ices when compared with other developed ���������������� ����������� countries In essence, the Labour government’s philosophy appears to be “what counts is what works” (Greer 2004: 225). Stevens (2004: 42) Strategic Commissioning offers an alternative perspective on such a Definitional clarity is needed in any debate multidimensional approach to health policy, about the value of commissioning. Such clar- describing the need to overcome the inertia ity requires answering the following three inherent in all human systems as “constructive questions: discomfort.” Finally, the Organising Framework • What is commissioning? for NHS Reforms considered the • What does it involve? need for system-management reforms. • What does it seek to achieve? Organizationally, Creating a Patient-Led NHS required changes to the structures underpin- The Department of Health (2006a: ning excellent commissioning and to the 3) defines commissioning as “the means mechanism by which the Department of by which we secure the best value for Health devolved market management to the patients and taxpayers.” By “best value,” the regional level. Figures 2 and 3 illustrate the Department of Health means “the best possi- main functions of the new strategic health ble health outcomes, including reduced health authorities (SHAs) – overseeing millions inequalities” and “the best possible healthcare” 81 HealthcarePapers Vol. 8 Special Issue delivered “within the resources made available The similarities and differences among by the taxpayer.” In 1995, Øvretveit provided these defi nitions underscore the variety of an alternative defi nition of commissioning as perspectives that characterize the debate about a sophisticated and strategic process of assess- the role and purpose of commissioning. In ing health needs, developing new services or particular, they question what emphasis ought providers, contracting for services and under- to be put on each of the elements of successful taking a range of strategic efforts to improve commissioning. Wade et al. (2006) underscore population health. Work by Smith and Mays the visionary and transactional components, (cited in Wade et al. [2006]) provides a further while Øvretveit (1995) stresses the health- characterization of commissioning: gain outcomes. Meantime, the Department of Health model adds the concept of value • It has a conscience, setting out “how for money, an essential element in a publicly things should be” (i.e., what the system funded system. The criteria for judging what aims to achieve and how). successful commissioning would add to the • It has eyes and ears, observing and report- health of a local population are, however, ing on “how things are” (i.e., what the less clear. This lack of clarity might refl ect system is currently delivering). the continually changing expectations of • It has a brain, processing information healthcare by the public, staff and politicians. from both sources (i.e., identifying and implementing the optimal solutions for Practice-Based Commissioning delivering stated objectives). The fi nal act of devolved decision-making within the Organising Framework for NHS Reforms in England was to devolve purchas- Figure 3. The three main functions of PCTs ing to the lowest organizational level – indi- vidual general practitioner (GP) practices. PBC involves passing funds from a PCT to individual GP practices so that they can ������������������������������� �������������������������������� commission services for their populations as they see fi t and within their PCTs’ overall strategic aims (Department of Health 2004).1 PBC is aimed at enhancing the prospects of the following (Crisp 2005): ����������������������������� ������������������������������� • The design of improved patient pathways ���������������������������������� • A better working partnership with PCTs �������������������������� to create convenient community-based services • GPs taking responsibility for the budg- ets delegated by their PCTs, which cover ������������������������ acute, community and emergency care ��������������������������������� • More effective budget management ����������������������������� ���������� Studies examining the effi cacy of effec- tive commissioning by PCTs indicate that the 82 Strategic Purchasing: The Experience in England following factors are important (Smith et al. In addition to these organizational factors, 2005): there are also profound changes in the skills and competencies required of commission- • Stability in health organizations ing leaders and managers, whether clinical • Time for clinical engagement or general management. One of the most • Policies that support patient choice thoughtful exponents of commissioning skill • Policies to allow shifts of resources both sets, Simon Stevens, president of United between providers and between different Health in the UK and previously health advi- sectors sor to the prime minister, has remarked on • Incentives for GPs to develop new forms the need for commissioners to have access to a of care number of tools, such as the following: • Effective management support and infor- mation • Actuarial design of risk pools and incen- • Regulations to minimize potential tives conflicts of interest arising from GPs • Utilization and equity auditing being both commissioners and providers • Elective care demand management • Emergency care subsystems redesign While compelling, these factors and the (including out-of-hours and community seed of reform and innovation are fraught hospital usage) with the following complexities when consid- • Primary care performance profiles ered at the level of implementation: • Medicines management to ensure appro- priate prescribing • How to provide stability for healthcare • Skill-mix redesign, especially at the organizations when the prevailing climate primary/secondary, health/social care has favoured repetitive reconfiguration boundary • How to deliver effective management • Patient and public engagement, including support when cost constraints are a self-care constant feature of public service manage- • Strategies for changing clinical practice, ment (as part of the implementation of including clinical decision-support meth- Creating a Patient-Led NHS, management- odologies cost reductions of 15% are required) • How to encourage clinical engagement The Commissioning Cycle when demands on GPs are expanded The Department of Health (2006a) has iden- through increasing patient expectations of tified for local commissioners the cycle and service alongside a change in culture to a descriptors shown in Figure 4 as additional better work/life balance aids for thinking about translating plans into action. Smith et al. (2005) further postulate that The following sub-sections explain the greatest challenge facing commissioning each of the elements presented in Figure 4 will be to create a set of incentives that will (Department of Health 2006a). engage GPs and enable the development of new forms of seamless services for people with Assessing Needs long-term conditions that have eluded previous Increasingly, assessing needs will be based on forms of primary care – led commissioning. more rigorous analytical approaches involving 83 HealthcarePapers Vol. 8 Special Issue Figure 4. The commissioning cycle for health services �������� ������� ����������������� ������������������� ��������� ��������� ��������� ������������������ ����� ���������� ��������� �������� ������������������ ������ ����������� ������������� ������������������� �������� ����������� ��������� ��������������� ������������ ��������� ���������� ���������������� ����������� ������������������ ������������������ population segmentation and risk stratifica- to reinvest resources that have been released tion. It will involve public health profession- through service redesign where these would als, local authorities, GPs, patients and the achieve greater impact. PCTs should ensure local community. their patients and local communities, as well as municipal authorities and other partners, Reviewing Service Provision are properly involved in the process of decid- Practices should identify gaps and the poten- ing priorities. tial for improvements in existing services. PCTs should utilize the aggregated intelli- Published Prospectus gence of their practices and their local needs Published PCT prospecti will signal the stra- assessment to identify gaps or inadequacies in tegic directions for local services, highlighting provision as well as broader requirements for commissioning priorities, needs and oppor- service development. tunities to service providers. The prospecti offer a focus for discussion with patients and Deciding Priorities local communities and an opportunity to open PCTs should produce a strategic plan for the dialogues with potential providers. health community based on data on needs assessment collated from practices and on the Designing Services clear choices patients are making. Practices Practices are expected to work individually, and PCTs are encouraged to work collectively or in groups, to develop strategies and service 84 Strategic Purchasing: The Experience in England models to improve healthcare services for the Managing Performance public and to address its priorities. Practices will always seek to manage their budgets to maximize the benefits of the Shaping the Structure of Supply resources available to them. To help them, PCTs should be clear about the services and PCTs have a responsibility to provide support service specifications they and their practices programs, including training and develop- and patients want to see developed and give ment, developing systems to allow practices strategic support to proposals where neces- to monitor the services their patients receive sary. PCTs have a role in encouraging and through accurate, relevant and timely data. supporting practices that offer services locally PCTs remain responsible for the aggregated and attract private sector and third sector financial position and for ensuring overall (voluntary) providers to offer services in line financial balance. with identified needs and priorities. Incentives and levers should be used by PCTs to stimu- Seeking Public and Patient Views late the supply of services. PCTs will make PCTs will be responsible for measuring and contracts with local secondary care providers reporting on patients’ experiences. Practices within a new national contracting frame- will also want to monitor patients’ satisfac- work, with the involvement of practice-based tion. Robust mechanisms for collecting and commissioners. For a few very specialized understanding patients’ views will need to services, contracts will be held at the national be developed by PCTs and made available to level. For other specialized services, PCTs practices. Throughout, PCTs must ensure that should group together to set contracts. the public voice is heard in the development of priorities and the shaping of services. Managing Demand Practices and PCTs will establish strategies Possible Implications of the Organising for care and resource utilization to ensure that Framework for NHS Reforms patients receive the most appropriate care No reform program ever has all the facets of in the right setting. This will guarantee that its consequences worked out in advance. The the benefits of healthcare resources are maxi- Organising Framework raises many questions mized. about the inter-relationship of its compo- nents. Work undertaken at the Kings Fund in Referrals; Individual Needs Assessment; London, for example, explored a number of Advice on Choices; Treatment/Activity key questions about commissioning’s ability to Individual practices and clinicians undertake effect a shift from secondary to primary care individual needs assessments, make referrals (Palmer 2006): and advise patients on choices and the treat- ments available to them – each referral is How will it help cope with potentially effectively a micro-commissioning decision. unlimited patient demand? Practices must work with social service and Demand is unlimited because healthcare other agencies to facilitate the opportunity for is free at the point of need. As the public patients to make their choices with the benefit becomes increasingly health-savvy and asser- of good advice from their GPs. tive, there is a greater likelihood that demands will increase. Palmer (2006) argues that 85 HealthcarePapers Vol. 8 Special Issue commissioning can partly mediate between to control the volume of hospital referrals? In potential demand and affordability, seeking addition to the above considerations, PCTs to obtain the greatest patient benefit with will require strong leadership to hold their the funds available. Historically, lengthening local markets to account because unpalatable wait lists/times constituted the pressure valve; decisions might, in some cases, have to be however, with the policy drive to reduce wait made about removing certain providers or, at times this option is no longer available. least, exposing them to external competition. In particular, how will PCTs reduce The degree to which the government would be patient demand well below the growth rate willing to see such levels of contestability is as seen in recent years – and below the levels yet unclear. SHAs also have a role in moderat- required to achieve the access targets – when ing between commissioners and providers over they have weak levers to manage hospital these precise points (Smith et al. 2006). This referrals? The framework says that PCTs is also particularly important where “stranded and providers should agree on activity levels; capacity” exists in a system. Palmer (2006) argues that the use of the Private Finance Initiative (PFI) to expand secondary provision will lead to a reduction in the need for more As the public becomes new PFI schemes to be approved. Where stranded capacity exists, hospitals increasingly health-savvy and with annual financial balance targets tend to assertive, there is a greater close this down to save costs. In an unfettered likelihood that demands will market, the price would fall and the utilization rate would rise as demand rose. If this were increase. allowed in the NHS, Palmer (2006) suggests that commissioners would be able to purchase more services for patients, and providers would however, what happens if they cannot agree be able to provide more services, thereby or if they do reach agreement but the actual earning more income and reducing deficits. referrals exceed agreed levels? NHS trusts The result would be less stranded capacity and and foundation trusts argue that there is a fewer services closed. Arguably, the NHS can quasi-market and that they should be free to work effectively only when downward price use available capacity to provide more patient flexibility is allowed (Kings Fund 2006). services if patients choose them. They also say they are obliged to make progress toward What are the incentives for hospitals to achieving the access targets. This progress increase admissions? might, however, involve an increase in elec- Hospital providers receive payment for almost tive activity that is unaffordable for PCTs and, all elective procedures under the fixed tariff therefore, inconsistent with PCTs’ statutory within the payment-by-results (PbR) system. duty to break even. It follows, therefore, that in a market system hospitals will seek to expand their revenue How will affordability influence demand? base to allow for investment in new services by If PCTs fail to limit demand they will run up increasing the numbers of “profitable” patients deficits. The key question thus becomes what they can see and treat under PbR. However, a levers and instruments do they have available number of key constraints apply: 86 Strategic Purchasing: The Experience in England • Because they are required to consult with edly be marginal costs of treating one patient, their PCT before taking any action, it work on that case will still be paid at the aver- is difficult for a provider simply to drop age cost. Expansion and contraction there- “unprofitable” services. Each PCT, not fore carry the same management issues of the providers, has the statutory right to complexity. Equally, there might come a point consult on service alterations, especially at which a hospital faces expensive step-costs when a change is seen as substantial. of bringing on new facilities or resources to The PCT, not the provider, consults with cope with extra demand. However, each extra the Local Municipal Authority Health case will still be funded at the average cost. Overview and Scrutiny Committee Work by Palmer (2006), based on unpublished (OSC) on the proposal. If the OSC data, indicates that the typical hospital cost objects, it can refer the proposed change structure is about 10%–15% variable costs, to central government. about 60%–75% semi-fixed costs and about • The provider may face relatively long lead- 15%–25% fixed costs. in times to bring on extra capacity, both physical (e.g., beds, operating theatres) How are PCTs to shift funding from exist- and human resource. This step change in ing hospital providers to support the provi- capacity is high risk unless it can be shed sion of new services closer to home? according to changing circumstances. The Organising Framework recognizes the • PBC encourages GPs to hold funds for need to fund providers of new services closer close-to-home care and encourages the to home and, in some cases, to offer them development of joint protocols with incentives. It does not, however, address the secondary providers to ensure that only fact that PCTs can do this only if they are sure those patients who need acute care are that spending on hospital care will be reduced. referred. Providers are more likely to Because PCTs have no effective levers to respond well to sophisticated commis- bring about a reduction of revenue spending sioning if they are confident in the future on hospital care, they are not in a position to of strategic planning – even if it does not contract with new providers to purchase new maximize their income. services. That is because the new services will • The development of a national framework be affordable for PCTs only if hospital spend- of clinical governance places considerable ing goes down, thereby releasing funds to pay emphasis on clinical quality and standards. for them. This problem is particularly acute Because providers are subject to inde- for PCTs that are in deficit and/or under pendent assessment by the Commission strong financial pressure. PCTs cannot expect for Healthcare Audit and Inspection, a any help from hospital trusts to reduce hospi- going-for-everything-you-can-get strat- tal demand because that would make it even egy carries additional risks. more difficult for them to achieve financial balance. This situation results in a vicious It is important to understand that neither circle because if there were alternative cheaper additional nor less work comes at marginal services closer to home to which GPs could cost. The extra revenue a hospital gains for refer it would be much easier for GP prac- doing more work – or loses for doing less tices and PCTs to manage hospital referrals. work – is still paid at the average cost for These systems are not yet mature; therefore, treating patients. While there will undoubt- elective demand remains difficult to manage. 87 HealthcarePapers Vol. 8 Special Issue Consequently, a high proportion of PCTs’ cost thereafter. Such an approach could have budgets is spent on hospital care, making it many advantages: harder for them to afford to commission or provide alternative services closer to home. • Commissioners would be seen to have PBC can – and should – motivate greater and real teeth through their ability to shift more rapid development in this direction. resources. • Providers would be more likely to support How are PCTs to deliver the commission- the care-closer-to-home agenda as their ing priorities they identify in their strategic ability to expand beyond contracted plans for the medium term? volumes became more muted. They would The description of the commissioning cycle also be under a statutory obligation to in the framework clearly envisages a strate- work in partnership with their PCTs and gic commissioning role for PCTs, one that Health Overview and Scrutiny commit- involves deciding priorities in collaboration tees. with local stakeholders and then shaping the • Medium-term contracts would provide structure of supply to ensure that the pattern greater certainty for providers. This might of expenditure reflects those priorities. A PCT be less destabilizing for both providers might want to spend more on disease preven- and commissioners because marginal costs tion, cancer services or care closer to home; would be less severe. however, if patients exercise choice for more • The incentives for providers to improve elective hospital care and all the PCT’s budget efficiency would be greater because of is used to fund this care at full tariff, then marginal income derived only from extra there is little the PCT can do about it. This work. sort of weak commissioning regime leaves the level and pattern of service provision largely Following Palmer (2006), however, I to the market. Demand is determined by should note that some observers might feel short-term GP referral practices and supply is that in a market-based system such matters determined by the response of existing provid- should be left entirely to the market. These ers (who are aiming to maximize admissions) same observers might also argue that lower to the incentives embedded in the tariffs. marginal prices for above-contract volumes Over time, the demand for elective services would reduce the incentive to expand supply, to hit wait time targets and for technologies which is an important characteristic of a is always likely to outstrip available funding system that has lower wait times and relatively – particularly from 2008 when the Wanless robust room for patient choices. effect begins to be felt and funding growth In addition, the whole basis of the tariff slows sharply. requires reworking. Such reworking involves, for example, the treatment of excluded costs, Some Possible Solutions the treatment of “sunk costs,” the methodol- There are many possible refinements that can ogy for allocating costs across HRGs, the minimize such consequences; e.g., moving finished consultant episode (FCE)/spell from annual to longer-term contracts and conversion and the impact of any market paying the full tariff only for contracted factors to recognize unusual costs (e.g., land volumes of activity and at a standard marginal values in London). 88 Strategic Purchasing: The Experience in England Understanding the Information Needs affect outcomes, such as the age and of PCT Boards deprivation of patients; and The issues discussed above illustrate that • enable comparisons with the perform- commissioning – at whatever level – demands ance of similar organizations and strong information in order continually to health economies. assess progress. This information can be in • The key tests of the success of any infor- many forms and used in many ways, ranging mation resource for boards will be the from public health improvement to contract extent to which it monitoring of providers. This diversity of • prompts relevant and constructive information and its application suggests the challenges; importance of some underpinning principles • supports informed decision-making; (Dr Foster 2006): • provides early warning of potential financial or other problems; and • All information should • develops all directors’ understanding • be clearly and simply presented; of the organization, the local health • be forward-looking and present economy and its performance. trends; • be updated in a timely manner accord- The method whereby commissioners ing to its purpose and potential vola- acquire this information – given that this tility; responsibility rests with PCTs and is not to • direct the boards’ attention to signifi- be delegated to practice-based commissioners cant risks, issues and expectations; and – can be contracted out to third-party agencies, • provide the level of detail that is a number of which already exist or might enter appropriate to the boards’ roles. the market. Wade et al. (2006: 10) highlight • Strategic information should this point using the example of the Greater • show trends in health needs, provision Manchester Commissioning Business Services: and patient satisfaction; • provide forecasts and anticipate future The Commissioning Business Service performance issues; and (CBS) is a new venture developed by • encourage an external focus and the 14 Greater Manchester primary care understanding of the context for trusts (PCTs). The CBS has as its mission reform and local action. the sourcing, procurement and contract- • Information for performance monitoring management of the delivery of quality and should cost-effective services. It will provide a • provide an accurate and balanced service to PCTs, practice based commis- picture of current and recent perform- sioners, local authorities, collaborative ance, including financial, clinical, commissioners, and even providers who regulatory and patient expectations; sub-contract services. CBS services will • focus on the most important measures include: the provision of off the shelf or of performance and highlight excep- bespoke service specifications; a detailed tions; directory of providers and services; public • be appropriately standardized in order health and comparative clinical data and to take account of known factors that intelligence; and the full range of opera- 89 HealthcarePapers Vol. 8 Special Issue tional contract management including • Being decisive in resolving complex prob- contract compliance and resource utili- lems sation analysis. The CBS is planned to • Leading the organization and inspiring become operational in April 2006 and is others currently working on business modeling, • Focusing effort and supporting a develop- the development of memoranda of infor- mental culture mation for each of its business areas, due • Facilitating change sensitively diligence, the seeking of expressions of interest in providing CBS services, and The development of clinical leadership the detailed design of the organisational and engagement in the new commission- model. ing models at the PCT and PBC levels will be critical to their success. Clinical lead- Leadership in Commissioning ers add knowledge, experience and skills to The agenda mapped above highlights the the commissioning map. Their leadership significant leadership task for commissioners. development must not be left to chance but The complexity of the task, taken together supported with personal coaching and organi- with the prospect of national elections in the zational development nested in a frame- near future and the financial position required work of patient and public engagement in by Wanless (2002), creates a hothouse climate the commissioning process and anticipated for accelerating progress. The successful outcomes. management of change and of harnessing the various interests, both organizational What if the Model as Conceived and professional, will be critical. Such leader Doesn’t Deliver? attributes will require development through- Speculating about “what if ” might seem a out the organizations, not just at the most little advanced when the reform program is senior levels (Wade et al. 2006). still so young. However, a number of issues This organization-deep leadership func- remain on which further work will be needed. tion mimics the move away from the heroic To begin with, “choice” implies that there leader model, so prevalent during recent needs to be headroom in system capacity in decades, to a more empowering and engaging order to offer real choice to patients. PCTs style of leader behaviour and change leader- will have the task of determining the desirable ship (although one that is no less transform- characteristics of their local health markets, ing in its ideology) (Smith 2002; Higgs and one aspect of which will be the extent of Rowland 2005). Additional leader behaviours “free capacity” and how that capacity can be particularly critical in this situation are as accessed equitably. Easing market entry will follows (Alimo-Metcalfe and Alban-Metcalfe require using new flexibilities to help encour- 2003): age new entrants where normal market signals might be insufficient (Department of Health • Showing genuine concern 2006a). These flexibilities include payments • Enabling above tariff, guaranteed income for providers • Being accessible and reduced capital investment for providers • Encouraging change through PCT capital grants or joint ventures. • Being honest and consistent and acting It will also be important to find ways to with integrity deal with market exit. Many hospitals are 90 Strategic Purchasing: The Experience in England constructed financially and physically on the accountable to their local populations through basis of an historical legacy. They might argue quasi-democratic processes by direct elec- that the volumes of activity are not readily tions to PCT boards, or through a stronger influenced, prices are fixed and wages are set mandate on PCTs from municipal authori- nationally. Hospitals might also contend that ties. In addition, while providers compete they carry significant fixed costs and they under patient choice, commissioners have must break even each year. Rules for founda- locked-in populations – competition among tion trusts offer greater budgetary flexibility commissioners might therefore be required. due to their financial framework; however, It is, however, too early to be judgemental they still form the minority of hospitals in about the rate, pace and success of the current England. Where a hospital is failing, Palmer reform program in England. (2006) suggests three options: Conclusion • Restructure the trust on a stand-alone The new commissioning within the English basis. This might involve the closure NHS is still very much in its early days. There of certain services for which sufficient are hopes and dangers in equal measure. The demand no longer exists, merging clini- divergence of health policy approaches within cal services across trusts under common the UK’s four countries will allow important management where this is cost effective comparisons to be made among them. In and expanding out-patient services to addition, the complexity of the reform agenda, address the closer-to-home agenda. the newness of the commissioning organiza- • Close the trust only when it can be shown tions and the need to accelerate organizational that it can be achieved consistent with and personal development to deliver the protecting patients, preserving the concept health gains the public and politicians expect of patient choice and delivering essential are not risk free. These health gains will services locally, albeit through a possible require influential and visionary leadership. alternative supplier. Likewise, significant organizational develop- • Transfer the trust to another party, such ment will be needed to secure the potential as another NHS trust or foundation trust, in the system in which clinical and public or to an independent provider. In 2007, a engagement is an integral part of that leader- foundation trust absorbed a failing NHS ship drive. trust (Timmins 2007). If it is successful, England’s health system reform agenda will deliver benefits to individ- Equally, commissioners would need to uals and communities. Looking further into lead or endorse such activities as those high- the future, more radical changes might then lighted earlier. This would place PCTs’ deci- be required to optimize those benefits. sion-making very much in the public gaze. PCTs remain largely answerable to the public Endnote by proxy rather than directly (although this 1 The English NHS is unusual in its continuing faith in primary care-based organizations to carry out effec- might change). Work commissioned by the tive purchasing of healthcare services (Smith et al. Health Policy Forum has touched on alterna- 2005). tive, and perhaps more radical, options, should these be needed (Smith et al. 2006). These References include, for example, holding PCTs more Alimo-Metcalfe, B. and R.J. Alban-Metcalfe. 2003. “Under the Influence.” People Management 9: 32–35. 91 HealthcarePapers Vol. 8 Special Issue Alvarez-Rosete, A., G. Bevan, N. Mays and J. Dixon. Klein, R. 2001. The New Politics of the NHS. Harlow: 2005. “Effect of Diverging Policy across the NHS.” Prentice Hall. BMJ 331: 946–50. Lewis, R. and J. Dixon. 2005. NHS Market Futures: Crisp, N. 2005. Commissioning a Patient-Led NHS. Exploring the Impact of Health Service Market Returns. London: Department of Health. London: Kings Fund. Department of Health. 2000. The NHS Plan: A Plan Osborn, R.N. and T. Gaebler. 1992. Reinventing for Investment, a Plan for Reform. London: Author. Government: How the Entrepreneurial Spirit is Retrieved May 31, 2007. 92 Strategic Purchasing in Home and Community Care across Canada: Coming to Grips with “What” to Purchase PURCHASING A. Paul Williams, PhD Professor, Department of Health Policy, Management and Evaluation, University of Toronto Introduction money might complicate, rather than cure, Over the past two decades Ontario’s health-system ills. While Ontario’s healthcare healthcare system, like those in other industri- system continues to provide a wide array of alized jurisdictions nationally and internation- publicly funded services on the basis of need, ally, has experienced converging demographic, it is also characterized by a lack of integration economic and political pressures. These pres- between healthcare silos, including hospitals, sures have pushed policy-makers to rethink physicians, home care, long-term care (LTC) how health services should be funded and facilities, community-based support serv- delivered. ices and public health. This lack of integra- On the one hand, after a period of tion erects barriers to accessing care, thereby constrained spending during the mid-1990s undermining care coordination and continuity governments are once again confronted with and raising important questions about the rising healthcare costs, a situation that fuels appropriateness of the care that is provided. public and political concerns about system Rather than encouraging efficiencies or more sustainability. On the other hand, there is a innovative, cost-effective approaches to care, growing sense that simply spending more this fragmented system has instead reinforced 93 HealthcarePapers Vol. 8 Special Issue a tendency, particularly under conditions of and physician care, H&CC encompasses a fiscal constraint, for providers to attempt to wide range of professional and non-profes- shift costs elsewhere through referrals, earlier sional health and social services (e.g., nursing discharges, tighter eligibility requirements and rehabilitation therapy services, Meals on and service restrictions. It has also led the Wheels, homemaking and transportation) provincial government to try to limit its costs aimed at helping people who need assistance through capping service budgets, de-listing to live as independently as possible in the certain insured services and an unwillingness community. Consumers include those who to cover new procedures and treatments. require minimal assistance with activities of It is in this context that, in 2006, Ontario daily living, as well as individuals with such established 14 Local Health Integration high needs that they are at risk of hospitali- Networks (LHINs) responsible for planning, zation or LTC facility placement. Most of funding and monitoring hospitals, home care, these consumers are seniors; however, other community-based support services, commu- needs groups – including acute care patients nity-based mental health and addictions serv- discharged from hospital earlier than was ices and LTC facilities (albeit not physicians, previously typical before the number of hospi- drugs or public health). According to the tal beds was reduced, persons with disabilities Government of Ontario (2006), “LHINs are a and a growing number of medically frag- critical part of the evolution of health care in ile children and their families – also utilize Ontario from a collection of services to a true H&CC. A growing body of international system that is patient-focused, results-driven, research suggests that, when appropriately integrated, and sustainable.” targeted, managed and integrated into the Like other provinces, Ontario is now broader health services continuum, H&CC attempting to integrate its healthcare system can play an important role in maintaining the at the regional level, emphasizing that health, well-being and autonomy of individuals cookie-cutter approaches will not work. and families, while reducing demand for more Unlike regional authorities in other prov- costly emergency, hospital and LTC facilities. inces, however, LHINs will not provide any In the sections below, I briefly review the services directly; rather, they will use budgets logic of strategic purchasing, now being posi- set by the province to purchase services from tioned in Ontario as a key lever for forging a multiple and potentially competing providers closer link between health outcomes and the (e.g., hospitals) that will continue to operate approximately $35 billion the province spends under their own governance. Policy-makers annually on healthcare (Ministry of Health and in Ontario thus confront a key question: Long-Term Care 2006-07). I then describe What mechanism or mechanisms can LHINs the mix of approaches for funding H&CC employ to ensure their funding and purchas- currently used across Canada, noting that these ing decisions create the right incentives to almost always include some service provision generate a high-performing, responsive and by in-house staff. Additional questions arise innovative healthcare system? out of my review of these approaches: In responding to this question, I focus in this paper on home and community care • To what extent can strategic purchasing, (H&CC), a sector that falls under the auspices which assumes a high degree of individual of LHINs. Located outside of the medicare agency and choice on the part of consum- mainstream of medically necessary hospital ers, be applied in a sector populated by 94 Strategic Purchasing in Home and Community Care across Canada vulnerable and often dependent individu- might seem self-evident, it stands in contrast als (e.g., frail seniors)? to the historical logic that governments should • To what extent can forms of strategic finance healthcare but leave responsibility for purchasing, particularly those involv- service delivery largely in the hands of provid- ing elements of market competition, be ers. Canadian medicare is essentially a funding expected to achieve performance gains in mechanism for medically necessary hospital areas where services are in short supply or and physician services. It sets clear conditions for relatively small but specialized-needs for eligibility, access and administration but populations such as technology-dependent does not direct service mix, volume or quality. children? In Ontario, a main role of the provincial • Are there other, more fundamental, government has been to negotiate the size of changes that need to be made before the insured fee-for-service payment pool for strategic purchasing can be expected to physicians and the amount to be transferred deliver on the promise of achieving a to individual hospitals and community care high-performing healthcare system? access centres through annual global budgets – albeit with few performance benchmarks. A key take-home message is that, particu- While minimizing many of the perceived larly in the complex field of H&CC, decisions pitfalls of bureaucratic command-and-control about what services to purchase and for whom structures, this approach has left the province are as important, or even more important, with few tools (short of the blunt instru- than decisions about how to purchase services ment of funding constraints) to encourage and from whom. Indeed, as the examples I high performance, integrate care or ensure give below demonstrate, a robust understand- the attainment of social goals. However, as ing of the purchasing context at the local political pressure has built to address concerns level – including both demand- and supply- around access, equity and quality – in the face side variables and the social, political and of rising costs – there has been a push away economic forces that shape them – is a crucial from government as a passive purchaser to a prerequisite for defining clear objectives for more active role that requires “a continuous purchasing, developing appropriate purchas- search for the best interventions to purchase, ing mechanisms and linking services to people the best providers to purchase from, and the in ways that serve their needs and contrib- best payment mechanisms and contracting ute to health system sustainability. Even if mechanisms to pay for such interventions” efficiently purchased, the wrong services are (World Health Organization 2000: 105; never a bargain. see also Custers 2006; Preker et al. 2006; McKee and Brand 2005; Duran et al. 2005; The Logic of Strategic Purchasing Department of Health 2006a, 2006b). Rather Strategic purchasing is only narrowly inter- than withdrawing from healthcare in favour of preted in the literature as a purchasing mecha- private markets, since this could also make the nism per se. Rather, it is a broad conceptual attainment of social goals such as equity and approach that emphasizes the active involve- access problematic, strategic purchasing points ment of funders and consumers in decision- toward public agencies taking a stronger role making around healthcare planning, funding in the quest to ensure that such goals are met and delivery. by assessing health needs, using evidence to Although the need for such involvement develop models of care that meet priority 95 HealthcarePapers Vol. 8 Special Issue needs, creating the appropriate combination research documenting and evaluating differ- of regulations and economic incentives to ent funding and purchasing mechanisms, implement those models and then evaluating particularly outside of the acute care sector the results (Preker et al. 2006). (McNamara 2006). In Canada, a continuing The idea of individual choice and agency lack of evaluation of regionalization initiatives is also key to the logic of strategic purchas- that integrate H&CC compounds this general ing. In its groundbreaking report on improv- lack of evidence. ing health system performance, the World In part, this lack of evidence reflects Health Organization (WHO) describes policy-makers’ continued preoccupation strategic purchasing and emphasizes that with acute care. It also reflects the challenges final purchasing decisions are to be made by associated with measuring soft outcomes such individuals armed with sufficient knowledge as quality of life and well-being; the fact that to select among high-performing provid- many circumstances and factors beyond the ers (2000). Rather than following the money healthcare system – including the presence and taking what’s given, consumers are now of family carers, social connectedness and the to use evidence to choose among alterna- broader determinants of health – strongly tives, thus establishing incentives for provid- affect outcomes; the reality that many indi- ers to be more responsive and to perform at viduals – particularly frail seniors – experience a higher level. As the recent report in the functional decline and death regardless of United Kingdom (UK) on the commission- the quality of care provided and that many of ing of health services also points out, however, those who depend on H&CC – including frail individual choice will almost always be quali- seniors, children with continuing complex care fied by structural factors, including an indi- needs and persons with mental health prob- vidual’s capacity to access and apply often lems – are among those least likely to be able complex technical information about services either to exit from services that do not meet and service alternatives and by the availabil- their needs or to voice their concerns about ity (and sometimes short supply) of needed inadequate or inappropriate care (Baranek et services (Department of Health 2006a). Such al. 2000, 2004; Williams et al. 1999). qualifications might be particularly marked Nevertheless, the grey literature in this in H&CC, where relevant information about sector is growing, albeit slowly. A scan of this alternatives; remains difficult to access; where, literature suggests that no single approach particularly outside of urban centres, there to funding and purchasing “fits all” – a mix might be few providers and few service alter- of approaches is currently used for H&CC natives; and where vulnerable, often depend- within and between jurisdictions across ent individuals – such as frail seniors and those Canada. For example, Alberta’s East-Central with cognitive impairments, mental illness Health Authority directly provides in-home or literacy problems – might face formidable nursing, rehabilitation services, respite and obstacles in navigating healthcare silos. home support personal care; coordinates access to meal programs, home support, Approaches to Funding and Purchasing homemaking and home maintenance; refers H&CC across Canada clients to day hospitals and group homes and In spite of growing interest in improv- directly provides or coordinates home care ing health system performance in Canada services for children with complex care needs and internationally, there is little published (Hollander 2007). Three cases below highlight 96 Strategic Purchasing in Home and Community Care across Canada three different approaches: coordination of used to determine the service needs of care across multiple providers, self-managed individuals and populations care models and managed competition. • An inter-institutional electronic clini- cal chart that makes critical information Program of Research to Integrate Services available to providers and consumers in for the Maintenance of Autonomy, Quebec real time An inter-sectoral cooperative model is at the core of Quebec’s Program of Research Self-Managed Care Programs, Alberta to Integrate Services for the Maintenance A second approach relies heavily on the capac- of Autonomy (PRISMA) that aims to meet ity of individuals and families to identify needs the care needs of frail seniors (Hébert et al. and purchase services. A range of self-managed 2003a, 2003b; Hollander 2007). In contrast care models are now being used by seniors, to fully integrated models – in which a single persons with disabilities and children with entity subsumes different elements of the continuing care needs (Spalding et al. 2006). care delivery system under one administrative Three such models are found in Alberta. structure – this model relies heavily on coordi- Alberta’s Self-Managed Care Program is nation among independent providers (funded available to people of any age who are eligible through different sources), which retain their for home care, have stable medical condi- own governance but agree to participate under tions or care needs and require personal care an umbrella system. Coordination takes place services. Applicants are assessed by an occu- at multiple levels, including the strategic or pational therapist who determines the number governance level (through creation of a joint of hours of care an individual is eligible for governing board comprising senior direc- per month and assigns a care budget. Care tors/decision-makers from different provider recipients may receive funds directly into their organizations); the tactical or management bank accounts to hire and train care providers level (through a service coordination commit- or they may elect to have family members or tee comprising intermediate-level managers friends manage funds and care on their behalf. who facilitate and monitor the service delivery Consumers who are legally incapacitated (e.g., continuum); and the clinical or operational people with developmental disabilities, seniors level (where case managers evaluate clients’ with dementia) may have their care managed needs and manage care delivery). by a legal guardian. PRISMA has several features that Alberta’s Individualised Funding Program promote the most appropriate use of services is available to people over 18 years of age who across the continuum (Hébert 2006): are assessed (usually by a physician or through a school program) as having a developmen- • A single point of entry tal disability (defined as having significantly • Support for frail seniors who require below-average intellectual capabilities) and multiple services and complex service require assistance in at least two areas. The coordination by case managers who assess majority of individuals in this program require needs, plan services, negotiate and coor- assistance to self-manage. With the aid of a dinate required services and ensure that family member or client-service coordinator, services are provided the individual must submit a plan of care that • A single assessment instrument that outlines his or her support and financial needs. elaborates a case-mix classification system To receive funds, individuals must either 97 HealthcarePapers Vol. 8 Special Issue designate a funds administrator or arrange to As part of its reform, the government created have their service providers paid directly. 43 community care access centres (CCACs) A third Alberta approach involves the – recently restructured to create 14 larger conversion of publicly funded LTC facil- CCACs under the auspices of LHINs – that ity beds into designated assisted living units serve as single points of access for individuals (Armstrong and Deber 2006). While conven- requiring professional home care services (e.g., tional nursing homes offer a range of bundled nursing, rehabilitation therapy), placement in services paid through a combination of public LTC facilities (e.g., nursing homes) or refer- funding and resident charges, this form of ral to community-based support services (e.g., assisted living offers lower accommodation Meals on Wheels, transportation) (Baranek et fees but shifts more responsibility onto resi- al. 2004). dents and their families for purchasing and From an operational standpoint, the managing services. For instance, according to CCACs represented a dramatic departure a recent review (Armstrong and Deber 2006), from the logic of the home care programs conversion of a nursing home to assisted that preceded them. Rather than more or living units in the town of Hinton has meant less automatically relying on established, that housing and support services (e.g., meals, mostly not-for-profit providers and rolling- laundry, cleaning, emergency call systems) are forward service contracts, the reform required now private contractual arrangements between that contracts be awarded on the basis of a operators and residents/families, who must competitive request-for-proposal bidding also take on direct financial responsibility for process open to for-profit and not-for-profit a range of medically necessary products and providers. Moreover, often due to difficul- services and for managing other services (e.g., ties in finding external contractors, CCACs nursing, physiotherapy) that have moved off that had previously provided some services site. While thus offering care recipients and (e.g., nursing, rehabilitation) in house were no carers greater control, questions have arisen longer permitted to do so. Instead, they were regarding the capacity of high-needs indi- to divest staff that would then, presumably, viduals who are eligible for LTC placement compete for service contracts. In a number to access and manage services themselves and of cases, however, CCACs were unable to about the availability of service options in divest because providers were unwilling to bid smaller centres. for contracts (Randall and Williams 2006; Williams et al. 2005). Managed Competition, Ontario As the 2004 report of the Office of the A further approach introduces competitive Provincial Auditor and a subsequent provin- market forces into the purchasing process. In cially commissioned report concluded (Caplan 1996, Ontario launched a managed competi- 2005), a lack of evidence, information and tion model for procuring home care services benchmarks hampered systematic evaluation as a means of achieving “highest quality” at of the impact of managed competition on the “best price” (Randall and Williams 2006). quality, client outcomes and overall home care While competition was seen as a mechanism performance. Nevertheless, Caplan concluded for encouraging innovation, responsiveness that service quality had improved due to the and cost-efficiency, the process itself was still competitive bidding process. Two more recent to be managed so that the lowest price did not studies (Randall and Williams 2006; Williams trump goals such as quality and accessibility. et al. 2005), however, suggest important limi- 98 Strategic Purchasing in Home and Community Care across Canada tations to this process in two areas character- within the broader healthcare continuum is a ized by high specialization and low volume: crucial prerequisite for attaining many of the paediatric and rehabilitation home care. individual and system-level goals associated The first limitation involves the introduc- with strategic purchasing. tion of competitive bidding, which appears to have complicated existing health human Vancouver Coastal Health resource shortages. Uncertainty and the cost The first example concerns Vancouver Coastal of producing bids resulted in few bids from Health (VCH), a regional health author- providers, with fewer individuals willing to ity in British Columbia (BC) that provides a work in the sector given higher wages and comprehensive range of health services and more stable work environments in proximate programs – including hospitals, commu- sectors (e.g., hospitals). Second, the combina- nity-based care, residential care, home-based tion of short supply and limited competition care and mental health and public health contributed to higher bids, particularly outside services – to over one million people (25% urban areas where there were fewer providers of BC’s population) in communities stretch- and individual professionals had more market ing from Richmond and Vancouver (Rigg leverage. Third, significant overhead costs were 2006; see also Goodreau’s contribution to incurred as a result of the competitive bidding this collection). VCH is noteworthy in that process, both by the CCACs, which managed it has explicitly linked community-based the process, and by providers, which now had services to performance benchmarks in the to produce detailed bids. In 2001, for-profit acute and LTC sectors. For example, as part and not-for-profit providers estimated that of its alternate level of care ALC bed strategy, overhead costs accounted for between 20% VCH aimed to reduce the number of acute and 35% of CCAC expenditures (Ontario and rehabilitation in-patient beds occupied Home Health Care Providers Association and by individuals who could not be discharged Ontario Community Support Association due to a lack of appropriate community care 2001). Fourth, given capped CCAC budg- options. In addition to using costly hospital ets, higher service costs led to lower service beds inappropriately, it was estimated that volumes and reduced access. Finally, the seniors in ALC beds lost up to 5% of their competitive process was widely seen to have functional capacity each day they spent in established a disincentive to collaboration hospital. VCH also aimed to reduce the and the sharing of evidence and best practices number of LTC beds as well as inappropriate because providers were increasingly concerned use of hospital emergency rooms (ERs). they might lose their competitive edge. Although a comprehensive evaluation has not yet been completed, preliminary results Toward an Integrated Continuum appear remarkable. By providing integrated, My brief review suggests that a range of case-managed care targeted particularly at different approaches to funding and purchas- high-needs individuals, an estimated 500 LTC ing H&CC are now being used across beds have been closed; individuals with lower Canada, albeit with little evaluation of needs can now be directed toward assisted outcomes. Two additional examples, however, living. Moreover, through a combination of offer preliminary but persuasive evidence that, measures – including transitional care units, regardless of how services are funded and priority placements for patients waiting in purchased, integrating and managing H&CC acute care and increased home support budg- 99 HealthcarePapers Vol. 8 Special Issue ets – ALC days dropped from 12% to 6% particularly noteworthy. Prior to VIP’s imple- (with a final target of 4%), thereby freeing mentation, aging veterans had experienced up additional resources for community care. growing wait lists for contracted LTC beds; Finally, through the introduction of geri- it was estimated that 20,000 beds would be triage nurses in hospital ERs who diverted required to meet their needs (Pedlar 2006). As inappropriate admissions to community care, an alternative, VIP offered wait-listed veterans an equivalent of 17 in-patient beds were community care packages in their own homes saved. Currently, VCH is developing partner- or in settings such as supportive housing. The ships with family physicians aimed at inte- result was that most veterans preferred to stay grating primary care into its continuum. at home and, following VIP’s implementa- tion nationally in 2003, LTC wait lists were The Veterans Independence Program virtually eliminated. Moreover, the most-used A second example is the federal Veterans services for these at-risk individuals proved to Independence Program (VIP). This program be homemaking and grounds maintenance. offers a comprehensive suite of services to Note that most of the services provided by 103,000 clients. Services include the following VIP are contracted out, or accessed through (Pedlar 2006): provincial programs. What seems to be key is the important role of the case manager • Assistance with daily personal care (e.g., in assessing needs, planning care, managing bathing, dressing) access to appropriate care across the contin- • Health and support services provided by uum, following up to ensure care continuity professionals (e.g. nurses, occupational and managing care transitions. therapists) • Access to nutrition (e.g., Meals on Discussion and Conclusions Wheels) Faced with rising costs and growing chal- • Housekeeping (e.g., laundry, vacuuming, lenges on both the demand and supply sides, meal preparation) governments in Canada and other indus- • Grounds maintenance (e.g., grass cutting, trialized countries are now seeking ways snow removal) to provide high-quality, cost-effective and • Ambulatory health assists outside the appropriate care to aging and increasingly home (e.g., adult day care, health assess- diverse populations. In Ontario, the govern- ments, diagnostic services) ment has positioned strategic purchasing as • Transportation to activities (e.g., shop- a lever for improving health system perform- ping, banking, visiting friends) when ance. In its narrowest conceptualization, stra- transportation is not otherwise available tegic purchasing refers to specific purchasing • Home adaptations to facilitate access/ mechanisms. Conceptualized more broadly, mobility (e.g., modifications of bathrooms, however, strategic purchasing encompasses the kitchens, doorways) dynamic processes of strategic thinking and • Nursing home care in the client’s commu- action through which funders continuously nity if/when he or she can no longer assess needs as well as plan, fund and evalu- remain at home ate services. H&CC’s greatest potential lies within this broader conceptualization. VIP’s success in substituting community- An expanding grey literature clarifies that based support services for residential care is a mix of approaches is now being used across 100 Strategic Purchasing in Home and Community Care across Canada Canada at the regional level to fund and case managers to select appropriate services purchase H&CC. This literature also clarifies from across the continuum. This is consist- that, regardless of the funding and purchas- ent with the recent policy thrust in the UK ing approach used, the most notable successes (Department of Health 2005), which differ- involve initiatives that integrate and manage entiates between the majority of the popula- care across the continuum and that there- tion that requires only minimal support or fore permit H&CC to be substituted, where information to self-manage; a smaller, but still appropriate, for more costly care in hospitals significant group that includes people who and institutions. When provided in a frag- require specialist support to manage their care; mented system, or to individuals who do not and a small minority of high-intensity users require them to avoid functional decline or of unplanned secondary care who are to be related health problems, support services such assigned a case manager to anticipate, coor- as grounds maintenance and housekeeping dinate and integrate needed healthcare and are unlikely to be more than a convenient social care services. cost add-on and a source of concern for The question is not whether individual policy-makers. However, as the VIP example choice is important, but how best to support shows, when provided within an integrated choice. Indeed, the Alberta self-managed care package to individuals at risk of becoming options suggest that individuals with different ill or losing independence, such services can levels of need will require different levels of effectively substitute for LTC facility care. support. They also underline the fact, recog- The VHA example further suggests that nized by a recent UK report (Department targeted, managed and integrated H&CC of Health 2006a), that choice depends both can relieve pressure on hospital ALC and on the capacity of individuals to negotiate ER beds, key concerns in Ontario and many services (which will be limited particularly other jurisdictions. for people with complex, long-term condi- Conversely, a failure to acknowledge tions) and on the availability of service options H&CC as a crucial element of the healthcare (which also may be limited, particularly continuum can have negative consequences outside of urban areas). for individuals and health system sustainabil- With regard to the use of competitive ity. For example, Hollander (2004) observes market models, Ontario’s experience with that a continuing preoccupation with cura- managed competition suggests some related tive, institutionally based care actually fuels a cautions. Particularly where services are in cycle of increasing costs as individuals, lacking short supply, competitive models might result lower-level community-based care, end up in higher service costs, higher overhead costs making greater use of more costly hospitals and reduced access to care. They might also and LTC facilities. This, in turn, draws more create disincentives toward collaboration and resources away from the community sector, the sharing of best practices, crucial require- leading to further rounds of increased demand ments for overcoming silos, allowing cost- on hospitals and facilities. effective substitutions and encouraging high With respect to the role of individual performance at both the provider and system agency and choice, case-management models levels. seem to be important, particularly for vulner- This brings me back to my key take-home able, high-needs individuals and their carers. message: Particularly in the field of H&CC, A key factor in VIP’s success is the ability of which is heavily populated by vulnerable 101 HealthcarePapers Vol. 8 Special Issue Custers, T. 2006. Strategic Purchasing in the LHIN individuals at the margins of dependency and Context: An Exploration. Toronto: Ontario Ministry of institutionalization, decisions about what Health and Long-Term Care. services to purchase and for whom are as Department of Health. 2005. Supporting People with important, or even more important, than deci- Long Term Conditions. London: Author. Retrieved sions about how to purchase services and from March 6, 2007. 102 Strategic Purchasing in Home and Community Care across Canada Hollander Analytical Services. Retrieved March 6, Randall, G.E. and A.P. Williams. 2006. “Exploring 2007. 103 Strategic Outsourcing by a Regional Health Authority: The Experience of the Vancouver Island Health Authority PURCHASING Joe Murphy, BSc Pharm, MBA Vice-President, Operations and Support Services, Vancouver Island Health Authority Introduction new governance and management structure This paper is based on the experience of that involved the creation of five regional the Vancouver Island Health Authority’s health authorities and a province-wide (VIHA’s) outsourcing initiatives for select health authority (see Figure 1). These bodies support services as well as residential care govern, plan and coordinate regional services and assisted living. I describe the formation and participate with the Provincial Health and functions of health authorities in British Services Authority, which coordinates and Columbia (BC) in general and VIHA in provides programs and specialized services particular. I also address the initiatives VIHA across BC. undertook in support of its strategies and The minister of health appoints the priorities and I include a discussion of results health authorities’ board members and chairs to date. for two-year terms. The maximum length of time a board member may serve is three BC’s Health Authorities two-year terms. Board chairs typically have In December 2001 the BC government a strong private sector business background. merged 52 health organizations to form a Performance contracts were created for all six 104 Strategic Outsourcing by a Regional Health Authority Figure 1. British Columbia’s health authorities and health service delivery areas Note: The Nisga'a Health Council is an independent health authority health authorities. Fiscal restraint during the annual operating budget is over $1.4 billion first three years of the health authorities’ exist- and it provides approximately 1,534 acute care ence (2002–2004) was widespread. beds and 4,900 residential care beds/assisted living units. VIHA VIHA is representative of BC overall. VIHA’s geographical area covers 56,000 Size-wise – i.e., budget, population and area square kilometres and includes Vancouver covered – it is at about the middle of the five Island, the Gulf and Discovery Islands and regional health authorities, with a balance part of the mainland area opposite Northern between major urban and rural/remote Vancouver Island (see Figure 2). VIHA serves components. It is also one of the most self- the health needs of over 730,000 people. reliant of the health authorities, with well over It operates a network of hospitals, clin- 95% of the workload for Vancouver Island ics, centres, health units and long-term care residents provided from VIHA facilities. facilities (138 facilities in total). It employs or contracts with 16,000 healthcare profes- VIHA’s Five-Year Strategic Plan sionals, technicians and support staff as well VIHA’s Five-Year Strategic Plan provides as approximately 1,600 physicians. VIHA’s the overall direction for service delivery to 105 HealthcarePapers Vol. 8 Special Issue Figure 2. VIHA’s territorial components the year 2010 (Vancouver Island Health graphic and health status differences Authority 2006). It articulates the need for throughout VIHA enhanced integration, responsiveness and • Clinical input and practical experience innovation. The plan also identifies prior- ity issues along with challenges associated Support Service Outsourcing with population and service delivery growth. The fact that each of BC’s health authorities Likewise, it sets goals, strategic themes and must deal with a unique political and financial strategic directions by sector and geographical context has resulted in different outsourcing area. The plan also addresses the following: approaches across the five regional bodies. In addition, agreement between the BC govern- • New and innovative service delivery ment and healthcare unions has limited the models amount of outsourcing permitted. For its part, • Capacity forecasts VIHA has outsourced environmental support • Alignment with the Ministry of Health’s services (ESS), food services and a portion of strategic direction security.1 Other BC health authorities have • Recognition of the significant demo- outsourced other services, such as laundry. 106 Strategic Outsourcing by a Regional Health Authority The following issues influenced VIHA’s required to meet industry best practices (and other health authorities’) review of the (historically, support services requests for potential to outsource select support services: capital equipment were treated as a lower priority than patient care requests) • Performance agreements included a 7% • Examining how performance agreement decrease in administrative and support targets could be met costs over three years. • Maintaining or exceeding current stand- • Existing collective agreements for the ards of quality and service volume major support services union called for wage increases in each of the following VIHA was the fourth BC health authority three years (8%–10% total). to enter the market, and three international • A 0% increase to budgets for three years vendors expressed an interest in providing was projected. services. This undertaking required the full • Provincial legislation allowed contracting support of the board of directors and virtually public health sector support services to the all segments of VIHA. private sector. The environmental support services agree- ment, which incorporated 80% of VIHA’s There were also multiple risks to consider ESS budget, resulted in the following: when contemplating outsourcing. These included, but were not limited to, the follow- • Annual savings of $6 million ing: • Performance standards • Internal/external audit procedures • Limited competition • Public reporting of results • Organizational disruption • Performance bonuses/penalties • Organizational culture • $500,000 investment in capital equipment • Union response • $1 million signing bonus for VIHA • Media interest • Public confidence The food service agreement resulted in the • Legal following: • Changing political landscape • Vendor capability • Greater Victoria sites converted >6,000 meals per day projected VIHA’s key objectives when contemplat- • Annual savings of $2.5 million ing outsourcing included the following: • $5 million capital/information technology (IT) investment • Reducing support services costs in order • Performance standards to maintain patient/client care services • Internal/external audit volumes • Public reporting of audit results • Facilitating raising the food-service deliv- • Performance bonuses/penalties ery system to meet the industry’s best- • $1 million signing bonus for VIHA practice level • Acquiring the capital equipment and When outsourcing a large and critical information technology infrastructure component of an organization’s infrastruc- 107 HealthcarePapers Vol. 8 Special Issue ture, risk mitigation is important. Both the and contract provides risk mitigation. ESS and food service agreements therefore • A changing environment can impact a contained the following clauses: proponent’s success. • Variables such as low unemployment rates, • Recruitment/retention became the sole high cost of living, increased competition responsibility of the successful vendor. in the same wage band, the robustness • Wage rate increases became the sole of union/labour strategy and a chang- responsibility of the successful vendor. ing political landscape all play a role in a • Significant performance bonds were private sector vendor’s success. secured for each contract. • The contracts are renewable for an addi- Residential Care and Assisted Living tional five years or parts thereof. • The contents are expandable to other VIHA’s Senior Population VIHA sites or affiliate organizations. The most notable difference between VIHA and the province’s other health authorities Results is the age of the population we serve, largely ESS standards have consistently been met because Vancouver Island is a preferred retire- after the first two years of operation (these ment destination. This is one of the most incorporate infection control standards). Food significant challenges we face and will continue safety standards are also being met. Food satisfaction ratings, however, remain Figure 3. Proportion of seniors in VIHA, BC, Canada and Western Europe challenging and require ���������������������������������� significant investment of ��� time by both the vendor and VIHA. Provincial standards ��� and audit methodology have been developed and adopted ��� by all BC’s health authorities ��� ��� for ESS and food services. ��� Standards and audit proce- �� dures have been extended to all VIHA facilities regardless �� of the providers involved. ���� �� ������ ������� Finally, cost savings are still ������ being realized and have allowed patient/client/resi- dent services to be maintained, thus enabling to face for at least the next 20 years. Figure 3 VIHA to meet its strategic priorities. shows that our demographic profile resembles that of Western Europe more than the rest of Lessons BC and Canada, as those aged 65 and over We learned abundant lessons from undertak- make up almost 17% of the total population ing outsourcing of this magnitude: (compared to 14% in BC and 13% in Canada). • A tight request for proposal (RFP) process About 8.6% of the VIHA population 108 Strategic Outsourcing by a Regional Health Authority is aged 75 and over (compared to 6.4% for • Value for money BC) and 2.2% of the population is aged 85 • Sound fiscal and risk management and over (compared to 1.6% for BC). Within • Strong accountability in a flexible and VIHA, the south area has the greatest propor- streamlined process tion of seniors. The largest growth in seniors • Emphasis on service delivery will, however, occur in VIHA’s central area, • Serving the public interest where a 40% increase (2,119) in residents aged • Competition and transparency 85 and over is expected by the year 2010. Coinciding with these principles, VIHA’s Outsourcing Residential Care and Assisted key objectives for its residential care and Living Services for VIHA’s Seniors assisted living initiative include the following: Figure 4 shows that VIHA is significantly below the provincial average for home and • Deliver on the strategic plan targets community beds per 1,000 people aged 75 for BC and open all units no later than and over. December 2008. • Develop communities of care where possible and appropri- Figure 4. Home and community beds per 1,000 people ate. aged 75 and over • Capture creativity and innova- ��� tion through the process. ��� • Introduce the new Provincial Residential Care Services �� Operating Agreement. �� �� Time-wise, the competitive selection process was extremely �� tight: we issued a notice of intent � in December 2005 and contracts �������� ������ ����������� ���������� �������� �� were signed by May 2006. Our RFPs sought innovations in the area of complex care and The BC government has committed to assisted living. Ideally, they were to be set up opening 5,000 additional long-term care beds as communities of care and located in eight by the end of 2008. VIHA and BC Housing2 different communities on Vancouver Island have initiated a procurement process to secure to meet the demographic needs we identified 980 residential care beds and assisted living in our strategic plan. The key terms of the spaces by 2008 and up to 1,230 residential contracts were as follows: care beds and assisted living spaces by 2010. Partnerships BC3 was engaged to manage the • Project development agreements – terms procurement process involved in delivering and conditions: firm contracts for this capacity. • Design requirements BC’s asset management framework is • Review process based on the following principles (Ministry of • Agreed-upon schedule Finance 2002): • Sanctions if terms and conditions were not met 109 HealthcarePapers Vol. 8 Special Issue • Residential care services operating agree- • All contracted proponents’ proposed ments facilities have been established as commu- • Assisted living services operating agree- nities of care. ments • Innovation was sought and provided. Some of the areas of innovation included We anticipate that all facilities will be in the proposals were as follows: open by September 2008. Service providers • Provision of respite or hospice care are responsible for all aspects of financing, within the community of care including design, development, construction • Adult day programs and operational costs. Funding commences • Community outreach • Intergenerational programming • A community of care model • Delivery of a new model of dementia … low unemployment rates, care high cost of living, increased • Therapeutic community bathing programs competition in the same wage • Delivery of mental health services band, the robustness of union/ within specialized areas labour strategy and a changing • Design flexibility to allow expansion • Design that incorporates a co-located political landscape all play a primary health centre role in a private sector vendor’s success. Taken as a whole, the overall development schedule is three months ahead of schedule. upon receipt of each provider’s first client and Conclusion penalties are included for each day a service BC’s health environment and structure have provider is behind schedule. Service provid- changed in the last five years to provide a wide ers are also responsible for all risks associated range of health services under large health with construction cost escalation. VIHA and authorities, and a performance monitoring BC Housing have contracted to fund the system is in place to monitor their delivery. facilities at the agreed-upon contract prices. VIHA has a well-thought-out strategic plan that captures the demographics and needs of Results the residents it serves until the year 2010. The VIHA’s residential care and assisted living two examples given in this paper reveal how initiative has achieved numerous positive VIHA has operationalized strategic levers in results: order to meet its strategic goals. • Value for money has been achieved: the Addendum successful proponent(s) in all four major On July 8, 2007, the Supreme Court of geographical areas (eight communities) Canada rendered its judgement on the consti- presented either the lowest bid (3/4) or tutional validity of Bill 29, BC’s Health and close to the lowest bid (1/4). Social Services Delivery Improvement Act. 110 Strategic Outsourcing by a Regional Health Authority The justices found three sections of Bill 29 to be constitutionally invalid. The decision struck down sections 6.2 (no restrictions on contracting out), 6.4 (no requirement of consultation prior to contracting out) and 9 (layoff and bumping). The judgement over- rules previous Supreme Court decisions, which held that collective bargaining was not constitutionally protected. The effect of the decision has been suspended for 12 months to allow the government to address the repercus- sions of this decision. The consequences for the province’s health authorities and contracted service providers concerning liability and indemni- fication are undetermined at this time. The Government of British Columbia is currently analyzing the implications of the Supreme Court’s verdict. Endnotes 1 ESS covers housekeeping, linen and laundry distri- bution, recycling and pest control. 2 The British Columbia Housing Management Commission (BC Housing) was created in 1967 under an Order in Council to fulfill the government’s commitment to the development, management and administration of subsidized housing. 3 Partnerships BC is a company responsible for bringing together ministries and the private sector to develop projects through public–private partner- ships. Registered under the Business Corporations Act, Partnerships BC is wholly owned by the province of BC and reports to its shareholder, the Ministry of Finance. References Ministry of Finance. 2002. Capital Asset Management Framework. Victoria: Government of British Columbia. Retrieved April 23, 2007. 111 Over 1.2 million hits a month See what you’re missing longwoods.com ALL THINGS CONSIDERED HealthcarePapers 113 Thoughts on the Day: Strategic Purchasing and Equity Raisa Deber, PhD Professor, Department of Health Policy, Management and Evaluation, University of Toronto Steven Lewis President, Access Consulting Ltd., Saskatoon Adjunct Professor, Centre for Health and Policy Studies, University of Calgary Health reform is complex, and simple Strategic Purchasing solutions tend to be elusive. The speakers at Narrowly understood, strategic purchas- the Strategic Levers for a High-Performing ing can be considered synonymous with Health System symposium presented valu- prudent buying: getting good value for money, able insights about two key issues confronting specifying with some precision the terms of a health system reform: strategic purchasing and transaction, managing risks and negotiating equity. Given the dollars at stake – $148 billion good prices. In effect, it shifts the argument annually and counting in Canada, nearly $100 from who should finance care (Figueras et al. billion of which comes from the public purse 2005; Marchildon et al. 2004; Mossialos et al. – and the fact that we are often talking about 2002) to who should deliver it (Deber 2004). life-and-death decisions, it is hardly surprising Strategic purchasing also entails addressing that interests, power and perceived legitimacy the incentives inherent in various payment affect how we choose to proceed. What can we mechanisms. As the symposium’s speakers conclude from what we heard?1 clarified, these considerations, in turn, involve 114 Thoughts on the Day: Strategic Purchasing and Equity a series of questions, including the following: purchased, for whom and the processes used to determine how purchasing is done. • Who decides about what? Ron Sapsford’s One element of the “what” question relates discussion of the extent to which such to the outcomes sought. At an aggregate level, decisions should be decentralized touched once a certain level of spending has been on the roles of Ontario’s new Local achieved there is no clear relationship between Health Integrated Networks (LHINs) and per-capita spending on health – which is Ministry of Health and Long-Term Care. itself a function of the mix of services, volume Reinhard Busse observed similar issues in provided and price paid for each – and such Organisation for Economic Co-operation aggregate outcomes as life expectancy and and Development (OECD) countries. infant mortality rates (Kanavos and Mossialos • What criteria will be used? Quality? Volume? 1999; Leon et al. 2001; Retzlaff-Roberts et al. Cost? Outcomes? Innovation? Satisfaction? 2004). Even considering the specific items, the And how will performance be measured? huge body of research attempting to esti- Adalsteinn Brown commented on key mate the cost per Quality-Adjusted Life Year issues involved in such activities. (QALY) has its own controversies, including • What issues are entailed in deciding whether how best to capture softer outcomes (Birch systems should rely on public delivery or shift and Donaldson 2003; Daniels and Sabin to private providers? Gerry McSorley 1998; Deber and Goel 1990; Donaldson 2004; described the shift as it unfolded in the Drummond and Sculpher 2005; Gold et al. United Kingdom (UK) and Reinhard 1996; Menzel et al. 1999). Busse addressed the transformation in the An optimist might suggest that strategic OECD systems that use public delivery. purchasing could help to deter or eliminate • What are the issues involved in using for- demonstrably inefficient purchases that have profit or not-for-profit delivery? Joe Murphy appeared otherwise impervious to change discussed this topic as it applied to British (Fisher et al. 2000; Wright et al. 2002). Columbia (BC). Others might note that the first problem is • What is incorporated in the delivery model? specifying what is to be purchased in broad Paul Williams discussed sector-specific terms. Strategic purchasing will be enor- models (emphasizing home care) and mously influenced depending on whether David Levine addressed Quebec’s inte- one seeks to buy the greatest health impact grated models. per dollar (a utilitarian approach), to meet needs (however defined), to enhance equity Putting it all together, we are prompted to or even to pursue additional policy goals ask, “When might strategic purchasing work?” such as encouraging job creation or research, Here is the short answer: “It depends.” building healthy communities or respecting The concept of strategy suggests that clinical autonomy. Similarly, concepts such as purchasers must make choices, invest and buy “value for money” can imply cutting costs by a coherently and should ultimately be account- variety of methods, including lowering wages able for achieving their declared ends. For and salaries, improving productivity, rearrang- a number of reasons, this has proven to be ing the division of labour or reducing utiliza- a very tall order in healthcare (Belli 2004; tion, not all of which are compatible with Figueras et al. 2005). One must consider, for each other and which might or might not be example, the characteristics of what is being widely endorsed. Indeed, to the extent that 115 HealthcarePapers Vol. 8 Special Issue some cost cutting has replaced full-time with merely because they had not won a particular part-time/casual positions and has otherwise competitive contract, or to risk the erosion of affected recruitment and retention, the result- clinical skills by allowing volume to fall below ing shortages of skilled labour (particularly, a critical mass. The ability to contract selec- but not exclusively, in nursing) have often tively is larger for contestable than for non- meant that short-term savings have translated contestable goods. into higher long-term costs (Alameddine et al. Measurability relates to how precisely 2005, 2006; Simoens et al. 2005). the inputs, processes, outputs and outcomes A second element of the “what” ques- of a good or service can be measured. Again, tion relates to the production characteristics monitoring performance is easiest when meas- needed to generate particular goods and urability is high. It is relatively simple, for services. Classical economics assumes that example, to specify the performance desired markets, which balance supply and demand, for laboratory tests. In contrast, it would be can ensure efficient outcomes. But this, in more difficult to specify the activities to be turn, presupposes perfect (or at least reason- expected of a general practitioner. Selective ably perfect) competition, whereby no single purchasing is simplified for measurable goods. buyer or seller can dominate the prices to be What might be done, however, if measura- paid. It also implies that the supply of serv- bility is low? The transaction costs of monitor- ices can expand or shrink to balance changing ing can be high. These issues are not unique demand, which further requires the presence to healthcare. Examination of other fields, of excess supply that can be called into service including military procurement, suggests “the if demand increases. As Alan Hudson noted in more completely rules, obligations, and proce- his presentation, additional capacity can come dures are defined in order to enforce account- either from existing providers operating more ability, the higher the price in time, money efficiently or from new ones, which in turn and flexibility” (Donahue 1989: 108). suggests something about how easy and desir- Complexity refers, somewhat confus- able it is for new providers to enter the market ingly, not to goods themselves but to the and old ones to exit it. Clarifying where extent to which they are “stand alone” or must strategic purchasing might work thus leads to be coordinated with other elements of care. the need to examine what economists term Laboratory tests might be highly measurable, contestability, measurability and complexity but they are also less useful if their results (Deber 2004; Preker and Harding 2000). cannot be delivered promptly to clinical deci- Contestable goods are defined as being sion-makers. Again, it is difficult to hive off characterized by low barriers to entry and exit goods that must be integrated with other serv- from the market. In contrast, non-contest- ices. McSorley accordingly noted the need to able goods may have any or all of high sunk pay careful attention to the extent of “unbun- costs, monopoly market power, geographic dling” deemed desirable. advantages and asset specificity (a techni- Competitive markets may also be hard to cal term used to refer to difficulties in rede- sustain, particularly when only one purchaser ploying assets from one use to another). For exists. In such cases, potential suppliers are example, the equipment and skills needed to likely to request guarantees of volume. Taken perform open-heart surgery have few alterna- together, this implies that it is easier selec- tive uses, and few policy-makers would wish tively to purchase cleaning services than to “waste” highly skilled and trusted providers open-heart surgeries. Murphy noted that BC 116 Thoughts on the Day: Strategic Purchasing and Equity has been relatively successful in contract- physicians (Berk and Monheit 2001; Deber ing housekeeping and food services, both of et al. 2004; Forget et al. 2002). There is a risk which are relatively measurable, contestable that the wrong payment mechanisms will and non-complex. As McSorley suggested, for provide a strong disincentive to serve such less-contestable goods one would also make a high-cost clients, particularly in a competitive case for longer-term contracts, as opposed to market. There are also ongoing issues about encouraging continuous competition. And as whether purchasers should be meeting needs Williams showed, when goods have produc- or demands. tion characteristics that are incompatible with Finally, it is important to clarify how competitive markets, costs can go up rather decisions will be made, and by whom. A than down, as occurred with home rehabilita- “social good” orientation will lead to a differ- tion in Ontario (Randall and Williams 2006). ent notion of strategic purchasing than will a The literature suggests that not-for-profit “rights” orientation; such factors as decision- providers have a better record of provid- making criteria and the entitlements to care ing services in the interest of clients if this under different conditions will vary. Formally, requires going beyond the precise terms speci- one could achieve consensus by having people fied in contracts (Deber 2004). When meas- express their preferences behind a Rawlsian urability is low, this willingness to do more “veil of ignorance,” whereby they would can produce superior outcomes. As the litera- assume they have an equal probability of being ture has noted, it is important to distinguish rich or poor, healthy or sick. But in real life between high-trust and low-trust models; at a we are not so ignorant of our circumstances certain stage, it might be wisest to adopt the and our preferences might well shift over time concept of stewardship and encourage those and in response to our own, our family’s or our providers who, because they have goals other community’s experiences. than profit maximization, can ensure needs are As the symposium speakers suggested, met even if purchasers have not clearly speci- there is no magic solution to the strategic- fied them (Saltman and Ferroussier-Davis purchasing issue. Nonetheless, tough cases 2000; Saltman et al. 2002). should not distract us from solving simpler Indeed, there are also issues concerning problems. The very term strategic purchasing how to balance competition with the sort of is loaded, as Williams observed in his presen- cooperation required to achieve better inte- tation. It suggests an ethos of consumerism gration and coordination. Such balancing and choice, and the challenge is to determine has been a major focus for health reformers, whether and where it can be successfully leading to questions such as, “Do we wish to applied. Some guides for genuine strategic lose key providers?” and “How do we distin- purchasing are as follows: guish between encouraging best practices and protecting intellectual property?” • Be precise and transparent about exactly The “who” question is also important what we want to purchase, for whom, how, – are we purchasing for a population or for by whom and why. Similarly, recognize the small proportion of people who are sick that certain goods and services might not and use healthcare services? In general, health lend themselves to strategic purchasing. expenditures are heavily skewed: the lowest- • Where purchasing is deemed appropriate, spending 50% of the population accounts for ensure there are different consequences, less than 5% of expenditures on hospitals and rewards and other signals for good and 117 HealthcarePapers Vol. 8 Special Issue bad performance, however defined and be used to justify a whole host of political nuanced they might be. agendas. As such, unless it is carefully defined • Capacity, authority, and accountabil- the term confuses more than it clarifies. As ity must be aligned. Busse highlighted Stone (1997) has noted, equity can refer to the role of genuine devolution in using the characteristics of potential recipients of an resources more effectively. In Canada, item, to the item itself and/or to the proc- responsibility has already been devolved esses used to distribute it. During her talk, from the national to provincial govern- Jeanette Vega (not represented in this collec- ments, but it has proven difficult to shift tion) highlighted large discrepancies across any meaningful accountability from the various nations. It is fine to follow Aristotle’s provincial to the regional or local levels, injunction to “treat likes alike” but who will even when regional health authorities be classified in the group of “likes”? To what exist. Who should decide? What some extent should Canadians be concerned about would term democratic control, others health outcomes in other countries? Indeed, might call politicization. To what extent as care in Ontario regionalizes, to what extent should purchasers be empowered to make should residents of one LHIN be concerned allocative decisions and be held accounta- about health outcomes in another? Again, a ble for them – as Busse notes is the case in series of compelling, pivotal issues arise, which European systems – as opposed to holding we will now discuss. governments accountable for meso- and Precisely what do we want to be equi- even micro-level events? table about – health or healthcare? And are we concerned with short-term or long-term Equity outcomes? If we focus on the short term, A similar definitional problem arises when we which is where most policy-makers spend speak of equity. During the symposium, Gwyn their attention, where does prevention fit? Bevan emphasized equal resources per capita, How much inequality of access and/or with a stress on inputs and access. Anthony outcome is acceptable? Indeed, how much is Culyer added the need to pay attention to addressable by public policy? Obviously, some outcomes, outputs and process. He empha- people will always be healthier than others, sized efficiency, with the strong suggestion that even after adjusting for every conceivable ineffective healthcare ought not to be provided social determinant of health. Genetic endow- at public expense. The question of whether ment, behaviour and luck will all play roles. effective healthcare should be purchased As population health researchers have ably regardless of cost, however, remained unre- described, inequality might also be related to solved, and gave rise to the question how class, gender, race/ethnicity and geography, would/should cost-effectiveness be incorpo- which to varying degrees interact (Evans et rated into an equitable health system? al. 1994; Starfield 2006). Socio-economic To make progress on health equity, it status (SES), which is about more than will be necessary to leave the comfort zones money, appears to be the dominant influence of rhetoric and hand wringing, and to pay on inequality. From the evidence available, to attention to language, politics and evidence. be in favour of wide socio-economic dispari- Vocabulary matters; “equity” is an elastic ties is to be in favour of irreducibly wide term that people with very different notions health disparities. There is no society-wide of distributive justice can all embrace. It can consensus on the acceptable degree of general 118 Thoughts on the Day: Strategic Purchasing and Equity inequality; indeed, this is the appropriately the casualties. In this regard, Richard Glazier contested ground of democratic politics. The described the current crisis in Canadian odds against there being a true consensus primary healthcare, but also presented data – implying near unanimity – on these matters showing some successes, particularly the small are long. This is not fatal to the enterprise of or absent SES gradients for many services, reducing inequalities; it means merely that albeit with considerable room for improve- we should understand the nature of what is ment for others. But the reform of primary required to make it a public policy priority in healthcare could also threaten legitimacy: a democratic context. The essential condition under some models, the main beneficiar- is not consensus but reasonably stable, consist- ies are likely to be the disadvantaged, for ent and sustained majority support. whom episodic, conventional care from If one takes a single set of definitions stand-alone medical clinics is insufficiently linked to a coherent set of principles, as Culyer effective. To the extent that well-off people suggested, how can the quest for such support seem to be content with conventional care be balanced against the recognition that and are not demanding the socially oriented, trade-offs are inescapable, that most difficult comprehensive centres promoted by primary decisions generate winners and losers and healthcare visionaries and population health that the losers will, in turn, try to change the experts, tension might arise. If they perceive rules to increase their probability of winning that major primary healthcare restructur- (Schattschneider 1964)? Participation is one ing reduces access to or quality of care they way to do this, which in turn leads to consider- receive, their support will wane and, as Vega ation of who is seated at the deliberative table. noted, allowing the rich to opt out of a health Sustained democratic support confers system is enormously risky because such with- legitimacy, which entitles the state to act and drawal erodes support for the overall system. allocate even if some people do not get what Ideally, the needs of well-off members of soci- they want some of the time. Here the class ety will also be better met by the restructur- divide becomes critical. Canada’s healthcare ing, in which case there will be no tensions to system is a cross-subsidization scheme resolve. But often there will be trade-offs and whereby the healthy and wealthy pay for their reallocations – a simple example is locating own care and for a large proportion of the clinics and other facilities closer to those in care of the poor and the sick. Thus far this need and farther from where the well-off live. transfer of wealth has been broadly accepted Engaged citizen participation in policy- across Canadian society; approval, however, making and preference-sorting exercises is is contingent on the subsidizers continuing much in vogue these days, and the literature to believe that the system by and large serves suggests that it can be fruitful and enlight- them at least adequately, and preferably that ening. Whatever its virtues, it is neither a it serves them well (Evans 2006). As a result, proxy nor a substitute for democratic deci- the system is organized mainly to meet the sion-making. Engaged and informed citizens needs of the middle class (and often for the are, by virtue of these very characteristics, convenience of providers). If a fundamental atypical; their views and preferences may reorganization of healthcare to improve access change during the deliberative process in and outcomes among the disadvantaged response to group interaction and an increas- clashes with the preferences or sensibilities ingly sophisticated understanding of issues of the middle class, legitimacy will be among and options. The more engaged and informed 119 HealthcarePapers Vol. 8 Special Issue they become, the less representative they are able. Professionalism is critical; the most we of the process of everyday opinion formation should expect is that the payment and incen- and expression. Enriched participation might tive systems should get out of the way of the generate wise and nuanced policy ideas but advance toward whatever notion of equity we not a deeper understanding of what the public seek to achieve. Here there are reasons for thinks, or finds acceptable, under the usual optimism, if only because existing financial conditions of indifference and surface reflec- incentives tend to discourage first-rate chronic tion. Healthcare in most industrialized coun- disease management, optimal care of the frail tries is a public realm and, ultimately, subject elderly and comprehensive approaches to care to democratic forces; citizens can thus exert for the disadvantaged. Removing the perverse power without having passed a knowledge incentives that affect provider behaviour is test. One could well imagine a citizen-partici- useful work, and anyone interested in marry- pation process that would rank wait times ing strategic purchasing to increased equity rather low on the priority list once people needs to address the matter. had been fully apprised of a system’s actual Related to this concern are the mixed performance, the quality of care of the frail signals about payment-for-results vs payment- elderly, the state of mental health services and for-activity. In Canada, we preach the former other considerations. Such a ranking would, and practise the latter. After exhorting prac- however, be a lonely voice amid a constellation titioners to abandon fee-for-service and of interests that insist on making hip- and to spend their time on high-need patients, knee-surgery wait times every decision- managers grumble about reduced productiv- maker’s top priority. ity and demand shadow billing to track how Are improved payment and incentive the new-style clinicians stack up against the systems pathways to increased equity, however ostensibly obsolete practices of their fee- defined? As Culyer pointed out, these would for-service counterparts. Increased rates of be ambitious expectations to thrust upon interventions and throughput are uncriti- revised processes – financial incentives and cally accepted as improvements in produc- targets can lead to “ridiculous distortions,” tivity, without consideration of whether the formulas do not always adhere to cost struc- outcomes are worth the cost and whether tures and capitation and similarly granular new thresholds of intervention are defensible. funding approaches do not always capture Funders must decide where they stand on the fixed costs. As is well recognized, fee-for- issue and practitioners have a right to expect service is not the best way to ensure that consistency of both message and policy, as the emergency room in a small hospital in well as clear standards and rules of account- a remote community is financially viable. ability. In this regard, it is important to clarify Indeed, teaching hospitals were not included whether we are interested in redistribution in the Quebec models Levine presented and or just in targeting new money to particular Ida Goodreau showed how the high cost of activities. Redistribution presents major chal- teaching hospitals affected the funding alloca- lenges to power relationships; new money is tion to those BC health authorities in which much less contentious (Kellow 1988). they existed. Finally, even if there is a stable majority As Culyer and Vega noted, there is a commitment to reduced disparities, there are need for government to set and monitor no guarantees of success. European countries standards and to ensure that data are avail- have adopted a population health perspective 120 Thoughts on the Day: Strategic Purchasing and Equity and some have created holistic frameworks for the debate. To cite one example: economists equity that focus on the social determinants have long maintained that a certain level of of health as well as the reorganization of care structural unemployment is required to make (Department of Health 2003; Mackenbach economies function well. That perspective and Bakker 2003). Yet in some countries guarantees that a significant group in soci- disparities are widening, while others are ety will be vulnerable to marginalization and holding the line; nowhere are there dramatic poor health even if there is a strong social reductions in health inequality (Mackenbach safety net. The organization of a great deal of and Stronks 2002; Mackenbach et al. 2003). human life involves hierarchy, which seems in Canadian research has also identified widen- itself to create a health gradient regardless of ing disparities (Brownell et al. 2003), despite absolute levels of abundance or deprivation. If the country’s strong tradition of population hierarchy is intrinsic to the human condition health research and advocacy. – hard-wired into our psyches and sense of The etiology of disparities is complex worth – then so too, at least to some degree, is and the extent to which they are amena- health inequality. ble to public policy solutions is debatable. While all these complexities are real There have been dramatic reductions in some and intellectually interesting, they should disparities such as infant mortality and certain not result in policy paralysis or seduce us communicable disease rates, where the inter- into believing that nothing can be done. It ventions are relatively straightforward and is within our power to eliminate poverty baseline differences were very large. In some even if we cannot make everyone content or cases all ships rise with the tide (e.g., extend- provide opportunities for all to reach their ing clean water to entire communities and full potential. We can make the healthcare effective immunization campaigns). It could system more needs oriented and responsive to be that the generally more egalitarian socie- the unhealthier end of the gradient (Health ties of northern Europe have achieved all of Disparities Task Group 2004). And we can the easier wins and now confront seemingly certainly develop indicators that are sensi- intractable levels of health inequality. After tive to SES and other markers of inequality all, as Marmot and Wilkinson (1999) have instead of reporting aggregate measures of shown, there is a gradient of inequality that performance that mask differential effects. affects every social class. No one fully under- Simply reconceptualizing the idea of perform- stands why upper-middle-class people are ance might, over time, create greater aware- healthier than middle-class people, and few ness of and momentum for addressing the are concerned about that disparity. The gap determinants of health, while still enabling widens as one approaches the bottom quintile recognition of the need to treat the small of the SES ladder and spreads further toward proportion of the population that at any given its lowest rungs. time urgently requires care. Thus, before we can strategically purchase Indeed, careful thought suggests that equity, we must define what equity we wish we might not be interested in equality at all. to purchase and learn more about the capac- Presumably, an easy way to reduce inequal- ity of various forms of capital to get the job ity would be to encourage higher SES people done. Again, honesty about willingness to to smoke, drink, eat poorly, drive recklessly pay for reducing disparities would add a and otherwise decrease their health outcomes more pointed, if uncomfortable, element to to the lowest common denominator. Few so 121 HealthcarePapers Vol. 8 Special Issue and J. Bodnarchuk. 2003. “Why is the Health Status advocate. Similarly, should a focus on equity of Some Manitobans not Improving? The Widening lead us to reject health promotion activities Gap in the Health Status of Manitobans.” Winnipeg: that are more likely to be adopted by those Manitoba Centre for Health Policy. Retrieved January with higher levels of education and thereby 25, 2007. 122 Thoughts on the Day: Strategic Purchasing and Equity “Associations among Hospital Capacity, Utilization, Mossialos, E., A. Dixon, J. Figueras and J. Kutzin. and Mortality of U.S. Medicare Beneficiaries, 2002. Funding Health Care: Options for Europe. Controlling for Sociodemographic Factors.” Health Buckingham: Open University Press. Services Research 34(6): 1351–62. Preker, A.S. and A. Harding. 2000. “The Economics Forget, E.L., R. Deber and L.L. Roos. 2002. “Medical of Public and Private Roles in Health Care: Insights Savings Accounts: Will They Reduce Costs?” from Institutional Economics and Organizational Canadian Medical Association Journal 167(2): 143–47. Theory.” Washington, DC: Health, Nutrition and Population Discussion Paper, Human Development Gold, M.R., J.E. Siegel, L.B. Russell and Network, World Bank. Retrieved February 16, 2007. M.C. Weinstein. 1996. Cost-Effectiveness in Health and 123 The Next Step on the Road to High Efficiency: Finding Common Ground between Equity and Performance Adalsteinn D. Brown Assistant Deputy Minister, Health Systems Strategy Division, Ontario Ministry of Health and Long-Term Care Assistant Professor, Department of Health, Policy and Evaluation, University of Toronto Jeremy Veillard Formerly Lead, Measuring Performance for Change, Health Results Team on Information Management, Ontario Ministry of Health and Long-Term Care Richard Prial Director, Strategic Alignment Branch, Ontario Ministry of Health and Long-Term Care Ryerson University Introduction 1984 or Ontario’s Commitment to the Future The mixture of strategic purchasing and of Medicare Act in 2005 – have tended to equity as themes for this volume may seem be quiet on the subject of strategic purchas- to be an uncomfortable or forced meeting ing and the wider range of tools that can help between unrelated issues or, at best, a reunion promote health system performance. Similarly, of distant relatives. Historically in Canada, policies directed toward increased efficiency or policies and laws directed toward equity – for quality have tended to neglect equity as one of example, the national Canada Health Act in their central or explicit goals. 124 The Next Step on the Road to High Efficiency From a policy perspective, the appar- means ensuring a coherent set of incentives ent divide between strategic purchasing for providers, whether public or private, to and equity might not be all that surprising. encourage them to offer priority interventions Scholars have long noted a trade-off between efficiently … for better responsiveness and policies designed to improve a health system’s improved health outcomes.” Again follow- fairness and those designed to improve its ing the WHO’s lead (2001), a definition of overall performance. Okun’s Efficiency and healthcare equity can be drawn from its defi- Equality: The Big Tradeoff (1975) is the most nition of gender equity; thus, we take equity in powerful description of the tension between healthcare to mean fairness and justice in the the two goals. Others, such as Ringen (1987), distribution of benefits and responsibilities. It have observed that government intervention can include notions of horizontal equity (simi- aimed at improving equity can actually reduce lar needs treated similarly) as well as vertical the legitimacy of government and percep- equity (different needs treated differently). tions of its performance. Thus, a collection of papers that includes discussions of equity and Policy Tools Common to Strategic strategic purchasing – a key lever for improv- Purchasing and Equity ing efficiency and performance – might be Both strategic purchasing and equity require a more than an uncomfortable mixture; it might similar set of policy tools. These tools should actually reflect an insoluble tension between answer two related and critical sets of ques- competing policy goals. tions. Strategic purchasing policies typically Not surprisingly, we argue that this have to answer (1) what areas of perform- tension should be resolved in order to ensure ance are important? and (2) who will make the creation of a high-performing health the purchases and for what groups of people? system. Further, we believe there are several Similarly, equity policies should answer (1) reasons to be optimistic that this tension can what areas of equity are important? and (2) be resolved. Ontario’s health system presents a what comparisons (horizontal and vertical) are situation in which important to our notions of equity? In their responses to the first question • the elements required to improve strategic in both sets, policy-makers usually develop purchasing and equity are in place; groups of tools. Among the most familiar are • achieving the goals of purchasing and quality councils, which report to the public equity depends on similar policy tools; on health system performance; report cards • strategic purchasing may, eventually, be or scorecards; and performance-management used to pursue equity as a goal; and instruments such as accountability agreements • equity concerns can help shape the envi- and commissioning or performance-manage- ronment for strategic purchasing. ment cycles. Ontario has a long tradition of publicly available reports and score- However, before wading too deeply into cards, which include those produced by the a consideration of these potential outcomes, Canadian Institute for Health Information, it is important to define strategic purchasing the hospital report cards that were jointly and equity. For the purposes of this paper, we sponsored by the Government of Ontario follow the definition of strategic purchasing and the Ontario Hospital Association and a put forth by the World Health Organization wide range of clinical atlases produced by the (WHO) (2000: xix): “strategic purchasing Institute for Clinical Evaluative Sciences. 125 HealthcarePapers Vol. 8 Special Issue In some cases, these reports and score- argues for an approach to equity that empha- cards include consideration of both overall sizes equity of health as opposed to equity of health system performance and equity. In healthcare use. This approach would require Ontario, the Ontario Health Quality Council the development or adaptation of technologies has adopted the Institute of Medicine (2001) and processes to ensure appropriate reflection definition of a high-performing health of societal values. system, a definition that includes both equity This sort of deliberative process aimed at and efficiency. The scorecard developed and defining equity dimensions and targets takes used by Ontario’s Ministry of Health and us to the second set of questions common Long-Term Care (MOHLTC) includes to strategic purchasing and equity. These health status, productivity and equity as questions stress the locus at which purchas- health system goals. Further afield, one of ing decisions are made or across which equity comparisons are conducted. Strategic purchasing almost always involves some form of decentralization so that purchasing Strategic purchasing almost decisions for particular communities can be always involves some form more closely directed by those communi- ties’ needs. In this collection, Ida Goodreau of decentralization so that emphasizes the importance of a regional purchasing decisions for structure to equity. Regional structures have particular communities can be on-the-ground perspectives that enable them to relate need to demand more accurately than more closely directed by those a central planner can. This is particularly true communities’ needs. in the situation Goodreau describes in which rich and poor communities sit side by side and are served by the same providers but where the recent reports from the European Union the aggregate number of such complex and (EU) (Judge et al. 2006) describes perform- different needs and the varying ability to meet ance measurement around equity as one them across an entire province would over- of three common policy approaches across whelm a central planning authority. the EU to promoting equity. However, as At the same time, equity is always defined Anthony Culyer notes in this volume, there in a relative fashion. Access or outcome is not yet an agreed-on set of methodologi- targets for one group are fair or equitable cal approaches to measuring equity nor has because they reflect a just distribution of or there been an explicit consideration of which benefit from resources compared to those aspects of performance are critical to strategic received by one or more other groups. Again, purchasing and to defining equity. regional structures are important to the defini- As performance measurement in health tion of equity because they provide the frame- systems evolves from a focus on healthcare work for one of those sets of comparisons. utilization and cost toward healthcare qual- As Gwyn Bevan notes in his contribution, ity and health outcomes, the question of what the goal of equity is actually embedded in the to measure for purchasing and equity will creation of some regional structures. In keep- become more difficult. In his paper, Culyer ing with this perspective, the Government of 126 The Next Step on the Road to High Efficiency Ontario (2006) considers that Local Health eliminate those biases or patterns. Although Integration Networks (LHINs) can “restore local agencies may be able to reduce variations equity to Ontario’s health care system, ensur- at the geographical level, they do not neces- ing quality care for every patient, in every sarily reduce variations across their population community, in the province.” groups (e.g., women vs men or Aboriginals The establishment of local purchasing vs non-Aboriginals). Again, central planners agencies is only one part of the answer to typically maintain some form of oversight, questions concerning which comparisons are advice or decision-making in order to coun- important to notions of equity. Equity across teract these historical patterns. In Ontario, the populations represented by a local agency these efforts can encompass a wide range of is one notion of equity; however, differences vehicles, including a women’s health insti- within each population, such as those between tute that will provide advice, best practices rich and poor, are also important. These other and new evidence to improve the quality of sorts of comparisons typically involve some women’s health services across the province; form of balancing between locally driven deci- provincial advisory councils on Aboriginal sion-making and central control. and francophone health services that report A number of health services are suffi- directly to the minister of health and long- ciently rare that they do not lend themselves term care; and planning entities for these same to local decision-making, particularly when populations for each LHIN. In other jurisdic- those services are costly and a small number of tions they include strategic purchasing and them could substantially affect a local agency’s planning authorities for women’s and peri- financial well-being. The high cost of such natal care, as in British Columbia, or specific services could lead to a situation in which report cards on minority populations, as in the access would be limited to the largest local United States (US). agencies, ones that are better able to manage Finally, strategic purchasing and equity the risk of rare events, that can rely on local converge strongly through resource allocation support for specialized services or that benefit mechanisms that seek to assign resources in a from having access to highly specialized care fair way across local or regional bodies. These at (largely urban) academic health science mechanisms can be described as population- centres. In response to these concerns, deci- based or needs-based, and they reflect values sion-making for such rare services is typi- relating to horizontal and vertical equity as cally maintained at a central level – as with well as to overall health system perform- provincial programs in Ontario or strategic ance. Each of these mechanisms or formulae health authorities in England (on the latter, includes assumptions about what an aver- see Gwyn Bevan and Gerry McSorley in this age person should be expected to consume collection) – so as to ensure both critical mass (horizontal equity) and adjustments to this for good performance and some degree of average for a number of characteristics, such equitable access across the entire jurisdiction. as age, health status and income, that contrib- Likewise, there are a number of popula- ute to differences in need (vertical equity). tions that face specific needs, historical biases Resource allocation mechanisms can also or patterns of delivery, and for which, for include assumptions around expected levels a number of reasons, policy-makers do not of performance and re-enforce continuing believe that local decision-making will entirely central involvement in strategic purchasing 127 HealthcarePapers Vol. 8 Special Issue through adjustments for quality (e.g., readmis- Strategic Purchasing as a Way to sion rates), appropriateness of management Promote Equity practices (e.g., requirements for supply-chain As Raisa Deber and Steven Lewis suggest in management or levels of administrative costs) their contribution to this collection, strategic and other factors. purchasing is nothing more than the prudent Strategic purchasing and equity policies expenditure of public resources. If one of the are thus linked by their mutual dependence goals of a health system is to promote health on a set of similar policy tools that define equity, then there is little to stop the establish- the aspects of performance deemed to be ment of equity targets within local agencies. In important, the local communities that will be essence, this would involve putting constraints on the way that overall performance within each local agency may be achieved. One of the challenges confronting this sort of target-setting will, however, be to coor- … efficiency in health system dinate local targets across multiple agencies in management depends on a way that balances provincial priorities that ensuring the right level of care might focus on large population groups (e.g., for each individual. francophones vs anglophones) and local prior- ities that are critical within specific areas but that have little relevance outside of specific geographical communities. In order to address measured and compared according to those this concern, central planners could adopt a aspects of performance and the balance of staged set of policies that require attending to responsibilities between central and local agen- both provincial priorities that are set centrally cies. Furthermore, the success of policy tools and some local priorities that are set locally. designed to meet the goals of strategic purchas- In each case, this sort of balance between ing and equity will likely depend on similar regional and local priorities would require a types of processes – whether described as some sufficiently light touch so that they did not form of deliberative discourse or democratic substantially reduce efficiency or the percep- renewal and public engagement – that include tion of the legitimacy of government inter- expert and lay opinion and ensure the wide vention. These sorts of policies could include communication of goals and strategies. explicit equity targets as measured by some Ontario has developed many of these form of Lorenz curve or other instrument, or policy tools and some of them, such as LHINs they could include standards for health status, and provincial and local councils, offer tech- care availability or the perception of met niques that can help ensure the acceptability healthcare need that could be captured and of targets for purchasing and equity. However, measured as part of regular census or vital- without some form of explicit balancing statistics surveying. between overall performance and equitable At the same time, so that strategic performance, strategic purchasing and equity purchasing itself could be evaluated these sorts still might collide. These policy goals will also of local targets would need to be made part help the government to frame some of the of an overall strategy that sets equity targets. most important questions around the appropri- These sorts of overall equity targets are ate scope and direction for strategic purchasing. perhaps even more important for equity than 128 The Next Step on the Road to High Efficiency for other areas of health system performance. though primary care, public health and public Each local agency could pursue improvements education campaigns were (and remain) in aspects of performance (e.g., efficiency) outside their funding authority. The promi- that represent the individual agencies’ starting nent inclusion of CDPM emphasizes the positions and some measurable and agreed-on importance of coordinated health system plan- level of performance. This approach to stra- ning that extends beyond funding authority. tegic purchasing has been used by employer The Quebec example described in this collec- and business coalitions in the US for years and tion by David Levine offers insight into how reflects the different starting position of each such coordination can occur. insurer or agency (Schauffler et al. 1999). Likewise, efficiency in health system The measurement of equity within and management depends on ensuring the right across local agencies depends, however, on level of care for each individual. This sort of levels of performance that are concurrently coordination entails moving patients in and changing within and across each agency. out of the health system with its hospitals, The relative amount of inequity within an chronic care facilities and long-term care agency could, therefore, improve at the same homes, and in and out of the broader system time that the position of that agency became of social supports, including housing, commu- less equitable compared to other agencies. nity services and the education system. In Equity targets therefore should be buttressed Ontario, LHINs’ first round of plans involved by an explicit approach to improving equity, paying attention to these broader social whether by increasing the performance floor services, including transport and housing. (standards), creating a performance ceiling Without some form of joined-up planning (limits) or reducing overall variation. Given and purchasing, strategic purchasing might the complex and dynamic nature of health not be able to pursue lofty goals such as health system performance, the importance of equity and might be limited to equity of approaches such as benchmarking to ensuring healthcare access. overall system performance (discussed below) and the value of a light touch in regulation Benchmarking to promote legitimacy, the most appropriate Finally, one of the goals of measuring varia- form of targets for equity likely include some tion is to show that someone, somewhere, is form of standards and a reduction in variation doing things better. Comparison of perform- based on the pursuit of benchmarks. ance across local agencies can be a powerful If the goal of equity policy is to promote stimulus to change and an important source health equity, then the scope of strategic of information on how to improve. This is not purchasing should also be considered. The surprising; leading organizations inside and importance of public health interventions and outside of healthcare have used benchmarking health promotion to health status is inargu- and comparative performance reporting for a able. Strategic purchasing at the local level long time. should therefore acknowledge – and might Benchmarking’s value depends, however, even support – some attention to health on an organization’s ability to innovate and promotion. In Ontario, LHINs’ first round pursue higher levels of performance. As of integrated health service plans included governments increase their work with strate- substantial attention to chronic disease gic purchasers it will be important for them prevention and promotion (CDPM), even to support a consistent approach to perform- 129 HealthcarePapers Vol. 8 Special Issue ance management that ensures performance include equity in an explicit fashion, central or within communities and sectors that supports government control should focus on the goals the achievement of system-level goals such of performance and equity. Local control, as equity. At the same time, policies that meanwhile, should focus on how best to meet promote equity by setting limits on perform- those goals in a way that reflects local condi- ance will actually run counter to the chief tions and allows the balancing of local needs goal of strategic purchasing. In contrast, a few against jurisdictional priorities. years ago Brown et al. (2003) experimented In every country currently experimenting with applying Achievable Benchmarks of with strategic purchasing and equity poli- Care techniques to equity measurement. cies, none of this balancing will occur without Results indicated that equity itself may be regular measurement and evaluation of health amenable to benchmarking. system performance. Success will also depend It is safe to conclude that the absence on developing strategies that make targets of mechanisms that support benchmarking explicit and on constantly reviewing – at and comparative performance reporting limit both the local and central levels – progress on a system’s ability to support benchmarking equity and other performance issues. activities and to measure equity. This means that, in the balance between central and local References control, central agencies should focus on Brown A., C. Porcellato, G. Baker and D. Stewart. 2003. Hospital Report 2002: Women’s Health. Toronto: establishing standards, supporting the creation Government of Ontario and the Ontario Hospital and use of benchmarks and defining the most Association. critical aspects of performance. Conversely, Government of Ontario. 2006. Commitment to the they should shy away from setting limits on Future of Medicare. Toronto: The Queen’s Printer. performance or from regulations that limit Institute of Medicine. 2001. Crossing the Quality innovation. Likewise, local agencies may Chasm: A New Health System for the 21st Century. concentrate on how best to meet targets and Washington, DC: Author. should avoid agency-specific sets of targets Judge, K., S. Platt, C. Costongs and K. Jurczak. 2006. Health Inequalities: A Challenge for Europe. Brussels: that do not support measurement across all European Union. agencies. Okun, A. 1975. Equality and Efficiency: The Great Tradeoff. Washington, DC: Brookings Institution. Conclusions Ringen, S. 1987. The Possibility of Politics. Oxford: Equity and strategic purchasing rely on Oxford University Press. a similar set of policy levers; the applica- Schauffler, H.H., C. Brown and A. Milstein. 1999. tion of those levers must take into account “Raising the Bar: The Use of Performance Guarantees both goals. As a number of contributors to by the Pacific Business Group on Health.” Health this collection argue, achieving equity is not Affairs 18: 134–42. inimical to attaining strategic purchasing’s World Health Organization. 2000. The World Health overall performance goals. To realize both will Report 2000. Health Systems: Improving Performance. Geneva: Author. require a conscious and regular rebalancing of central and local control as performance World Health Organization. 2001. Transforming Health Systems: Gender and Rights in Reproductive and equity issues change, as technologies Health. Geneva: Author. develop and diffuse and as priorities for health system performance change. However, as strategic purchasing evolves and begins to 130 HealthcarePapers Volume 8 • Special Issue EDITOR-IN-CHIEF Peggy Leatt EDITORIAL ADVISORY BOARD FOR HEALTHCAREPAPERS Dr. Janet Thompson Reagan, Professor and Director, Health Owen B. Adams, Director of Research, Policy and Planning, Administration Programs, California State University, Northridge, Canadian Medical Association California Dr. Arif Bhimji, Executive Vice-President, RJA Medicentres Canada Dr. Anne E. Rogers, Professor of the Sociology of Health Care, Inc., Edmonton, AB National Primary Care Research and Development Centre, Dr. Gordon D. Brown, Professor and Director, University of Missouri– University of Manchester, England Columbia, Department of Health Management & Informatics Dr. Judith Shamian, President and CEO, VON Canada Mr. Tom Closson, Victoria, BC and Toronto, ON Ms. Tina Smith, Program Director, University of Toronto, Mr. William Carter, Borden Ladner Gervais, Toronto, Ontario Department of Health Policy, Management and Evaluation, Toronto, Mr. Michael Decter, Toronto, Ontario Ontario Dr. Jeff Edelson, Vice-President Therapeutic Area Head, Johnson and Dr. Willem Wassenaar, President, Wellesley Therapeutics, Toronto, Johnson, Spring House, PA Ontario Dr. Bruce J. Fried, Associate Professor and Director, University of Dr. Ruth Wilson, Professor, Department of Family Medicine, Queen’s North Carolina at Chapel Hill, North Carolina University, Kingston, Ontario Mr. Peter Goodhand, CEO, Canadian Cancer Society, Dr. Howard S. Zuckerman, Professor and Director, Center for Ontario Division Health Management Research, University of Washington, Seattle, Dr. Toby Gordon, Associate Professor and Director, The Johns Washington Hopkins University, Department of Health Policy and Management, Baltimore, Maryland and Vice-President Planning & Marketing, EDITORIAL ADVISORY BOARD FOR HEALTHCARE Johns Hopkins Medicine QUARTERLY PUBLICATIONS Dr. Carol Herbert, Dean, Faculty of Medicine and Dentistry, Mr. Richard Alvarez, President and CEO, Canada Health University of Western Ontario, London, Ontario Infoway Inc. Dr. Alan Hudson, Toronto, Ontario Dr. Charlyn Black, Director, Centre for Health Services and Policy Mr. Ron Kaczorowski, Chairman, Kensington Health Centre Board Research, University of British Columbia of Directors, Toronto, Ontario Dr. Christopher Carruthers, Chief of Staff, The Ottawa Hospital and Mr. John King, Executive Vice-President, Hospital Services, President, Society of Physician Executives, Ottawa, Ontario St. Michael’s Hospital, Toronto, Ontario Sister Elizabeth M. Davis, Sisters of Mercy of Newfoundland & Dr. Peggy Leatt, Professor and Chair, Department of Health Policy Labrador and Administration and Associate Dean for Academic Affairs, Dr. Jeff Edelson, Vice-President Therapeutic Area Head, Johnson and School of Public Health, University of North Carolina Johnson, Spring House, PA at Chapel Hill Mr. Hy Eliasoph, CEO, South Central LHINs, Markham, Ontario Dr. Sandra Leggatt, School of Public Health, LaTrobe University, Mr. Ted Freedman, Toronto, Ontario Bundoora, Victoria, Australia Mr. Chris Helyar, Associate Director, Hay Health Care Consulting Mr. Steven Lewis, Partner, Access Management, Saskatoon, Mr. Kevin Higgins, Vice-President, Healthcare Markets, 3M Canada Saskatchewan and University of Calgary, Department of Community Company, London, Ontario Health Services, Alberta Dr. Peggy Leatt, Professor and Chair, Department of Health Policy Mr. Jonathan Lomas, Founding Executive Director, Canadian Health and Administration and Associate Dean for Academic Affairs, Services Research Foundation, Ottawa, Ontario School of Public Health, University of North Carolina Dr. Noni MacDonald, Dalhousie Medical School, Halifax, at Chapel Hill Nova Scotia Mr. John Malcom, President and CEO, Cape Breton District Health Mr. Bruce S. MacLellan, President, Environics Communications Inc., Authority, Sydney, Nova Scotia Toronto and New York Mr. Joseph Mapa, President and CEO, Mount Sinai Hospital Mr. Joseph Mapa, President and CEO, Mount Sinai Hospital, Mr. Murray Martin, President and CEO, Hamilton Health Sciences Toronto, Ontario Centre Dr. Michael McGuigan, Medical Director, Long Island Regional Mr. James Saunders, President, J.L. Saunders and Associates Inc., Poison Control Center, New York Calgary, Alberta Dr. Robert McMurtry, Professor of Surgery, University of Western Mr. Don Schurman, Sierra Systems, Edmonton, Alberta Ontario and Orthopedic Consultant, St. Joseph’s Health Care, Dr. Judith Shamian, President and CEO, VON Canada London, Ontario Ms. Linda Moxey, Vice-President, Customer Care, Syneron Medical Dr. Eric Meslin, Director, Indiana University Center for Bioethics, Ltd. Indianapolis CONSULTING EDITORS Dr. Terrence J. Montague, Professor of Medicine and Director, FOR HEALTHCARE QUARTERLY PUBLICATIONS Disease Management Research Group, University of Montreal, Dr. Robert Filler, Founding Member and Chair, Ontario Telehealth Montreal, Quebec Network Mr. Torbjörn Pelow, Health Administrator & Consultant, Dr. Michael Guerriere, Managing Partner, Courtyard Group Ltd. Gothenburg, Sweden Mr. Ken Tremblay, CEO, Chatham-Kent Alliance, Chatham, Dr. Bernardo Ramirez, Academy for Educational Development, Ontario Washington, DC 132 This issue of HealthcarePapers was made possible through the support of: Ontario Ministry of Health and Long-Term Care University of Toronto, Department of Health Policy, Management and Evaluation