Challenges in hospital reform

1
Challenges in hospital reform

• Barbara McPake
• London School of Hygiene and Tropical Medicine

2
Why reform hospitals?

• Over-funded or under-funded?
• Failure to play designated role in the health
  system?
• Political importance, especially of national
  referral hospitals
• Dominance of medical professional interests in
  hospital policy, combined with inappropriate
  incentives

3
Why reform hospitals?

• Over-crowding, staff attrition, waiting and
  waiting lists?
• Long neglect in public health debate
• Necessary adaptation to greater emphasis on PHC
• Adaptation to new technical opportunities
• HIV/AIDS

4
What are the options for hospital arrangements?

• Budgetary unit
• Autonomy
• Corporatization
• Privatization

Source Harding and Preker 1998
5
Important dimensions of these options
Source Harding and Preker, 1998
6
Alternative interpretations

• Contract incompleteness and opportunism
• Are strengthened incentives compatible with
  public objectives for hospitals?
• Access for patients who do not offer surplus
  generating possibilities?
• Quality
• Hospital objective function
• Alternative possibilities to surplus what
  implications for hospital behaviour?
• Are market forces allowed to work?

7
Hospital reform in the UK (1991)

• Hospitals could apply for trust status
• Board of directors
• Determine management structure and profile of
  services (with some provisos)
• Directly accountable to centre
• Employ own staff and set employment terms and
  conditions
• Income determined by contracts with health
  authorities, GP fundholders and private sector
  (also introduced for non-trust hospitals)
• Retain surplus for following year
• Constraints on prices, and borrowing on capital
  markets

8
Trend in cost per episode by hospital group
Source Soderlund et al., (1997)
9
Hospitals competitive strategies

• Competitive pressures not allowed much rein
• Environment implied little scope for competition
  for main DHA contracts
• More energetic competition for extra-contractual
  referrals, GP fund-holder contracts, pay beds
• 1990-1 81,366 patients treated in pay-beds
• 1994-5 99,399 22

10
Median waiting times to elective admission, 1994-5
All beds days 76 15 86 175 46
Pay beds (days) 13 7 13 17 10
Operation
Operation on coronary artery
Excision of breast
Operation on inguinal hernia
Prosthesis of lens
All patients with surgical operation
Source Williams (1997) in Keene et al., (2001)
11
Health sector reform in Zambia

• Separate policy making and purchasing from
  service delivery
• Creation of Central Board of Health,
  implementing agency of MoH
• Commission services from public and private
  (PNFP) tertiary hospital, and district boards.
• Contracts negotiated each year set out services
  which district and hospital boards commit to
  provide for catchment population

12
Position of tertiary hospitals in reformed system
13
Features of implementation

• 3 changes of leadership of MoH between 1994 and
  2000, stop-go cycle
• Structures put in place but not used
• Block contracts did not evolve
• Difficulties in de-linking staff from PSC (but
  some direct recruitment)
• Direct interference by MoH continued
• Background to reform implementation was economic
  decline and shrinking resource availability for
  health sector

14
Financing

• Cost sharing fees for essential package, cost
  recovery fees for additional services
• Package for tertiary hospitals only defined 2001
• Interpretation cost recovery fees for
  high-cost, fast-track, private wards and
  clinics
• Zambian hospitals could not gain by competing for
  ordinary patients this became their main
  strategy

15
Implications of financing strategies

• Major use of increased managerial discretion at
  hospital level
• High-cost fees quite considerable when
  bundled for an episode of care
• eg. Cerebral malaria, adult price bundle Kw
  11,000, low cost 294,980, high cost at one
  government hospital
• What are the implications of these fees for
  hospital behaviour and the services received by
  low cost users?

16
Cost and revenue by ward (1998, Kwacha)
Unit cost
cost staff
Unit revenue
Revenue cost ratio
0.4 0.38 0.41 0.13 0.00 0.00 0.00 0.24
31,469 32,432 24,346 113,885 16,681 11,579 9,921
85,162
56 55 49 69 71 65 62 71
12,461 12,462 9,861 15,181 35 8 9 21,101
High cost wards Med, Surg, M Med, Surg,
F Paediatrics Maternity Low cost
wards Medical Surgical Paediatrics Maternity
NB DATA PROVISIONAL
17
Quality differences between the two services
extend to clinical QoC components
For example Items purchased from the list of
drugs prescribed Public hospital X
18
Clinical staff presence per patient on ward,
hospital X.
19
Clinical staff presence per patient on ward,
Hospital Y
20
Indonesia

• Major objective of hospital autonomy programme
  (Swadana) was to encourage hospitals to recover
  costs
• Hospitals granted Swadana status in waves
• Autonomy circumscribed, but less so than in
  Zambia
• Hospital directors have greater control over
  own-generated resources
• Hospitals set fees except for class III beds
  (for the poor)
• Hospital can determine service pattern subject to
  class III beds constituting a minimum of 50
• Favourable financial environment subsidies
  increasing throughout period

21
Own revenue as total income
Source Bossert et al. Hospital autonomy in
Indonesia, 1996
22
Trends in fee levels RSUP dr. Kariadi
Source Bossert et al. Hospital autonomy in
Indonesia, 1996
23
Numbers of Class III beds
Source Bossert et al. Hospital autonomy in
Indonesia, 1996
24
Room charges per unit cost per class
Source Bossert et al., 1996
25
Efficiency effects?

• Bossert et al.
• no marked change in LOS and BOR or differences
  Swadana, non-Swadana
• Management systems deemed to have improved
• Physician absenteeism reduced due to incentive
  payments
• Lieberman and Alkatiri
• Similar conclusions
• Also, increases in BOR in both types of hospital

26
Colombia

• Law 100, 1993 framework for national health
  insurance system
• Contributory regime contribution 12 income
• Subsidised regime reduced rate on sliding scale
  for those judged unable to pay
• Cross-subsidy from contributory to subsidised
  regime
• All insured entitled to package of care defined
  separately for contributory and subsidised
  members

27
Insurance market in Colombia

• Insurance regulation liberalised market opened
  to EPS organisations to sell insurance packages
  and contract with networks of provider
  institutions
• Equalisation fund Each EPS collects according
  to the national schedule, remits to equalisation
  fund and receives back standard sum per patient
• 1X for each member of compulsory regime
• 0.5X for each member of subsidised regime

28
Changed role of hospitals

• Previously directly managed by state Secretariats
  of Health or mandatory insurance agencies (eg.
  CISS), or private
• Now providing services on the basis of contracts
  with EPSs, and while non-insurance persists,
  state Secretariats of Health

29
Key differences from Zambia and Indonesia

• Avoids user fees at the point of use
• No two-tier or multi-tier charging systems
• Redistributes entitlements to hospital services
  by enforcing cross-subsidies within insurance
  system
• Remaining inequities in the differences between
  contributory and subsidised packages of care
• Background to reform has been considerably
  increased health funding (cf. Zambia)

30
Colombian reforms evidence of impact

• Study of Bogota hospitals Admission rates

Source McPake et al. Is the Colombian health
system reform improving the performance of
public hospitals in Bogota? 2002
31
Bogota hospitals bed occupancy rates
Source McPake et al. Is the Colombian health
system reform improving the performance of
public hospitals in Bogota? 2002
32

• Some evidence of growing activity and
  productivity
• No evidence of falling patient satisfaction or
  quality
• No evidence or expressed concerns about equity
  impacts
• Comparison of World Bank and ECLAC data 1992 and
  1997 indicates slightly increased progressivity
  of government subsidy over period

33
Equity?

• Incidence of public expenditure 1992 and 1997

Source 1992 Molina et al. in (1993) World Bank
(1993) and ECLAC (1997)

• Jaramillo (2002) Hospitals increased coverage
  from 35 of population in 1990 to 63 (MoH data,
  no basis given)

34
Conclusions for market forces model

• Limited scope for optimism with respect to equity
  gains
• Clearer evidence that incomplete contracts carry
  risks of disadvantage for particular patients
• Gap for political rather than market forces to
  dominate in UK and Zambia, constraints to
  competition may have exacerbated equity effects
  ordinary patients business can be taken for
  granted
• Colombian model may protect equity but may not be
  feasible in low income countries

35
Indications for policy

• Recognise that impact depends on context and
  policy detail
• Role to be played by competition needs to be
  clear and enabled in context of realistic
  political analysis
• Incomplete contracts increase completeness
  apply regulation external to contracts allow
  perverse incentives to prevail?