Ray Robinson, Elke Jakubowski and Josep Figueras
Introduction
Strategic purchasing has been identified as a key component for the improvement of health systems performance. In its ideal form it brings together a range of separate functions with the potential to improve efficiency, effectiveness and responsiveness. It can also make a major contribution to the achievement of public health goals and wider social objectives of equity within the health care system. In practice, however, the extent to which individual countries have attained this ideal varies enormously. In this chapter we assemble empirical evidence on the present state of purchasing in a range of Eastern and Western European countries.
The aim of the chapter is to provide a descriptive analysis of purchasing in different countries and thereby to enable comparison of experiences and identification of international trends. After a discussion of the ways in which purchasing is organized in different countries, the chapter describes the key components of strategic purchasing. Each of these components is discussed in more depth in the individual chapters in Part Two of the book. Evidence about the impact of these purchasing strategies is summarized in Chapter 3, together with the main lessons for policy makers.
Chapter 2 draws heavily on a series of case studies of the purchasing arrangements in 11 countries prepared specifically for this project (Figueras et al., forthcoming) together with additional material drawn from the European Observatory Health Systems in Transition profiles and other Observatory work (www.observatory.dk). This material provides the basis both for the text and for illustrative examples of different aspects of purchasing presented in the tables in this chapter. Our analysis also draws extensively upon material presented by individual authors in the chapters in Part Two of this book.
After a brief description of the organization of purchasing in European coun-tries, the chapter reviews the main components of the triple principal–agent relationship outlined in Chapter 1. This focuses on the relationships between purchaser organizations and:
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the public and patients on behalf of whom they purchase services;•
the provider organizations from whom they purchase services;•
the government, which acts as a steward of the overall health care system, including purchaser organizations.Organization of purchasing
European health care systems display considerable diversity in terms of the organizations that carry out purchasing. Countries differ in terms of the types of organizations that act as purchasers (for example, central government, regional government, municipalities, health insurance funds), the numbers of organiza-tions that carry out this function (that is, market concentration) and the ways in which they interact with each other, in particular whether there is competition between purchasers. They also vary in terms of their funding sources (for example, social insurance versus tax-based), and jurisdictions (for example, geographical, occupational, religious affiliations). This diversity derives from a complex interplay of social, economic, cultural and historical factors. Different mixes of public–private ownership, scope and level of population coverage, forms of management and systems of accountability are some of the other dimensions on which there is substantial variation.
Within this complexity, however, we believe that two important dimensions are of particular interest. These are the dimensions of vertical and horizontal organization, which can be expected to exert profound influences on purchaser behaviours.
On the vertical dimension, a key consideration is often national–local rela-tionships and, in particular, the degree of autonomy possessed by local man-agers and decision takers. On the horizontal dimension, the number of pur-chasing organizations, their market shares and the extent of competition between different purchasers are all factors that will exert an impact upon performance.
Vertical organization
Purchasing functions may take place at the macro (central), meso (regional) and micro (local) levels, but these are not watertight categories. Often there are elements of more than one level in any particular country. Secondary and tertiary care may be purchased at a more aggregate level than primary care. In many countries, services involving advanced technologies are often purchased centrally, whatever the arrangements for other services. Complications such as these can make deciding whether a system is more accurately described as macro, meso or micro problematic. Nonetheless, the tripartite categorization
does permit the identification of some broad features of purchasing behaviour.
In particular, where central government or its agencies are responsible through a central health insurance fund (that is, the macro level) there is often little autonomy for local organizations such as regional branches of the funds, and little decentralized decision making. However, administration of contracting and reimbursement can still be decentralized, such as in the case of Hungary (Box 2.1). At the meso and micro levels, autonomy tends to be greater but this can vary according to particular national arrangements. The size of a country will also be a relevant consideration. The following discussion sets out to high-light differences in autonomy between levels of purchasing and also some important variations between countries at the same level.
Macro-level purchasing
Good examples of centralized macro-level purchasing are provided by countries such as Hungary and Lithuania (Box 2.1). In these countries there is a single health insurance fund. Although these funds have a network of regional offices, they have very limited autonomy on purchasing matters. On the other hand, some countries have sought to break away from centralized systems, by intro-ducing devolved purchasing, only to return to strong central control in the face of failings in the devolved system. Estonia is one such example.
Meso-level purchasing
The majority of European countries assign responsibility for purchasing to some form of meso-level organization. These may be regional governments or health funds with regional affiliations. The meso level is not necessarily territorial. It can also cover employment-based health funds with similar numbers of insured.
In essence, the term ‘meso’ is reserved for those arrangements where devolved purchasing responsibilities are assigned to organizations catering for around 100 000 to 500 000 people. Typically, these organizations operate within an overall structure where certain functions reside at the macro level (for example, revenue raising) and others at the micro level (for example, service provision), but the meso level usually has primary responsibility for major purchasing decisions.
The meso-level purchasing countries can be divided into three main categor-ies. First, there are countries that have national health services for the funding and delivery of services, such as those of Italy and Spain where general taxation raised by central government is transferred to regional governments with general purchasing responsibilities (Box 2.2). It is, however, relevant to note that in both Italy and Spain the extent of the regional purchasing function varies within the country. Regions such as Lombardy in Italy and Catalonia in Spain have developed quite strong strategic purchasing approaches, whereas other regions – such as the Veneto region in Italy – have less distinct purchasing systems.
Box 2.1 Macro-level central purchasing Hungary
In Hungary a compulsory social insurance scheme operates through a National Health Insurance Fund. The funding system remains centralized with central government control. The National Health Insurance Fund Administration (NHIFA) is a single, national purchaser. The central purchaser buys a range of health care services on behalf of the whole population. The NHIFA is a not-for-profit organization that is closely supervised by the Ministry of Health and has a decentralized set of branches around the country, which contract with local health care providers and reimburse service costs. The decentralization of administra-tion does not mean, however, that there has been much devoluadministra-tion of power. This is still closely managed from the centre.
Lithuania
In Lithuania there is also a single statutory health insurance fund covering about 90% of public expenditure on health. This was introduced in 1997.
The insurance scheme makes annual allocations to the central state sick-ness fund. Although the fund has ten regional branches, decisions about the allocation of spending are made centrally. In effect, the health fund is a governmental budgetary institution largely financed by general taxation. Between 1998 and 2002 only about 20% of the fund’s finan-cial resources were derived from pay roll taxes and self-employed contributions.
Estonia
Estonia established 22 independent regional health insurance funds in 1992. A revenue sharing arrangement between them was planned, but this did not work in practice. As a result, a central health insurance fund was established in 1994 with the purpose of controlling and coordinating the individual funds. By 1995 the number of regional funds had fallen to 17, as mergers took place between the smaller funds, frequently due to management difficulties. In 1999–2000 the health insurance system was granted more autonomy through the establishment of the Estonia Health Insurance Fund (EHIF) (based on the previous Central Fund and the 17 separate regional funds) as a public independent organization. At the same time as the EHIF became more independent, there was a degree of centralization at regional level and the previous 17 regional funds, were first merged into 7 regional funds in 2001, and later into 4 regional departments in 2003. At present the national level is responsible for regu-lation, developing the purchasing strategy and establishing the benefit package, while the regional level is responsible for contracting decisions and reimbursement.
A second category of meso purchaser includes the social health insurance based countries of Western Europe such as Austria, Belgium, France, Germany and the Netherlands (Box 2.3).
The third category of meso purchaser comprises those CEE/CIS countries that have made the transition from centrally planned, command-and-control systems to more devolved social health insurance schemes during the 1990s.
These countries include the Russian Federation, the Czech Republic, Latvia and Slovakia. Although these countries have adopted Western European-style social health insurance schemes, their history and transitional status mean that they operate these schemes within a different economic, social and political climate and this inevitably affects their performance. For these reasons, there is a case for identifying them as a third and separate category (Box 2.4).
Micro-level purchasing
We use the term ‘micro-level purchasing’ to refer to situations where there is a high degree of local decision making. Purchasing budgets are devolved to local organizations (or may be raised locally, at least in part) and these organizations have varying degrees of freedom over the allocation of funding to providers.
The Nordic countries – where there is a high level of local government Box 2.2 Regional meso-level purchasing
Italy
Within the Italian National Health Service, reforms of 1992 granted regions the major responsibilities for the organization and management of their health care systems. There are now 19 regions and 2 autonomous provinces carrying out these functions. The regions receive the bulk of their budgets from central government on the basis of a weighted capita-tion formula and can choose how to allocate these resources among dif-ferent programmes. The actual provision of services is devolved down to the micro or local level via local health units (LHUs) and to independent hospital trusts. In 2000, there were 197 LHUs covering average popula-tions of 82 000 to 601 000 people.
Spain
A similar regionally based meso system operates in Spain. Until 2002, seven special regions (covering 62% of the population) had responsibility for purchasing health care whereas the remaining ten ordinary regions had health care purchased on their behalf by the central government.
From 1 January 2002, however, the ten ordinary regions have also been allocated purchasing responsibilities. Thus all regions now have purchas-ing functions, with the central government retainpurchas-ing only broad regulatory functions.
Box 2.3 Social-insurance-based meso-level purchasing in Western Europe
Germany
Statutory health funds and private health insurance companies act as pur-chasers of health care. The health funds are corporatist, non-governmental organizations, operating on a not-for-profit basis. In January 2003 there were 319 statutory health funds catering for about 70.9 million insured (about 50.3 million members plus their dependents). There are several var-ieties of health fund. In 2003, the largest category (257 funds) comprised company-based funds (BKK). Others include regional health funds (AOK), substitute funds (Ersatzkassen) and guild funds. Throughout the 1990s there have been a series of mergers between health funds, with the result that the number has fallen from 1146 in 1994 to 290 in 2004. The main reason were efforts by the sickness funds to increase economies of scale in pooling and distributing funds. In 2003, the private insurance industry comprised 52 private health insurance companies and provided cover for 7.1 million people who were outside the social insurance scheme. These people included those whose incomes were above the level for which social health insurance is mandatory; self-employed people who were excluded from social health insurance unless they were previously mem-bers of a scheme; and public employees who were excluded from social insurance and were reimbursed by the government for private health insurance expenditures.
The Netherlands
The Netherlands offers another example of meso purchasing based upon a mix of health funds and private insurers. Health funds are not-for-profit organizations that are responsible for purchasing health care for those people enrolled with them. Many of them have charitable origins and were originally regionally based. In the late 1980s there were over 40 regional health funds but these have been subject to con-siderable rationalization and amalgamation. In 2004, about 60% of the population was enrolled in 22 health funds operating nationwide. The remainder of the population whose income levels fall above the thresh-old for health fund eligibility under the Health Insurance Act, take out insurance with private insurers. Both health funds and private insurers have experienced a marked change in their roles as a result of the reforms that have taken place over the 1990s. Instead of fulfilling a primarily administrative function through the retrospective payment of claims, they have been expected to become cost-conscious purchasers of care. In addition recent reform proposals (currently planned for imple-mentation in 2006) give a role to private insurers in the administration of basic health insurance.
France
France is a rather more complex, multi-level system with a strong meso-level component. The main health insurance scheme (régime gén-éral) has a network of 16 regional offices and 129 local fund offices. These health funds are responsible for purchasing health services: they make service agreements with providers on behalf of their insured and, at the national level, negotiate agreements with professional unions and set tariffs. The local fund offices are responsible for making payments to providers. All of these offices are not-for-profit organizations with their own boards and a degree of managerial autonomy, although they are subject to a supervisory function carried out by the national fund organization. A major change introduced in France in 1996 involved the establishment of regional hospital agencies as joint ventures between the state and regional associations of health funds. These agencies now have major responsibilities for purchasing through their ability to contract with hospitals, both public and private. In fact, their leverage over hospitals is a hybrid of purchasing (contracting), planning and funding.
Box 2.4 Social-insurance-based meso-level purchasing in the Russian Federation and the Czech Republic
Russian Federation
In the Russian Federation, the compulsory health insurance system introduced in 1993 created a purchaser–provider split through the estab-lishment of a federal mandatory health insurance fund (MHIF) and territorial MHIFs at the regional level. The federal fund is responsible for supervising and regulating the 89 territorial funds, as well as imple-menting an equalization mechanism. The territorial funds collect and manage insurance revenues from a 3.6% payroll tax on employers on behalf of the working population, as well as regional government contri-butions on behalf of the non-working population (children, pensioners, unemployed, . . .) and distribute these funds to health insurance com-panies or territorial MHIF branches which purchase health services on behalf of their members.
Czech Republic
The Czech Republic currently has nine health insurance funds, which act as meso purchasers. The largest, the General Health Insurance Fund, is granted by the state and covers about 71% of the population (7.3 million people). The other funds each cover between 113 000 and 807 000 people. These funds are national (as in the case of the
responsibility – provide examples of micro-level purchasing (Box 2.5). Another, possibly stronger, example of micro-level purchasing that has emerged in recent years is primary-care-based purchasing. In this model, primary care organiza-tions have control of budgets and are responsible for the purchase of secondary care services on behalf of their patients. England has the most highly developed version of this model, although Spain, Estonia and the Russian Federation have all experimented with some form of it.
Similar local-government-based decision-making powers are vested in county councils and municipalities in Norway, Sweden and Denmark, although the extent of purchasing varies. Sweden was one of the first countries in Europe to introduce purchasing and has gone through a succession of reforms with differ-ent models. These have included approaches based upon municipalities, coun-ties and primary care. The city of Stockholm, in particular, has been associated with market-based reforms. At the moment, purchasing takes place in some of the 21 counties where the purchaser–provider split was introduced, but not in others. In Norway, 435 municipalities act as purchasers of primary care but not secondary care. Similarly, the 14 county councils purchase primary care and outpatient services in Denmark, but not inpatient hospital care.
General Fund), company-based or organized around professional groups.
They are all public, not-for-profit organizations that receive delegated funds from the government, but have a degree of autonomy from the government.
Box 2.5 Micro-level, local government purchasing in Finland
In the Finnish system, purchasing responsibility rests with the 448 municipal councils, which cover populations of, on average, 11 000 people (in fact they range from less than 1000 to over 500 000). Each council is elected every four years by the inhabitants and appoints an executive board that is accountable to the council. The council also appoints members to various municipal committees, including health, education and social services. The municipal council, the municipal executive board and the committees are politically accountable to the electorate. Although the Finnish system has a long-standing reliance on local government (municipality) responsibility, it was the Government Subsidy Reform Act of 1993 that really turned municipalities into pur-chasers. This led to prospective, needs-based budgetary allocations to municipalities in the place of activity-related, retrospective reimburse-ment. Following the reforms, municipalities – by themselves or in associ-ation with other municipalities – were empowered to purchase secondary and tertiary care services from providers of their choice.
Turning to primary care-based purchasing, there have been a number of recent reforms in England that have led to the devolution of purchasing responsibility to locally based, primary-care-led organizations. Although the emphasis placed upon primary-care-led purchasing in England is certainly greater than in any other European country, there have been a number of pilot schemes experimenting with this form of purchasing elsewhere (See Box 2.6).
Box 2.6 Micro-level, primary-care-based purchasing in selected countries England
The reform process began in 1991 with the introduction of purchaser–
provider separation. As part of this process, selected primary care practices where allocated funding to purchase secondary care services for their patients. By 1998, there were 3500 of these GP fundholding practices
provider separation. As part of this process, selected primary care practices where allocated funding to purchase secondary care services for their patients. By 1998, there were 3500 of these GP fundholding practices