During the past decade, how to strengthen the purchasing of health care services to improve performance has attracted increasing attention. Many countries began to introduce some form of strategic purchasing model from the early 1990s. Purchasing strategically implies using methods that link the allocation of resources to information on, for example, the performance of providers or the needs of the population they serve. In contrast, passive purchasing typically takes the form of input-based or historical budgeting or untargeted fee-for-service reimbursement.
Health systems based on a vertically integrated model in which the national or regional government funds and delivers services have made many reforms to split the purchasing and providing functions and give purchasers a lever to improve provider performance. Following the internal market reform in the NHS in the United Kingdom – introduced in 1991 and then consolidated into regionally defined purchasers as primary care trusts in 2000 –, Italy, Portugal and some regions in Spain and Sweden also introduced purchaser–provider splits.
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Bishkek city Chui Issyk-Kul Osh Jalal-Abad Batken Naryn Talas
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Index of spending per head relative to Bishkek
Oblasts
2005 2006
Fig. 3.5. Relative spending per head on the state benefit package (Mandatory Health Insurance Fund) by region, Kyrgyzstan, 2005 and 2006
Source: Financial management reports on execution of the state guaranteed benefit package and 2007 Ministry of Health performance indicator report (67).
Many mechanisms are available, beginning with health needs assessment and the use of contracts, which may include quality monitoring and performance-based payment systems. In these contexts, methods of adjusting risk are used to ensure that the resources flowing to the purchasers match health care needs, which can enhance equity of access and allocative efficiency.
In some countries with a historical split between purchasing and providing functions and insurance funds making contracts with providers, policy-makers have sought to create or extend competition between funds managing compulsory social insurance revenue (including non-profit-making and profit-making insurers), partly to create incentives for strengthened purchasing to achieve efficiency and quality gains. Other reasons for introducing or expanding patient choice of insurer have been to improve responsiveness to consumers and to reduce variation in contributions. As noted above, this strategy faces challenges, especially the scope for risk selection, and the many constraints that limit competition among funds. Many of the measures taken to limit the effects of risk selection – such as nationally defined benefit packages, fee schedules and contribution rates – also limit the scope for insurers to innovate with new purchasing methods. Nevertheless, efforts have recently been made to facilitate competition by permitting selective contracting by insurers to leverage efficiency and quality improvements by providers. One positive development has been in Germany, where some aspects of strategic purchasing were integrated into the risk adjustment formula. In particular, the formula gives a financial incentive to insurers to enrol people with disabilities into disease management programmes (68).
Paying hospitals
An increasing number of countries have experimented with mechanisms to improve the efficiency and transparency of hospital services. Most European health systems pay hospitals
Districts
Index of spending per head relative to UTA Gagauziaa UTA Gagauziaa Ocnita Soroca Taraclia Edinet Glodeni Stefan Voda Rîscani Donduseni Orhei Causeni Floresti Basarabeasca Ungheni Anenii Noi Nisporeni Cahul Criuleni Briceni Soldanesti Cimislia Drochia Rezina Leova Straseni Cantemir Calarasi Sîngerei Telenesti Falesti Ialoveni Hîncesti Dubasari
2003 2004
0.0 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1.0 1.1
Fig. 3.6. Health spending per head in districts of the Republic of Moldova, 2003 and 2004
a Autonomous Territorial Unit of Gagauzia.
Source: Shishkin, Kacevicius, Ciocanu (64).
through global budgets, although case-based payments (often called diagnosis-related groups) are increasingly being introduced to define the budgets or as a form of payment. Although hard budgets have the potential to contain costs, case-based payments bring incentives to increase both activity and transparency in typically opaque hospital accounting systems. The specific goals of introducing case-based payments in hospital care vary across countries, with some aiming to increase activity and reduce waiting times and others seeking to control costs and improve transparency in financing. All, however, broadly aim to create incentives for greater provider efficiency. Hospital case-based payment systems vary in design. For instance, the broader diagnosis–treatment combination in the Netherlands includes payment for both specialist physicians and hospitals in one package. Such an approach inevitably risks premature discharge along with increasing readmission rates, so careful monitoring is required (69).
Overall, such case-based payments have been demonstrated to increase hospital activity, generate information on hospital costs and case mix, and encourage cost control per diagnosis.
Although the incentives associated with case-based payments give rise to such advantages, they also have a disadvantage that can potentially undermine the gains: they encourage hospitals to select less costly cases within a category (cream skimming) and shift more expensive cases to other hospitals, overreport the complexity of cases (upcoding) and skimp on the quality (or more accurately, the quantity) of care provided per case (70).
Paying physicians
Across the European Region, the main approaches for paying providers are salary, capitation and fees for services. In the public sector, most primary and outpatient care physicians are paid by salary or capitation or a combination. In primary care, capitation is the predominant form of payment in many countries, such as Croatia, England, Estonia, Hungary, Italy, Kazakhstan, Kyrgyzstan, Lithuania, the Netherlands, Poland, Romania and Slovakia. Fee-for-service payments prevail in Austria, Belgium, France, Germany (within an overall budget cap), Luxembourg and Switzerland. This method of payment is also the norm for privately delivered primary and outpatient care. For hospital physicians, however, salary payment is the most common method, except in Belgium and Switzerland. Fee-for-service systems have an incentive to increase activity, while salary and capitation methods may control costs but provide incentives to decrease activity and shift patients’ costs onto other providers. Several studies have found evidence for the effects of payment method on physician behaviour (71,72), and countries are increasingly experimenting with mixed payment schemes, which include elements of the different methods to maximize positive incentives and moderate negative ones (69).
Some countries, especially in central and eastern Europe, have moved away from paying salaries to primary care providers towards paying fees for services or capitation. Other countries, such as those in western Europe, have extended targeted fee-for-service payments in addition to capitation, to increase preventive care and reward good performance. Purchasing mechanisms may be able to offset the effects of perverse incentives by carefully linking funds to compliance with quality indicators. Provider contracts in a few countries are being tied to quality indicators, which may include meeting accreditation standards, following quality assurance procedures or achieving quality and outcome targets. Similarly, some countries are moving towards performance-based payment systems for professionals with explicit financial incentives to reward certain behaviour and outcomes. The recent contract and payment reform for GPs in the United Kingdom rewards those achieving certain quality targets, but also has problems, similar to all types of performance-related pay. Most GPs already met the targets (73), so that the budget was exceeded, leading to subsequent failure to increase fees with inflation and resulting low morale.
Although financial incentives are necessary, they are not sufficient to improve quality in service delivery, and work needs to be closely coordinated with initiatives in service delivery and stewardship.
Conclusion
Despite large and growing differences in the context within which health systems are developing across the European Region, all countries need to address the challenge posed by fragmentation in financial arrangements and need to move to align provider incentives with the objectives of health financing policy. These needs are heightened at times of economic recession, when fiscal constraints are likely to be very tight, thus constraining the capacity of governments to continue the past decade’s trend towards increasing public spending on health. One clear message from countries’ reform experience in recent years is that a focus on policy objectives, not on implementing particular mechanisms, should drive health financing policy. Basing policy choices on distinctions between broad health financing models such as Bismarck and Beveridge is not useful, as these have lost their relevance. What matters are the details: what is the source of funds, how they are collected, how funds are pooled, how services are purchased and how a population’s entitlements and obligations are specified. Financing policy should aim to sustain good health system performance, orienting the system in accordance with the underlying values of equity, solidarity and participation while managing resources in a fiscally responsible manner (74).