From evolution to revolution: Restructuring the New Zealand health system

After a number of years of evolutionary changes to the New Zealand health system, the government announced a radical restructuring of all publicly funded health services in July 1991, to be implemented on 1 July 1993. The primary features of these changes are a splitting of the purchaser and provider roles, and a restructuring of health services along more business-like lines. The proposals have been highly contentious and have attracted little support from within the health sector. This paper outlines the reasons for and nature of the reforms and explores some of the issues behind the changes. These include problems of pricing services for purchasing purposes, the potential conflict between financial and social objectives, and questions of accountability of purchasers and providers. Considerable uncertainty surrounding these and other issues means that any potential efficiency gains cannot be guaranteed. The costs of the reform process have, however, already been high, both in financial terms and in terms of their impact on the morale of health workers.     

Doing the splits: contracting issues in the New Zealand health service

The purchaser-provider split is an integral part of the New Zealand and UK health care reforms. The split is seen as an opportunity to introduce competition by increasing the number of players. The assumption is that competition among providers, purchasers or indeed funders, increases efficiency and provides more consumer choice. This paper looks at the issue of contracting in the New Zealand health services within the framework of transaction cost analysis. It examines evidence about the effects of formal contracting rather than the more traditional, informal negotiations that take place within a hierarchy. A number of potential problems with an indiscriminate provider split are highlighted and the conclusion drawn, that the outcome of such a split is likely to be more unpredictable than official expectations. In the absence of pilots, monitoring the implementation will be critically important to be able to compare the outcomes of different ways of organising the health care system.     

Toward a 21st century quality-measurement system for managed-care organizations

As the Nation's largest managed-care purchaser, the Health Care Financing Administration (HCFA) is working to develop a uniform data and performance-measurement system for all enrollees in managed-care plans. This effort will ultimately hold managed-care plans accountable for continuous improvement in the quality of care they provide and will provide information to consumers and purchasers to make responsible managed-care choices. The effort entails overhauling peer review organization (PRO) conduct of health maintenance organization (HMO) quality review, pilot testing a new HMO performance-measurement system, establishing criteria for Medicaid HMO quality-assurance (QA) programs, adapting employers' HMO performance reporting systems to the needs of Medicare and Medicaid, and participation in a new alliance between public and private sector managed-care purchasers to promote quality improvement and accountability for health plans.     

Defining core services: New Zealand experiences

A key aspect of the New Zealand health reforms was the proposed development of an explicit core of services to which all New Zealanders would have access. A range of approaches has been taken by the government, its advisers, purchasers and providers to describe sets of services to which New Zealanders are to have access. The development of an explicit core aims to promote equity of access to services, to ensure that those services available are those that are the most cost-effective and the services New Zealanders feel to be the most important, and to clarify entitlements to publicly funded health care. This paper describes the current approaches that are being used to define core services in New Zealand, discusses the reasons behind some of the choices made and notes some key issues for further policy debate.     

Choice of contracts in the British National Health Service: an empirical study

Following major reforms of the British National Health Service (NHS) in 1990, the roles of purchasing and providing health services were separated, with the relationship between purchasers and providers governed by contracts. Using a mixed multinomial logit analysis, we show how this policy shift led to a selection of contracts that is consistent with the predictions of a simple model, based on contract theory, in which the characteristics of the health services being purchased and of the contracting parties influence the choice of contract form. The paper thus provides evidence in support of the practical relevance of theory in understanding health care market reform.     

Contracting for health services in a public health system: the New Zealand experience

This paper reports on the process and outcomes of contracting for health services in New Zealand between 1993 and 2000 when a purchaser-provider split was in place. Key factors that shaped the contracting environment were the legal framework, funding constraints, and the cultural and professional norms of contracting personnel. A lack of good information-especially on costs, volumes and quality-increased the costs of contracting and made monitoring and accountability difficult. Over time, however, the contracting process became simpler and less costly. Overall, the introduction of contracting generally improved the focus of providers on costs and volumes; led to greater clarity through specification of services; encouraged providers to focus on methods to improve quality; and enabled new styles of service provision from providers that had not traditionally received public funds for health services. Good relationships between purchasers and providers were seen as the key to successful contracting.     

Reporting comparative results from hospital patient surveys.

Externally-reported assessments of hospital quality are in increasing demand, as consumers, purchasers, providers, and public policy makers express growing interest in public disclosure of performance information. This article presents an analysis of a groundbreaking program in Massachusetts to measure and disseminate comparative quality information about patients' hospital experiences. The article emphasizes the reporting structure that was developed to address the project's dual goals of improving the quality of care delivered statewide while also advancing public accountability. Numerous trade-offs were encountered in developing reports that would satisfy a range of purchaser and provider constituencies. The final result was a reporting framework that emphasized preserving detail to ensure visibility for each participating hospital's strengths as well as its priority improvement areas. By avoiding oversimplification of the results, the measurement project helped to support a broad range of successful improvement activity statewide.     

Informal payments and the financing of health care in developing and transition countries

Informal, under-the-table payments to public health care providers are increasingly viewed as a critically important source of health care financing in developing and transition countries. With minimal funding levels and limited accountability, publicly financed and delivered care falls prey to illegal payments, which require payments that can exceed 100 percent of a country's median income. Methods to address the abuse include establishing official fees, combined with improved oversight and accountability for public health care providers, and a role for communities in holding providers accountable.     

Lost in the market? A survey of senior public health service managers in New Zealand's ‘reforming’ health system

Abstract: In 1993, New Zealand implemented radical health sector reform, separating purchaser from provider and creating a competitive market. This paper reports on a 1994 survey of senior managers' perceptions of how well public health services were adapting to this more commercial environment. An initial questionnaire to chief executive officers of Crown health enterprises, the main providers of public health, as well as secondary treatment services, was followed by a telephone survey of managers of public health services. Chief executives expressed generally positive views about the importance of public health, especially health promotion, within their organisations. Public health managers indicated a wide range of negative and positive views about the new system. They were concerned especially about service fragmentation, diminished information-sharing and decreased collaboration, especially with Maori and general practice providers. Questions were raised about the compatibility of competition with the need for collaboration in public health. The major issue was the inefficient, costly, conflicting and fragmented purchasing arrangements for public health. Managers wanted unified systems and fewer purchasers. More positive views were expressed on an improved focus on outputs and clearer directions, and none wanted to return to the former era of an entirely separate system for public health services. The abolition of the Public Health Commission during 1995 should lead to increased integration of purchasing and policy making, but important questions remain about the place of public health services, especially in their links with primary care.     

Knowledge based commissioning: can a national clinical effectiveness policy be compatible with seeking local professional advice?

OBJECTIVES: To help develop a means, based on the views of purchasers and providers of health care, of incorporating national research on clinical effectiveness into local professional advisory mechanisms in order to inform health care purchasing and contracting. METHODS: Three geographically based multidisciplinary workshops attended by National Health Service (NHS) staff drawn from the principal purchaser and provider groups in one English region were organized around the discussion of three health care purchasing case studies: coronary artery disease, diabetes and management of clinical depression in general practice. The proceedings were transcribed and analyzed using content analysis methods. RESULTS: 95 people took part. There were major differences between the purchasers' and health care providers' views on the right balance between local and national information and advisory sources for purchasing. In general, providers wanted the provision of advice to purchasers to be local, in which their opinion was sought, either individually or collectively, acted on and the results fed back to them. In contrast, health authority purchasers considered that local professionals were only one source of professional advice, albeit an important one, to be utilized in coming to decisions. General practitioner fundholders as purchasers, however, preferred to rely on their own experiences and contacts with local providers in making purchasing decisions. CONCLUSIONS: Professional specialist advisory groups are necessary to inform the purchasing of health care, but should extend beyond advising on the placement of individual contracts. Involving health care providers in all short-term contracting is unlikely to be cost-effective given the time commitment required. The emphasis at purchaser/provider meetings should be on education: providing an opportunity for purchasers and providers to develop closer relationships to discuss political imperatives and financial constraints; increasing communication and understanding of providers' and purchasers' roles; and providing an environment for professionals and purchasers to share their views on purchasing. As currently presented, elements of the national policies in the NHS advocating the use of both national evidence on clinical effectiveness and local professional advice are contradictory and should be clarified.     

Do beneficiaries’ views matter in healthcare purchasing decisions? Experiences from the Nigerian tax-funded health system and the formal sector social health insurance program of the National Health Insurance Scheme

Background

Purchasing is a health financing function that involves the transfer of pooled resources to providers on behalf of a covered population. Little attention has been paid to the extent to which the views of that population  are reflected in purchasing decisions. This article explores how purchasers in two financing mechanisms: the Formal Sector Social Health Insurance Programme (FSSHIP) operating under the Nigerian National Health Insurance Scheme (NHIS), and the tax-funded health system perform their roles in light of their responsibilities to the populations.

Methods

A case study approach was adopted in which each financing mechanism is a case. Sixteen (16) in-depth interviews with purchasers and eight (8) focus group discussions with beneficiaries were held. Agency and organizational behavioural theories were used to characterise the purchaser-citizen relationships. A deductive framework approach was used to assess whether actions identified in a model of ‘ideal’ strategic purchasing actions were undertaken in each case.

Results

For both cases, mechanisms exist to reflect people’s health needs in purchasing decisions, including quantitative and qualitative needs assessment, mechanisms to raise awareness of benefit entitlements and allow choice. However, purchasers do not use the mechanisms to effectively engage with and hold themselves accountable to the people. In the tax-funded system, weak information systems and unclear communication channels between the purchaser and citizens constrain assessment of needs; while timeliness of health information and poor engagement practices of Health Maintenance Organisations (HMOs) are the main constraints in FSSHIP. Inadequate information sharing in both mechanisms limits beneficiaries’ awareness of entitlements. Although beneficiaries of FSSHIP can choose providers, lack of information on the quality of services offered by providers constrains rational decision-making and the inability to change HMOs reduces HMO responsiveness to beneficiary needs.

Conclusions

Responsiveness and accountability to beneficiaries are undervalued by purchasers in both financing mechanisms. In the tax-funded system, civil society organisations can facilitate engagement and accountability of purchasers and the people. In FSSHIP, NHIS needs to provide stronger stewardship of HMOs to promote effective engagement with members. Furthermore, the NHIS should introduce mechanisms that allow FSSHIP members to choose their own HMO, which could encourage HMOs to be more responsive to members.

     

Primary care reform: a three country comparison of 'budget holding'

Governments in most developed nations have been looking to organisational and financial reform of health systems over the last decade. Although the structure and problems of the health care sector in each country may differ, with countries correspondingly adopting different reform agendas, there has been some element of commonality in reforms: that of (managed) competition. Of particular importance in such reforms has been the strengthening of primary care. General practitioners and primary care physicians, as 'gatekeepers' to the health system, are increasingly being called upon to be accountable; not only for their patients' health but also for the wider resource implications of any treatments prescribed. In some countries this role has been formalised through establishing 'budget holding' for general practitioners and primary care physicians, for example, through general practice 'fund holding' in the UK, Health Maintenance Organisations in the USA, and Independent Practice Associations in New Zealand. This paper examines: (i) what such budget holding seeks to achieve; (ii) the effectiveness of the budget holding experience to date in achieving these objectives; and (iii) factors which appear to determine the success of budget holding in achieving its objectives.     

Shopping for health: purchasing health services through contracts

The 1993 New Zealand health service reforms were based on the purported efficiencies of the purchaser/provider split. Purchasers are required to contract for services that will maintain, improve and restore the health of the populations they serve. The purchasing role, which requires the development of contracting skills as well as the setting of strategic directions and priorities, is new and as yet poorly developed. This paper describes the role of purchasing agents in setting priorities, the different approaches that are being taken to contracting for services and some of the problems that have arisen in the first year of contracting. It explores the trade-off that is evident between the potential for improving efficiency through contestable contracting and the need to minimise transaction costs associated with the contracting process. The purchasers' accountability to the public and the Minister is analysed in the broader political context of the purchasers' role in shaping a public health service and improving the health of the population.     

Reform and counter reform: how sustainable is New Zealand's latest health system restructuring?

New Zealand's health care sector has undergone almost continual restructuring since the early 1980s. In the latest set of reforms, 21 district health boards (DHBs) have been established with responsibility for promoting health, purchasing services for their populations and delivering publicly owned health services. Boards will be governed by a mix of elected and appointed members, will be responsible for arranging the delivery of primary and community health services, and will own and run public hospitals and related facilities. We clarify the differences and continuities between earlier reforms and the 2000/01 structures, as well as the current reforms' potential strengths and weaknesses. The paper discusses whether the DHB model was the only feasible option for restructuring and whether the dynamics of the new system may lead to further changes, particularly on the purchaser side of the system. Given that DHBs face potential conflict between their purchasing and provision roles, and given the potential advantages that primary care organisations may have as purchasers, we conclude that it is possible that all or part of the purchasing function of DHBs might eventually shift to primary care organisations, leaving the DHBs as hospital-based provider organisations.     

Integration, accountability and decentralisation of Crown Health Enterprise decision making

New Zealand is possibly moving further than any other western country in achieving a decentralised, integrated, accountable and population-based health system. However, this progress owes as much or more to the reforms implemented through the area health board system, particularly general and service management, than the current reform process. Services have largely replaced hospitals as organizational entities. The leading edge of CHE service development should not be high-tech services but primary health care (PHC). Progressive CHEs are implementing a PHC service as a structure for managing their own PHC services and to begin the necessary dialogue with GPs and other non-government PHC providers.     

How healthcare systems shape a purchaser’s strategies and actions when managing chronic care

Healthcare purchasing organisations in both insurance-based and tax-based healthcare systems struggle to improve chronic care. A key challenge for purchasers is to deal with the chain of multiple providers involved in caring for patients with complex needs. To date, most research has focused on differences between healthcare systems in terms of regulation, tools and the freedom that healthcare purchasers have. However, this does not explain how such different healthcare system characteristics lead to different purchasing strategies and actions. A better understanding of this link between system characteristics and purchaser behaviour would assist policymakers seeking to improve healthcare purchasing. This multiple case study conducted in England, Sweden and the Netherlands examines the link between the different healthcare systems’ characteristics and the purchasers’ strategies and actions when managing chronic care chains. Purchasers’ strategies and actions varied in terms of the purchaser’s engagement, strategic lens and influencing style. Our findings suggest that differences in purchaser competition, purchaser governance and patient choice in healthcare systems are key factors in explaining a purchaser’s strategies and actions when pursuing improvements in chronic care. This study contributes to knowledge on what shapes the purchaser’s role, and shows how policymakers in both insurance- and tax-based regimes can improve healthcare purchasing.     

Provider-specific report cards: a tool for health sector accountability in developing countries

In most health care systems in most countries, providers are not adequately held accountable - by governments, purchasers, provider professional associations or civil society - for the quality of care. One approach to improve provider accountability that is being debated and implemented in a subset of developed countries and a smaller group of developing countries is provider-specific comparative performance reporting. This review discusses universal design options for report cards, summarizes the evidence base, presents developing country examples, reviews challenges and outlines implementation steps. The ultimate aim is to provoke thoughtful debate about if and how comparative performance reporting fits within a developing country's broader framework of strategies to promote quality of care.     

Managed markets in health care: the UK experiment

The reforms to the United Kingdom national health service initiated in 1989 have unlocked established relationships. Health care providers have come under challenge from an alliance of purchasers and general practitioners. This is resulting in a major rationalisation of acute hospital services in cities such as London. The general practitioner fundholding scheme appears to have produced benefits for patients, although its impact in the longer term remains uncertain. The combination of population based and patient focused models of purchasing within the reforms has created competition between purchasers as well as providers. This has served as a stimulus to purchasers to act as effective agents for patients but it also creates a risk of fragmentation. This paper analyses these developments and draws out their implications for the future of the National Health Service.     

The quality of health purchasing

Much has been written about quality in patient care and clinical support services, but very little about the quality of purchasing. This paper gives an overview of quality issues in purchasing, and offers guidelines and practical steps for purchasers to improve service quality--both their own and their providers'. It defines quality in purchasing and considers how purchasers can influence markets and work with providers to improve health services quality. The paper gives practical guidance for improving quality, which recognises the limited resources and skills which purchasers have for the task. It addresses some issues raised by purchaser/managers: How does a purchasing organisation measure and improve quality? Is there a better way of specifying and monitoring quality than the "shopping-list of standards" approach--what should be asked of providers? How can information about clinical quality, outcome and costs, be obtained in a form in which reliable comparisons can be made? Is quality accreditation or registration a good predictor of future quality?     

Market Concentration in Secondary Health Services Under a Purchaser–Provider Split: The New Zealand Experience

The separation of purchaser and provider in government-funded health systems enables competition to develop between providers. Competition is seen as a means to drive technical efficiencies by providers. While it is difficult to assess comprehensively the level of competition in a market taking into account contestability and substitutability effects, it is possible to measure the degree of market concentration. This paper employs the Hirschman–Herfindahl index to provide measures of market concentration in selected secondary health care markets in New Zealand immediately prior to (1992) and following (1994) implementation of a purchaser–provider split. The results show that, generally, the selected markets are highly concentrated and that there has been little change in the degree of concentration over the 2 year period under investigation. The paper also discusses some of the methodological problems associated with the measurement of market concentration and acknowledges the limitations of such measures as indicators of competition. © 1997 by John Wiley & Sons, Ltd.