Summary articles Essentials of care
Week 1. Decentralization & the regulated market
Atun, R. (2006). Privatization as descentralization strategy. Report to
the World Health Organization Regional Office for Europe, 14, 246-
271
Decentralization = the wide range of acts of transfer of power and authority from higher to
lower levels of government for a number of functions, such as planning, human resource
management, budgeting and performance management
- From national to subnational level
Administratively, powers and functions can be decentralized vertically within the same
corporate entity (for instance, geographic decentralization from national to regional ministries
of health with limited transfer of functions – deconcentration – or more extensive transfer of
functions – delegation)
- Alternatively, with devolution, powers and functions can be decentralized to a
different corporate entity within the public sector, such as the local government
Privatization involves the transfer of assets, responsibilities or functions from the
government/public sector to a non-governmental organization which may be either a
voluntary agency or a private company.
- . Privatization is considered by some as the point for decentralization (Mills et al.
1990) but by others as being a distinctly different process (Collins 1989).
The Rationale for privatization
Rationale 1
Proponents of privatization argue that the process helps a government to fulfil a number of
objectives, for example, reduce administrative and financial burdens with respect to providing
public services, increase efficiency and effectiveness of services to achieve value-for-money,
encourage innovation, and develop more user-sensitive services appropriate for a particular
community or context
- This is because privatization aligns the interests of the principal (the government) and
the agent (the manager) thereby improving performance
Rationale 2
give the purchasers and consumers a stronger voice through increased choice and competition
However, it is not clear to what extent these benefits, which are based on experience and
economic analyses of non-health sectors, can be extrapolated to the health sector.
Critics on privatization
privatization fails to meet the objectives defined above (Tittenbrun 1996). Especially in the
health sector where there is market failure – due in part to externalities (where benefits of a
health intervention accrue to an individual receiving it but also to the broader public, such as
immunization), asymmetry of information (where consumers or patients are relatively ill
informed about their health care needs), moral hazard (both on demand and supply side) and
uninsurable risk.
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,Privatization in Europe: the evolving context
European countries adopted four major strategic directions of change to redefine the role of
the state, profoundly changing the public sector by subjecting it to market forces and various
modes of private sector involvement.
These four directions were:
(1) full privatization;
(2) outsourcing services from the private sector;
(3) creation of hybrid organizations, such as quasi-autonomous non-governmental but public
bodies, subject to rigorous private sector management methods and managed at arm’s-length
through contracts and performance targets, as well as new ventures in the shape of public–
private partnerships; and
(4) transforming or “modernizing” work practices in those organizations that remained under
state control
Neo-liberal economics US UK central and eastern Europe
neo-liberal economic models could be applied to health care, and stressed the beneficial
effects of markets and strong incentives. These arguments were influential in shaping health
reforms in the United Kingdom, then subsequently in central and eastern Europe.
New public management
The profound structural changes observed in many public and health sectors are, in part,
attributed to the rise of the New Public Management (NPM)
This change is most visible in the “high-impact” countries of the United Kingdom, and New
Zealand (Boston et al. 1996) but can also be observed in Brazil, Canada (Aucoin 1995), the
United States of America (Barzelay 1992) and many European countries
New Public Management marks a fundamental shift from “administering” towards
“managing”, with the roles of the “centre” and the “periphery” being redefined.
- The centre increasingly assumes a corporate stewardship role, centralizing or
strengthening regulatory functions with decentralization of operational management
- NPM encourages replacement of hierarchical bureaucracies with managed networks
and emphasizes performance management
- A “command and control” mode of management gives way to managing through
empowerment and motivation.
- With NPM, there is more “market-like” orientation and increased convergence with
private sector models of organization.
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,Privatization experience in the European health sector
Full privatization
Central European countries such as Hungary, Poland, and the Czech Republic have privatized
dentistry and pharmacy services. A similar trend can be observed in eastern Europe. There
have been limited evaluations of the impact of privatizing dental or community pharmacy
services
In several central and eastern European countries such as Croatia, the Czech Republic,
Georgia, Estonia, Hungary, Poland, Slovenia and The former Yugoslav Republic of
Macedonia, primary health care (PHC) and hospital services have been privatized to varied
levels.
New organizational forms
Hybrid organizations = are not fully privatized and remain in the public sector but have many
characteristics of private sector organizations.
- Various forms exist including autonomous trusts in the United Kingdom, state-owned
joint stock companies, and public–private partnerships such as those created through
private finance initiatives
Saltman has developed a typology to describe four major forms of private and public
organizational forms:
(1) private for profit;
(2) private not-for-profit;
(3) public but not state = regional and local government-run institutions – such as the
autonomous provinces in Spain; the Ländern in Germany; county councils in Sweden or
Denmark; municipal governments in Finland – as well the managerially independent but
publicly accountable public entities: such as hospital trusts in the United Kingdom;
independently managed hospitals in Norway, Sweden, and Spain, as well as primary health
centres in Sweden
(4) public and state
Public-private partnerships = variety of relationships between the private sector and public
bodies. These range from informal and strategic partnerships to schemes that entail designing,
building, financing and operating assets (with or without transfer) which were previously in
the public domain
- . In effect, the private sector develops and builds assets and provides services which
are financed or coordinated by the public sector
- PPP has been widely used for infrastructure development, facilities management and
for service development and delivery. In these arrangements, there is shared
capitalization and risk.
- The European Commission has actively encouraged the use of public–private
partnerships and has provided grants to encourage their establishment
- In the EU context, the aim of PPPs is to enhance efficiency and reduce expenditure in
the public sector and create opportunities for the private sector
- Public–private partnerships have been introduced in numerous European countries,
including Austria, Finland, France, Ireland, Italy, Portugal, Spain and the United
Kingdom, to varying extent
Conclusion
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, In Europe, there is considerable movement towards various forms of privatization of the
health sector. There is evidence of heterogeneity of approaches adopted along the
privatization continuum. The experience is characterized by the varied mechanisms and
instruments used.
There is a growing degree of convergence in the environments within which the public and
private sectors organizations operate. The term “Third Way” (Giddens 1998) has been coined
to describe the transition from the strict separation of the public and private sectors to a
situation where these organizations operate within a unified context and are subject to similar
regulatory and managerial disciplines. With the Third Way, “hands-on management”
practices by the government are replaced by “corporate stewardship”, where the government
aims to enhance local operational flexibility at the organizational level, but within the context
of the reintroduction of stronger national regulatory frameworks.
The roles and relationships of the centre and the periphery are being redefined, with more
“arm’s-length” rather than “hands-on” management styles prevailing. Hence, in this model,
one witnesses simultaneous decentralization and recentralization: decentralization of
operational flexibility with budgets and managerial autonomy and recentralization of
regulatory powers, with stronger frameworks which specify process and performance criteria
In effect, the Third Way embodies an idealized hybrid between central and local control, to
combine the benefits of both: decentralization to encourage innovation and responsiveness
while maintaining arm’s-length control to maintain performance and reduce risk
As regards managerial practices, the public sector is now less secluded from private sector
methods. For example, in personnel, structure and business methods, private sector practices
have been adopted. Further, the rules and regulations, which in the past limited the freedom of
public officials in managing planning, budgets, human resources and contracts, have
decreased due to decentralization.
Wilson and Doig comment that in the public sector there is a clear move from an
administrative culture operating in a bureaucratic environment – which they call “the enclosed
bureaucratic” approach – towards managerial practices in a market environment – which they
name “the responsive market” mode
Pavolini, E., & Vicarelli, G. (2012). Is decentralization good for your
health? Transformations in the Italian NHS. Current sociology, 60(4),
472-488
Introduction
Over the last two decades European healthcare systems have been subjected to several
institutional reforms, spanning from new forms of regulating health professionals and the
introduction of managerialism to different types of privatization
One of the cornerstones of these reforms has been political and administrative
decentralization with devolution of powers and responsibilities from central government to
the regional and sub-regional tiers. This trend is common to many Western European
healthcare systems from the Nordic countries to those of the Mediterranean region
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