Lecture 1
Disadvantages:
- Accessibility: your monetary resources
determine how much care you can
receive.
- No risk sharing
Disadvantages:
- Moral hazard: withholding information
- Right incentives: e.g. the contract could
say every service to a patients we will
pay you; incentive to take more
patients
- Regulations: interest are to control
healthcare spending, but also to have
a healthy population
Regulations regarding:
- How patients can choose their
insurance, e.g. when can you switch
insurance
- Quality: what standards can we expect, how do you check whether these
standards are met
Why separating purchasing from care provision?
1. Stimulates shift to more cost-effective care solutions;
2. Population health needs are better met;
3. Providers’ performance improved through purchasers’ incentives and monitoring tools;
4. Providers can focus on efficiently providing health services (instead of administrative burden
in a command-and-control system);
5. Competition among providers should increase efficiency in terms of health outcomes / costs.
Role of the purchaser
- Universal access for all citizens
- Effective care for better health outcomes
- Efficient use of resources
- High-quality services
- Responsiveness to patient concerns
,Greer and Klasa; ‘’Power and Purchasing: Why Strategic Purchasing Fails’’
Strategic purchasing promises to achieve affordable access to high-quality care and maximize health
system efficiency through financing mechanisms and purchasing tools that promote provider
competition, pool risks, prioritize effectively, and ensure equity trough citizen engagement.
WHO definition of purchasing: the allocation of pooled funds t providers that deliver health care
goods and services to the covered population, as per the defined benefit package.
In principle, the logic of purchasing, as an alternative to hierarchical decisions about resource use, is
that it allows market-based coordination of decisions. Rather than allocating resources through
hierarchies, it allows decentralized actors to allocate (at least some) resources in order to better
reflect efficiency, priorities, and local tastes. In Hirschman’s terms, it mobilized the purchaser’s exit
option to shape policy at least on the margins, since purchasers who do not like a given provider’s
offering are able to replace it. Reliance on group purchasers allows both risk pooling and the
possibility that the purchasers will develop expertise, policy capacity, and data that allow them to
make better decisions.
WHO definition of strategic purchasing: purchasing organizations should ‘’continuously search for the
best interventions to purchase, the best providers to purchase from, and using the best payment
mechanisms and contracting arrangements possible to achieve the highest, equitable health
outcomes possible.’’ The following are key elements of strategic purchasing:
1. Use public health to determine priorities for public financing, enforce stewardship, and use
population health data in choosing which interventions to buy.
2. Prioritize units in purchasing in order to promote the creation of more long-term contracts.
3. Avoid micro-purchasing and micro-managing, which prevent the pooling of health services
and populations and prevent risk-sharing.
4. Through budgeting and contracting, establish an environment in which there are appropriate
incentives for providers to (1) prevent health problems of pool members, (2) provide
services and solve health problems of members, (3) be responsive to people’s legitimate
expectations, and (4) contain costs.
5. Establish appropriate political capacity and governance to promote flexible provider resource
management, promote accountability, and prevent negative consequences of financing
reforms.
,The absence of strategic purchasing by any definition is the result of four key asymmetries that lead
to power imbalances between purchaser and provider (or patient), which are difficult or unlikely to
change.
- Information Asymmetries
o Purchasers suffer from information asymmetries relative to the providers they seek
to contract with or individual patients. This means that effective needs assessment or
utilization reviews, as well as purchasing decisions, will be very costly and often
require more information and time than can be had within existing financial,
technical, and organization capacity to collect and use data. The temptation will be
to simply continue purchasing more or less what was purchased last year, or use
crude approaches that can lead to backlash.
- Political Power Asymmetries
o Strategic purchasers are intervening with purely financial instruments in decisions
about patient care, professionalism, and the behavior of large community
institutions such as hospitals and universities. We posit that strategic purchasers will
always be politically weaker than patients, professionals, or hospitals. As a result, any
serious efforts by a payer to discipline a provider by pushing patients elsewhere will
be undercut bvy medical and patient noncompliance and risks political backlash
when politicians choose to intervene to save a hospital or treat patients differently.
- Market Power Asymmetries
o Market power asymmetry refers to competitive structures, and geographical
constraints, that lead to a lack of competition and imbalances such as between
monopoly providers and purchasers. A purchaser has power – an exit option – only if
there are comping providers with spare capacity. The assumption of competing
options with spare capacity is not always operative, for reasons of population
density, geography, or investment in health care facilities. Often, providers attempt
to strategically increase their own market power by merging.
- Financial Asymmetries
o For this to discipline providers, the amount of money purchasers have and can
redirect must suffice to make providers responsive to purchasers. In general,
purchasers do not have enough money to influence providers, especially capital
investment, and when they do it is at the margins. Even if payers did have enough
money to shape capital investments, political difficulties would still hinder their
ability to threaten disinvestment.
As a result, the capital investments that form the skeleton of the health care system
are often decided by governments, not strategic purchasers.
Last, this financial asymmetry also affect the purchaser’s ability to selectively
contract, as governments will generally not allow institutions that received
substantial government funding to go bankrupt. In principle, this is the easiest
asymmetry to address, since all it requires is that capital expenditure budgets be
given to the payers and incorporated into the strategic purchasing process.
, Böhm, et al; ‘’Five types of OECD healthcare systems’’
The delivery of services and their financing are core dimensions to be looked at, particularly with
respect to the extent to which the sate intervenes in healthcare and with respect to the
public/private mix. Occasionally, these criteria are supplemented with questions of professional
autonomy, eligibility, coverage or access, and the administration of financing. The latter all refer to
aspects of regulation.
Distinguishing three ideal forms of regulation, corresponding to state-based actors, societal actors,
and market participants. Hierarchy, sate-led systems, or command-and-control-systems frame one
class of coordination or governance. The second refers to networks, collegiality, or corporatism as
means of regulation through non-governmental actors. Finally, the market emerges as a typical mode
of regulation in these studies. Consequently, again three types are identified, highlighting the statis,
corporatist, and private modes of healthcare regulation.
The regulation dimension can be structured as the relation between financing agencies, providers,
and (potential) beneficiaries:
The financing dimension:
- State financing: general and/or earmarked tax revenues
- Societal: social insurances contributions
- Private sector: contributions to private insurance and out-of-pocket payments
The service provision dimension:
- Public, private non-profit and private for-profit
State involvement can be justified by the public interest in guaranteeing effective, affordable, and
accessible healthcare for the entire population.
The state can either finance healthcare out of its own revenues or grant societal actors privileges to
raise funds for this purpose.
