Hospitals 1. Contracting is a purchasing mechanism used to Acquire a specified service Of a...
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Transcript of Hospitals 1. Contracting is a purchasing mechanism used to Acquire a specified service Of a...
2
Definition
Contracting is a purchasing mechanism used to Acquire a specified service Of a defined quantity and quality For a specified period.
Not a “1-off” exchange…rather…
Ongoing exchange relationship, supported by a contractual agreement
Taylor, 2005
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“What” …Definitions
Written formalization of the process of agreements between purchaser and provider
Define clearly Purchaser and provider Scope definition and volume of services Price to be paid Minimum quality of services Administrative arrangements…..mgmt/m&e KEY!
Our Perspective: Insurer or Gov’t (not manager)
Why?
Ensuring Services for Beneficiaries Contracting a sufficient number of qualified providers Acting as a broker between patient and provider to assure timeliness and suitability of the
needed services
Performance Review of Providers as Agent of the Beneficiary Financial Monitoring (Submitted claims for payment) Clinical Appropriateness & Quality of Care Paying the services
Optimizing Resource Use and Quality Selecting providers
Selecting Interventions Selecting volume of interventions
Selecting payment system
Creating a win-win situation for purchaser and providers Sticks & carrots
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And in OECD Countries…
Germany Netherlands Switzerland Austria United Kingdom Estonia Czech Republic Canada USA
Japan South Korea China Taiwan
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Range of Contracting
Public Health and Primary Care
Clinical Support Services
Specialized Clinical Services
Hospitals
Increasing Impact ??
Family Planning Labs, Imaging Dialysis/ Private Management Transplants
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Does it Work?
South Africa
2 build-own-operate district hospitals under 10 year service contracts
3rd hospital publicly built and privately managed
Studied by Broomberg, Masobe and Mills (1997)
Matched against similar public facilities
Higher productivity Lower staff costs Improved staff mix
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Contracting non-clinical support services
common termsOptions
Contracting clinical support services
Contracting specific clinical services
Buying hospital services
Private management of public hospital
Private financing, construction, and
leaseback of new public hospital
Private financing, construction, and
operation of new public hospital
Sale of public hospital for alternative use
Services & capital
contract
BOO
BOOT
PFI
Operating contract
Private sector responsibility
Public sector responsibility
Provides nonclinical services (cleaning, catering, laundry, security, building maintenance) and employs staff for these services.
Finances, constructs, and operates new public hospital and provides nonclinical or clinical services, or both.
Reimburses operator for capital costs and recurrent costs for services provided.Reimburses operator for capital and recurrent costs for services provided. Takes facility ownership at end.
Finances, constructs, and owns new public hospital and leases it back to government
Manages public hospital under contract with government or public insurance fund; provides clinical and nonclinical services. May employ all staff. May also be responsible for new capital investment, depending on terms of contract.
Contracted private hospitals provide services in accordance with contractual provisions
Provides specific clinical services (such as lithotripsy; dialysis) or routine procedures (cataract removal).
Provides clinical support services such as radiology or laboratory services.
Purchases facility and converts it for alternative use depending on sales agreement
Provides all clinical services (and staff) and hospital management; manages contract and pays for support services
Manages hospital and provides clinical services; manages contract and pays for services.
Manages hospital and provides most clinical services; manages contract and pays for services.
Contracts with private hospitals, monitors, pays for services.
Contracts with private firm for provision of public hospital services, pays private operator for services provided, and monitors and regulates services and contract compliance.
Manages hospital and makes phased lease payments to private developer.
Monitors conversion to ensure adherence to contractual obligations.
Outsourcing; PPP
Privatization
Outsourcing Contracting
Co-location
Co-location of private wing or department
within or beside public hospital
Operates private wing or department (for private & public (?) patients); fulfills payment and service access conditions agreed
Manages public hospital for public patients and contracts with private wing for sharing joint costs, staff, and equipment.; supervises fulfillment of patient access and other conditions
Outsourcing;PPP
Contracting; Purchasing
12
Contracting non-clinical support services
common termsOptions
Contracting clinical support services
Contracting specific clinical services
Buying hospital services
Private management of public hospital
Private financing, construction, and
leaseback of new public hospital
Private financing, construction, and
operation of new public hospital
Sale of public hospital for alternative use
Services & capital
contract
BOO
BOOT
PFI
Operating contract
Private sector responsibility
Public sector responsibility
Provides nonclinical services (cleaning, catering, laundry, security, building maintenance) and employs staff for these services.
Finances, constructs, and operates new public hospital and provides nonclinical or clinical services, or both.
Reimburses operator for capital costs and recurrent costs for services provided.Reimburses operator for capital and recurrent costs for services provided. Takes facility ownership at end.
Finances, constructs, and owns new public hospital and leases it back to government
Manages public hospital under contract with government or public insurance fund; provides clinical and nonclinical services. May employ all staff. May also be responsible for new capital investment, depending on terms of contract.
Contracted private hospitals provide services in accordance with contractual provisions
Provides specific clinical services (such as lithotripsy; dialysis) or routine procedures (cataract removal).
Provides clinical support services such as radiology or laboratory services.
Purchases facility and converts it for alternative use depending on sales agreement
Provides all clinical services (and staff) and hospital management; manages contract and pays for support services
Manages hospital and provides clinical services; manages contract and pays for services.
Manages hospital and provides most clinical services
Contracts with private hospitals, monitors, pays for services.
Contracts with private firm for provision of public hospital services, pays private operator for services provided, and monitors and regulates services and contract compliance.
Manages hospital and makes phased lease payments to private developer.
Monitors conversion to ensure adherence to contractual obligations.
Outsourcing; PPP
Privatization
Outsourcing Contracting
Co-location
Co-location of private wing or department
within or beside public hospital
Operates private wing or department (for private & public (?) patients); fulfills payment and service access conditions agreed
Manages public hospital for public patients and contracts with private wing for sharing joint costs, staff, and equipment.; supervises fulfillment of patient access and other conditions
Outsourcing;PPP
Contracting; Purchasing
Contracting
13
Contracting non-clinical support services
common termsOptions
Contracting clinical support services
Contracting specific clinical services
Buying hospital services
Private management of public hospital
Private financing, construction, and
leaseback of new public hospital
Private financing, construction, and
operation of new public hospital
Sale of public hospital for alternative use
Services & capital
contract
BOO
BOOT
PFI
Operating contract
Private sector responsibility
Public sector responsibility
Provides nonclinical services (cleaning, catering, laundry, security, building maintenance) and employs staff for these services.
Finances, constructs, and operates new public hospital and provides nonclinical or clinical services, or both.
Reimburses operator for capital costs and recurrent costs for services provided.Reimburses operator for capital and recurrent costs for services provided. Takes facility ownership at end.
Finances, constructs, and owns new public hospital and leases it back to government
Manages public hospital under contract with government or public insurance fund; provides clinical and nonclinical services. May employ all staff. May also be responsible for new capital investment, depending on terms of contract.
Contracted private hospitals provide services in accordance with contractual provisions
Provides specific clinical services (such as lithotripsy; dialysis) or routine procedures (cataract removal).
Provides clinical support services such as radiology or laboratory services.
Purchases facility and converts it for alternative use depending on sales agreement
Provides all clinical services (and staff) and hospital management; manages contract and pays for support services
Manages hospital and provides clinical services; manages contract and pays for services.
Manages hospital and provides most clinical services
Contracts with private hospitals, monitors, pays for services.
Contracts with private firm for provision of public hospital services, pays private operator for services provided, and monitors and regulates services and contract compliance.
Manages hospital and makes phased lease payments to private developer.
Monitors conversion to ensure adherence to contractual obligations.
Outsourcing; PPP
Privatization
Outsourcing Contracting
Co-location
Co-location of private wing or department
within or beside public hospital
Operates private wing or department (for private & public (?) patients); fulfills payment and service access conditions agreed
Manages public hospital for public patients and contracts with private wing for sharing joint costs, staff, and equipment.; supervises fulfillment of patient access and other conditions
Outsourcing;PPP
Contracting; Purchasing
“PPPs”
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India…PPP or Contracting?
Rajiv Ghandi Super Specialty Hospital, Karnataka
Poor District of 1.7 million people 90 KM from Bangalore
Govt constructed and equipped (350 beds) + direct subsidy
Idle for 2 years
10 Year concession
Private management Apollo Hospital Corporation
Governing CouncilGovernment Audits
High Levels of Patient Satisfaction
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3 Basic Types of Contracts(Specific or General Services?)
1. Block Contracts Fixed sum for access to services, regardless of
volume Providers guaranteed income High Volume and Low Cost Setting when access
critical (e.g., maternity services) More than 1 Service or Specialty 1-2 activities monitored
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And…
2. Cost and Volume Agreed baseline volume and price for each Above baseline, marginal payments
Multi-specialty, specialty or even procedure specific
“Tolerance bands” around baseline to protect both purchaser and provider 2-5% and depends on volume and potential for
change in case mix
3. Cost Per Case Contract Can Specify Volume Cap or Not
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Russia (Kemerovo): Cost and Volume Contracts (1998-2000)
Retrospective Cost Per Case to Prospective Negotiated Volumes
Risk Corridors (sharing) for deviations from targets
Day Care Cases Also Doubled ALOS Admissions
0
2
4
6
8
10
12
14
16
18
20
19982000
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Following the Money: Government/SHI – Private Provider
Supply-Side Budget Funding
“Demand-Side” Financing Purchaser Consumer
Out-of-Pocket Payments
“Patient Follows the Money”
“Money Follows the Patient”
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East Asia Countries Rely Heavily on OOP for Health System Revenues
Source: : Langenbrunner et al., Health Financing Note East Asia and Pacific Region, World Bank, 2011
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
Cam
bodi
a
Chi
na Fiji
Indo
nesi
a
Kor
ea, R
ep
Lao
PD
R
Mal
aysi
a
Mon
golia
Phi
lippi
nes
Sam
oa
Tha
iland
Ton
ga
Vie
tnam
Direct Tax Indirect Tax Non-tax RevenueSocial Health Insurance Private Insurance OOPsOther
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Third-Party (Pre-Payment) Purchasing Also Important….
In recent years…move to Supply-Side to Demand-Side “Strategic Purchasing”
22
Revenue Pooling Resource AllocationCollection or Purchasing (RAP)
Strategic Purchasing can include elements of Risk Pooling, Contracting, and Payment
Pri
vate
Pu
bli
c
Taxes
Public Charges/Resource Sales
Mandates
Grants
Loans
PrivateInsurance
Communities
Out-of-Pocket
PublicProviders
PrivateProviders
Service Provision
GovernmentAgency
Social Insurance orSickness Funds
Private Insurance or Community-basedOrganizations
Employers
IndividualsAnd Households
Source: World Bank
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“THE WHOLE POINT OF STRATEGIC PURCHASING IS TOCHANGE BEHAVIOR”
BY PROVIDERS….TO IMPROVE QUALITY AND RESOURCE USE…FOR IMPROVED PERFORMANCE AND OUTCOMES
Contracts are One Mechanism for implementing Payment Systems
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Paying for
inputs
Paying for
outputs
Paying for performan
ce
Paying for outcomes/ results
• Line item budgets
• Fee-for-service with no fee schedule
• Fee-for-service• DRGs
• Capitation
• P4P
• Full capitation with performance incentives
• Episode-based payment with performance incentives
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FEE-FOR-SERVICE(US, Canada, parts of Europe, Philippines, Vietnam)
ACCESS/DEMAND
QUALITY
COST-CONTAINMENT
+
-
Missing Providers in Remote Regions?
Start Simple
Identity of parties Their obligations Terms for renewal Conditions of termination Recourse for non-performance Arbitration or mediation
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2. Define the Services
3. Design the Monitoring and Evaluation
5. Arrange for Contract Management
7. Carry out Bidding Process and Manage the Contracts
1. Dialogue with Stakeholders
4. Decide how to Select Contractors and Establish Price
6. Draft Contract & Bidding Documents
Over Time, Move to Performance-Based Contracting
The Contracting Cycle: A Systematic Approach (page 20)
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2. Define the Objectives/Services
3. Design the Monitoring and Evaluation
5. Arrange for Contract Management
7. Carry out Bidding Process and Manage the Contracts
1. Dialogue with Stakeholders/Feasibility?
4. Decide how to Select Contractors and Establish Price
6. Draft Contract & Bidding Documents
Over Time, Move to Performance-Based Contracting
The Contracting Cycle: A Systematic Approach (page 20)
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Defining Objectives
A big advantage in contracting is results focus so concentrate on outputs/outcomes, not inputs.
The purchaser should objectively define: Quantity of services (e.g., case-mix and volumes? Or
specific services to relieve queue? Special such as high tech surgeries? )
Technical Quality (e.g., national technical guidelines) Equity (ensuring the poor receive services)
Payment Incentive Performance Outcomes/Goals
Paying Providersbased on Performance
What is it? Measure performance of participating providers and set financial incentives for improving performance, leading to better outcomes
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BrazilGlobal budgets allocated in monthly installments
A 10% retention bonus fund for compliance with performance indicators includingGood quality (e.g., hygiene and sterilization practices)Patient satisfaction (no overcharging and perceptions of quality)No fraud (ghost patients)
Hire and fire staffing policies Staff mix flexibility/Salary adjustments/bonuses and staff/ promotions flexibility
Outcomes Improvement in quality
general and surgical mortality lower infection rates
Higher efficiency improved bed turnover rates, occupancy rates, lower length of stay physician hours lower expenditure per admission
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Brazil (2)
Main Contractual Terms Related to Global Budget Inpatient discharges by service Day hospital discharges Emergency consultations Outpatient consultations Diagnostic tests
Retention Fund (compliance with benchmarks)
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2. Define the Services
3. Design the Monitoring and Evaluation
5. Arrange for Contract Management
7. Carry out Bidding Process and Manage the Contracts
1. Dialogue with Stakeholders
4. Decide how to Select Contractors and Establish Price
6. Draft Contract & Bidding Documents
Over Time, Move to Performance-Based Contracting
The Contracting Cycle: A Systematic Approach (page 20)
Selecting the Provider
Relational Contracts with any Provider Basic Quality Standards -- Accredited or
Licensed? Long-term relational contracts ..tends to be
rule with Govt-non-State providers
Selective Contracting? Which types of Services
Well-defined: Cataract, surgical procedures “Spot” contracts?
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Selecting the Provider
Relational Contracts with any Provider Basic Quality Standards -- Accredited or
Licensed?
Selective Contracting? Which types of Services
Well-defined: Cataract, surgical procedures
Hybrid Approach Any provider, but Levels of Payment/Co-Pays
according to quality and performance43
Selecting the Provider
Relational Contracts with any Provider Basic Quality Standards -- Accredited or
Licensed?
Selective Contracting? Which types of Services
Well-defined: Cataract, surgical procedures
Hybrid Approach Levels of Payment according to quality and
performance
Public and Private? How about Non-Profit?44
45
Why Contract with Private Sector?
1) Growing Draw Investment Flows New Services not in Public Sector
Haiti, Guatemala, Cambodia, Romania
2) Harnessing Gov’t buyer can harness sector to achieve priority goals
South Africa – slide 13, reaching the poor Guatemala, Argentina – geographic regions of poor Philippines (2011) – Mandate beds for poor/scale up to UHC
3) Convert Public to Private Management India, PPPs etc (April covers….
48
Romania – “Growing”
Major Public Hospital in Bucharest
21 Private Operators of CT Scans invited to bid for services Indicative volume Set service and quality parameters Public patients a priority but private pay patients
allowed and fee schedule developed
Public services offered at 35% discount, renovated space and new equipment…all without government expenditures
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Establishing Price… = Costs?
“Top-Down” Cost Accounting
Philippines – 18 hospitals Germany – 52 hospitals Brazil – improved over time…benchmarked
“Bottom-Up” Time and Motion Activity-Based Costing (“ABC”)
Negotiation Sometimes…no cost data… Services may need to be well-defined
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2. Define the Services
3. Design the Monitoring and Evaluation
5. Arrange for Contract Management
7. Carry out Bidding Process and Manage the Contracts
1. Dialogue with Stakeholders
4. Decide how to Select Contractors and Establish Price
6. Draft Contract & Bidding Documents
Over Time, Move to Performance-Based Contracting
The Contracting Cycle: A Systematic Approach (page 20)
52
Challenges of Contracting 1(Internationally)
• Transactions costs: often are 7-20 percent of the value of the contract (depends of payment system, e.g., budget or FFS)
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Challenges of Contracting 1(Internationally)
• Transactions costs: often are 7-20 percent of the value of the contract (depends of payment system, e.g., budget or FFS)
• Purchaser (MOH or HI Fund) capacity – Management (enough staff, right measures?) – Enforcement capacity
– Russia pre-admission controls in Moscow in late 1990s – did not work
– 19% inappropriate admissions; 67% not referred by polyclinics
– South Africa – poor contract management meant government actually paid more (Broomberg)
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Challenges of Contracting 1(Internationally)
• Transactions costs: often are 7-20 percent of the value of the contract (depends of payment system, e.g., budget or FFS)
• Purchaser (HI Fund) capacity – Management (enough staff, right measures?) – Enforcement capacity
• Provider capacity to deliver – Hospital Board Oversight (e.g., Brazil)
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Challenges of Contracting (2)Internationally
• Monitoring: Level of detail and kinds of tasks – non-clinical services easier to monitor than clinical services -- where one wants to monitor outcomes not inputs (except for adjusting, e.g. a DRG system’s price/DRG)
• Information reinforces financing, purchasing, enforcement
• Brazil Electronic Cost Accounting systems installed in all hospitals• Monthly statements sent to State• Basis for budget/contract negotiations
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M and EContracting Policy and
Implementation
• Determine the Indicators of success? Examples:
• Access/Equity:– Surgical waiting times; Geographically, e.g. travel to
provider: 15 MN; to 2nd level hosp. 30 MN• Prevention (UK blood pressure screening)• Quality (avoidable admissions; guidelines for heart attack
admission -- US, Korea) • Efficiency (use of generics, emergency room visits – US)• Financial protection of members e.g., OOP down 20%
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England: Examples of Measures for Chronic Care
Do Process Measures = Improved Outcomes?
Asthma % of patients with asthma who have had an asthma review in previous 15 months
Cancer % of patients with cancer reviewed within 6 months of confirmed diagnosis
Chronic obstructive pulmonary disease (COPD)
% of patients with COPD with diagnosis confirmed by spirometry and reversibility testing
Coronary heart disease (CHD)
% of patients with CHD whose last blood pressure measurement was 150/90 mm Hg or less
Diabetes % of patients with diabetes whose last blood pressure measurement was 145/85 mm Hg or less
Hypertension % of patients with hypertension with last blood pressure measurement was 150/90 mm Hg or less
Hypothyroidism % of patients with hypothyroidism with thyroid function tests recorded in the previous 15 months
Mental health % of patients with severe long-term mental health problems reviewed in the preceding 15 months
Source: Pay for Performance Program, UK. www.nejm.org
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How Many Indicators?
Unite
d Ki
ngdo
m
Afgh
anista
n
Braz
il
New Z
eala
nd0
20406080
100120140
Indicators
Indicators
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How Many Indicators?
Unite
d Ki
ngdo
m
Afgh
anista
n
Braz
il
New Z
eala
nd0
40
80
120
Indicators
Indicators
Higher Valida
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Lower Administrative Burden; Clearer Market Signals
Higher Validity
How Many Indicators?
Unite
d Ki
ngdo
m
Afgh
anista
n
Braz
il
New Z
eala
nd0
40
80
120
Indicators
Indicators
Higher Valida
Benchmarked costs, production, quality and efficiency
60
Lower Administrative Burden; Clearer Market Signals
Higher Validity
61
Challenges of Contracting (2)Internationally
• Monitoring: Level of detail and kinds of tasks – non-clinical services easier to monitor than clinical services where one wants to monitor outcomes not inputs (except for adjusting e.g. a DRG system’s price/DRG)
• Regulatory framework : must be enforceable and assure proper behavior, i.e. presupposes adequate working judicial system and/or arbitration. Accountability is meaningful due to effective enforcement
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Challenges of Contracting (2)Internationally
• Monitoring: Level of detail and kinds of tasks – non-clinical services easier to monitor than clinical services where one wants to monitor outcomes not inputs (except for adjusting e.g. a DRG system’s price/DRG)
• Regulatory framework : must be enforceable and assure proper behavior, i.e. presupposes adequate working judicial system and/or arbitration
• Contracting learning curve (for both parties)
63
Easier with Non-Profits?
NGOs, Religion-based Organizations May be less opportunistic …with same goals as public sector
Contracting may be easier Even with poor monitoring and poor contract
process.. Serve poor, deliver high quality services for low
rates of remuneration
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And…Privates are Not Publics…
Cannot Pay Late Public Sector Budget allocation lags
Reimbursement Must Cover Capital, Not Just Operating Costs (Slide 51)
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Take Away Messages
Hospital Contracting Tool Most Powerful Tool for Influencing Private Hospitals or Private Services
Hospital Services Most Difficult to Contract of all Health Services
Privates Survive on Income!
Most Effective for ensuring Quality, too
66
Take Away Messages
Hospital Contracting Tool Most Powerful Tool for Influencing Private Hospitals
Hospital Services Most Difficult to Contract of all Health Services
Privates Survive on Income!
Most Effective for ensuring Quality, too
South Africa Brazil Romania
Bangladesh India Philippines Indonesia Thailand China Mongolia Cambodia