Improving Quality and Efficiency of Health Services by Introducing Market Incentives,

Competition, and Choice: Opportunities and Challenges

19th April 2014, KermanKerman University of Medical Sciences, Iran

Marianna Fotaki

Professor of Business Ethics Warwick Business School

The University of Warwick

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The aim of the presentation

To understand the effects of introducing a market ethos and

individual choice in public health services on:

Efficiency

Quality

Equity

Individual and institutional trust by users,

To propose an alternative approach to choice that is in line

with patients needs’ 2

Assumptions

Introduction of market tools into health service

provision is expected to improve quality and

efficiency in health care provision

It could improve equity for those who did not have

access to health services

It is also an aspect of care that patients value

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Policy shifts towards market-based consumerist patient choice

Reflexive welfare subject (Giddens, 1990)

Questioning the benevolence of civil servants: knights, knaves and pawns (Le Grand, 2003)

Governance by scrutiny mechanisms such as inspection and audit

Introduction of choice, competition, and decentralisation (New Public Management)

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The logic of choice

In health policy world choice is a normatively and ideologically loaded concept (‘choice is a good thing!’)

It is mostly influenced by normative theories and advocacy,

and almost not at all by descriptive accounts of how choices are made in reality

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Impact on efficiency 1

In marketised health systems administrative expenses are higher while additional losses of efficiency occur due to gaming of the system

The evidence from other public health systems committed to universal health service provision (e.g. the Netherlands and Sweden) shows that implementing competition and choice is associated with an increase in costs

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Impact on efficiency 2

In marketised systems providers tend to compete on

quality by introducing expensive technology

(particularly when they do not face hard budget

constraints)

This leads to higher costs and squeezes out cost-effective

care

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Impact on quality 1

There are ways in which quality can be driven up in

hospitals other than through competitive mechanisms

The impact of market choice and competition in terms

of improved clinical outcomes is inconclusive

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Impact on quality 2

Many other factors besides competition influence the quality of hospitals’ services including: price structure, payment methods, internal organisation and pre-existing culture in addition to quality regulation systems and protocols

In reality, any impact on quality will depend on the precise institutional setting and on the regime of regulation

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Impact on equity 1

Age, class, income, health literacy and family obligations affected patients’ ability to travel to a non-local provider, and therefore their choices

Although users may be generally attracted to the idea of having a choice, research shows that not all groups of patients are able to exercise it in an equal measure

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Impact on equity 2

The risk for creating new inequalities over and above those that already exist is real

Some patients could receive preferential access and treatment under certain schemes

Physicians are likely to modify their behaviour in order to fit the market

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Do patients want choice?

Contrary to policy makers’ beliefs, patients tend to favour a provider they know and trust and opt for choice only when no such provider is available

Choice depends on the context and the condition

Retaining the public and universal aspects of the health system is a concern overriding any desire for choice for patients across the UK and the EU

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Which patients choose?

Age – older patients over 65 are less likely to choose

Those with family commitments are less likely to choose

Less educated are less likely to choose

Those with income below £10,000 are less likely to choose

Source: Burge et al (2005) London Patient Choice Project Evaluation. A model of patients’ choices of hospital from stated and revealed preference choice data.

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Factors affecting patients choice

Patient individual characteristics Availability of transport Distance Relatives/visitors Car parking Waiting lists Performance of surgeon Recommendation by GP Continuity of care Social services Follow-up/emergencies

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Therefore we need to explore

How communication in health care affects information provision which changes the way people make choices

Factors that impact on choices such as:

Beliefs about health and body,

Perceptions of risk,

Patient expectations, Witnessing unsuccessful treatment, A long experience of prejudice

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Furthermore,

“Choice, then, is not simply something which occurs after reasoned deliberation,

most choices we make are made on impulse in urgent and contingent

encounters in which we have to make on-the-spot decisions as our own and

others’ needs, expectations, phantasies and feelings press in on us. Indeed, for

much of the time we are not even aware of having made choices; it is as if they

catch up with us later, often much, much later when the reasons for key

choices in our lives - of partner, job, lover etc. – become clear to us. Or

should I say, ‘some of the reasons’ for we can never quite seem to get to the

bottom of the multitude-determined nature of our own life histories.”

Hoggett, P. (2001), ‘Agency, rationality and social policy’, Journal of Social Policy 32(1):37-56.16

Choice paradoxes

Choice has different meanings for different user groups in different life

circumstances

It is constrained by the asymmetry of information between user and

provider

Barriers of culture, language and education limit access to information

and therefore to choice

Users of healthcare services are not rational utility maximisers17

How is market choice affecting trust in health care?

Intangible factors (e.g. emotions, anxiety, vulnerability, powerlessness) involved in the medical encounters

Choice is not always desirable (derived utility from decisions deferred to the professional)

Doctor’s omnipotence is being replaced by user’s/market’s omnipotence

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Conceptual relations between trust and choice

One advantage of conceptualising trust in terms of choice is that decisions are observable behaviours (Kramer, 1999)

The notion of trust-as-choice enables exploration of theoretical and empirical implications (March, 1994)

Trust has a moderating effect on patient decision making and is also likely to have an impact on patient choices in the future.

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Trust paradoxes

There is a recent revival of interest in the role of trust in public and private sectors but

But there is also evidence of decline of public trust in institutions (Nye, 1997; Norris, 2002; O’Neil, 2002)

Surveillance and monitoring decreases trust but these mechanisms are increasingly relied upon in public service provision

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Concepts of trust

Economist’s view

an important precondition of economic exchange (Arrow, 1974)

a substitute for imperfect information (Williamson, 1993)

Sociologist and political scientist’s view

constitutive part of an institutionalisation process (Zucker, 1987)

and ‘social embeddedness’ (Granovetter, 1985)

encourages civic engagement (Putnam, 1993; Fukuyama, 1995)

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The role of trust in markets

Reduces transaction and negotiation costs

Makes contractual relationships possible

Improves quality of services and products

Reduces cost by lessening the reliance on monitoring and surveillance

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Is trust in public sector different?

It is a more diffuse and a taken for granted concept

It is more closely associated with societal normative values and moral principles

Discourages litigation (e.g. health care)

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The role of trust in public institutions

On a macro level – it is important for increasing social capability and political legitimacy of the state

On a meso-level – public organisations build their legitimacy when their norms and practices are underpinned by trust

Trust underpins many individual relationships and enables provision of public services (e.g. effective health care)

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What is the role of individual trust in health care?

Counteracts asymmetry of information

Makes dependency on the ‘stranger’ possible/tolerable

Decreases the cost of the service provision by limiting surveillance and litigation

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The role of organisational trust in health care?

It fosters collaboration among different professional groups

It encourages trustworthy behaviour of doctors towards patients and their trust in organisations

Reduces the incentives to game the system (for adverse effect in its absence see HMOs)

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Do patients trade off choice for trust?

Contrary to policy makers’ beliefs, patients tend to favour a provider they know and trust and opt for choice only when no such provider is available

Because patients often lack the information needed to make informed choices about their care, they need medical professionals they can trust; this overrides their desire to ‘shop around’

While choice may be desired, fairness of the system is more important than empowerment

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Anticipating future developments

Trust could become less important as the deficits and access to appropriate information decrease

Exercise of agency will take priority over the significance of the trust towards an institution

Negative impact on trust brought by the market

might improve users’ benefits by improving overall responsiveness

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Policy implications 1

Policies need to account for the social, cultural and context-specific factors guiding patients’ choices

Patients want to make choices together with trusted health professionals, rather than as consumers in the market place

Independence and choice are less important when compared to relationality and trust underpinning the ethics of care

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Policy implications 2

Policies must also foster public trust in the health system

and health organisations, and protect trust between patient

and doctor or nurse, without which care is impossible

Policy makers should draw on interdisciplinary

frameworks and alternatives to market mechanisms in

health care to design their policies

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Conclusions

Market competition relies on old-school neo-classical economics and involves a significant narrowing of the concept of choice

Choice and independence are powerful concepts but they do not always apply in health care

Public policy has to protect the most vulnerable members of society

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