Healthcare Reform Checklist

 

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Checklist for reforms in the healthcare sector: purchasing, provision, delivery, commissioning, and stewardship. Detailed case studies from Germany and Eastern Europe.

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Healthcare Reform Checklist 1st EDITION Sam Vaknin, Ph.D. Editing and Design: Lidija Rangelovska Lidija Rangelovska A Narcissus Publications Imprint, Skopje 2009 Not for Sale! Non-commercial edition.

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© 2002, 2009 Copyright Lidija Rangelovska. All rights reserved. This book, or any part thereof, may not be used or reproduced in any manner without written permission from: Lidija Rangelovska – write to: palma@unet.com.mk Visit the Author Archive of Dr. Sam Vaknin in "Central Europe Review": http://www.ce-review.org/authorarchives/vaknin_archive/vaknin_main.html Visit Sam Vaknin's United Press International (UPI) Article Archive – Click HERE! World in Conflict and Transition http://samvak.tripod.com/guide.html Created by: LIDIJA RANGELOVSKA REPUBLIC OF MACEDONIA

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CONTENTS 1. 2. 3. 4. 5. 6. 7. Healthcare Reform Checklist The Dying Breed - Healthcare in Eastern Europe Better Get Sick in Germany The Sickly State of Public Hospitals Global Differential Pricing Social and Cultural Values as Guidelines for Health System Reform The Author

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Healthcare Reform Checklist POINTS FOR THE AGENDA OF THE STEERING COMMITTEE FOR THE ADVANCEMENT of HEALTHCARE in the REPUBLIC OF MACEDONIA Presented to the Plenum of the Committee on June 15, 2009 By: Sam Vaknin, Ph.D., economist GENERAL Healthcare legislation in countries in transition, emerging economic, and developing countries should permit - and use economic incentives to encourage - a structural reform of the sector, including its partial privatization. KEY ISSUES • • • • • • Universal healthcare vs. selective provision, coverage, and delivery (for instance, means-tested, or demographically-adjusted) Health Insurance Fund: Internal, streamlined market vs. external market competition Centralized system – or devolved? The role of local government in healthcare. Ministry of Health: Stewardship or Micromanagement? Customer (Patient) as Stakeholder Imbalances: overstaffing (MDs), understaffing (nurses), geographical distribution (rural vs. urban), service type (overuse of secondary and tertiary healthcare vs. primary healthcare) AIMS • • To amend existing laws and introduce new legislation to allow for changes to take place. To effect a transition from individualized medicine to population medicine, with an emphasis on the overall welfare and needs of the community Hopefully, the new legal environment will: • • • • • Foster entrepreneurship; Alter patterns of purchasing, provision, and contracting; Introduce constructive competition into the marketplace; Prevent market failures; Transform healthcare from an under-financed and under-invested public good into a thriving sector with (more) satisfied customers and (more) profitable providers.

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• Transition to Patient-centred care: respect for patients’ values, preferences, and expressed needs in regard to coordination and integration of care, information, communication and education, physical comfort, emotional support and alleviation of fear and anxiety, involvement of family and friends, transition and continuity. The Law and regulatory framework should explicitly allow for the following: I. PURCHASING and PURCHASERS (I1) Private health insurance plans (Germany, Czech Republic, Netherlands), including franchises of overseas insurance plans, subject to rigorous procedures of inspection and to satisfying financial and governance requirements. Insured/beneficiaries will have the right to apply contributions to chosen purchaser and to switch insurers annually. Private healthcare plans can be established by large firms; guilds (chambers of commerce and other professional or sectoral associations); and regions (see the subchapter on devolution under VI. Stewardship). Private insurers: must provide universal coverage; offer similar care packages; apply the same rate of premium, unrelated to the risk of the subscriber; cannot turn applicants down; must adhere to national-level rules about packages and co-payments; compete on equality and efficiency standards. (I11) Breakup of statutory Health Insurance Fund to 2-3 competing insurance plans (possibly on a regional basis, as is the case in France) on equal footing with private entrants. Regional funds will be responsible for purchasing health services (including from hospitals) and making payments to providers. They will be not-for-profit organizations with their own boards and managerial autonomy. (I12) Board of directors and supervisory boards of health insurance funds to include: Two non-executive, lay (not from the medical professions and not politicians) members of the public. These will represent the patients and will be elected by a Council of the Insured, (as is the practice in the Netherlands) Municipal representatives; Representatives of stakeholders (doctors, nurses, employees of the funds, etc.). - (I13) The funds will be granted autonomy regarding matters of human resources (personnel hiring and firing); budgeting; financial incentives (bonuses and penalties); and contracting.

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The funds will be bound by rules of public disclosure about what services were purchased from which providers and at what cost. Citizen juries and citizen panels will be used to assist with rationing and priority-setting decisions (United Kingdom). (I2) Procurement of medicines to be done by an autonomous central purchasing agency, supervised by a public committee (drug regulatory authority) aided by outside auditors. All procurement of drugs and medications will be done via international tenders. The agency will submit its reimbursement rates for drugs on the PLD to external audit in order to accurately reflect pharmacists’ overhead costs. At the same time, the profit margins on all drugs, whether on the PLD or not, will be regulated. This agency should be separate from the Health Insurance Fund and the Ministry of Health. This agency will also maintain national drug registries. It will secure volume discounts for bulk purchasing and transparent, arm’s-length pricing. (I21) Use of reference prices for medicines. If the actual price exceeds the reference price, the price difference has to be met by the patient. (I3) The Approved (Positive) List of Medicines will be recomposed to include generic drugs whenever possible and to exclude expensive brands where generics exist. This should be a requirement in the law. Separately, an Essential Drug List will be drawn up. (I31) Encourage rational drug prescribing by instituting a mixture of GP and PHC incentives and penalties, or a fundholding system: budgets will be allocated to each GP for the purchase of drugs and medications. If the GP exceeds his/her budget, s/he is penalized. The GP gets to keep a percentage of budget savings. Prescription decisions will be medically reviewed to avoid under-provision. (I4) Payments and Contracting Payment to providers should combine, in a mixed formula: BLOCK CONTRACTS Capitation - A fixed fee for a list of services to be provided to a single patient in a given period, payable even if the services were not consumed, adjusted for the patients' demographic data and reimbursement for fee-for-service items. Inflation-adjusted Global budgeting (hospitals) and block (lump sum) grants (municipalities)

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COST and VOLUME CONTRACTS Provide incentives and reward marketing efforts which result in an increase in demand/referral beyond the limit set in a block contract. COST PER CASE CONTRACTS Apply Diagnosis Related Group (DRG)/ Resource-based Relative Value (RBRV) / Patient Management Categories (PMCs) / Disease Staging/Clinical Pathways Levels of reimbursement, case-mix adjusted to be decided by external auditors. Contracts with providers should include: • • • • • Waiting Times Guarantee Single Contact Person (“Case Officer”) for the duration of a stay at the hospital Hospital benchmarking (individual-level data on costs, diagnoses, and procedures during entire case episodes: inpatient admissions and outpatient visits; cost-effectiveness of services. Performance targets in performance agreements with all healthcare facilities, both public and private. All payments - wages included - will be tied to these targets and their attainment as well as to healthcare quality as determined by objective measures (internal, external, and functional benchmarking), clinical audits (sampling), as well as customer satisfaction surveys and interviews and discussions with patients. Provider and Staff Bonuses and penalties tied to exceeding/under-performing targets and contract variance Patients’ rights, including their rights to litigate • • Selective contracting will be allowed on all levels (including specialist ambulatory care and hospitals), although all providers, private and public, will be permitted to apply for contracts with health funds and insurers. The funds will choose from among private providers either following a process of deliberation, or via an auction, or public tender (United Kingdom). (I5) Commissioning preference will be given to the purchase of Primary Healthcare over secondary, or tertiary Healthcare.

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II. PROVIDERS The Law and regulatory framework should explicitly allow for the following: (II1) Hospital Management (See separate document) The law should allow: I. Co-location of a private wing within or beside a public hospital II. Outsourcing of non-clinical support services III. Outsourcing of clinical support services IV. Outsourcing of specialized clinical services V. Private management of public hospitals VI. Private financing, construction, and leaseback of new public hospitals VII. Private financing, construction, and operation of new public hospitals VIII. Sale of public hospitals as going concerns IX. Sale of public hospitals for alternative use X. Consolidation of redundant public healthcare facilities by merging them or closing down some of them XI. Privatization of Primary Healthcare (PHC) clinics within medical centers XII. Healthcare institutions will be granted autonomy regarding matters of human resources (personnel hiring and firing); administering financial incentives or penalties, budgeting; and contracting. XIII. Privatization pharmacies inside medical centers and hospitals. (II2) Primary, Ambulatory, and Secondary Care and General Practitioners (GP) (II21) Limit the number of patients per GP

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(II22) Stimulate and financially incentivize the following activities, which should be declared national priorities within a National Needs Assessment: • • • • • • • • • Group practices and networks (for continued, around-the-clock services) Day and minimally invasive surgery Dispensaries Home and day care services Long-term care (nursing homes, visiting nurses, home I.V. and other services provided to chronically ill or disabled persons) Patient hotels Rehabilitation facilities and programs Provision of merit goods (also through mass campaigns) Conversion of hospital units to outpatient services, and day-care centers Example of such financial incentives: • • • Physicians will be entitled to see patients who receive services free-of-cost in the public sector in the morning, and private patients who pay the full cost of the medical consultation in the afternoon. Allow private beds in public hospitals and private financing of hospital stays (NHS, UK) Subsidize or fully cover transaction costs (legal fees of contracting, compliance, accounting, etc.) (II23) Allow hospitals to administer packages of outpatient services and be reimbursed by the Health Insurance Fund (or funds). (II24) Impose an admission quota on medical schools; reduce the obligatory number of doctors per 1000 population; and make GP a medical specialty. (II25) Strengthen the gatekeeper function of GPs and healthcare provision in outpatient settings. Encourage gatekeeping by instituting a mixture of GP and PHC incentives and penalties, or a fundholding system (United Kingdom, Estonia, Spain): Budgets will be allocated to each GP for the purchase of secondary and tertiary healthcare (as well as to cover salaries, premises, diagnostic tests). If the GP exceeds his/her budget, s/he is penalized. The GP gets to keep a percentage of budget savings. Referrals will be medically reviewed to avoid under-provision. (II26) Introduce GP target income and adjust services and fees to reach it (perhaps by using tax credits).

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(II27) Provide GPs and other types of primary and secondary healthcare providers with financial incentives to relocate to remote and rural areas (II28) Render clinical and best practice guidelines mandatory (not merely recommended) (II29) Encourage managed care (peer review panels, pre-approval procedures for surgery, case management for the chronically ill, formularies limiting pharmacy reimbursement to an approved list, and other contractual provisions). III. PRIVATE SECTOR Risks of privatization and private non-managed, imperfect competition: market failure, as patients received too many unnecessary services, due to fee-for-service reimbursement and information asymmetry. The Law and regulatory framework should explicitly allow for the following: (III0) Allow private primary healthcare physicians to offer preventive care, treatments and interventions after office hours, emergency dental and medical care, emergency home treatment, preventive checkups for preschool and school children, patronage and polyvalent patronage services, and all other elements of comprehensive healthcare. (III1) Arrangements with the private sector and Private-Public Partnerships (PPP) for the provision of healthcare: (III11) Service Contract (Dominican Republic), or Contracting-out The government pays private entities - including doctors - to perform specific healthcare tasks, or to provide specific healthcare services under a contract. The private service providers can make use of state-owned facilities, if they wish, or operate from their own premises. Payments by the government are usually based on capitation (a fixed fee for a list of services to be provided to a single patient in a given period, payable even if the services were not consumed) adjusted for the patients' demographic data and reimbursement for fee-for-service items. (III12) Management Contract Outsourcing (Cambodia) The government pays private entities to manage and operate public health care facilities, like clinics, or hospitals.

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(III13) Lease (Romania since 1994) Private entities - including doctors - pay the government a lump sum or monthly fees to use specific state-owned equipment, state-employed manpower, clinics, or complete public health care facilities. The private entity is entitled to all revenues from its operations but also bears all commercial risks, is responsible for management and operations and liable for malpractice and accidents. The state is still responsible to make capital investments in the leased facility or equipment, but maintenance costs are borne by the private entity. (III14) Concession and Build-Operate-Transfer (BOT) (Costa Rica) Concession is exactly like a lease arrangement (see above) with one exception: the private entity is responsible for capital investment. In return, the contract period is extended and can be voided only with a considerable pre-advice. In BOT (Build-Operate-Transfer) and ROT (Rehabilitate-Operate-Transfer) the capital investment involves the construction or renovation/upgrade of new healthcare facilities. The private entity uses the constructed facility to provide services. After a prescribed period of time has elapsed, ownership is transferred to the government. (III15) Divestiture and Build-Own-Operate (BOO) (Texas, USA) The law should permit the outright sale of state- owned health care facilities to a qualified private entity, including physician groups who band together to purchase previously staterun facilities. Another possibility is a BOO scheme, in which the private entity contractually undertakes to add facilities, improve services, purchase equipment, or all three. (III16) Free entry The law should allow qualified private providers to operate freely. Though regulated, these private firms will have no other relationship with the state. Such entities would have to be licensed, certified, overseen, and accredited for expertise, safety, hygiene, maintenance, track record, liability insurance, and so on. The state may choose to encourage such providers to locate in specific regions, to cater to poor clients, or to provide specific healthcare tasks or services by offering tax incentives, free training, access to public facilities, etc.

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(III17) Franchising (Kenya, Pakistan, Philippines) A private firm (franchisee) acquires a license from and shares profits with the franchisor (a domestic, or, more often, foreign firm). The franchisee uses the brand name, trademarks, marketing materials, management techniques, designs, media access, access to approved suppliers at bulk (discounted) prices, and training offered by the franchisor. The franchisor monitors the performance and quality of service of the franchisee. This model works mainly in preventive care, family planning, and reproductive health. The World Bank ("Public Policy for the Private Sector", Note number 263, dated June 2003): "Franchisers in the health sector, often supported by international donors and nongovernmental organizations (NGOs), establish protocols, provide training for health workers, certify those who qualify, monitor the performance of franchisees, and provide bulk procurement and brand marketing." (III18) Allow Charities and Not-for-profit organizations to run health insurance funds and a variety of providers (including full-scale secondary and tertiary healthcare institutions). (III9) Voluntary Health Insurance (substitutive; complementary; and complementary), subject to open enrollment periods and mandatory coverage of dependants (to prevent cream-skimming and adverse selection). IV. FINANCING The Law and regulatory framework should explicitly allow for the following: (IV0) Institute co-payments for examination by a GP, emergency medical care, and certain preventive programs. (IV01) Introduce negative co-payments: rebates or credits (to be deducted from future contributions) to insured persons who, in the preceding year, did not use services and did not consume interventions or drugs from the positive list above a level determined by the Ministry of Health. (IV02) Introduce provider co-payments for hospital stays above the European Union average. Whenever the length of stay exceeds the EU average, the provider (hospital) will make a co-payment to the Health Insurance Fund or to the insurer.

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(IV1) Voucher System (Nicaragua) The law should allow for experimenting with novel payment and resource allocation techniques, such as vouchers or prepaid health cards distributed to needy populations and guaranteeing free basic service packages provided by a limited list of clinics or other healthcare facilities. Such schemes can also be managed by the private sector. (IV2) Medical Savings Accounts (Singapore) Allows or mandates people to place money in (tax-free) savings accounts to be used only for medical expenses, usually in conjunction with the purchase of a catastrophic stop-loss health insurance plan. Contributions by employers and employees accumulate over time and are used, tax-free, to pay for hospital expenses in public and private hospitals, national supplementary health insurance premiums, special procedures (including abroad), and expensive outpatient treatment and drugs for the saver and his immediate family. (IV3) Consumer Organizations and Community Healthcare Financing Consumer organizations in the healthcare field (such as buyers' clubs or Health Maintenance Organizations-HMOs owned by cooperatives, NGOs, municipalities). These groups will shop and tender for the best, most reasonably priced, and most efficient healthcare services for their members (Switzerland). Example: HMO in USA – Integrated Model of Healthcare (Source: WHO) Health maintenance organization (HMO) is US health care sector term. It is an organization that contracts to provide comprehensive medical services (not patient reimbursement) for a specified fee each month. The term health maintenance organization arose because doctors under this arrangement have a financial incentive to keep their patience healthy, since they are not paid more for providing more services. Health maintenance organizations, which focus on providing patients comprehensive medical care and pay doctors a specified monthly fee, have become increasingly popular in the United States, prompted by high costs from the previous fee-for-service, traditional indemnity health insurance plans. In this model, doctors are typically paid by salary and hospitals are typically funded by global budgets. Benefits are supplied to patients in-kind, often free of charge. The public

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version of this model involves government financing and provision of health care and is often funded mainly out of general taxation. In the US, the voluntary form of this model is better known as the staff model of the health maintenance organisation. “Integration” as such is not only used for integrated model, but also for types of care provisions in which providers offering differing services (e.g., ambulatory care, inpatient care, rehabilitative care) provide them in an integrated way. (IV4) Voluntary Health Insurance (substitutive; complementary; and complementary) with the right to apply one’s contributions to pay the premium and the right to switch insurers annually. (IV51) Earmark a percentage of vice (sin) taxes, customs duties, VAT, and excise (on alcohol and tobacco; drugs and medications) for healthcare purposes. (IV52) Reform healthcare budgeting. All healthcare budgets (including the budgets of the Ministry of Health; of hospitals, clinics, and primary healthcare facilities) will include amortization (and capital investments), goodwill and intellectual property, and intangibles (such as environmental externalities). (IV6) Allow providers to retain a percentage of the user-fees they collect. (IV7) Means-tested system: affluent and certain constituencies will be excluded from coverage (Netherlands, Germany) or pay much higher co-payments, co-insurance, or deductible (cost-sharing). In such a system, private insurers administer compulsory insurance for the excluded groups (e.g., civil servants in Netherlands). (IV8) Introduce VAT on hospitals to encourage investment, the purchase of medications, the retention of external services (e.g. training, skilling, continued education, management consultancy, auditing, etc.), where the hospitals can deduct VAT and retain it as an addition to their own budget. (IV9) Community rating system vs. Demographically-adjusted or experience-rated premiums (e.g., the old and sick pay more than the young and healthy or vice versa; people with dependants pay more than insured or subscribers without dependants, etc.) (IV10) Blind Fundholding: Financial resources for health care are allocated on a per capita basis; financial resources are held in a fund; and the general practitioner is usually the decision-maker for allocating the funds to purchase hospital and community services (with the patient choosing the providers, not the GP as was the case in the United Kingdom).

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V. E-HEALTH The Law and regulatory framework should explicitly allow for the following: (V1) Citizen-centered and Mobile Healthcare (V12) Provide a legal framework for health data transfer (V13) Harmonize confidentiality and privacy laws (V14) Establish legal liability or waiver thereof for e-treatment (V15) Settle issues of entitlement and reimbursement (V16) Encourage Medical e-Tourism (inbound telemedicine) (V17) Provide for infrastructure and interoperability (V18) Permit and licence Web Health and (outbound) Telemedicine (laws, regulations, forms) (V19) Establish early warning systems (V110) Foster patient-driven comparative indicators (e.g., online rating of professionals and providers) and empower patient organizations (V111) Electronic European Health Insurance Card (V112) Each citizen (or his/her custodian) will have full access to a personal Health Home Page with his EMR (Electronic Medical Records)/EPR (Electronic Patient Record)/EHR (Electronic Health Record)

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