Soft competition: The role of nonprofits in healthcare systems

1
Soft competition The role of non-profits in
healthcare systems

• Gur Ofer
• The Hebrew University

2
The challenges

• The challenges to the healthcare systems
• Cost increases (see Cutler 2002)
• Post Fordism away from uniformity and toward
  more individualism and demand for choice (Le
  Grand, yesterday).
• Balance between equity and solidarity, and
  efficiency.

3
Meeting the challenges

• First stage Regulatory cost containment
• Market type institutions, incentives and
  mechanisms, and Melting public -private
  boundaries (Saltman)
• Decentralization
• From national to regional and local
• Corporatization to public and non-profit
  organizations
• privatization and changing the P/P mix.
• Market type incentives EBM, Quality measures
  and reward for results (gain sharing (wilensky
  et al 2006)
• The HMO and prospective remuneration Combining
  insurance and provision
• Competition internal and normal
• Reducing the scope of the public basket and
  raising co-payments.

4
Recent literature

• Cutler, 2002
• Saltman and Figueras, 1997
• Saltman, 2002, 2003
• Health Affairs, 24 (6), 2005
• And many references thereof

5
Measured means the middle (or third)
wayand the golden path

• This paper
• While discussing some of mixes and the melted
  boundaries
• Is mostly concerned with the issue of the
  intensity with which some of the new institutions
  and instruments are, or should be applied
• In particular it investigates
• The nature and role of non-profit institutions
  and behavior that apply middle way means
• The optimal, measured application of
  competition, incentives, remuneration, regulation
  etc.

6
Maimonides middle way

• Maimonides, a Jewish physician philosopher and
  scholar of the 12th century, in Egypt, defined,
  following the Greek philosophers, the middle
  way in human characteristics
• The virtues are states of the soul and settled
  dispositions in the mean between two bad states,
  one of which is excessive, the other deficient.
  (Ch. 3)
• The right way is the mean in every one of a
  person's character traits. Mishneh Torah
  1,Character Traits,1.4.
• The main emphasis is therefore not a mix of two
  conflicting elements but the level of intensity
  of the application of a given trait.
• Not Le Grands knights or knaves but the right
  balance between knighthood and knaveness

7
Elements of the Golden paththe right measure

• Between government run and the for profit market
  
• Between cost overruns and adequate level of
  service
• Between no (or internal) competition and market
  competition
• Between public finance, insurance and provision
  and private ones
• Between efficiency, equity and consumer
  sovereignty
• Between planning and control and steering and
  channeling

8
Non-Profit Providers

• Existing types of non-profits
• Autonomous public enterprise
• Genuine non-profit (Newhouse)
• Charitable organization (churches etc..)
• Tax privileged NP (USA)
• Physicians cooperative (Pauly)
• Organization run by a physician (Fuchs)
• A well designed and run non-profit has both, a
  mix of otherwise conflicting elements and an
  optimal degree of application of various
  instruments. Both are important but the second is
  the one that really makes it a deserving
  non-profit

9
Appropriate properties of non-profit providers

• Governance and legal status
• Well defined mission (objective function)
• Maximize health at a given budget
• A full fledged and accountable board with
  representatives of the public and outside experts
  (as real as in corporate boards)
• Headed by a physician (ala Fuchs?)
• A strong internal control committee
• allowed or not to keep the surplus (taxable?)
• Allowed or not to make major investments

10
Properties of Non-Profit Providers (2)

• Service characteristics
• As compared with government providers
• Less bureaucratic and stiff. More flexible and
  adaptable to changes
• More responsive, human friendly with more
  diversified services (responds better to
  post-Fordism to individual demands and tastes)
• Can provide a second layer of, privately paid
  for services more naturally (public/private by
  the same provider)
• Competes more naturally, effectively (than
  internal competition)

11
Properties of Non-Profit Providers (3)

• Service characteristics
• As compared with for profits
• Balances better between service quality and
  budgetary considerations
• Especially when it combines provision with
  insurance
• Balances between the economizing tendency of
  insurance organization and the (over) spending
  tendency of health care providers

12
Soft Competition among providers

• Over quality of service, not over price
• Among non-profits, not for profits
• Less artificial as internal competition among
  bureaucratic units
• A small number of competitors
• Even allowing some joint consultations
• soft, if any, selection, when under prospective
  payment
• Relatively soft regulation universal and
  transparent (quality indexes)

13
The golden path in the role of government

• Financing
• Income based tax (or general taxation)
• Takes care of equity
• (mostly) Prospective payments (capitation) to
  (softly competing) providers
• Mimics the perfect insurance model by
  approximating the true health insurance premium
  and thus minimizes selection
• Provides to every citizen a voucher, according to
  (relative) need (equity again)
• Free choice of plan provides for (soft)
  competition

14
The golden path in the role of Government (2)

• Regulation (supplementing the soft
  competition)
• Strategic planning including of major new
  investments
• Quality and adequacy of service mostly through
  universal quality indexes
• Measured incentives and sanctions
• Determining the content of the basket of
  services, updating the capitation formula, and
  the annual adjustments
• All these are cheaper than the direct and
  control model of government provision

15
Beyond Economics Formal and informal institutions

• Douglass North
• The politics of healthcare systems
• The sociology of
• The behavioral culture a level of trust (Le
  Grand)
• Especially of physicians internalize the
  objectives of the organization or loose
  independence.

16
The Utopia of Victor Fuchs

• Provision of care through integrated health
  systems that include hospitals, physician
  services, and prescription drugs. These systems
  would be led by physicians, would be reimbursed
  by capitation plus modest co-payment from
  patients at the time of use, and would be
  required to offer a wide variety of point of
  service options to be paid for by patients with
  after-tax dollars
• A broad-based tax earmarked for health care to
  provide every American with a voucher for
  participation in a basic plan.
• A large private center of technology assessment
  financed by a smal industrywide levy on all
  health care spending.

17
The Israeli Healthcare System

•  

A
III
I
B
C
II
18
Thank You
19
Choosing the boundaries
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The public/private baskets of services (1)

• The public basket of services
• All that is medically effective and reasonably
  affordable
• Effective as determined by sound and scientific
  testing, mostly by experts.
• The estimates of benefits will be determined by
  medical as well as ethical experts, as well as
  representatives of the public
• Affordable at an acceptable cost per QALY (could
  be different across countries)
• The process of determination of the public basket
  will be open and transparent

21
The public/private baskets of services (2)

• Co-Sharing public basket services
• Only in response to moral hazard (over using)
  but not as a source of finance
• How to respond efficiently to the moral hazard
  without progressive charges?

22
The public/private baskets of services (3)

• All the rest
• All that is not effective and/or too expensive
  will be left to the consumer and his pocketbook.
• This P/P arrangement is extra-Welferist (ala
  Culier and others) for the public basket
• it is equitable to everybody according to need
• and is efficient in the sense that it maximizes
  health (though not necessarily work
  productivity)
• On the private side
• It respects consumer choice and sovereignty and
  therefore it could be (given needed assumptions)
  Pareto efficient.
• It hurts equity the least since the included
  services have little medical value, or are
  extremely expensive.
• Private services can be voluntarily insured as
  supplementary insurance by the NPs, or by
  private companies

23
Insurance and provision of private services (1)

• Private services can be voluntarily insured as
  supplementary insurance by the NPs, or by
  private companies
• Insuring by the NPs providers has advantages and
  drawbacks
• () It provides for the continuity of services
• (- ) It limits the mobility across providers
• (-) It may help to discriminate against those
  who dont carry SI
• (-) It may create conflict of interest (non
  basket items may be more profitable, so their
  inclusion may be delayed)

24
Insurance and provision of private services (2)

• Can or should privately financed services be
  provided by the non-profits in their facilities?
• More efficient, continuity of services
• Less equitable?
• Make sure that it is not at the expense of the
  quality and adequacy of services to public
  patients.
• The case of choosing your physician
• The Jerusalem SHARAP study (with Bruce Rosen and
  Miriam Greenstein
• Most SHARAP operations are basic
• Almost all public complex operations are
  performed (or closely supervised by senior
  surgeons