Alan M. Garber

STANFORD HEALTH POLICYCenter for Primary Care and Outcomes Research/School of Medicine Center for Health Policy/Freeman Spogli Institute for International Studies

Royal Society of Medicine, London20 July, 2011

I doubt the NHS will be able to deliver on all these demands and expectations. At least on the present lines of fiscal policy, there won’t be enough money. There seems to be little support for higher taxes and no easy source of funds elsewhere in the budget to raise health services spending to the level of other northern European countries.

Alain Enthoven

The challenge health care poses to the wealthy nations of the world

The search for efficiency: three key components

Competition: Accomplish allocative efficiency with markets or alternatives

Integration: Gain economies of scope and often scale

Incentives: Getting them right is necessary to achieve internal and external efficiencies under imperfect information

Equity and Excellence: Liberating the NHS

Promote competition and choiceRaise qualityEliminate layers of bureaucracyEmpower physicians (ie GPs)Integrate services

Health and Social Care Bill introduced in January of 2011

From Nuffield Trust, Snapshot Survey of Health Leaders on the Government’s NHSReforms, March 2011

Competition and integration for greater efficiency

“…competition has often been interpreted as the opposite of integrated services. However, it is possible to have responsive, joined-up services working in patients’ interests and competing for their choice, and this is what we are seeking to achieve.”

Section 5.3, Government response to the NHS future forum report

Competition

What is the definition of product or service, and therefore market?

Levels of potential competition in NHSCommissioningGP servicesSpecialist servicesHospital servicesCommunity servicesIntegrated services

“Competition” does not always increase choice

Inadequate demand for some choices

Economies of scale

Welfare loss from monopoly usually results from increased prices

When more choice isn’t: Any Willing Provider in U.S.

Is competition good?Under idealized conditions, competitive markets lead to a powerful form of optimality

But effects on quality are generally indeterminate

Literature: mixed results, but good studies suggest that competitive pressures lead to better health outcomes

Competition brings political risk

The role of integration

Integration widely believed to be crucial to good care

Evidence base heavily tilted toward specific coordinated care programs

Rand Health Insurance Experiment: capitation prevents hospitalization. Does result generalize?

Integration requires scope and may require scale

Can we tolerate the loss of competition?

Geographic limits on commissioning groups limit competition

Pricing in an integrated system is challenging

Incentives

Physician, commissioners as agentsDesire to increase qualityPbR, QOF designed to increase efficiency and quality of care“Tariffs based on best clinical practice” (Government response, section 3.82)

Performance-based incentives in medicine have had mixed success

Premier Hospital Quality Incentive Demonstration

Begun in 2003Combined financial rewards and public reporting2% premium for achieving top decile, 1% for 2nd

decile(Process) quality improvements maintained for about first 4 years

Quality and Outcomes Framework

Sizable incentives for GPsTargets attained rapidly

From Tim Doran, NHS Information Centre (www.qof.ic.nhs.uk)

Results for Years 1-6Points scored and remuneration

Paying Physicians for Quality

$0

$5,000

$10,000

$15,000

$20,000

$25,000

$30,000

$35,000

$40,000

0%

10%

20%

30%

40%

50%

60%

70%

80%

90%

100%

2004/5 2005/6 2006/7 2007/8 2008/9 2009/10

Rem

uner

atio

n

Perc

enta

ge o

f tot

al p

oint

s sc

ored

Income

Points

Paying for performanceThe Quality and Outcomes Framework

US programmes

The UK contextThe FrameworkQuality of care under the QOF

High performance organizations use a mix of incentives

Competition, integration, and incentives: US and UK approaches to health reform

Goal is better health, not simply more health services

Give physicians and hospitals more financial responsibility

Measure and reward quality

Competition

In US, competition among health insurers and among providers

In UK, competition among providers and limited competition among commissioners

Extensive regulatory controls in both nations

Challenges of setting prices

Integration

US: bundled payments and incentives for creating integrated provider organizations (ACOs)

UK: some change in payment, change in commissioner organization

Incentives

Both nations are changing payment mechanisms – do they go far enough?

Provider acceptance key to changes in payment

What the reforms can tell us

Many unknowns about how to organize and pay for care – the reforms in both nations will lead to new informationCompetition creates variation – we must learn from it

Thank you

To the many people who generously gave of their time and thoughts about the NHS and NICE, and especially Jennifer Dixon and her colleagues at Nuffield Trust