The Danish Structural ReformMorten Rand Jensen

Executive Vice President in the Capital Region

Denmark before the structural reform in 2006• 14 counties with a broad portfolio of tasks

• operation of the health care system and especially the hospitals was the biggest task• but also tasks such as physical planning, environmental protection, public transport and

operation of specialized social institutions and colleges

• 271 municipalities also with a broad task portfolio• schools, kindergartens, • elderly care, • physical planning and roads

• Metropolitan municipalities Copenhagen and Frederiksberg have both the municipal and county tasks• Hospitals in the metropolitan area, however, are operated by the public company

Copenhagen Hospital Corporation

Denmark before the structural reform in 2006• Both counties and municipalities were led by democratically elected

councils• Both counties and municipalities could levy taxes

Background to the desire for structural reformThe Commission of Administrative Structure (2004):• “A major part of the current administrative units are too small considering the performance

required by the legislature today

• In a number of areas it is difficult to ensure a consistent and coordinated effort. The problem is mainly based on the fact that responsibility for some tasks has been divided between several decentralised administrative units. The result is a risk of "grey zones“

• In some areas there are problems due to parallel tasks in several administrative units. This makes it more difficult for the administrative units to coordinate and prioritise task performance and to improve efficiency and quality

The Commission recommends a total reform of the public sector, including a change in boundaries and transfer of tasks between the state, counties and municipalities.”

Denmark after the structural reform

• The 14 counties become 5 regions with a smaller portfolio of tasks• health, especially the operation of hospitals and contracts with private practitioners (90% of

the budget)• regional development, including public transport and soil pollution• operation of specialized social institutions as a supplier. Responsibility for the social area in

the municipalities

• Each region is headed by an elected regional council with 41 members• Regions can, in contrast to the former counties not collect taxes

Allocation of budgets in Danish regions in 2015• There are three distinct economies. The Regional Council must not

move money between these separate economies:• Health: 14.5 billion euros

• 80% block grants from the state• 2% activity-based funding from the state• 18% activity-based funding from the municipalities

• regional development: 0.4 billion euros• block grant of 76% from the state • block grant 14% from municipalities

• specialized social institutions: 0.3 billion euros• payment from the municipalities for their clients covers all expenses

Municipalities

• From 271 to 98 municipalities after the reform• Capital Municipalities equated with other municipalities• Many tasks from the old counties transferred to the new

municipalities (other transferred to the State)• Municipalities can continue to collect taxes

Responsibilities of the Municipalities since 2007• Social services: Total responsibility for financing, supply and authority• Child care• Primary school, including any special education and special pedagogical assistance for

small children• Special education for adults• Care for the elderly• Health care: Preventive treatment, care and rehabilitation that do not take place during

hospitalisation, treatment of alcohol and drug abuse, home care, local dental care, special dental care and social psychiatry

• Activation and employment projects for the unemployed without insurance in job centres run jointly with the state

• Integration and language education for immigrants

Responsibilities of the Municipalities since 2007• Citizen service regarding taxation and collection in cooperation with

state tax centres• Supplies and emergency preparedness• Nature, environment and planning: E.g. specific authority and citizen

related tasks, preparation of local plans and plans regarding waste water, waste and water supply• Local business service and promotion of tourism• Participation in regional transport companies. The local road network• Libraries, schools of music, local sports facilities and cultural activities

Responsibilities of the Regions since 2007• Health service, including hospitals, psychiatry and health insurance as

well as general practitioners and specialists• Regional development, i.e.

• nature, environment, business, tourism, employment, education and culture as well as development in the fringe areas of the regions and in the rural districts

• secretarial service for the regional growth fora• establishment of transport companies throughout Denmark• soil pollution• raw material mapping and planning

• Operation of a number of institutions for exposed groups and with special needs for social services and special education

Responsibilities of the State since 2007• Police, defence, legal system• Foreign services• General planning within the healthcare sector• Education and research except primary school and special education• Activation of the unemployed with insurance in joint job centres with

the municipalities, unemployment insurance, working environment and overall employment policy• Taxation and collection of debt to the public authorities• The general road network and the state railway

The five RegionsRegion Population

(millions)Nordjylland (North Jutland) 0,6

Midtjylland (Central Jutland) 1,3

Syddanmark (Southern Denmark) 1,2

Sjælland (Zealand) 0,8

Hovedstaden (Capital) 1,7

. Political and administrative headquarters decided by Parliament

Political and administrative leadership of the fusion project• June 2004: Agreement between the government (the Liberal Party and the Conservative

Party) and the Danish People's Party about the structural reform• Submission of the 50 bills of the reform to parliament and final vote during the spring of 2005• Selection of the 41 future members of each regional council in November 2005. The counties

will continue in 2006, but the newly elected regional members will be in 2006 a Preparatory Committee to plan the merger to the new region

• The upcoming regional councils elect the President and elect from among its members an Executive Committee of 11-19 members

• The CEO and executives are hired in the spring of 2006. A small administration with managers and staff from the old units will be transferred to serve the preparation committees

• Political and administrative cooperation between the new and the old units on the transfer of tasks, personnel, property, etc.

The process of transfer of staff from the previous units• The political agreement said that employees follow the task• The purpose is not dismissals but new distribution of tasks• National agreement between public employers and employees’

organisations for the period 2005-6 establishes the conditions in more detail• Employees transferred without loss of pay, even if they get a job

below their former level• Leaders below the level of CEO and executives are appointed among

those transferred through a transparent process with application and selection on the recommendation of an appointments committee

Central administrative staff transferred to the Capital RegionTransferred from: Number of

FTEsCopenhagen County 227

Frederiksborg County 126

Copenhagen Hospital Corporation 110

Municipality of Copenhagen 34

Municipality of Frederiksberg 11

The Metropolitan Regional Council 12

Municipality and Region of Bornholm 17

Total 537

Merger gains -105

New central administration in the Capital Region 432

• Hiring freeze in the previous units from the beginning of 2006

• Less than 10 FTEs too much by the region's start in 2007

• Found room for them in hospitals, etc..,so no one was laid off

• Some leaders were placed in lower positions such Senior Consultant

• Wages were not immediately harmonized, but at the annual individual salary negotiations the following years the wage structure influenced the results

Costs and benefits of the merger

• There can be no single answer to what the benefits and costs have been• Of course there have been costs of relocation, new signs, dual

administration in the transition year 2006, etc.• Conversely, there has been a significant administrative rationalization as a

result of the reform. Alone in the Capital Region, we reduced the central administration with over 100 employees on the merger, and since there is further rationalized• We have also rationalized by centralizing procurement, IT etc.• The biggest gains have been achieved in the hospitals where we know

collection of treatments at fewer hospitals and other rationalization has achieved a productivity growth of 2.6% annually

Organisation and employees in the Capital RegionUnit Number of

employeesManagement and Secretariat 40

Center for Economy 203

Center for HR 506

Center for IT, Medico and Telephony 794

Center for Communications 55

Center for Regional Development 181

Centre for Health 416

Hospitals and Other Institutions 32.865

Total 35.060

Centers have administrative and cross-cutting service functions

• Most administrative staff gathered in the political and administrative headquarters in Hilleroed• Centers having specific cross-cutting service functions such as HR and

IT are at other addresses

Organisation and employees in the Capital Region

Cooperation between the State and the regions• There is a long tradition of close cooperation between the state,

counties (and now the regions) and municipalities• The collaboration is particularly true of regional and local economy,

where every year are made agreements on how much money the regions and municipalities may use• In recent years it has also emphasized how much service regions and

municipalities must deliver for the money• A new budget law adopted a few years ago has introduced financial

penalty if regions and municipalities spend more money than agreed

Future of the Danish regions

• Denmark is a small country• Therefore, there has long been debate about whether the regions should

exist or be disbanded• We had hardly regions in Denmark today if it was not because the

operation of hospitals is a regional task that is difficult to place elsewhere.• The two organizations representing the decentral political level, Local

Government Denmark and Danish Regions, has been in close dialogue to merge to be stronger against the State• But opposition from the smaller municipalities has meant that the merger

plans are abandoned.

• The current center-left government will preserve the regions• Danish People's Party and the Conservative Party will discontinue

regions• The Liberal Party, which is the main opposition party, has not

announced a clear position• The issue may be relevant for the upcoming election this year

Future of the Danish regions

Other ways to organize hospitals

• The state operates hospitals as part of the Ministry of Health• The state operates hospitals, but through professional boards• Hospitals operated as local communities• Hospitals operated as private institutions with state or local

authorities as "buyer" of healthcare