Decentralization without choice and competition: how we can make health systems work better without market


Thank you for inviting me to talk on this topic. My name is Ian Greener, I’m a professor at Durham university in the UK. I am going to talk for the next 15 minutes on decentralization without choice and competition, how to make health systems work better without markets, and I’ve also supplied a presentation which I hope will be helpful in supporting for what I have to say.

In terms of an outline, first I’m going to talk about how choice and competition are meant to work, so at a theoretical level, we can gain some sort of base, some sort of understanding how this is supposed to make things better. And then I am going to work through problems with the choice and problems with the competition, both theoretical and empirical. And then I’m going to talk about some ideas that can get health care organizations to work better without markets or perhaps despite them in terms of thinking about how we reward people and how we can try make things work better within health care systems, without the needs to have excessive amounts of competition and choice in place.

First of all, let’s start at the beginning; so, how a choice or competition meant to work?  To think about this in terms of standard economic theory of markets then we’ve got informed consumers making choices about where to go, where to spend their money. We’ve got resources attached to their choices, so that they go to the providers that they choose. That’s really important because that provides the reward for those providers then being good. That means in term the best providers thrive as they get chosen and poor providers fail financially as they are not chosen. So, that means we got strong incentives to provide good service for providers, which drives up the quality of services that are on offer. This is the basic model of economic and supplies and virtually any good or service that’s supposed to be out there. I think my contention is this doesn’t work theoretically or empirically in the area of health care. To work through this, let’s deal with the problems about choice, first of all. The basic observation here is if the consumers do not make the right choices then we have a big problem in using market mechanisms. We might as well allocate the money randomly.

In healthcare we have what economists call asymmetric information, that’s information which isn’t balanced from both sides in terms of supply and demand. Those finding care, those receiving care, rather, find it very difficult to judge how good it actually is. Unless you’re medically qualified, it is very difficult for you to judge the standard of a service you’re receiving. We can judge it on other things which are coming through in a moment but intrinsically if I get better I would think that I’m getting to a good health care service but that doesn’t necessary stand up. I could be getting the very best one in the world and still not get better or as George Bernardoshaw, the British author, who is very fond of saying that medical profession exists primarily to take credit for things that nature would have done anyway. I might just have got better and I might associate that with the hospital or the service provider but that’s in place when it may actually had nothing to do with them.

What we therefore do as people, as we judge other aspects of the service that we receive. I can’t judge intrinsically how good the care I’ve received is, then what I’m trying to do, so I judge things that I can judge, like in the UK with our big problems about car parking, for example. So I might judge a hospital on how well, how easy it is to park there. That seems to me to be a bit of a problem because that has nothing to do with care quality. Equally, I might judge it by how nice the people are to me while I’m there. Now that’s important in terms of care but again it’s not the most important thing and at least in some perverse acts which I talk about in a moment.

There is also evidence from psychology that we don’t actually judge experiences or remember experiences more clearly very well. So, if you ask me to judge how good the service I received is after the event then that can have real problems for me because what I intend to remember are the very good things and the very bad things, forgetting how everything was in between. And if I have one very bad thing, particularly at the end, that will tend to me that I underestimate, that I regard the whole experiment is being substantially worst than it was. There is a lot of interesting research in clinical areas of this. If you give a patient a little bit of pain at the end which they will tend to regard the whole experience has been bad regardless of how good it was up to that point because that is the thing that they remember most about it. So we may not be good judges of things even when we’ve experienced it.

So, if we were actually being asked to make a choice as a consumer as a patient in a health care market place what would you choose? Well we can measure waiting time so we might choose the hospital with the shortest waiting time but that might also lead you to the, what psychologist again call cognitive distance, so what’s the problem here? Why they have got such a short waiting time? Is it because nobody else is choosing them, are they no good? Well fine lets choose the one with the long waiting time. Well that might just mean that they are not very efficient or it might mean that they are very very popular so that might be good but remember we got lots of other uninformed people making these choices.

Do you really want to wait every time you make a decision about your health care? So let’s pick the one, say with the lowest mortality figures, but again I think that leads to perverse outcomes. It can particularly lead to problems with providers trying to pick the most healthy people to treat, which is obviously not what we really wanted to do. Or, it can lead to them performing procedures on healthy people, which aren’t particularly necessary and avoiding the really sick, again we really don’t want them doing that. These all lead to substantial issues.

So, I think my first claim would be in terms of choice. There is no real basis for making any kind of informed choice as a health consumer in a health market place and this is not just a lack of information. It’s a lack of ability for me to understand this information as an average kind of patient. Coming off the street being told I need to be referred for surgery I don’t know how I’m supposed to actually make the choice of where it is I go.

In terms of competition, then, if patients don’t make the right choices, then there’s very little incentive for providers to actually improve their services particularly to improve the care that they’re providing. They may, on the other hand, be really perverse incentives; they try to improve the things that patients can actually measure like car parking. So, we might build a big car park, we might hire the most attractive staff we possibly can and get them to smile a lot. There’s some really interesting researches around nursing and relation, so it’s about nurses going home with their faces aching at the end of a long day because they had to smile continuously and they’ve kind of forgotten that they were supposed to be there to provide care. We might also say, as I’ve said earlier, that hospitals might try to restrict their care to only very minor cases; to providing care for only very healthy people because that won’t affect the mortality figures. The only way this can possibly work is through what economist call contestability which is by health care providers believing that patients are actually making much better decisions than they really are making. But even then there is a danger; it might end up losing out to the hospital down the road that has built the biggest car park any way because even if they are interested in providing better care it’s possible that patients won’t really understand that; what they’ll do instead again is to make choices based upon how attractive the place is or who has the biggest car park, and again that’s not really what we want health care to be based around.

So if we decided that markets don’t really work from industry world because there are problems on both the supply and the demand sides here. What we can do instead? Well, we can try to motivate or incentivise staff to try and improve and make things better for themselves. The obvious way to do this is to divide incentives, I think, to extrinsic incentivise, things that come to us from the outside and intrinsic incentivise, things that might try to motivate us from the inside based up on our personal goals. An obvious example of an extrinsic incentivise is to pay people more. Now the problem with this is; overwhelming research evidence suggests that paying people more doesn’t actually mean they provide a better service. This goes back to Catesly research, it’s baffling to me why we still continue to have ideas like performance related pay. How long does a pay-rise actually make you happy for? Well maybe a couple of days and then what are we going to do the rest of the time. Equally, there are often real perversities around us and the financial services industry provides one, so I provide a bonus for people who do really well. Well what that leads to do is people chasing targets rather than remembering what it is they’re actually there for which is providing care. So I don’t think that there is any evidence at all that paying people more or paying people bonuses actually motivates them to do a better service in health care.

Intrinsic motivation on the other hand does seem to have evidence to support it. It’s much better on this view of the world to appeal to peoples professionalism, to say to them look ok what we want to do is try to improve services what do you think?  What do your professional ethics say? What do your own understandings around professionalism suggest we ought to do to improve? In other words, we build up better health care systems not from the top by dictating people how we do things but from the bottom by asking first how they could make things better by appealing to their professionalism by allowing them to do a better job.

Remember we are talking about a caring profession; here we’re talking about doctors, nurses, lab technicians and variety of other people who presumably decided to enter health care because they wanted to make the world better in some kind of a way.

Well let’s ask them, shall we, we spend an awful load of money training them, now wouldn’t it be good to actually get their view on how we can make things better rather than again assuming that we know the answer from the start or politicians know the answer or a bunch of people who don’t actually have to provide the care know better than the health care professionals. By all means we can measure to make sure that the improvements do come, but we need to use evidence and we need to use the opinions of the people who actually are going to be doing this work rather than assuming that we can do this from the outside. I think this leads to the idea that we need self-organizing teams. Now we can have centrally set targets, provided again they are evidence-based but the self organizing teams need to be given discretion about how they improve the way healthcare works within the sphere which they occupy. We can monitor them against targets, we can have system-level goals but we need to make sure that those are all aligned in a sensible kind of way and that the actual way the actual means by which we deliver care is from the bottom up. Presuming somehow this is going to happen through choice or through competition simply doesn’t stack up in terms of health care. There is no way that I can see that will go. Equally on the final key on this, if you look at all the costs that have actually put in place in market place all of the costs that we put in place around contractual monitoring, about accessing frameworks in which we can put in place contracts in the first place, we should start trying to put in place mindless targets that have nothing to do with clinical evidence. We are spending masses and masses of money on things, which don’t actually achieve any kind of measurable outcome. So, if any of you think about this on the context of the UK which is the system that I know best we’ve been trying to have a market in place for care since 1990. The benefits that have come from that have been relatively minor. If you would have balanced that of against the cost of implementing the systems which we’ve been put in place to measure competition; which would have been put in place to put all the contracts in place, all the negotiating of the contracts every year, we spend billions and billions of pounds possibly tens of billions pounds over that stuff. Wouldn’t it be much better spent in the first place and actually try to improve care.

OK thank you very much for your attention. I hope that’s been useful to you, thanks.

Download Word File