1. Regulating private hospitals
Professor EK Yeoh

2. Harding-Preker Framework
Issues and Goals
Focus
Assessment
Strategy
Grow
Harness
Convert
Distribution (equity)
Efficiency
Quality of Care
Private Sector
PHSA
Gather available information
Identify additional needs
In-depth studies
Instruments
Activities
Hospitals
PHC
Diagnostic labs
Producers / Distributors
Ownership
For-profit corporate
For-profit small business
Non-profit charitable
Formal/ Informal
Policy Tools
Regulation
Contracting
Training/Info
Social marketing
Social franchising
Info. to patients
Demand-side
(incl. Vouchers)
PPP transactions
Enable environment improvement
Basically very simple: what are your goals/ problems?
What is relevance (if any of private health sector) PHSA
Which private sector is relevant? (characteristics that matter)
Which strategy fits best?
Which set of instruments
Most public policy courses focus on some version of goals; analysis; policy options; implementation; feedback. We will also.
In this module – we work through a similar logical framework – however, focusing on the important distinctions between public and private providers.
General Private Sector Relevance Check. In this framework – after identifying your goals – and the parts of the health system relevant to achieve your goals – you then look at the role of the private sector in these parts of the health system. Is it small or large?
[ please keep in mind, that misperceptions, BIG ONES, are very common with respect to the private sector]
Detailed Private Sector Relevance Check (PHSA). (NEXT SESSION) If it’s large, then most likely you need to do more info collection and analysis – to ensure that you take the priv. sector adequately into account.
This Assessment follows the logic of this module framework.
The logic goes like this: you think about……..
Who are the private actors that are relevant (service providers; producers)
How are they relevant (doing good stuff but you want them to expand; doing bad stuff you want them to stop; doing good stuff generally – but you want them to change in specific things (treatment of ARI; referral to public TB program)
How are they organized (formal/ informal; legal organization; degree of organization – e.g. representative body
For your particular goals – which are more important: hospitals? PHC? Drug sellers? Labs?
Ownership type and organization - four major types:
For-profit small business – this is the way that most private primary care clinics are organized. Just like any small business – but the business is supplying medical care, and usually medicines too.
For-profit corporate – hospitals are often organized this way – as they are very large and costly, and require that capital investment is raised from outside the business- often in the form of equity (requiring repayment of dividends)
Non-profit charitable (beneficial) – some organizations are organized as non-profits, pursuing at least partly altruistic/ social objectives
Taking all this together
Given
what you want them to do
given how they are organized
what they are interested in
which policy instrument or instruments are most likely to get them to do what you want?
I will briefly talk about approaches or strategies to working with the private sector.
The rest of the module will cover instruments – always discussing which private actors they are most useful to influence.
Final critical element of the framework is monitoring and evaluation activities.
Monitoring and evaluation is important to ensure that policies are being implemented, being implemented as intended; and ensure that they are having the desired impact. Otherwise, it is important to make further efforts to ensure implementation, or to make needed course corrections.
Monitoring – is collecting the information, so as to know what is actually happening
Evaluation - is analyzing the information, to be able to draw conclusions about whether things are going in the right direction.
Public Sector
Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

3. Harding-Preker Framework
Issues and Goals
Focus
Assessment
Strategy
Grow
Harness
Convert
Distribution (equity)
Efficiency
Quality of Care
Private Sector
PHSA
Gather available information
Identify additional needs
In-depth studies
Instruments
Activities
Hospitals
PHC
Diagnostic labs
Producers / Distributors
Ownership
For-profit corporate
For-profit small business
Non-profit charitable
Formal/ Informal
Policy Tools
Regulation
Contracting
Training/Info
Social marketing
Social franchising
Info. to patients
Demand-side
(incl. Vouchers)
PPP transactions
Enable environment improvement
Regulation
Basically very simple: what are your goals/ problems?
What is relevance (if any of private health sector) PHSA
Which private sector is relevant? (characteristics that matter)
Which strategy fits best?
Which set of instruments
Most public policy courses focus on some version of goals; analysis; policy options; implementation; feedback. We will also.
In this module – we work through a similar logical framework – however, focusing on the important distinctions between public and private providers.
General Private Sector Relevance Check. In this framework – after identifying your goals – and the parts of the health system relevant to achieve your goals – you then look at the role of the private sector in these parts of the health system. Is it small or large?
[ please keep in mind, that misperceptions, BIG ONES, are very common with respect to the private sector]
Detailed Private Sector Relevance Check (PHSA). (NEXT SESSION) If it’s large, then most likely you need to do more info collection and analysis – to ensure that you take the priv. sector adequately into account.
This Assessment follows the logic of this module framework.
The logic goes like this: you think about……..
Who are the private actors that are relevant (service providers; producers)
How are they relevant (doing good stuff but you want them to expand; doing bad stuff you want them to stop; doing good stuff generally – but you want them to change in specific things (treatment of ARI; referral to public TB program)
How are they organized (formal/ informal; legal organization; degree of organization – e.g. representative body
For your particular goals – which are more important: hospitals? PHC? Drug sellers? Labs?
Ownership type and organization - four major types:
For-profit small business – this is the way that most private primary care clinics are organized. Just like any small business – but the business is supplying medical care, and usually medicines too.
For-profit corporate – hospitals are often organized this way – as they are very large and costly, and require that capital investment is raised from outside the business- often in the form of equity (requiring repayment of dividends)
Non-profit charitable (beneficial) – some organizations are organized as non-profits, pursuing at least partly altruistic/ social objectives
Taking all this together
Given
what you want them to do
given how they are organized
what they are interested in
which policy instrument or instruments are most likely to get them to do what you want?
I will briefly talk about approaches or strategies to working with the private sector.
The rest of the module will cover instruments – always discussing which private actors they are most useful to influence.
Final critical element of the framework is monitoring and evaluation activities.
Monitoring and evaluation is important to ensure that policies are being implemented, being implemented as intended; and ensure that they are having the desired impact. Otherwise, it is important to make further efforts to ensure implementation, or to make needed course corrections.
Monitoring – is collecting the information, so as to know what is actually happening
Evaluation - is analyzing the information, to be able to draw conclusions about whether things are going in the right direction.
Public Sector
Source: Adapted from Harding & Preker, Private Participation in Health Services, 2003.

4. Outline for Presentation
Define regulations
Regulatory strategies and instruments
Regulating quality
Compliance-based
Incentive-based
Self-regulation
Regulatory regime and effectiveness
Key Messages
Further Reading and References

5. Regulation
Three basic categories
Regulation as setting forth mandatory rules that are enforced by a state agency
Regulation incorporates all efforts by state agencies to steer the economy… include state ownership and contracting, taxation and disclosure requirements
Regulation to include all mechanisms of both intentional and unintentional social control
Saltman and Busse (2002)
Baldwin et al (1998)

6. Regulation
Regulation is the range of factors exterior to the practice or administration of medical care that influences behaviour in delivering health care
Brennan and Berwick (1996)

7. Dimensions [Purposes] of health sector regulation
Policy Objectives
Normative and value driven
Broad public interest
Specific policy goals [ends and objectives]
Managerial mechanisms
Specific regulatory mechanisms to attain policy objectives
Technical in nature, emphasis on efficient and effective management of human and financial resources
Saltman and Busse (2002)

8. Social and economic policy objectives
Equity and justice
Social cohesion
Economic efficiency
Health and safety
Informed and educated citizens
Individual choice
Harding and Preker (2003)
Saltman and Busse (2002)

9. Health sector management mechanisms
Regulating quality and effectiveness
Regulating patient access
Regulating provider behaviour
Regulating payers
Regulating pharmaceuticals
Regulating physicians
Harding and Preker (2003)
Saltman and Busse (2002)

10. Regulatory strategy Command and control Self regulation
Incentive-based regimes
Market harnessing controls
Disclosure
Direct action
Rights and liabilities laws
Public compensation and social insurance
Saltman and Busse (2002)

11. Actors Government Professional/ provider organizations
Patients’/ Consumers’ organizations

12. Regulatory actors
self-regulators tend to be strong on specialist knowledge but weak on accountability to the public;
local authorities strong on local democratic accountability,
weak on coordination;
parliament strong on democratic authority, weak on sustained scrutiny;
courts and tribunals strong on fairness, weak on planning;
central departments strong on coordination with the government, weak on neutrality;
agencies strong on expertise and combining functions, weak on neutrality;
directors general strong on specialization and identification of responsibility, weak on spreading discretionary powers.
Saltman and Busse (2002)
Baldwin and Cave (1999)

13. Targets Quality Capacity Price Market structure and levels of services
Entitlements
Saltman and Busse (2002)

14. Regulatory instruments
Control-based regulation
Licensing
Registration
Incentive-based regulation
Contracts
Accreditation
Market-structure regulation
Encourage desired behaviour
Harding and Preker (2003)

15. Control-based regulatory instrument
Area
Method of regulation
Application
Target
Healthcare facilities
Facility licensing
Operation of new facility
Minimum facility structure
Certificate of need programs
New facility construction
or facility expansion
Community need for service
Resource allocation
Health maps (carte sanitaire)
Health planning and
distribution of health
facilities
Efficient distribution of
health facilities
Health system agencies
Rationalization of capital
investment
Antitrust regulation
Relationship between
providers
Price and quality of services
Facility accreditation
Facility structure and
performance
Quality of services
Harding and Preker (2003)

16. Control-based regulatory instrument
Area
Method of regulation
Application
Target
Healthcare personnel
Licensing
Minimum qualifications
Quality of services
Primary and specialty certification
Specialized competence
Recertification
Maintained competence
Practice guidelines
and outcomes research
Clinical practice
Professional standards
review organizations
Utilization review
Cost of care
Peer review
organizations
Fines, penalties and
sanctions
Provider compliance with
regulation
Varied
Harding and Preker (2003)

17. Incentive-based regulatory instrument
Financial Incentives
Capital markets
• Provide government loans at low interest.
• Provide government guarantees for borrowing on private markets.
• Improve access to low-cost credit and simplified loan application processes.
• Provide access to foreign currency.
Taxes and tariffs
• Introduce tax waivers, exemptions, and deductibles.
• Provide favorable tariffs and duty-free imports of medical equipment and supplies.
Other subsidies
• Give direct government subsidies targeted to public health objectives.
• Provide government grants targeted to public health objectives.
Provider payment
• Ensure appropriate provider payment mechanisms.
• Assure reasonable profit margins (if prices are controlled by the government).
• Pay government obligations to providers in a timely manner.
• Protect overdrafts in response to government payment delays.
• Give bonuses to serve in underserved areas.
Harding and Preker (2003)

18. Incentive-based regulatory instrument
Nonfinancial Incentives
Regulatory environment
• Improve ease of entry to the market.
• Improve regulatory processes and reduce bureaucratic controls.
• Disseminate information on regulations and laws.
• Confer legal authority to transform public providers into public corporations.
Market and business environment
• Purchase selectively.
• Provide referral systems with the public sector.
• Grant access to use government facilities and equipment.
• Provide consumer and market information.
• Support development of an adequately skilled work force.
Human resource development
• Offer training and professional development opportunities in needed specialties.
• Improve career path for specialties that are in short supply.
Public-private sector relations
• Assure clarity and predictability of provider-performance expectations.
• Promote public and private sector provider dialogue.
• Formal partnership where appropriate (such as engage private providers in public health programs).
Harding and Preker (2003)

19. Regulatory instruments by regulatory strategy and target of regulation
Target of regulation/ regulatory strategy
Controls
Incentives
Indirect regulatory instruments (aimed at the input-provider interface)
Capital funding
Regulation of capital markets
Mechanisms for allocating public funds (such as contracting, prospective/ retrospective reimbursement)
Government low-interest loans
Government guarantees for borrowing on private markets
Manpower
Control of medical school admissions
Pay scales for public managerial personnel
Accreditation of educational institutions
Facilities, equipment, and supplies
Import restrictions
Global budgets
Testing requirements and quality controls on production of equipment and supplies
Health system agencies
Duty-free imports of medical equipment and supplies
Technology/ knowledge
National health technology agencies/advisory panels
Research funding
Direct regulatory instruments (aimed at the provider-consumer interface)
Price of services
Rate setting and price controls
Government subsidies
Health system capacity (quantity and distribution of services)
Certificate of need programs
Health maps
Bonuses to serve in undeserved areas
Quality of services
Registration/licensing requirements
Practice guidelines
Medical technology/equipment safety acts
Voluntary facility accreditation
Personnel credentialing
Combinations of the above targets
Fines , penalties, and sanctions
Antitrust law (to control prices and quality of services).
Professional standards review organizations and peer review organizations (to control cost and quality of services)
Tax laws (to influence volume and price of private provision
Provider-payment schemes (can influence volume and quality of services)
Harding and Preker (2003)
Harding and Preker (2003)

20. Self-regulation
A state-generated mandate that allows certain professionals or enterprises to set standards for the behaviour of its membership
Private self-regulation without state enforcement e.g. some professional organisations or voluntary organisations
Publicly mandated self-regulation e.g. professional self-regulation by physicians, dentists and pharmacists, etc.
Joint self-regulation with non-governmental actors
Saltman and Busse (2002)
Baldwin and Cave (1999)

21. Self-regulation Advantages Disadvantages
High commitment to ownership of rules
Self-serving
Well-informed rule making
Impetus toward monopolistic behaviour
Low costs to government
Command and control problems cannot always be avoided
Close fit of regulatory standards with those seen as reasonable by actors
Exclusion of public from rule-making procedures
Potential for rapid adjustment
Enforcement bias toward industry
Enforcement and complaints procedures potentially more effective
Public distrust of enforcers
Potential for combining with external oversight
Problematic legal oversight
Public preference for governmental responsibility
Harding and Preker (2003)
Baldwin and Cave (1999)

22. Regulatory body in Hong Kong
The Medical Council of Hong Kong
Hong Kong Academy of Medicine
Hong Kong Hospital Authority

23. The Medical Council of Hong Kong
Empowered by the Medical Registration Ordinance, Cap. 161, Laws of Hong Kong, the Medical Council maintains a register of eligible medical practitioners, administers the Licensing Examination, issues guidelines and a Professional Code and Conduct, exercises regulatory and disciplinary powers for the profession, and answers general enquiries from doctors and the public.

24. The Medical Council of Hong Kong
Standards of practice
Licensing
Entry to the professions
Re-certification not required
Continuing medical education not required
Clinical audit and quality assurance not required
Accreditation of specialties
Code of practices and ethics

25. The Medical Council of Hong Kong
24 medical members, 4 lay members
Preliminary Investigation Committee
Licentiate Committee
Education and Accreditation Committee
Ethics Committee
Health Committee

26. Hong Kong Academy of Medicine (HKAM)
In recognition of the need for essential postgraduate medical education and training in Hong Kong, the Hong Kong Academy of Medicine was formally established under the Hong Kong Academy of Medicine Ordinance (Cap 419) with the statutory power to organise, monitor, assess and accredit all medical specialist training and to oversee the provision of continuing medical education.

27. Role of HKAM
To maintain the standard of specialist training and specialist continuing medical education (CME) and continuous professional development (CPD) in the territory
To assists the Medical Council of Hong Kong, the Registration body, in the maintenance of the Specialist Register (SR) since its inception in 1997 (Medical Registration Ordinance)

28. Specialist training
Standard 6-year format for basic and higher specialist training leading to Fellowship
Examinations and assessment
Require continuing medical education and continuous professional development to maintain specialist status

29. Hong Kong Hospital Authority
Public hospitals were corporatized in 1991 under the holding of a single statutory nonprofit public corporation, the Hospital Authority, independent of the government bureaucracy and established with the mandate to manage all public hospitals.

30. Hong Kong Hospital Authority
Under the Hospital Authority Ordinance, the Hospital Authority is responsible for:
Advising the Government on the needs of the public for hospital services and of the resources required to meet those needs;
Managing and developing the public hospital system;
Recommending to the Secretary for Food and Health appropriate policies on fees for the use of hospital services by the public;
Establishing public hospitals;
Managing and controlling public hospitals; and
Promoting, assisting and taking part in education and training of persons involved in hospital or related services. 30

31. Management structure Functions:
Clinical effectiveness and technology management
Patient safety and risk management
Patient relations and engagement
Quality and Standards
Infection, emergency and contingency
Chief Infection Control Office
Infectious Disease Control Training Centre

32. Quality assurance/ clinical audit
Monitoring, audit and inspection
Implement pilot hospital accreditation program, which includes defining the quality of hospital services in line with international standards and review by an international accrediting agent
Key performance indicators
Satisfaction survey

33. Regulating quality Structure Process Outcome Facility licensing
Healthcare personnel licensing
Process
Facility accreditation
Clinical practice guideline
Outcome
Performance reporting
Clinical audit

34. Complementary/ synthetic role of regulatory instrument
Licensing/ professional standards
Compliance/ control based
Self-regulatory
Specialist practice
Non-financial incentive-based

35. A framework for comprehensive regulatory assessment
Overall country
profile
Political economy
Demographic and
health indicators
• Political ideology
• Culture, values, and norms
• Interrelationship or power balance between stakeholders
• Per capita income level
• Demographic data
• Literacy rates
• Health status
Existing or potential
capacity for regulation
Overall health
sector structure
Current regulatory
system
Government
capacity
• Provider mix and extent and forms of private provision
• Breadth of insurance coverage: public, private
• Health care utilization indicators
• Status of current health care regulation
• Effectiveness of current regulation in encouraging private participation and ensuring desirable performance
• Information systems, ease of data collection, and ability to process data efficiently
• Organizational structure
• Level of government
• Technical capacity to perform regulatory functions (set standards, monitor, evaluate and enforce)
• Availability of trained personnel
• Funding (public and private)
Harding and Preker (2003)

36. Regulatory decision-making
Is the issue correctly defined?
Is government action justified?
Is regulation the best form of government action?
Is there a legal basis for regulation?
What is the appropriate level of government for this action?
Do the benefits of regulation justify the costs?
Is the distribution of effects across society transparent?
Is the regulation clear, consistent, comprehensible and accessible?
Have all interested parties had the opportunity to present their views?
How will compliance be achieved?
OECD (2002)

37. Regulatory activity Legislation Implementation Monitoring Evaluation
Enforcement
Judicial supervision
Saltman and Busse (2002)

38. Regulating legitimacy
Acceptability
Political
Social
Regulated
Process
Communication
Transparency
Independent creditability of regulatory body
Legal foundation

39. Regulatory cycle Regulation Decide to regulate
Evaluate system performance
Secure legal authority
Impose penalties for violators
Write rules
Monitor compliance
Peter Berman

40. Key Messages
Regulations is an inherently complex and political process.
Regulation is a strategic, dynamic and on-going process.
Control/Compliance based regulations needs to be complemented with other instruments (e.g. (purchasing, self-regulations) to be effective.
Legitimacy and wide awareness of quality regulations are critical for effectiveness.

41. Reading and References
Busse R, Hafez-Afifi N and Harding A (2000). “Chapter 4: Regulation of Health Services.” Private Participation in Health Services Handbook. Washington, DC: The World Bank
Saltman R, Busse R and Mossialos Elias (2002). European Observatory on Health Care Systems Series: Regulating entrepreneurial behaviour in European health care systems. Open University Press. World Health Organization