1. LSE / NHS Confederation Seminar Series 25 May 2010 Siok Swan Tan institute for Medical Technology Assessment tan@bmg.eur.nl

2. Structural reforms of the Dutch healthcare sector (1) Reasons for structural reforms: improve the efficiency of hospital care increase transparency of hospital costs introduce fundamental incentive mechanisms  transition from supply-led system to demand-led system 2

3. Structural reforms of the Dutch healthcare sector (2)  transition from supply-led system to demand-led system 1. Integration of social and private insurance schemes  increasing competition between health insurers 2. Free access to the hospital care market  increasing competition between healthcare providers 3. Introduction of the DBC casemix system  financing the primary care chain based on quality 3

4. Integration of social and private insurance schemes (1)  increasing competition between health insurers mandatory scheme coverage to the whole population customers’ free choice of health insurer risk equalization fund Insurers are to compete by critically purchasing care for their customers. Market power of insurers would be determined by willingness of customers: to switch between insurers to go to hospitals which are contracted by their insurer 4

5. Free access to the hospital care market (1)  increasing competition between healthcare providers Number of hospitals: university hospitals: 8 general hospitals: 86 specialised hospitals: 35 revalidation centers: 17 Independent treatment centers and private clinics allowed to freely access hospital care market HospitalsIndependent treatment centers Private clinics Not-for-profit For-profit Mandatory scheme (non-acute outpatient care) Non-insured care 5

6. Introduction of the DBC casemix system (1) DBC = Diagnosis Treatment Combination A DBCs includes:  whole set of hospital services  from first consultation  until treatment completion 6

7. Introduction of the DBC casemix system (2) Features of the DBC casemix system: patient classification: diagnosis and treatment –medical specialty –type of care –demand for care –diagnosis –treatment axis (setting and nature) clinical and resource use data care intensity is not (yet) used about 30,000 DBCs all hospitals and independent treatment centers inpatient and outpatient care mental healthcare distinction between list A and list B 7

8.  financing the primary care chain based on quality Share list AShare list B 200690%10% 200880%20% 200967%33% ?50% ?40%60% ?30%70% Introduction of the DBC casemix system (3) List A DBCsList B DBCs fixed national DBC pricesnegotiable prices production volumequality 67%33% 8

9. Introduction of the DBC casemix system (4) List B DBCs *: sufficiently homogeneous sufficiently high incidence/ production volume predictable non-acute inpatient/ outpatient care freely accessible for (new) healthcare providers Transfer from list A to B: supported by the ‘field’ technically realisable 9 * Note conformity independent treatment centers, slide 5

10. Introduction of the DBC casemix system (5) List B DBCs: –mean to encourage insurers and hospitals to negotiate on quality –deficiencies/ earnings responsibility of hospital 10 Health insurersHospitals not obliged to contract all hospitalsnot obliged to contract all insurers may employ different prices for different hospitals may employ different prices for different insurers may set maximum to number of DBCs they want to reimburse may agree upon lower/ higher price if production exceeds predetermined figure determine frequency/ terms of agreements

11. Evaluation of structural reforms 11  transition from supply-led system to demand-led system ??? 1. Integration of social and private insurance schemes  increasing competition between health insurers 2. Free access to the hospital care market  increasing competition between healthcare providers 3. Introduction of the DBC casemix system  financing the primary care chain based on quality

12. Integration of social and private insurance schemes (2)  increasing competition between health insurers Insurers were to compete by critically purchasing care for their customers. However, insurers reluctant to selectively contract with hospitals and to offer preferred hospital contracts to their customers. Lack of high-quality information Afraid of losing reputation Limited financial risk 12 Source: van de Ven WPMM, Schut FT (2009). Managed competition in the Netherlands: still work-in-progress. Health Econ 18:253–255.

13. Integration of social and private insurance schemes (3)  increasing competition between health insurers Market power of insurers would be determined by willingness of customers: to switch between insurers to go to hospitals which are contracted by their insurer  In 2006, 18% of the population switched to another insurer.  After 2006, annually 4% of the population switched. 13 Source: van de Ven WPMM, Schut FT (2009). Managed competition in the Netherlands: still work-in-progress. Health Econ 18:253–255.

14. Free access to the hospital care market (2)  increasing competition between healthcare providers many hospitals established independent treatment centers number independent treatment centers increased from 79 to 135 relatively high-quality care due to: the routine delivery of specific treatments easy response to changes in the needs of the patients reduced waiting lists of competing hospitals encouraged competition quality/ efficiency  higher accessibility for patients, especially for straightforward non-acute outpatient care (list B DBCs) 14

15. Introduction of the DBC casemix system (6)  financing the primary care chain based on quality List B DBCs meant to encourage insurers and hospitals to negotiate on quality However, health insurers and hospitals predominantly negotiate on production volume and/ or prices  production volume list B increased at a higher rate than list A  prices list B increased at a lower rate than list A 15

16. Introduction of the DBC casemix system (7)  financing the primary care chain based on quality 2004 price (€) Minimum 2007 price (€) Maximum 2007 price (€) Mean 2007 price (€) % price increase Hip replacement8,5617,60311,3709,0976.3% Knee replacement10,2289,09713,00010,7465.1% Inguinal hernia repair2,1631,5293,0882,2544.2% Diabetes4093851,02748318.1% Tonsillectomy7404331,4988008.1% Cataract1,3171,0441,5991,3814.8% Spinal disc herniation3,0462,4135,7783,3088.6% 16 Source: Nederlandse Zorgautoriteit, 2005

17. Introduction of the DBC casemix system (8)  financing the primary care chain based on quality  negotiations take place annually  either party re-opens negotiations if required by circumstances  great negotiated price deviations only minority of DBCs  complex and chronic DBCs less sensitive to market competition  hospitals negotiate on the total budget rather than on individual DBCs 17

18. Introduction of the DBC casemix system (9)  financing the primary care chain based on quality Limitations for health insurers that restrain them from competing on quality: Patients assume that quality is equal among all hospitals Hospitals have contracts with several insurers, which limits the effect of a single insurer’s effort to motivate hospitals If an insurer achieves recognition for providing high-quality care, it is likely to enrol a disproportionate share of patients with chronic medical problems 18 Source: Custers T, Arah OA, Klazinga NS (2007). Is there a business case for quality in the Netherlands? A critical analysis of the recent reforms of the health care system. Health Policy 82:226–239.

19. Conclusion of structural reforms 19  transition from supply-led system to demand-led system ???

20. Conclusion of structural reforms 20  transition from supply-led system to demand-led system ???