Regulated performance-based financing: Cost containment vs. performance-based financing

Summary Health care expenditures in the Netherlands are rising. The Minister of Health has described that, to control the rising health care expenditures, health care needs to be improved and become safer and more efficient (Ministerie VWS 2011d:1). A way to achieve this is to introduce a performance-based financing system for hospitals and independent treatment centres (ZBCs, Zelfstandig behandelcentra). Some measures need to be taken to implement this system, for example; the abolition of the current budgeting system for hospitals, the introduction of the DOT financing system, the expansion of segment B, the enhancement of the risk-bearing character of health insurers, and the introduction of the budget management tool (MBI, macrobeheersingsinstrument) by changing the Health Care Market Regulation Act (WMG, Wet Marktordening Gezondheidszorg) (Ministerie VWS 2011a:3; NZa 2011c:11). The administrative outline agreement (bestuurlijk hoofdlijnenakkoord) is the basis of the changes in the financing system for hospitals and ZBCs (Ministerie VWS 2011e:1). Besides the agreed changes in the financing system for hospitals and ZBCs, the Minister of Health also proposed changes in the financing system for self-employed medical specialists (vrijgevestigde medisch specialisten). According to the Minister of Health the current funding system for self-employed medical specialists is unsustainable due to major cost overruns (Ministerie VWS 2011b:1). The income management model (beheersmodel medisch specialisten) is created to control the cost of self-employed medical specialists but still guaranteeing health care of good quality. The administrative outline agreement and the agreement about controlling the cost of self-employed medical specialists are the basis of the transition from supply-side regulation towards demand-driven health care. However, there may be some contradictions within and between these two agreements and this is the focus of this research. This research has two main research questions: 1. What is an efficient way of financing hospitals and self-employed medical specialists under a performance-based financing system? 2. How to combine elements of regulated competition and cost containment in the financing of hospitals and self-employed medical specialists? The data was collected in two ways; by a literature study and by conducting interviews. The literature study was conducted to get information about the history of hospital funding, the current financing system, and the effects of the changes in the funding of hospitals and self-employed medical specialists. Interviews were held with important stakeholders within the current financing system for hospitals and self-employed medical specialists. The research showed that due to the performance-based financing system and the income management model hospitals and self-employed medical specialists have conflicting interests regarding the delivering of health care. Self-employed medical specialists will try to deliver as much care as possible below the revenue ceiling. They may stop delivering health care before the end of the year if the revenue ceiling is reached. This may be resolved if health insurers will make overall production agreements with both hospitals and self-employed medical specialists. However, the income management model is only a transition model for self-employed medical specialists. This model should be abolished in 2014. So, problems could occur when the transition model for hospitals is ending in 2013 and the income management model for self-employed medical specialists still continues in 2014 (NZa 2011c:65). From 2015 onwards the income of self-employed medical specialists will be part of the integral prices within the performance-based financing system (NZa 2011c:17). However it is uncertain if the fiscal status of self-employed medical specialists is still guaranteed while using these integral prices (Ministerie VWS 2010b:1; NZa 2011c:67). Therefore, self-employed medical specialists may have the incentive to go into salaried service of a hospital. They may also have the incentive to create other types of partnerships to make sure the fiscal status is maintained (OMS 2011a:20; OMS 2011b:24). If no other types of partnerships are created, medical specialists and hospital boards shall negotiate about the share of the fee for self-employed medical specialists within the integral prices (NZa 2011c:18). At the beginning of the year the fee of medical specialists will be determined. This will cause the fee of self-employed medical specialists to become a fixed income. Medical specialists may then not have an incentive to deliver more health care. However, both the performance-based financing system and the MBI will give hospital boards the incentive to deliver more health care. This could cause conflicts with medical specialists within a hospital. Hospitals will become more aware of their performances and may try to distinguish themselves from others, by reducing their prices or by specializing. They need to become an interesting partner for health insurers. The constant threat of a budget cut via the MBI will make it much harder for hospitals to invest and innovate (Schut et al. 2011:296; Schut et al. 2010:375). To make health insurers more risk-bearing, the ex-post calculation of the risk equalization will be fully abolished in 2015 (Ministerie VWS 2011a:7-8; NZa 2011c:26). To have certainty about their expenditures, health insurers will have the incentive to create some control mechanisms for hospitals, to make overall production agreements with hospitals and medical specialists, and to monitor health care processes. They will also have the incentive to selectively purchase health care. This research showed that the performance-based financing system may have effects on quality, accessibility, and affordability of health care. However, these effects are uncertain. The system may however, be appropriate, because since the 1940s the Dutch health care consists of public and private involvement. However, the system may only be suitable and appropriate if all actors pick up their intended roles. Health insurers should become prudent buyers of health care for their enrolees. Health care providers need to become more commercial and an interesting partner for health insurers (Ministerie VWS 2011a:2). Patients should become critical consumers. If the performance-based financing system will be implemented in 2015 depends on the political developments in the Netherlands. This research showed that other models could replace the performance-based financing system . For example, instead of integral prices, direct agreements about the prices could be made between health insurers and medical specialists, without an intervention of the hospital board. It could also be appropriate to extend the financing system and base it on outcome indicators, for example quality rather than on the amount of treatments performed. Finally, we conclude that the performance-based system may not be an efficient way to finance hospitals and self-employed medical specialists. An efficient financing system should reduce the unrest within hospitals, maintain the fiscal status of self-employed medical specialists, financially limit hospitals in the same way as self-employed medical specialists, guarantee health care of good quality, and prevent the possibility to manipulate the validation process of care products. Also, cost containment within the health care setting is necessary, because of the expenditures’ growth. This cost containment needs to be combined with the performance-based financing system for hospitals and self-employed medical specialists. Cost containment should be arranged by the actors within the market and health insurers should play an important role. By purchasing health care selectively health insurers should be responsible for monitoring and controlling the costs. They should make agreements with hospitals for health care that is included in the basic benefit package. In this way they may rule out exceedances of the BKZ and at the same time fulfil their duty of mandated care (Baarsma et al. 2012:7,8). If the BKZ is still exceeded health insurers will be responsible and need to take measures, for example by compensating the exceedances by their own resources or by raising their premiums. The MBI can also still be used to compensate the exceedances, however, only hospitals that caused the exceedances need to repay it (Baarsma et al. 2012:22).