Katharina Janus

Integrated Health Care Delivery Based on Transaction Cost Economics: Experiences from California and Cross-National Implications

Integrated health care delivery (IHCD), as a major issue of managed care, was considered the panacea to rising health care costs. In theory it would simultaneously provide high-quality and continuous care. However, owing to the backlash of managed care at the turn of the century many health care providers today refrain from using further integrative activities. Based on transaction cost economics, this chapter investigates why IHCD is deemed appropriate in certain circumstances and why it failed in the past. It explores the new understanding of IHCD, which focuses on actual integration through virtual integration instead of aggregation of health care entities. Current success factors of virtually integrated hybrid structures, which have been evaluated in a long-term case study conducted in the San Francisco Bay Area from July 2001 to September 2002, will elucidate the further development of IHCD and the implications for other industrialized countries, such as Germany.

Managing motivation among health care professionals

Human resources management (HRM) has evolved from primarily focusing on monetary incentives toward incorporating other nonmonetary aspects for managing professionals’ motivation. However, in health care organizations, paying professionals for performance persists although evidence for its return on investment is scant. This raises the question whether monetary incentives are, in fact, the (only) motivator for health care professionals or whether other incentives could substitute or complement them in the future. This chapter reviews the basic ideas of pay for performance (P4P) and its current challenges. Taking into account HRMs experience (and evolution) in other industries, I discuss the interdependence and the impact of extrinsic and intrinsic motivators in health care. On the basis of the health care markets standing as a knowledge-intensive industry in which multiple actors contribute their knowledge to multiple tasks, I will offer suggestions how to manage motivation based on individuals’ intrinsic needs instead of relying solely on extrinsic motivators.

Medical ethics: enhanced or undermined by modes of payment?

BackgroundIn the medical literature [1, 2, 7], the view prevails that any change away from fee-for-service (FFS) jeopardizes medical ethics, defined as motivational preference in this article. The objective of this contribution is to test this hypothesis by first developing two theoretical models of behavior, building on the pioneering works of Ellis and McGuire [4] and Pauly and Redisch [11]. Medical ethics is reflected by a parameter α, which indicates how much importance the physician attributes to patient well-being relative to his or her own income. Accordingly, a weakening of ethical orientation amounts to a fall in the value of α. While traditional economic theory takes preferences as predetermined, more recent contributions view them as endogenous (see, e.g., Frey and Oberholzer-Gee [5]).MethodsThe model variant based on Ellis and McGuire [4] depicts the behavior of a physician in private practice, while the one based on Pauly and Redisch [11] applies to providers who share resources such as in hospital or group practice. Two changes in the mode of payment are analyzed, one from FFS to prospective payment (PP), the other to pay-for-performance (P4P). One set of predictions relates physician effort to a change in the mode of payment; another, physician effort to a change in α, the parameter reflecting ethics. Using these two relationships, a change in ethics can observationally be related to a change in the mode of payment. The predictions derived from the models are pitted against several case studies from diverse countries.ResultsA shift from FFS to PP is predicted to give rise to a negative observed relationship between the medical ethics of physicians in private practice under a wide variety of circumstances, more so than a shift to P4P, which can even be seen as enhancing medical ethics, provided physician effort has a sufficiently high marginal effectiveness in terms of patient well-being. This prediction is confirmed to a considerable degree by circumstantial evidence coming from the case studies. As to physicians working in hospital or group practice, the prediction is again that a transition in hospital payment from FFS to PP weakens their ethical orientation. However, this prediction could not be tested because the one hospital study found relates to a transition to P4P, suggesting that this mode of payment may actually enhance medical ethics of healthcare providers working in a hospital or group practice.ConclusionThe claim that moving away from FFS undermines medical ethics is far too sweeping. It can only in part be justified by observed relationships, which even may suggest that a transition to P4P strengthens medical ethics.

Reply to commentary on: medical ethics: enhanced or undermined by modes of payment?

In this Comment, two main criticisms (C) are leveled against the paper by Zweifel and Janus (ZJ) and one remedy (RBL) offered. C1. Using comparative statics, the paper first examines de/dp (linking physician effort e to an increase in prospective payment p (PP for short), away from fee-forservice (FFS). Next, it derives de/dp (linking effort to ethics a, defined as the relative importance of patient wellbeing in the physician’s utility function). From these two relationships, da=dp is derived through division, linking ethics as an endogenous variable to PP (the d notation is not ‘‘erroneous’’ as claimed in the Comment but serves to ‘‘... distinguish it [i.e., a comparative-static result, ZJ] from regular derivative expressions [the o notation, ZJ] that merely constitute part of the model specification’’ [1, p. 229]. To evaluate this criticism, consider the following sequence of events as an alternative to this single contribution. In a first paper, physician effort e is related to a transition from fee-for-service (FFS) to PP; the conditions in which e decreases are analyzed. In a second paper, physician effort is related to physicians’ ethical orientation a, showing that weaker ethics induces them to spend less effort benefiting patients. Later on, another researcher, noting these two papers, derives the prediction that one is likely to infer a negative correlation between PP and ethical orientation. Would anyone have objected to the conclusion of the third paper? Probably not. The mortal sin of ZJ evidently was to combine these three steps into one— duly pointing out that a becomes endogenous in the process. No fewer than three referees (who had other points of criticism for sure) found this combination acceptable. C2. Noting that da=dp should not be interpreted as a causal relationship because the ethical variable was initially exogenous, ZJ use the term ‘‘correlation.’’ However, according to the Comment, this does not make sense because the model is not couched in stochastic terms. Arguably, most microeconomic theorizing is performed in a nonstochastic setting, as though agents responded to changes in exogenous variables (the Xs, which are usually viewed as independent from each other) with probability one. The objective is to keep the analysis reasonably simple by avoiding probability statements regarding adjustments in endogenous variables. However, as soon as researchers turn to empirical estimation, correlations between the same Xs pop up because they are in fact stochastic, often causing multicollinearity. In addition, the exogeneity of the Xs is frequently in doubt, calling for statistical (i.e., stochastic) testing. In sum, this criticism turns out to be rather puristic. RBL. The proposed remedy is to define a physician’s utility function with a and p as its arguments. From this, the slope da=dp of an indifference curve in (a, p)-space is to be derived. However, RBL creates more problems than it solves. First, the medical profession does not conceive of PP and pay-for-performance as something physicians can choose (see also the pertinent literature cited in ZJ). Rather, it regards these changes as imposed by health insurers (the government, respectively). Typically, physicians have to This reply refers to the article available at doi:10.1007/s10198-0160838-6.