Martin Chalkley

Contracting for health services when patient demand does not reflect quality

This paper analyses contracts to keep down costs while maintaining quality of health services when patient demand does not reflect quality. There is then a natural role for forms of contract that have emerged during the reforms of the NHS in Britain that differ from pure fixed price or cost reimbursement contracts. The optimal form depends on whether the provider is entirely self-interested or benevolent in having genuine concern for patient welfare. With fully benevolent providers there are roles for block and cost and volume contracts. With partially benevolent providers, some degree of cost sharing is typically optimal.

Government Purchasing of Health Services

This chapter reviews the literature on payment schemes for government purchases of health services. It focuses on four themes: (1) the tension between obtaining appropriate quality of services and keeping the cost of those services at an acceptable level; (2) the role of cost sharing by the payer when there is asymmetric information between purchaser and supplier about costs or case-mix; (3) the importance of committment in purchasing; and (4) the role of reputation in maintaining quality in long term relationships between purchasers and suppliers.

Contracting for Health Services with Unmonitored Quality

In both the British National Health Service (NHS) and U.S. Medicare, recent emphasis has been on contracts with payment based only on the number of patients treated. It is shown that, without direct monitoring of quality or effort to reduce costs, such contracts are efficient only when it is efficient to treat all patients wanting treatment. It may not be when treatment costs are insured or subsidized. Such contracts can then be improved by including payments for the number of patients wanting treatment, as well as for the number actually treated. Even then, the outcome will not generally be efficient if quality is multidimensional.

Has payment by results affected the way that English hospitals provide care? Difference-in-differences analysis

Objective To examine whether the introduction of payment by results (a fixed tariff case mix based payment system) was associated with changes in key outcome variables measuring volume, cost, and quality of care between 2003/4 and 2005/6. Setting Acute care hospitals in England. Design Difference-in-differences analysis (using a control group created from trusts in England and providers in Scotland not implementing payment by results in the relevant years); retrospective analysis of patient level secondary data with fixed effects models. Data sources English hospital episode statistics and Scottish morbidity records for 2002/3 to 2005/6. Main outcome measures Changes in length of stay and proportion of day case admissions as a proxy for unit cost; growth in number of spells to measure increases in output; and changes in in-hospital mortality, 30 day post-surgical mortality, and emergency readmission after treatment for hip fracture as measures of impact on quality of care. Results Length of stay fell more quickly and the proportion of day cases increased more quickly where payment by results was implemented, suggesting a reduction in the unit costs of care associated with payment by results. Some evidence of an association between the introduction of payment by results and growth in acute hospital activity was found. Little measurable change occurred in the quality of care indicators used in this study that can be attributed to the introduction of payment by results. Conclusion Reductions in unit costs may have been achieved without detrimental impact on the quality of care, at least in as far as these are measured by the proxy variables used in this study.

Mortality associated with in-hospital bacteraemia caused by Staphylococcus aureus: a multistate analysis with follow-up beyond hospital discharge

OBJECTIVES The main objective was to study the impact of in-hospital bacteraemia caused by Staphylococcus aureus on mortality within 90 days after admission. We compared methicillin-resistant S. aureus (MRSA) with methicillin-susceptible S. aureus (MSSA). PATIENTS AND METHODS The study population consisted of adult residents of Tayside, Scotland, UK, from 1 January 2005 to 30 September 2006 who had a new admission to Ninewells Hospital between 1 July 2005 and 30 June 2006. All patients (n = 3132) in the same wards as the patients infected with S. aureus were included. We addressed key weaknesses in previous studies by using a cohort design and applying a multistate model, which addressed the temporal dynamics. Critically, the model recognized that death and discharge from the hospital are competing events and that delay in discharge independently increases the risk of death. RESULTS The cohort included 3132 patients, of whom 494 died within 90 days after admission, 34 developed MRSA bacteraemia and 26 MSSA bacteraemia in the hospital. In comparison with patients without S. aureus bacteraemia, the death hazard was 5.6 times greater with MRSA [95% confidence interval (CI) 3.36-9.41] and 2.7 times greater with MSSA bacteraemia (95% CI 1.33-5.39). After adjustment for co-morbidity, hospitalization, age and sex, the death hazard was 2.9 times greater with MRSA (95% CI 1.70-4.88) and 1.7 times greater with MSSA bacteraemia (95% CI 0.84-3.47). CONCLUSIONS Time-dependent models such as the proposed multistate model are necessary to address the temporal dynamics of admission, infection, discharge and death. The impact of S. aureus bacteraemia on mortality should be considered on two levels: the burden of disease, i.e. nosocomial infection with S. aureus bacteraemia, and the burden of resistance to methicillin.

Cost sharing in health service provision: an empirical assessment of cost savings

Fixed price payments for treatment of patients with a specified diagnosis are widespread in both US Medicare and the British NHS even though there are substantial variations in the cost of treatment. Theory suggests that, when there is asymmetric information about those costs, total payment can be reduced by cost sharing. This paper uses data from Medicare to assess the cost savings that might be feasible in practice from cost sharing. For diagnosis related groups with low cost variation, the calculated cost savings are approximately 7%. For those with high cost variation, the calculated cost savings are more than 60%.

Integrating funds for health and social care: an evidence review

Objectives Integrated funds for health and social care are one possible way of improving care for people with complex care requirements. If integrated funds facilitate coordinated care, this could support improvements in patient experience, and health and social care outcomes, reduce avoidable hospital admissions and delayed discharges, and so reduce costs. In this article, we examine whether this potential has been realized in practice. Methods We propose a framework based on agency theory for understanding the role that integrated funding can play in promoting coordinated care, and review the evidence to see whether the expected effects are realized in practice. We searched eight electronic databases and relevant websites, and checked reference lists of reviews and empirical studies. We extracted data on the types of funding integration used by schemes, their benefits and costs (including unintended effects), and the barriers to implementation. We interpreted our findings with reference to our framework. Results The review included 38 schemes from eight countries. Most of the randomized evidence came from Australia, with nonrandomized comparative evidence available from Australia, Canada, England, Sweden and the US. None of the comparative evidence isolated the effect of integrated funding; instead, studies assessed the effects of ‘integrated financing plus integrated care’ (i.e. ‘integration’) relative to usual care. Most schemes (24/38) assessed health outcomes, of which over half found no significant impact on health. The impact of integration on secondary care costs or use was assessed in 34 schemes. In 11 schemes, integration had no significant effect on secondary care costs or utilisation. Only three schemes reported significantly lower secondary care use compared with usual care. In the remaining 19 schemes, the evidence was mixed or unclear. Some schemes achieved short-term reductions in delayed discharges, but there was anecdotal evidence of unintended consequences such as premature hospital discharge and heightened risk of readmission. No scheme achieved a sustained reduction in hospital use. The primary barrier was the difficulty of implementing financial integration, despite the existence of statutory and regulatory support. Even where funds were successfully pooled, budget holders’ control over access to services remained limited. Barriers in the form of differences in performance frameworks, priorities and governance were prominent amongst the UK schemes, whereas difficulties in linking different information systems were more widespread. Despite these barriers, many schemes – including those that failed to improve health or reduce costs – reported that access to care had improved. Some of these schemes revealed substantial levels of unmet need and so total costs increased. Conclusions It is often assumed in policy that integrating funding will promote integrated care, and lead to better health outcomes and lower costs. Both our agency theory-based framework and the evidence indicate that the link is likely to be weak. Integrated care may uncover unmet need. Resolving this can benefit both individuals and society, but total care costs are likely to rise. Provided that integration delivers improvements in quality of life, even with additional costs, it may, nonetheless, offer value for money.

Choice of contracts in the British National Health Service: an empirical study.

Following major reforms of the British National Health Service (NHS) in 1990, the roles of purchasing and providing health services were separated, with the relationship between purchasers and providers governed by contracts. Using a mixed multinomial logit analysis, we show how this policy shift led to a selection of contracts that is consistent with the predictions of a simple model, based on contract theory, in which the characteristics of the health services being purchased and of the contracting parties influence the choice of contract form. The paper thus provides evidence in support of the practical relevance of theory in understanding health care market reform.

Health and Economic Impacts of Antibiotic Resistance in European Hospitals – Outlook on the BURDEN Project

Infections by resistant pathogens cause a financial burden to European hospitals and societies through the exacerbation or prolongation of illness and subsequent in-hospital treatment, with potentially serious health consequences for the infected individual [1, 2]. Increased morbidity and mortality with a long-term impact on working ability, productivity, and family life lead to scarce health care resources being diverted to increased infection control efforts and may result in a loss of confidence in the medical profession and the public health care delivery system [3]. Economists consider the existence of an expected net benefit at the level of the individual as one pre-requisite for collective action [4]. This incentive is often overlooked. Measuring the financial burden of antimicrobial resistance (AMR) also means estimating the possible benefit of avoiding the emergence and spread of resistant bacteria. From this point of view, an estimate of the economic consequences of AMR for hospitals, health care systems, and societies may be looked upon as a first step toward cross-national collective action in addressing the problem of AMR. Most of the existing cost-of-illness studies on AMRrelated infections are limited to a narrow perspective from which an analysis is conducted. This is mainly due to methodological problems associated with the inclusion of cost data, such as the determination of intangible costs or the identification of costs associated with organizational changes [5]. The few exceptions that have attempted to estimate the financial burden of resistance from a countywide perspective refer to the situation in USA [6–9]. In one of these studies – a 1987 review of more than 100 articles on infections with resistant bacteria – the authors concluded that the incidence of death, the likelihood for hospitalization, and the average length of the hospital stay were at least twofold higher for infections with drug-resistant bacteria as for those with drug-susceptible bacteria [6]. Phelps published a study in 1989 in which he described an economic model with the objective of determining the financial impact posed by drug-resistant bacteria. Estimates ranging from US

Monopsony Wage Determination and Multiple Unemployment Equilibria in a Non-Linear Search Model

350 million to US