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Social Entrepreneurialism and Regulation in the European

Hospital Sector

Richard B. SaltmanProfessor of Health Policy and ManagementEmory UniversityAtlanta

Research DirectorEuropean Observatory on Health Care SystemsMadrid

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Taking Stock I: Western Europe

-15 years since Dekker Reportin Netherlands (1987)

-13 years since “Working for Patients”in UK (1989)

-12 years since “Nitiotals Programmet”in Sweden (1990)

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Taking Stock II: Eastern Europe

- 14 years since “Leningrad Experiment” in Russia (1988)

- 12 years since Polish “Bismarck Proposal” (1990)

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Re-visiting Issues of Entrepreneurialism and Regulation:

I. Definitions

II. Current Experiences

III. Future Challenges

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Definitions I: Entrepreneurialism

“shifts economic resources out of an area of lower and into an area of higher productivity and greater yield”

- J.B. Say, circa 1800

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Definition II: Entrepreneurialism

Entrepreneurs:

- Buy and sell commodities

- Are for-profit

- Goal: personal wealth

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Definitions III: Social Entrepreneurialism

“combines the passion of a social mission with the image of business-like discipline,

innovation and determination”

A.R. Hunt,Wall Street Journal,13 July 2000

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Definitions IV:Social Entrepreneurialism

Social Entrepreneurs:

-Deal in social goods

-Are not-for-profit or publicly owned

-Goal: improved service to community

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Definitions V: Regulation

Regulation is a means to achieve a

desired objective rather than an

end in itself

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Definitions VI: Regulation – Social Objectives

Table 1.1 Social and economic policy objectives

• Equity and justice: to provide equitable and needs-based access to health care for the whole population, including poor, rural, elderly, disabled and other vulnerable groups

• Social cohesion: to provide health care through a national health care service or to install a social health insurance system

• Economic efficiency: to contain aggregate health expenditures within financially sustainable boundaries

• Health and safety: to protect workers, to ensure water safety and to monitor food hygiene

• Informed and educated citizens: to educate citizens about clinical services, pharmaceuticals and healthy behaviour

• Individual choice: to ensure choice of provider, and in some cases insurer, as possible within the limits of the other objectives

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Definitions VII: Regulation – Management Objectives

Table1.2 Health sector management mechanisms

• Regulating quality and effectiveness: assessing cost–effectiveness of clinical interventions; training health professionals; accrediting providers

• Regulating patient access: gate-keeping; co-payments; general practitioner lists; rules for subscriber choice among third-party payers; tax policy; tax subsidies

• Regulating provider behaviour: transforming hospitals into public firms; regulating capital borrowing by hospitals; rationalizing hospital and primary care/home care interactions

• Regulating payers: setting rules for contracting; constructing planned markets for hospital services; developing prices for public-sector health care ser vices; introducing case-based provider payment systems (e.g. drug related groups); regulating reserve requirements and capital investment patterns of private insu rance companies; retrospective risk-based adjustment of sickness fund revenues

• Regulating pharmaceuticals: generic substitution; reference prices; profit controls; basket-based pricing; positive and negative lists

• Regulating physicians: setting salary/reimbursement levels; licensing requirements; setting malpractice insurance coverage

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II. Current Experience in European Hospital

Sector

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Current Experience I:

• Public-private mix

• Purchaser – provider split

• Autonomous management

• Patient choice

Key Issues:

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Current Experience II: Public-Private Mix

State Public-but- Not-for-profit For-profitnot-State voluntary

“directly - public firms - religious/ - small clinics

managed - self-governing charitable (France; Germany)

units” (UK) trusts

- municipal/ - community/ - large corporate

county NGO chains (USA)

(budgetary) (autonomized)

(corporatized)

Public Private

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Current Experience III:Public-but-not-State: Major Growth

• England: self-governing trusts (all hospitals) foundation hospitals

• Sweden: public firms (Stockholm County) (Skåne County)

• Norway: public firms (all hospitals) (State recentralization, then re-

organization)

• Italy: trusts (100 hospitals)

• Spain: “public entity under private law” “public health care foundation” “consortium” “entity of public law”

• Portugal: “public firms”

(Social entrepreneurialism)

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Current Experience IV:Not-for-profit/Voluntary: Stasis

Social Health Insurance Countries

(most hospitals)

(statutory responsibilities)

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Current Experience V:For-profit hospitals: Minimal/Stasis

(entrepreneurialism)(no privatization)

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Current Experience VI:

• Major shrinkage in number of State “directly managed” hospitals

• Minimal/No growth in For-profit “entrepreneurial” hospitals

• Major growth in Public-but-not-State “social entrepreneurial” hospitals

Re: Entrepreneurialism in European Hospitals

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Current Experience II: Public-Private Mix

State Public-but- Not-for-profit For-profitnot-State voluntary

“directly - public firms - religious/ - small clinicsmanaged - self-governing charitable (France; Germany)units” (UK) trusts - municipal/ - community/ - large corporate

county NGO chains (USA)(budgetary) (autonomized) (corporatized)

Public Private

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Regulation I: Two Regulatory Baselines

A) “Normal” Industrial Regulation:- environmental (low-level nuclear waste)

- employment (pension law; minimum wage)

- legal (contract law; privacy rights; EU purchasing rules)

- professional (licensure)

- financial (operating reserves for insurance

functions; loan requirements)

- occupational (storing toxic substances;

accident reduction measures)

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Regulation II: B) Continuum of State Power

Degrees of State Authority and Supervision

Entities with full state ownership as part of the healthsector hierarchy

Entities with full state ownership but manageriallyindependent

Private not-for-profit entities with statutory responsibilities

Private not-for-profit entities without statutory responsibilities

Private for-profit providers with continuous service relationships with tax-funded and/or statutory social health insurance payers

Private for-profit companiesweaker

Com

mand and

Control

Steer and C

hannel Regulation

Stronger

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• Insert transparency 23 here

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• Insert transparency 24 here

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Regulation IV: Regulating Hospital Sector

New regulations for growing “public-but-not-state” category:

- evolving

- “learning by doing”

(UK; Sweden)

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Regulation V: Rules of the Regulatory Road

Regulate strategically • Regulation is part of strategic planning• Regulation is a means rather than an end• Regulation should further core social and economic policy

objectives• Regulation is long-term not short-term

Regulate complexly• Regulation involves multiple issues simultaneously• Regulation can combine mechanisms from competing disciplines• Regulation requires an integrated approach that coordinates multiple

mechanisms• Regulation should fit contingencies of each health system• Regulation requires flexible public management

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Continuation: Rules of the regulatory road

No deregulation without re-regulation

• Deregulation requires a new set of regulatory rules

• Re-regulate before you deregulate

Trust but verify• Regulation requires systematic monitoring and enforcement

• Self-regulation requires systematic external monitoring and enforcement