In this slideshow, Professor Carolyn Hughes Tuohy, School of Public Policy and Governance, University of Toronto, outlines the concept of the institutional entrepeneur, particularly in UK, Dutch and US contexts of health reform. Professor Tuohy presented at the Nuffield Trust seminar: Sharing international experience: The institutional entrepeneur – a new force in health policy in July 2012.

1. The Institutional Entrepreneur – a New Force
in Health Policy?
Carolyn Hughes Tuohy, PhD, FRSC
Nuffield Trust, September 19, 2012
1

2. Entrepreneurs in Private and Public
Sectors
 entrepreneurs identify opportunities to recombine
existing resources to create new value for some set
of consumers.
 business entrepreneurs: combine capital, labour, technology
in private sector; seek financial profit
 public/political/policy entrepreneurs: link problem
definitions, policy remedies, political support to produce
innovations in policy design; seek to augment political capital

3. The Concept of the Institutional
Entrepreneur
 Institutional entrepreneurs combine resources and
power bases across the public and private sectors.
 In health care, the principal bases of power are state
authority, private capital and professional expertise
 Institutional entrepreneurs combine authority (public
mandates) with private capital and/or professional expertise
 May operate from a principal base in any one of the three
bases

4. Policy entrepreneurs vs institutional
entrepreneurs
 Policy entrepreneurs link problems with “solutions” in
politically saleable ways to make changes in policy
frameworks (the rules of the game)
 Institutional entrepreneurs (IEs) link public
mandates with private-sector resources to create
hybrid public-private arrangements
 Policy entrepreneurs and IEs may (or may not) act in
complementary ways
 The activity of IEs can drive reforms in
unanticipated directions

5. Institutional entrepreneurs vs business
entrepreneurs
 Institutional entrepreneurs (IEs) act in lieu of the
state in some matters – i.e. are “ordained” with public
mandates
 Business entrepreneurs may contract with
government for certain deliverables, but they do not
exercise state authority

6. A British example: the road from GP
fund-holding to CCGs
 Fundholding introduced as relatively minor aspect of
1990s internal market reforms – at initiative of
“policy entrepreneurs” (Maynard, Clarke)
 Combined public mandate (purchasing) with
professional expertise
 Seized upon by entrepreneurial GPs; became popular
beyond expectations (>50% by 1997)
 Multiple models of GP commissioning – multifunds,
TPP, etc.

7. Political ramifications
 Fundholding galvanized opposition to “two-tier”
medicine among non-FH GPs who pursued “locality
commissioning” relationship with HAs
 Both groups established political associations (now
NHS Alliance and NAPC) and links with politicians
 Milburn and universalization of locality commissioning
through PCT/PEC model
 Return to “fundholding” with PBC
 Lansley and GP consortia

8. Political ramifications
 Clinical Commissioning Coalition supports Health and
Social Care legislation
 IEs took GP commissioning from margins to centre of
policy framework
 But, perhaps ironically, not involved in detail of
design or broader architecture

9. Institutional entrepreneurs in
health care reform: other nations

10. The Dutch Case
 20-year reform process moved from bifurcation of
social insurers and private insurers to “universal
managed competition”
 Sparked by Lubbers government, influenced by
Enthoven’s ideas
 First wave “liberated” social insurers from regional
monopolies to compete nationally

11. The Dutch Case
 Entrepreneurs took advantage of unique mixes of
public resources (including publicly-mandated social
insurance contributions) and private capital
 distinction between sickness funds and private
insurers blurred
 some not-for-profit sickness funds drawn into broader
holding companies with private insurers and other for-profit
entities
 private insurers established sickness funds as divisions
 complex corporate structures

12. The Dutch Case – Unanticipated
Consequences (1)
 As risk-adjustment mechanisms were being
developed, insurers were buffered against loss by
government subsidies
 But opportunities for profit also very limited by regulation.
 Entrepreneurial activity aimed at increasing market share –
led to increased market concentration
 Number of sickness funds: 53 in 1985, 26 by 1993, 22 by
2003; Four large corporate umbrellas accounted for almost
90 percent of the market by 2009
 increased market power of insurers vis-à-vis providers:
especially re price in deregulated segment

13. The Dutch Case – Unanticipated
Consequences (2)
 Investments in information technology by insurers
created an enhanced potential for risk selection on
the basis of morbidity.
 But also allowed regulators to respond by incorporating
measures of morbidity into their risk adjustment formulae
 These developments “softened up” the ground for
final round of reform in 2006
 Erosion of social/private distinction
 market actors (including consumers) became accustomed to
the new landscape.

14. The US case
 An early example: HMOs in the 1970s:
 Legislation mandated demand
 But business entrepreneurs successfully lobbied for
progressive dilution of HMO advantage
 Current example: health insurance exchanges:
 at the heart of the failed Clinton reform initiative of 1993:
regional health alliances, with employer “play or pay”
mandates
 Other models developed at state level; taken up as
centrepiece of the Affordable Care Act of 2010

15. Health insurance exchanges: market
players grounded in public authority
 1990s: Attempts in numerous states to develop
pooled purchasing arrangements for the small-group
market
 e.g. California – began as state agency, later privatized,
closed.
 All failed to achieve critical mass without employer or
individual mandates
 2000s: Massachusetts and Utah “bookends:”
 MA: individual mandate, public subsidy
 UT: employer-based defined contribution model; employees
then select among competing plans, bearing any cost above
the employer contribution

16. Massachusetts Health Connector
 Market player whose power derives from mandated
demand plus public subsidy
 quasi-public agency: start-up public funding, then entirely
financed from premium surcharges
 First executive director recruited from HMO (past
connection to BCBS), second executive director moved from
Governor’s office
 operates two exchanges: for subsidized and non-
subsidized clients)
 focused on simplifying and streamlining choices;
includes products from all major health plans in state

17. Massachusetts Health Connector - impact
 Product: innovative web portal
 98% MA residents now insured.
 Needs to attract non-subsidized clients (individuals
and small businesses) to validate model

18. Utah Health Exchange
 public agency within a branch of the Governor’s
Office
 limited authority: reliant on insurer cooperation
 Four of five major insurers participated, cooperated
on risk-adjustment mechanism
 Launched as a pilot project with innovative web
portal in 2009
 rolled out under somewhat strengthened rules in
2011

19. Utah Health Exchange - impact
 Product: innovative portal and risk selection process
 Little impact on uninsurance:
 300,000 individuals without insurance prior to establishment
 Exchange involved 300 employers with about 6500 covered
lives by June 2012

20. US Health Reform at the Federal Level
 Massachusetts as model for Affordable Care Act
2010:
 Increased regulation of employer-based insurance
 State-level health insurance exchanges
 Medicaid expansion
 Key actors from Massachusetts closely involved
 Utah became Republican foil

21. US Health Reform at the Federal Level
 By July 2012, 11 additional states had enacted
legislation to establish exchanges.
 10 under solid Democratic control of the legislature and
governorship
 In two more states, Democratic or Independent governors
issued Executive Orders to establish exchanges after
legislation failed.
 Wide variation anticipated across states
 Federal government will operate exchanges in some
states by default

22. Institutional entrepreneurs in
health care reform:
an explanatory framework

23. Institutional entrepreneurs thrive in
heterogeneous contexts
 resources are “loosely coupled” enough to be
recombined in more productive uses.- cf Ostrom’s
“polycentricity.”
 policy frameworks vary in the extent to which they
provide structural sites in which resources are
loosely coupled enough to allow for recombination.
 “market-oriented” reforms provide fertile ground
 Those sites in turn differ in the power bases from
which they make it possible for entrepreneurs to
emerge:
 state authority, private capital, professional expertise, etc.

24. Content of Policy Reform and Sites of Institutional
Entrepreneurialism
Britain Netherlands US
Managed
Managed
Purchaser-provider competition/universal
Content of competition/universal
split replacing mandate replacing
reform mandate grafted onto
hierarchy social/private
mixed system
insurance
Site of
Health insurance
entrepreneur- Fundholding Insurer competition
exchanges
ialism
Institutional
GPs Sickness funds State actors
entrepreneurs
Functional role of
Purchaser Underwriter, purchaser Broker, regulator
IE
Authority: State
Base of IE power Clinical expertise Authority: State position
mandate
Scope of IE
State mandate Private revenue/capital Private revenue
power

25. Institutional entrepreneurs exploit
uncertainty
 Entrepreneurs make bets on an uncertain future: profit
(or lose) from the difference between the value of the
resources they invest at time T and the value of the
product of those resources at time T+n.
 i.e. they gamble that their predictions are more
accurate than those of competitors.
 Institutional entrepreneurs need to bet on conditions in
both private and public sectors - i.e. political
uncertainty is added to the mix

26. Institutional entrepreneurs exploit
uncertainty
 Uncertainty is heightened in episodes of major reform:
timing and nature of uncertainty depends on political
strategy of reform:
 scale and pace attempted:
 Big-bangs: large scale, fast pace
 Blueprints: large scale, slow pace
 Mosaics: small scale, fast pace
 Increments: small scale, slow pace

27. Strategy of Policy Reform and Opportunities for Institutional
Entrepreneurialism
Britain Netherlands US
Strategy of
big-bang -> cycling -> mosaic blueprint mosaic
reform
Big-bang: tight window for large-
scale change
Extended period for Tight window for
Duration of Cycling: extended window for
enactment of reform multiple deals; longer for
uncertainty small-scale change
in phases implementation
Mosaic: Tight window for multiple
deals; longer for implementation
Big-bang: Policy design, duration of
political support
Type of Degree of political
Cycling: political receptivity Policy design
uncertainty support, policy design
Mosaic: Degree of political
support, policy design

28. Britain – Big bang internal market
reforms
 political leadership solidified quickly among early-
mover entrepreneurs; stayed stable through a period
of policy cycling until the next episode of major
change.
 most apparent in the case of GP fundholding: early movers
who “believed in a market” for fundholders rapidly adopted
and adapted the model
 different sub-set of GPs who objected to fundholding on
ideological grounds moved quickly to develop and promote
a competing model. .

29. Britain – Cycling under Labour
 Incremental change through centralist and
decentralist cycles
 For a time, GP entrepreneurs seemed to lose their
bets on the future: GP commissioning eclipsed by
Primary Care Trusts during centralist policy cycle
after 1997.
 But when the cycle turned again to attention to the
need for clinical expertise in the making of
purchasing decisions, entrepreneurial GPs found
another foothold in PBC.

30. Britain: the Coalition Mosaic
 Coalition reforms built on some Labour reforms,
discarded others – rebranding, consolidation and
acceleration
 GP commissioning as centrepiece, but politically
contested
 NHS Alliance and NAPC not involved in drafting - – product
of coalition “mosaic” of multiple compromises under time
pressure
 Clinical Commissioning Coalition mobilized in
support

31. Britain: the Coalition Mosaic
Implementation
 Compromise required extended implementation
timeframe
 PBC provided nuclei for “pathfinder” commissioning
groups created in anticipation of the passage of 2012
legislation.

32. The Dutch Blueprint
 measured pace of “blueprint” strategy allowed for
development of entrepreneurial talent among social
insurers, gradually phasing in the transfer of risk
 stalling of reforms in early stages created political
uncertainty re whether social and private insurance would
ultimately be merged
 principal institutional entrepreneurs were the largest social
insurers, who worked from the base of their public
mandates to act increasingly as businesspeople pursuing
market share.
 Created technological infrastructure to support
reforms

33. US (Massachusetts) Mosaic
 MA: incrementalism accelerated under shadow of
threatened loss of federal Medicaid funding
 Multiple compromises in bipartisan environment
 Key roles for policy entrepreneurs
 Multiple uncertainties re market responses
 Institutional entrepreneurs took the concept to
market

34. US (federal) Mosaic
 Historically: “bifurcated” welfare state confined
entrepreneurialism to the private sector; state
actors played classic regulatory and program
management roles
 2009: Like Coalition government in the UK,
Democratic reformers adopted a “mosaic” strategy:
multiple adjustments to the established system –
including MA experiment.
 compromises included delays in implementation of a number
of key features of the reform, including the state-level
exchanges

35. US (federal) Mosaic
 Despite enactment of ACA in 2010, continued
political uncertainty
 First state actors to respond had highest stakes in success
of exchange model – the political leaders of states in
Democratic control.
 ACA allows for a range of interpretation in
implementation
 considerable variety among states: different models of
corporate structure, composition of the governing boards,
etc.
 Significant new political and economis actors

36. Institutional Entrepreneurialism:
Implications
 Shift in instruments:
 England and NL:↑ use of exchange-type, market
instruments: puts professional resources and
private finance at risk
 US: ↑ use of state authority, but as market player
 Shift in balance of power – to private finance; or
increased state regulation??

37. Summary
 Institutional entrepreneurs (IEs) combine public
mandates with a power base in the private sector.
 Facilitated by certain policy designs and strategies of
reform
 bases from which institutional entrepreneurs emerge
depends on policy design
 IEs then affect the course of policy change
 The impact of IEs depends on political strategy of
reform: the scale and pace of change attempted
 The growing importance of IEs raises new challenges
of accountability