1) The document discusses competition, integration, and incentives in healthcare systems, comparing approaches in the United States and United Kingdom health reforms. 2) It notes both nations are changing payment mechanisms to give providers more financial responsibility and measure/reward quality, though acceptance of changes is key. 3) The reforms in both countries will provide new information, as there are many unknowns about how to organize and pay for care effectively. Competition can create useful variation to learn from.

1. Alan M. Garber
STANFORD HEALTH POLICY
Center for Primary Care and Outcomes Research/School of Medicine
Center for Health Policy/Freeman Spogli Institute for International Studies
Royal Society of Medicine, London
20 July, 2011

2. I doubt the NHS will be able to deliver on all
these demands and expectations. At least on
the present lines of fiscal policy, there won’t be
enough money. There seems to be little
support for higher taxes and no easy source of
funds elsewhere in the budget to raise health
services spending to the level of other northern
European countries.
Alain Enthoven

3. The challenge health care
poses to the wealthy nations
of the world

6. The search for efficiency:
three key components
Competition: Accomplish allocative efficiency
with markets or alternatives
Integration: Gain economies of scope and
often scale
Incentives: Getting them right is necessary to
achieve internal and external efficiencies under
imperfect information

7. Equity and Excellence:
Liberating the NHS
Promote competition and choice
Raise quality
Eliminate layers of bureaucracy
Empower physicians (ie GPs)
Integrate services
Health and Social Care Bill introduced in
January of 2011

8. From Nuffield Trust, Snapshot Survey of Health Leaders on the Government’s NHS
Reforms, March 2011

10. Competition and integration
for greater efficiency
“…competition has often been interpreted as
the opposite of integrated services. However, it
is possible to have responsive, joined-up
services working in patients’ interests and
competing for their choice, and this is what we
are seeking to achieve.”
Section 5.3, Government response to the NHS future forum report

11. Competition
What is the definition of product or service, and
therefore market?
Levels of potential competition in NHS
Commissioning
GP services
Specialist services
Hospital services
Community services
Integrated services

12. “Competition” does not
always increase choice
Inadequate demand for some choices
Economies of scale

13. Welfare loss from monopoly
usually results from
increased prices

14. When more choice isn’t: Any
Willing Provider in U.S.

15. Is competition good?
Under idealized conditions, competitive markets lead to a
powerful form of optimality
But effects on quality are generally indeterminate
Literature: mixed results, but good studies suggest that
competitive pressures lead to better health outcomes
Competition brings political risk

16. The role of integration
Integration widely believed to be crucial to
good care
Evidence base heavily tilted toward specific
coordinated care programs
Rand Health Insurance Experiment: capitation
prevents hospitalization. Does result
generalize?

17. Integration requires scope
and may require scale
Can we tolerate the loss of competition?
Geographic limits on commissioning groups
limit competition

18. Pricing in an integrated
system is challenging

19. Incentives
Physician, commissioners as agents
Desire to increase quality
PbR, QOF designed to increase efficiency and
quality of care
“Tariffs based on best clinical practice”
(Government response, section 3.82)

20. Performance-based incentives
in medicine have had mixed
success

21. Premier Hospital Quality
Incentive Demonstration
Begun in 2003
Combined financial rewards and public
reporting
2% premium for achieving top decile, 1% for 2nd
decile
(Process) quality improvements maintained for
about first 4 years

22. Quality and Outcomes
Framework
Sizable incentives for GPs
Targets attained rapidly

23. Paying for performance The UK context
The Quality and Outcomes Framework The Framework
US programmes Quality of care under the QOF
Results for Years 1-6
Points scored and remuneration
100% $40,000
90%
$35,000
Percentage of total points scored
80%
$30,000
70%
$25,000
Remuneration
60%
50% $20,000 Income
40% Points
$15,000
30%
$10,000
20%
10% $5,000
0% $0
2004/5 2005/6 2006/7 2007/8 2008/9 2009/10
From Tim Doran, NHS Information Centre (www.qof.ic.nhs.uk) Paying Physicians for Quality

24. High performance
organizations use a mix of
incentives

25. Competition, integration,
and incentives: US and UK
approaches to health reform
Goal is better health, not simply more health
services
Give physicians and hospitals more financial
responsibility
Measure and reward quality

26. Competition
In US, competition among health insurers and
among providers
In UK, competition among providers and
limited competition among commissioners
Extensive regulatory controls in both nations
Challenges of setting prices

27. Integration
US: bundled payments and incentives for
creating integrated provider organizations
(ACOs)
UK: some change in payment, change in
commissioner organization

28. Incentives
Both nations are changing payment mechanisms
– do they go far enough?
Provider acceptance key to changes in payment

29. What the reforms can tell us
Many unknowns about how to organize and pay
for care – the reforms in both nations will lead
to new information
Competition creates variation – we must learn
from it

30. Thank you
To the many people who generously gave of
their time and thoughts about the NHS and
NICE, and especially Jennifer Dixon and her
colleagues at Nuffield Trust