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Part ITI
Managing Care in the
United Kingdom and Canada
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F riority S e1d n g in a
Tic e dab use d S y stc m
Alan Williams
The British beaMb care system is of prickly interest because ~ teas,
Tom Us inception iD 1948, sought to reconcUe widespread access to beaRb
cage wi1b ~ tight, centraHy controlled budget Before considering bow weH
or iD ~ teas performed in that respect ceded key Azures need lo be home
. · .
ID mlDO:
1. The N~iona1 Heabb Service (NBS) is commuted to providing care
according to need, Dot according to wilUngness or acuity to pay. It Cows
within ~ strong, but iU-deOned, eg~it~ian ideology.
2. The NBS provides Tout go percent of aH beaMb cage far Bdtisb
citizens; the phv~e sector concentrates mainly on providing elective sur-
gery for those who wish to avoid NBS mating lists and for those Boo Tab
to improve on 1be general level of hospital amenides. Pdv~e treatment is
provided in large paw by doctors Boo spend most of tube time in the OHS.
3. The NHS teas a centraHy determined, 1~-ADanced, heed annual
budget, ~bicb is disidbuted geogr~bicaMy 10 regional (=d distinct) beabb
~tbobties. Dis~ibudon Chows ~ formula based mosUy on (weigbted)
population but to some extent also on geogr~bic visions in depdv~ion
and mo~idity/monabty rues. These beabb ~tbobties Be responsible far
the provision of ~1 the beabb cage in tube Lea and for coor~naUng the
provision of do~cHi~y support services limb local ~tbobties (see below).
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so
ALAN WILLIAMS
4. The total NHS budget is approximately 6 percent of the gross na-
tional product (GNP), of which approximately 60 percent is spent on hospi-
tal services. Local authorities, who are formally outside this centrally tax-
financed system, provide many health-related services for the domiciliary
support of ill and disabled people (services that are very important in the
care of the elderly and certain other vulnerable groups).
5. Apart from accidents and emergencies, the patient's first point of
contact is always with the general practitioner (GP), who acts as the "gate-
keeper" for the system. Every patient is registered with a GP (in principle
if not in practice). Under the NHS system, there are small charges for
primary care prescriptions, somewhat larger charges for dental and oph-
thalmic services, and no charges for hospital care. Thus, billing is totally
absent, which significantly reduces both the system's administrative over-
head and its knowledge of how much things cost. NHS hospital doctors are
salaried employees, and GPs are independent contractors. most of whoop.
_ _ 1 _ ~ _ ~ . . ~ · . ~ _ .
salaries come from capitation fees paid for the patients registered with them.
Fee-for-service charges are rare; they are used only when it is desirable to
encourage specific activities (such as home visits or night calls).
6. Political support for this system is strong among the public and
among health care providers. The system, however, is widely believed to
be underfunded and forced to make painful decisions that it is thought could
be avoided if funding could be increased.
PROBLEMS OF THE BRITISH HEALTH CARE SYSTEM
It will be obvious from the above that the British health care system has
no problem with cost containment, if by that is meant controlling total
costs. Instead, two other issues predominate: (1) is the right amount being
spent on health care? and (2) is good value being received for the money
that is spent? The present state of knowledge about the marginal benefits of
health care spending precludes an accurate answer to the first question. The
second question is more interesting, and most of this paper will be devoted
to addressing it and exploring its ramifications. The broad response of most
observers to this question is that surprisingly good results are achieved,
considering how little is put into the system. Others might argue, this author
among them, that the results are good largely because so little is put in.
Before considering the way the system works, some general observa-
tions are in order about optimization subject to constraints (i.e., about the
discipline of economics). The resources devoted to health care must be
diverted from other valuable uses; therefore, it is not rational to extend
health care provision to the point where all the good that could be done is
being done. The system should stop providing health care when the extra
health benefit to be gained is of approximately the same value as whatever
has been given up to provide the extra resources for health care. This
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PRIORITY SETTING IN A NEEDS-BASED SYSTEM
81
principle demands that health care alternatives be ranked in order of cost-
effectiveness; in a system with a fixed budget, the choosing of which ser-
vices to fund proceeds by starting at the top of the list and working down it
until the point in this priority ordering at which the money runs out. Once
the system's budget level is set, the optimization problem is one of estab-
lishing (and implementing) priorities in cost-effectiveness terms.
It is here that this paper's first background point becomes crucial. In a
private health care system that seeks profitability (or at least to break even),
optimization requires that alternatives be subjected to financial appraisal-
that is, to systematic analysis of the revenue and expenditure implications
of each alternative. The precise pattern of the rationing that ensues will be
the result of (somebody's) willingness and ability to meet (at least) the
estimated expenditures. Here, the "somebody" may be an individual, an
insurer, a charity or foundation, or a public agency, and they may or may
not be in a position to judge the likely effectiveness of treatment when
deciding how much to pay. In fact, the multiplicity of actors in this system
is likely to lead to great variability in such judgments. But in a public
system that has explicitly rejected willingness and ability to pay as a ration-
ing device, and that has its revenue fixed according to the population for
which it is responsible (rather than according to what it does for them),
optimization needs to be informed by economic appraisal. That is, it should
be guided by systematic analysis of the benefit and cost implications of
alternatives; rationing thus will be guided by (somebody's) assessment of a
person's ability to benefit (i.e., by "need" for treatment) in relation to the
costs (which will be borne by the citizenry at large). In practice, these
economic appraisals have unfortunately limited their consideration of cost
implications to the implications for the NHS budget (because that is the
constraint uppermost in people's minds), and in practice, the "somebody"
who assesses need, at both the clinical and community levels, has for the
most part been a doctor. To do this job properly, doctors should know not
only about the effectiveness (in outcome terms) of the treatments at their
disposal, and how their patients value these various outcomes, but also
about the benefits of all the other treatments the system provides for other
patients, and how benefits to one patient are to be weighed against benefits
to another. Needless to say, no one has this information, but doctors be-
lieve that because of their clinical experience they are best placed to fill the
void. Consequently, it has been their priorities that have driven the system
(with little regard to costs). Concern about costs has been left to the man-
agers in the health authorities or in the hospitals, who, because they had
little or no influence over (or even knowledge about) the priorities that were
being applied by doctors in the use of the system's capacity, found themselves
having to make rather arbitrary decisions about increasing or decreasing that
capacity, in order to balance their predetermined (fixed) budgets.
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ALAN WILLIAMS
The gatekeeper role mentioned in point number 5 at the beginning of
this chapter requires the GP to be the initial "needs-assessor" (once the
patient has decided that he or she "needs" to see a doctor, i.e., that he or she
might benefit from such an encounter). If the GP refers the patient to a
hospital doctor, a second needs assessment takes place, and at this point an
important conflict of interest manifests itself. Can the doctor simultaneous-
ly act as the patient's agent and the system's agent? Or, to put the point
differently, should the doctor be expected to mediate the conflict between
the interests of the citizen-as-taxpayer (in keeping costs down) and the
interests of the citizen-as-patient (in getting the best possible "free" care)?
Can he or she do so evenhandedly, when the citizen-as-patient is sitting
there and the citizen-as-taxpayer is vicariously represented only by a busy,
somewhat remote manager who is rather detached from the pressures of
clinical work and probably located in a different building? Although the
majority of British doctors seem comfortable with this role most of the
time, every now and again a protest is heard; occasionally, a doctor asserts
that it is his role to do everything he can for the patient in front of him, no
matter what the cost, and that that is what he proposes to do, because for
him to do anything else would be unethical.
A brief excursion into medical ethics seems called for here. Put suc-
cinctly, medical ethics require a doctor to do no harm, to preserve life, to
alleviate suffering, to respect the autonomy of the patient, to tell the truth,
and to deal fairly with patients. It is accepted that these principles often
conflict and that one of the skills required of doctors is to exercise appropri-
ate judgment as to where to strike a compromise between them in any
particular clinical situation. The injunction to deal fairly with patients
differs from the others in that it requires a comparison to be made between
what is done for one person and what is done for another. In a regime of
fixed budgets, to offer a treatment to one person, regardless of the cost of
that treatment, implies that no account is to be paid to the inescapable
consequence that some other patients will be denied treatment, and that
those sacrifices by others will be commensurate with the costs that are
being disregarded. This approach is not consistent with "dealing fairly"
with patients, which, at the very least, requires that the needs of other
potential patients be weighed in the balance of treatment decisions. Thus,
the argument that it is unethical for doctors to play the gatekeeper role is
untenable (which is not to deny that the role might actually be played in an
unethical way by some doctors).
Let us return to the main theme, however, which is the setting of prior-
ities in a needs-driven system. As will be evident from the foregoing, need
is defined as the capacity to benefit (people cannot need something that is
of no benefit to them). But the capacity to benefit from any health care
activity varies (among treatments, among patients, and even among practi
~ _1_. 1 rat, r
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PRIORITY SE1TINGINA NEEDS-BASED SYSTEM
83
tioners) and might be so small in relation to its costs as not to be worth
providing. In other words, needs must be prioritized, and some will, inevi-
tably and quite properly, remain unmet. Thus, if the people on waiting lists
are those whose capacity to benefit from treatment is smaller than those
who are not kept waiting, this constitutes evidence that the system is work-
ing rationally (not that it has failed nor that it needs more money, for even
with more money there would still be marginal cases on waiting lists). A
more legitimate cause for concern would arise if those on waiting lists
would benefit more from early treatment than many of the people who were
not being forced to wait. The general point remains, however: the mere
existence of waiting lists, or their size, or even the length of the wait, is not
important. What is important is the size of the benefits that are being
denied to those who are waiting, compared with what other people are
receiving that is, a comparison of needs.
It is necessary to determine how benefits are to be measured in a need-
driven system. The first factor to keep in mind is that what people want is
not treatment per se but improved health. Improved health means the ex-
tension of one's life expectancy or a better quality of life, or both. Because
each is valued, people may be willing to trade off one against the other.
Health-related quality of life is judged by examining such characteristics as
mobility, self-care, pain, distress, and ability to perform normal, accus-
tomed social (including work) roles. Measuring the benefits of treatment
requires estimates of the effect of treatment on these various characteristics
of health, which, in principle, are encapsulated in the concept of the quali-
ty-adjusted life year (or QALY). Yet disappointingly little is known in
these terms about the health benefits to be derived from most treatment for
most people. So at the very heart of the priority-setting process is a great
information void, which renders the system vulnerable to priority setting by
less appropriate means. The recent discovery and promotion of outcomes
research is a belated response to this information void.
THE "REFORMED" BRITISH EIEALTH CARE SYSTEM
On All Fools Day 1991, the reforms of the NHS that had been instituted
by the Thatcher government went into effect. Their principal feature is the
separation of the demand side of the market for health care from the supply
side. On the supply side (the providers) are the hospitals, the primary care
doctors, and the community services. On the demand side (the purchasers)
are the health authorities and those GPs who have been permitted to become
budget-holders.) There are some obvious anomalies here, such as the am
iThis means that certain large group practices will receive part of the hospital budget, which
allows their GPs to purchase certain hospital services on behalf of their patients.
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ALAN WILLIAMS
biguous role of primary care doctors and the designation of community
services as providers when they are not really part of the system at all but
are run by local authorities. (Despite recommendations that the government
received to expand and strengthen the community care system, Mrs. Thatch-
er prevaricated in regard to this because she could not agree to any strength-
ening of the role of local government in Britain.) There are also some less
obvious anomalies- for example, certain hospitals (and a few other provid-
ers) enjoy a special status as self-governing trusts, which exempts them
from some of the restrictions (e.g., on pay and conditions of staff, access to
capital, etc.) placed on hospitals that remain within the main NHS system.
Generally, however, the idea is that providers will compete with each other
for contracts drawn up by the purchasers, who will choose the provider that
offers the best deal.
Each purchaser's task is to assess the need of the particular population
for which it is responsible, set performance criteria for potential providers
(which should relate to quality as well as quantity), and evaluate the bids
against policy objectives and budget constraints. Certain services (e.g.,
accident and emergency) must be provided locally, but others (especially
elective surgery) might be "bought in" from hospitals outside the geograph-
ic boundaries of the purchasing health authority.
Clearly, this kind of competition is more viable in large urban areas
than in more sparsely populated areas, and it depends on the providers' not
forming informal cartels. More crucially, however, it depends on the ability
of purchasers to specify the content of contracts in the manner required,
which leads one to the information void mentioned earlier. If need means
capacity to benefit, purchasers must know what is beneficial and what is
not, and just how beneficial the beneficial things are in relation to the costs.
They must also monitor performance in outcome (rather than process) terms,
a task of no small difficulty, given a situation in which even medical audits
directed at technical competence have been voluntary, nonthreatening edu-
cational activities pursued only by enthusiasts who set their own local stan-
dards and operate in a rather informal (and highly secretive) manner. Even
now the official position is that audits are to be strictly professional affairs
in which managers are not to be told anything that might enable them to
identify individuals who are performing poorly. It is likely to take at least a
decade to generate a data base that will enable any of these changes to
operate in a manner that is even passably systematic, and for the first few
years, even with determination and goodwill, the reforms are unlikely to
move beyond the level of ritual.
In the new system, the rationing or priority-setting role is vested firmly
in the purchasers, but to make their chosen priorities effective they will
have to specify the case-mix of each hospital specialty and check on patient
selection criteria and quality of performance. It is not clear quite how this
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PRIORITY SE~ITING IN A NEEDS-BASED SYSTEM
85
is going to happen if the rhetoric surrounding the protection of clinical
freedom and the voluntary and confidential nature of medical audits is to be
taken seriously. Making doctors budget-holders may force them to think in
terms of priorities and cost-effectiveness, but it will not necessarily lead
them to adopt the particular priorities, or notions of effectiveness, held by
the health authorities.
IMPLICATIONS FOR
TECHNOLOGICAL ADVANCE IN MEDICINE
In principle, it is clear that what makes a technological innovation a
technological advance is that it proves to be beneficial in cost-per-QALY
terms. To determine whether an innovation can make such a leap in status,
it should be introduced initially in a controlled manner in which it is used
only in the context of a carefully designed evaluative trial that is conducted
by independent researchers, with full disclosure of data, and financed out-
side the main therapeutic budget of the health service. Only when such a
test has been passed should the innovation move into the armamentarium of
practicing clinicians, and possibly even then only with restrictions on its
use.
But it is necessary here to distinguish between those innovations that
require the use of (expensive) specialized resources, be they drugs, devices,
or people, and those that can easily be accommodated within the existing
resources for everyday clinical activities. In the latter case, there are few
effective sanctions that can be applied at a managerial level to enforce
independent evaluation, and the only early indicator that something differ-
ent is happening may be a change in patient selection, as an interested
clinician seeks more cases on whom to practice the innovation. In the
British system, this is most likely to be noticed if the waiting lists for
certain conditions lengthen because these cases have been squeezed out to
make room for the innovative ones. Health authorities have learned, when
new appointments are made, to monitor as closely as possible the likely
implications of clinicians' research interests.
Even if formal evaluation could be enforced prior to general dissemina-
tion of an innovative practice, there are some obvious disadvantages, main-
ly to do with delay. It may take quite a while to establish rigorously a clear
gain to patients, and even longer to be sure that there are no adverse effects
over the longer term. Given the variety and complexity of manufacturers'
pricing policies, it may not be easy to extrapolate from the cost data in the
trial to the costs that are likely to be faced when the innovation becomes
more widely disseminated. Indeed, if it is known that a particular cost-
effectiveness ratio has been established by purchasers as the cutoff point
between what can be afforded and what cannot, manufacturers may well use
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ALAN WILLIAMS
the results of the trial to price the technology at a level that is as close to
that ratio as possible, even though the true cost of producing it is much
lower. An additional problem common to all trials is that the results ob-
tained by well-disciplined practitioners observing punctiliously the protocol
of a scientific trial may not be replicated when the technology is being used
in the "real world" of clinical practice. Nevertheless, the system does have
to move in the direction of earlier, more formal cost-effectiveness analysis
of emerging new technologies. One sign that this has already been accepted
is the current burgeoning interest of the drug companies in quality of life
measurement and cost-effectiveness analysis. Inevitably, however, their
interest is more strongly motivated by marketing considerations than by a
desire to improve the efficiency of the health care system or to enhance the
methodology of cost-effectiveness analysis, although both of those benefi-
cial side effects may follow incidentally.
The increasing pressure for earlier and more formal economic appraisal
has come from dissatisfaction with the existing situation. Health authorities
see themselves confronting collusive activity among manufacturers, practi-
tioners, and patients, which prevents or delays systematic evaluation and
leads to the weakly controlled dissemination of well-marketed but poorly
evaluated new technologies. Manufacturers encourage and exploit the de-
sire of practitioners to improve their performance by offering something
that helps them resolve some diagnostic, monitoring, or therapeutic difficul-
ty of which they are acutely aware, given the current state of the art of
medical practice in their particular field. In addition to the desire to help
their patients, practitioners are motivated to pursue innovative technologies
by the various professional "perks" associated with them, such as subsi-
dized attendance at professional conferences in sometimes delightful loca-
tions and personal association with published research findings. The pa-
tients themselves can usually be induced to go along with the latest "advance"
(especially if it has also been promoted in the media as the latest technolog-
ical wonder). NHS qualms about the costs of, say, radiological equipment
(which nowadays may include qualms about the associated operating ex-
penses as well as about capital costs) can be overcome by "giving" the
capacity to the service during the experimental phase. Unless it proves to
be positively harmful, the technology becomes incorporated into routine
practice in the experimental sites, and possibly elsewhere. through the in
fluential grapevine of the conference circuit.
~1 ~ALA 1~__1~C _ _,1 ~. 1 ~ . . . .
By the time the stage is
l~i"~ll~U Wll~ll tI1~ ~leal~n au~norlly itself nas to pICK Up the costs, it will have
become politically quite difficult to discontinue it on cost-effectiveness grounds,
especially if the media can show a handful of people who have benefited
dramatically from the innovation. The constraint of its fixed budget has
adc; the DliLlbll bySt~l no~onous~y slow, compared with most countries of
equivalent wealth, in diffusing expensive new technologies throughout the
system. Yet that very system also offers opportunities, by virtue of its
._^,l~ ~ 1~ D~:~l ~3 ~
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PRIORITY SEATING IN A NEEDS-BASED SYSTEM
87
monopsonistic position within the United Kingdom, for guiding this diffu-
sion in a purposeful way. Unfortunately, effective strategies by which to
exploit these opportunities have yet to be developed.
RATIONING HEALTH CARE: IS IT ETHICAL?
This much-asked question is always puzzling because it is so oddly
formulated. If by rationing is meant deciding who is to get something and
who is to go without, then rationing, like death, is unavoidable. No one
asks, is death ethical? Instead, practitioners do (and should) ask, when they
have some influence over the situation, whether it is ethical to allow (or
cause) someone to die in a particular manner at a particular time rather than
in some other manner at some other time. So it should be with rationing.
The appropriate question is whether it is ethical to impose a particular kind
of rationing on a particular community at a particular time, as opposed to
imposing some other kind of rationing on that community at that time.
Before answering this question, it is necessary to examine the particular
ideology that a community wishes to bring to bear on its health care system.
Essentially two such ideologies are relevant in this context, the libertarian
and the egalitarian. In the libertarian view, access to health care is part of
the society's reward system, and as a general rule, people should be able to
use their income and wealth to get more or better health care than their
fellow citizens, should they so wish. In the egalitarian view, access to
health care is every citizen's right (like access to the ballot box or to the
courts of justice), and it ought not to be influenced by income or wealth.
Each of these broad viewpoints is typically associated with a distinctive
configuration of views on personal responsibility, social concern, freedom,
and equality, as set out in Table 6-1.
The ascendancy of either of these broad viewpoints would generate a
distinctive health care system whose characteristics would be very different
from those of a system shaped by the other viewpoint. A system shaped by
the libertarian ideology would establish willingness and ability to pay as the
determinants of access; this kind of access would be best accomplished
through a market-oriented "private" system (provided such markets can be
kept competitive). In an egalitarian system, equal opportunity of access for
those in equal need would be the determining rule, and because this requires
the establishment of a social hierarchy of need independent of who is pay-
ing for the care, it would be best implemented through a system of public
provision of care (provided the system can be kept responsive to social
values and changing economic circumstances). Table 6-2 lists the essential
characteristics of each kind of idealized system. Note that the success
criterion to be applied to the egalitarian system is the level and distribution
of health in the community.
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MORRIS L. BARER AND ROBERT G. EVANS
years to match the growing supply of physicians (Barer and Evans, 1986).
Because these two forms of capital are complementary, this asymmetry
creates continuous political pressure through physician claims of system
underfunding, "shortages," and "waiting lists."
The Canadian centralized process of capital approval, however, has
Because
limited the diffusion of diagnostic and therapeutic technology.
physicians cannot generally receive lump-sum or fee-based funding for cap-
ital acquisitions, much of Canada's high-tech capacity is restricted to public
hospitals. In turn, all hospitals in each province must go through provin-
cial, and often regional, approval processes that provide at least the poten-
tial for rational planning of the acquisition of such equipment. The hospi-
tal- and physician-based pressures to have every conceivable piece of new
equipment at every hospital are similar to those in the United States. But
the diffusion outcomes, the rates of utilization, and the implications for
overall hospital costs are quite different in Canada (Detsky et al., 1983,
1990; Rublee, 1989~.
Even when hospitals manage to raise local funds for a CT (computed
tomography) scanner, for example, the provincial ministry of health is un-
der no obligation to provide the necessary operating funds. In such a case,
the hospital must reallocate monies from within its global operating budget
or raise the operating funds as well. Taking the former route runs the risk
of raising Questions within the mini~trv At how the h^~^it~1 fnllr`A the
~ _ A ~ ~ A ~ ~ ~ ~ ^ ~ ~ = all. t,-~ 1 V ~. Al ~ At 1 ~
necessary --slack In a budget about which it is constantly complaining
---a ~ I- =
Although hospitals are raising money for capital expenditures with increas
ing frequency, such situations remain the exception.
As noted earlier, Canada plays a minor role (on a world scale) in the
development of medical technological capital. Most of it simply arrives at
the border. Canada has not controlled access to new knowledge in fact,
how could it? Instead, in the manner described above, the macro approach
to health care management controls the number of "embodiments" of that
new knowledge in new machinery.
To date, as suggested above, the record
is mixed. How successful Canada has been depends on where one sits, and
on one's perception of the value of more, relative to lesser amounts, of
different types of health care capital. Some American observers find much
to envy in the Canadian approach (Marmor et al., 1990~. Others argue that
the limitations on the availability of new high tech capital in Canada are a
serious drawback to the Canadian system; to support their contention, these
observers point to the alleged flow of Canadians in search of high-tech
interventions south of the border or to long waiting lists for high-tech inter-
ventions. No one suggests that the management process is perfect (Iglehart,
1990~. Every health care system is a dynamic set of solutions to the continu-
ing emergence of a series of connected and complex problems. The choice of
a health care management approach is a choice among alternative sets.
. . ~
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MANAGING CAPITAL, CAPACITY, AND COSTS IN CANADA
111
FROM MACRO- TO MICROMANAGEMENT AND BACK AGAIN?
Largely absent until recently within this macromanaged system has been
micro- or clinical management. Provincial ministries of health generally
have been more or less content to manage overall costs and the allocation of
funds. Although decisions have been made about the availability and loca-
tion of new technology, those decisions have been based more on financial
and political factors than on effectiveness or efficiency evidence. There has
been virtually nothing that looks or feels like "managed care," as it is
understood in the United States.
Whether this is better or worse than other alternatives, and whether
Canada should (as it appears now to be doing) put more energy into micro-
management initiatives (e.g., technology evaluation, continuing competence
programs for physicians), depends on the goals of technology and system
management. New technologies offer a variety of cost and outcome possi-
bilities, but there are few instances in which information on these possibili-
ties is known in advance of application. For the rest, policymakers must
attempt to acquire it after the technologies are put into use, all the while
hoping that they (and the population to which they are accountable) do not
get too badly "burned" while the evidence accumulates. (Of course, in
many cases the evidence never accumulates, but management decisions must
still be made.)
Interventions (including any new approach to clinical diagnosis or ther-
apy) may have one of several effects:
a. reduce health care costs while improving or leaving unaltered the
health status of recipient patients;
b. increase health care costs but produce substantial and unequivocal
improvements in the functional capabilities of recipients;
c. increase health care costs and produce small, positive, often diffi-
cult-to-measure increments in the health status of some segments of the
patient population;l° or
d. whatever their costs, produce no or negative effects on health sta
tus.
Health care managers in any system should welcome all possible occurrences
of type (a) interventions. The management of type (b) technologies can
be assisted by technology evaluation, but care must be taken in generalizing
0Welch has labeled these the "epsilon effects."
1lThe vendors of services, however, are often less supportive; as emphasized earlier, re-
duced costs translate into reduced incomes for some vendors. If these vendors are in a position
to insist that absence of harm be proven to their satisfaction before the new technology is
introduced, type (a) changes may be slow in coming.
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MORRIS L. BARER AND ROBERT G. EVANS
results from one setting to another, let alone across countries. Furthermore,
many evaluations are themselves quite costly.
The primary problems of health care system management do not, how-
ever, come from type (a) and (b) interventions. Most of the micromanage-
ment (and research) efforts are intended to identify and eliminate type (d)
technologies indeed, they have no place in any health care system. The
great danger in this approach is that a single-minded preoccupation with
type (d) interventions may skew the application of management energy out
of all proportion to their relative importance. Category (c) may be more
important quantitatively than the other three categories combined. More-
over, clinical ingenuity and technological progress are likely to ensure a
growing stream of such interventions (Wennberg, 1990~.
Although category (c) interventions produce small benefits for individ-
ual patients, collectively, the high costs of the health gains they offer may
swamp the benefits. Heroic measures for the late-stage Alzheimer's disease
patient come to mind as an example of a situation in which extremely costly
interventions may extend life for a few hours, days, or even weeks (Calla-
han, 1987~. Most people, if they were given the choice at earlier stages in
their lives, would choose a different process for the final stage of life.12
But a person may not have that choice, because new technologies continue
to make more things possible and because they are there they will be used.
The problem with many category (c) interventions is that the ethical
imperatives within the health care sector malice it exceedingly difficult, if
not impossible, to make choices against such "epsilon interventions." Cost-
effectiveness evidence is unlikely to be available to the management pro-
cess, because many of these everyday interventions are not individually
important enough to warrant the use of limited evaluation research resources.
The only practical way to reduce the occurrence of category (c) interven-
tions is to reduce the capital and capacity that makes them possible.
How does Canada manage category (c) and (d) interventions? There
seems to be little doubt that Canada lags behind the United States in identi-
fying category (d) technologies. As noted earlier, the macromanagement
approach has provided few management incentives, and in fact powerful
political disincentives, to look over the clinician's shoulder. Some evi-
dence suggests that Canada has better addressed the epsilon problem within
12There are, in fact, two conceptually distinct issues here. Life extension per se does not
necessarily represent improvement in health status. The person concerned might feel, and
genuinely be, "better off dead." An intervention that appears to belong in category (c) when
measured only by life expectancy may actually fall into class (d). However, even for "authen-
tic" class (c) interventions, the relation of benefit to cost may be such that a representative
individual, looking forward in life, might reasonably judge that he or she would prefer to
forego the possibility of such interventions.
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MANAGING CAPITAL, CAPACITY, AND COSTS IN CANADA
113
the hospital sector than has the United States (Detsky et al., 1983, 1990;
Barer and Evans, 1986; Anderson et al., 1989~. But it may be less success-
ful in other areas- for example, by providing more physician services for
and institutional care of the elderly. As for high-technology diagnostic
equipment, Canada's approach of "controlled technological diffusion" has.
at least in relation to the United States, controlled technological diffusion.
The jury is still out, however, on whether this has made Canadians better or
worse off than their better-endowed American neighbors (Evans et al., 1991~.
The American managed care approach to category (d) interventions is
able to muster political and financial support because it is identifying and
promoting the elimination of unequivocally "bad buys." In comparison, the
Canadian macromanagement approach may be coming under increasing po-
litical pressure as the social consensus on which it rests is threatened by the
asymmetry of information dissemination to the public. Much of what Cana-
dian patients (like their American counterparts) learn about the possible
benefits of interventions comes from their vendors, for whom doing better
means doing more. The predictable result is a growing public perception of
an underfunded health care system, bled white by continual financial cut-
backs.
There is no informational counterpart to the provincial financial and
managerial roles. Provincial ministries of health are loath to become in-
volved in an organized effort to counter the claims of vendors because they
fear that they cannot possibly succeed-that they will be perceived as sim-
ply projecting a message consistent with their responsibility to control costs,
without much regard for outcomes. The research and policy analysis com-
munity, which might be expected to assume this role, is too small and, more
fundamentally, with few exceptions does not yet see this as a legitimate or
appropriate task (Lomas, 1990~.
At the same time, the number of "promotional" voices continues to
grow far more rapidly than the population, and more rapidly than the real
rate of economic growth of the country. Canada, as has been mentioned,
has done little to manage its human health capital in a manner consistent
with its approach to health care system management. Continued tight con-
trol over hospital capacity and over medical care budgets, in the face of a
rapidly expanding physician supply, offers very few possible outcomes.
That of "loosening the public purse strings" seems unlikely and, on current
evidence, unjustifiable. That of forcing physician incomes down, perhaps
precipitously, would be politically hazardous, and not necessarily fair to the
large majority of the profession. Yet those are the two stark options. They
ensure a continuing climate of public conflict.
There is, in fact, a third option, favored by many vendors. The constant
pressure of the human capital who depend on an ever-expanding health care
system for their own survival and prosperity frequently produces renewed
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14
MORRIS L. BARER AND ROBERT G. EVANS
calls for the introduction of private-sector funding. As Iglehart (1990)
noted recently, Canada is alone in the Western world in its "resistance to
private funding." User fees, in various forms, are an idea that continues to
surface, even in Canada. They are proposed regularly by the medical pro-
fession, allegedly as a means of reducing cost pressures. In reality, they are
seen by the profession as a means to increase expenditures, while reducing
public cost pressures.
Nor are vendors the only advocates of greater expenditures through
direct access to patients' private resources. It appears that a growing num-
ber of relatively well-off Canadians are becoming convinced by the ven-
dors' arguments that public funding cannot or will not support ready access
to first-class care for themselves and their families. They are realizing that
a limited schedule of user fees will give them an advantage: preference for
services, and thus first call on the public funds that will always form the
backbone of any health care system.~3 In the end, the funds all come from
the same source; thus far, Canadian governments have recognized this and
stood by the principle of universal access on equal terms and conditions.
Yet this, too, may be about to change. Recent federal legislation in
Canada (Bill C-69) will dramatically reduce the federal contributions in-
tended for provincial health care. The bill froze such contributions for a
period of 2 years, and this freeze has recently been extended so that it will
now be in place until 1995. The legislation was introduced and passed with
surprisingly little fanfare or outcry, either from federal opposition parties or
from the provinces, under the cover of a major (and continuing) constitu-
tional crisis. Given historical, federal all-party support for the Canadian
medical and hospital insurance programs, the relative silence from the op-
position parties suggests that they have not yet fully recognized the poten-
tial ramifications of the bill. The glue that holds the system together, that
ensures adherence to a common set of principles by all provincial plans, is
the federal fiscal role. As that erodes, as the contributions from the federal
government become less important, provinces are more likely to go their
own ways. In the end, it may be the federal government itself, rather than
the medical profession, that drives the wedge of private funding into the
door. In the process, however, it may destroy the whole system, a possibil-
ity clearly recognized by the profession in its public opposition to Bill C-
69. In the view of these authors, this legislation represents a major threat to
the Canadian system of financing health care, a threat perpetrated by a
federal government increasingly seen by Canadians as slowly disembowel-
ing Canada. The implications for the possibility of macromanagement of
i3This statement includes the American system, in which the rhetoric of private funding
obscures the major public role in subsidizing and regulating the "private" system.
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MANAGING CAPITAL, CAPACITY, AND COSTS IN CANADA
115
health care in Canada are not good. Nevertheless, whatever system (or
country) emerges over the longer term, the need for such management will
not disappear.
THE FUTURE OF HEALTH CARE MANAGEMENT IN CANADA
Despite these looming dark clouds, macromanagement is likely to con-
tinue to dominate the Canadian health care economy for the foreseeable
future. But nothing inherent in the Canadian approach guarantees efficien-
cy or effectiveness in the use of health care resources. The outcome-of
what gets done, to whom, where, by whom, with what complementary re-
sources, and with what effects is not necessarily, or even likely to be, the
outcome that one might observe if one were able "objectively" to rank all
possible interventions and then allocate resources to them up to the current
global expenditure ceilings. Macromanagement may be crucial to global
cost control, but it is not sufficient to produce the patterns of care sought by
micromanagement initiatives.
Canada's record with macromanagement, if viewed from the perspec-
tive of cost control, is quite good in comparison to the United States, but
unimpressive in comparison to any other country. To a large extent, the
current condition of the health care economy is a product of medical educa-
tion and funding decisions (capital commitments) made in the late 1960s
and early 1970s. The demographic projections on which those medical
school enrollment decisions were based were made in the early 1960s; it has
been known for nearly 20 years that they were grossly in error (too high by
about 35 percent by 1991; Barer and Stoddart, 19911. But capital commit-
ment is politically far easier than capital contraction. The incentives to
encourage adjustment in the face of new demographic information simply
were not in place.
Macromanagement in Canada over the next decade may begin to look
more like that in the United Kingdom, as budgeting and management re-
sponsibilities are decentralized. But the challenges for smaller managerial
units will be no less daunting than those presently faced by the centralized
provincial authorities unless those authorities are willing at the same time
to make some hard capital decisions that cannot be made locally.
Yet what of micromanagement? It is at best misleading, at worst dis-
honest, to promote the notion that micromanagement, if only there was
enough of it, would achieve macrocontrol. As Wennberg (1990) has noted,
"The inventive nature of the medical mind, the endless possibilities for
plausible theories, and the urge all physicians feel to work for and be help-
ful to their patients combine to make it impossible for outcomes research to
keep up with the flow of new medical ideas" (p. 1204~. Grumbach and
Bodenheimer (1990) describe this phenomenon as the "continual attempt
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116
MORRIS L. BARER AND ROBERT G. EVANS
[by physicians] to extend the borders of the medical pasture" (p. 121).
Micromanaged care will continue to change the shape and composition of
the health care pie; it is unlikely, however, to have much effect on its size.
In this, it seems remarkably (and depressingly) similar to basic medical
research. In that sphere, as each "insulting" organism is identified and a
clinical assault mounted, three others emerge.l4 Continued uncertainty about
the specifics of appropriate care seems likely to hinder the effort for some
time to come (Grumbach and Bodenheimer, 1990~.
Clinical management in Canada is the object of increasing interest and
effort, but resources are not being channeled into this arena because of a
belief that it will replace the need for macromanagement. Rather, outcomes
research, the development of clinical practice guidelines, clinical compe-
tence assurance activities, and the like are seen in the Canadian context as
tools for guiding resource allocation and organization within global bud-
gets not as replacements for those budgets. No amount of micromanage-
ment or outcomes research can tell a society how much of its scarce real
resources should be devoted to health care. There will always be more inter-
ventions that produce "epsilon effects" than can possibly be evaluated.l5
A commitment to maintaining a system of global budgets still leaves
the problem of setting and controlling them. The present Canadian ap-
proach of bilateral negotiation and, in the end and if necessary, imposition
may not be sustainable politically in the absence of new policy directions
for capital management. A reduction in the rate of production of new
physicians seems an essential starting point. But even that simple step will
require a new, heretofore elusive, national consensus. Physicians are a
national resource, budgets a provincial responsibility. The elements push-
ing stakeholders toward such a consensus may now be there: the present
fiscal climate, a growing understanding of the broader (non-health-care)
determinants of population health (Evans and Stoddart, 1990), the increas-
ing range of questions raised by research on outcomes and procedural var~a-
tions regarding the population benefits of ever-larger allocations of limited
public funds to health care (Roos and Roos, 1990), and a common sense of
political fatigue from the prospect of having to manage an ever-larger med-
ical community. The hope is that these elements will finally come together
140pportunistic infections of AIDS patients offer the clearest example of this phenomenon.
As the patient's T-cell count progressively declines, new infections gain a foothold. Increas-
ing research efforts find new treatments for each, which are effective only until the count falls
sufficiently to bring on the next infection.
15What is transpiring in the United States suggests that micromanagement is being saddled
with a far more onerous burden. Outcomes research and managed care appear to be the
replacement for the lost promise of, first, more regulation and, then, more competition (which
was, in fact, more regulation in a different package) as vehicles of cost control.
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MANAGING CAPITAL, CAPACITY, AND COSTS IN CANADA
117
in Canada to produce a new contractionist era in medical resource policy. It
will not have come a year too soon.
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Representative terms from entire chapter:
managing capital
