Monday, December 5, 2011

Scotland vs England: Medicare & Perverse Incentives

Smart people: can we chase these annoying bloggers away!!!

                                                                  ©2005 Am Ang Zhang
It is indeed very sad to see how modern perverse incentives that were used in other institutions were used in our NHS hospitals in one part of the United Kingdom: England.

There really is no need to look further than Scotland to see what is possible.

The figures are there for all to see and it is hard to believe that the very smart people that are currently running the country did not know.

In the brave new world, English Hospitals (or their managers) need to  perversely increase activity to survive (or collect a good bonus before moving on or going off sick). GP Commissioners need to reduce hospital referrals in order to achieve government imposed savings or if it is run by privateers to find profits for shareholders.

Hospitals will fail and be bought up and the privateers will be so smart that they will only run the profitable parts.

Government will be left still running the loss making services or they could be sold out to the likes of Southern Cross .

The US has its version of our future and it is called Medicare:

An estimated 77 million people born between 1946 and 1964, turn 65. This year, the first 3 million will reach that milestone, adding significantly to the 47.5 million patients covered by Medicare in 2010. That explosive growth will jeopardize the federal program’s ability to meet its obligations at the same time that it inundates physician practices and hospitals.
Largely left to their own devices in finding help with these problems, these patients have a habit of seeing several physicians, including specialists. No referrals are needed, and Medicare pays a fee to each doctor for every visit. That adds up to a situation in which not only are there no limits on how much is spent, but often there’s no one in charge to make sure patients don’t receive unnecessary or counterproductive treatments.
US Health Insurers had a good deal, they do not need to deal with this group.

Doctors and hospitals perversely do not want change as Medicare money is good government money.

Let us not look that far:

Increases in English inpatient / day case hospitalisation rates-26 times those in Scotland between 1998-99 and 2009-10.

Increases in new outpatient referrals were 13 times greater in England than in Scotland over this period and increases in A&E attendance rates were almost 4 times greater.

Interpretation of the significance of changes in Scottish trends in clinical activity in the postdevolution decade are easier to interpret than in their English counterparts.

In Scotland:

 Acute admission units and rapid assessment wards were established to deal with emergency admissions and facilitate their rapid discharge. There was also considerable financial investment in waiting list initiatives and increased efforts to facilitate rapid discharge of older patients to community care or supported home care.

Collectively, these initiatives resulted in a decline in winter bed crises and cancelled elective admissions with a progressive fall in inpatient, day case and outpatient waiting times and waiting lists. As noted in a previous newsletter, Office of National Statistics data indicate that Scottish waiting times for a range of elective procedures were shorter than those of England, Wales and Northern Ireland between 2005-10.

At the same time, “bottom-up” demand for emergency and elective hospital admission and new outpatient referrals from the primary care sector levelled off, and A&E self-referral rates also stabilised. These changes were accompanied by abolition of the internal market, rejection of Payment by Results and of further privatisation of clinical services, including the creation of Independent Surgical Treatment Centres. Block grant funding to Scottish Health Boards was retained, based on a needs-assessment formula; perverse incentives to increase hospital income from tariff-based revenue remain absent.

Post devolution: the figures are scary!!!

English inpatient and day case hospitalisation rates rose from 14% below to 7% above Scottish rates between 1998-99 and 2009-10. More remarkably, new outpatient rates rose from 11% below to 42% above Scottish rates, and new A&E rates rose from 3% below to 27% above Scottish rates over this period.

This reversal of a long established relationship strongly suggests that rapid expansion of clinical activity in England may not simply represent a response to unmet demand.

English outpatient rates increased by two and a half times more than inpatient and day case rates between 2003-04 and 2009-10. This implies the referral of increasing numbers of outpatients with lower degrees of morbidity than previously.

Rapid acceleration of the rise in hospital referrals of inpatient and day cases and of new outpatients from 2004 on was synchronous with a new emphasis on “modernisation”, by the Labour administration.

This year marked the introduction of Foundation Trusts, and the beginning of the roll-out of Payment by Results in which the greater part of a Hospital Trust’s income derives from the volume of patients treated. There was also more emphasis on an increased role for the private sector in the provision of clinical services with the establishment of Independent Surgical Treatment Centres (ISTC’s). There is a large body of evidence, principally from the USA, that fee and tariff based health systems amplify hospital activity.

Perverse Incentives:

If a hospital’s survival is critically dependent on patient turnover, in a competitive market powerful perverse incentives exist to drive up its activity. The coincidence of rapidly expanding clinical activity in the English NHS with the introduction of PbR and increasing emphasis on competition and privatisation suggest that the two events are causally related.


Private ‘suppliers’ to the NHS also have the perverse incentive that they will love the patients especially those in psychiatry. Many are chronic or else there is such variation in terms of treatment modality and recovery time. Anorexia Nervosa is clearly one such case and the government’s current push to farm out Child Psychiatry services to AQPs will certainly not save any money in the very long term. 

No comments: