County level responses to the introduction of DRG rates for “extended choice” hospital patients in Denmark
Introduction
The opportunity for patients to choose hospitals in other counties was introduced in the Danish hospital system in 1993 with the “free choice”/“extended choice” reform1. The initial responses to the reform were limited. This can be explained by weak incentives on the supply side and institutional resistance based on cultural and normative structures in the health care system [1]. However, a recent political decision to introduce DRG rates for “extended choice patients” may change the picture since it increases cross county payment levels for many types of treatments compared with the previous flat rate payment2.
This paper explores the “political economy” of extended choice in terms of responses at the supply side after the introduction of DRG rates. The main question is whether the introduction of DRG rates and the resulting changes in incentive structure have challenged the apparent institutional resistance and traditions for behaviour in the system. In other words have we seen changes in county level perception and strategy, and can we expect to see such changes in the future? How has the county-based governance system, which traditionally has emphasised budget control, co-operation, and equality reacted to the introduction of stronger incentives for “extended choice patients”?
The introduction of patient choice is not only taking place in Denmark. Many other European countries are experimenting with a greater role for patient choice and case-based economic incentives, and indeed there are indications that EU integration may further push the development towards choice of provider across country borders [2]. This raises a number of issues on planning, managerial control and economic accountability. The Danish case and the analysis of reactions in the Danish counties can be illustrative for the types of reactions that can be expected in other public health care systems.
The Danish health care system can be characterised as a public integrated health system with universal access, which is free at the point of delivery (except co-payments on dentistry, physiotherapy and drugs). Delivery and financing of hospital services are county level responsibilities but take place within a national regulatory frame and a set of agreements between the central political level and the counties3.
In addition to the county hospitals the health care system consists of self-employed general practitioners fully or partly reimbursed by the counties and public home care, public health services and dental care for children/adolescents run by the municipalities.
There are democratically elected assemblies at national, county and municipal levels and the national level has regulatory, advisory and co-ordinating responsibilities, but no direct responsibility for delivery of services. Hospital services are predominantly financed by county level taxation (more than 80%), but the state also subsidises health care via block grants to the counties. Payment to hospitals is mostly via global budgets combined with negotiated targets for performance (often specified in negotiated “contracts”).
A fundamental idea behind the decentralised health care system with financing and delivery responsibilities at the county level is to create a strong link between the citizens/taxpayers/voters and the political decisions on service delivery. County councils have had relatively large autonomy to plan the development of their hospitals and make decisions on service and taxation levels within the general economic and legislative frame for the sector. Extended choice has loosened the ties between the county and its citizens and has made it more difficult for the counties to plan their provision of health services and their expenditures. The introduction of DRG rates to replace the previous flat rates for out-of-county patients has increased the potential economic impact of extended choice for the counties. In this paper we explore the county perceptions of the new situation and look at county strategies particularly in regards to creating incentives for hospitals.
Section snippets
The history of extended choice in Denmark
“Free choice”/“extended choice” of hospitals was introduced on the public agenda in the early 1990s. It was mainly discussed as a solution for patient complaints about rigid administration of requests for access to hospitals in neighbouring counties. The counties initially opposed the idea but entered a voluntary agreement on extended choice before a parliamentary decision was made. This can be seen as a defensive move to maintain control over the design of the system. “Free choice” was
Theoretical frame
The analysis in the paper is based on insights from health economic literature [4], [5], [6], [7], [8], [9], [10], [11]. The overall question is whether DRG rates for “extended choice patients” have introduced incentives that are sufficiently strong to induce the various actors (i.e. county politicians and administrators) to redefine strategy and change behaviour. The basic economic theory questions of financial incentives are framed within a broader theoretical approach that emphasises the
Methodology and data
To investigate developments in county level perceptions and strategies we have collected data from the county councils and the national Ministry of Health. The analysis is based on the following sources.
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Data collected by analysing itineraries and minutes from county council meetings in the period of 1999–2001 as they are presented on the web pages. We have searched through the county web sites and documents using combinations of the keywords “choice”, “extended choice”, “DRG”, “extended choice
The perception of choice and DRG rates—opportunity or threat
The starting point for our discussion is the hypothesis that the introduction of DRG charges for extended choice patients has changed the counties’ perception of economic uncertainty and ability to prioritise and control their budget. We will look at county level perceptions of such issues as they are expressed in minutes from county council meetings.
Extended choice implies that patients can choose where they want to be treated and the county will no longer control their choices and, therefore,
The impact of extended choice in terms of patient and money flows
Implementation of DRG charges, reflecting average cost in each of the diagnose-related-groups, has increased the counties’ attention to the flow of patients in and out of the county because the level of the payment has increased considerably.
The counties have traditionally controlled and co-ordinated the provision of hospital services by reimbursing hospitals with global budgets. The counties are obligated to pay for patients crossing the county borders and they cannot directly control this
County level strategies—incentives for hospitals and departments
How have the counties reacted to the opportunities and threats with DRG rates for extended choice patients? Have they established incentives for their hospitals, or have they chosen a more cautious path? How have they balanced the concerns for within-county and out-of-county patients?
Counties have traditionally reimbursed hospitals with global budgets but one could hypothesise that the counties will react to the change in payment system between the counties by changing their reimbursement of
Discussion: what is the impact in a decentralised and politically managed health care system
We have discussed two main questions, namely how do counties perceive choice, and which strategies have they adopted in terms of incentives for their hospitals. We have also presented data on the economic impact of patients’ extended choice so far.
In terms of the counties’ perception of choice we have seen that choice and DRG rates have been on the agenda in all county councils and that they are mainly discussed as a potential threat to planning and expenditure control. Some counties also point
Perspectives for the future
Are the preliminary conclusions from the previous section likely to hold up in the future? What are the broader perspectives for the system after the introduction of choice and activity based payment for out-of county patients based on DRG rates?
While the dominant governance rationality in Danish health care is still structured around regional planning systems and home county patients, there is also an increasing awareness in the counties of the new strategic situation. This was illustrated in
County web sites
http://www.frederiksborgamt.dk; http://www.kbhamt.dk; http://www.hosp.dk/H:S; http://www.vestamt.dk; http://www.ra.dk; http://www.stam.dk; http://www.fyns-amt.dk; http://www.nja.dk; http://www.ribeamt.dk; http://www.aaa.dk; http://www.vejleamt.dk; http://www.vibamt.dk; http://www.sja.dk; http://www.ringamt.dk; http://www.arf.dk.
Acknowledgements
The authors are grateful to colleagues from the Institute of Public Health, University of Southern Denmark, participants at the Nordic Health Economics Study Group Meeting, 2001 and three anonymous reviewers for helpful comments. The authors alone are responsible for any errors made in the analysis.
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