Getting Better Value for Money from the Hospital System
Although prescribing how resources should be allocated across levels of care is hard, at least they should be efficiently used, wherever they are spent within the hospital system. The preceding analysis has highlighted how deficiencies at the lower levels of the hospital system render referral hospitals less efficient and how factors that affect access lead to skewed benefits and inequity. Here we look more specifically at three areas for improving the efficiency of the hospital system: interventions within the referral hospital, the use of public-private partnerships, and strengthening of the referral chain.
Improving the Efficiency of Referral Hospitals
Although space does not permit a lengthy discussion of approaches to improve efficiency in the context of referral hospitals, this aspect is nonetheless important in planning and system strengthening (for a more detailed discussion see Barnum and Kutzin 1993; Hensher 2001; Walford and Grant 1998). In summary, the key areas on which planners and managers should focus are as follows:
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reducing inappropriate outpatient and inpatient use of referral
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improving systems to allow early discharge from the hospital
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ensuring that bed occupancy rates can be maintained as close as possible to optimal rates—namely, 85 percent for referral hospitals
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developing systems for booked outpatient appointments, admissions, and procedures to permit better planning of activity and staffing
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undertaking as much activity as possible on an ambulatory rather than an inpatient basis, supported by the use of "step-down" beds and patient hotels
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evaluating the staff skill mix and the potential for skill substitution, as well as efficient remuneration strategies, on a continuous basis
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evaluating and improving processes and systems, including cost-effective clinical guidelines for patient treatment, on a continuous basis
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ensuring that new or replacement referral hospitals conform as much as possible to available evidence on economies of scale—that is, that hospitals with fewer than 200 beds are likely to be scale inefficient and that diseconomies of scale are likely to become increasingly evident in hospitals with more than 600 beds
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adopting intelligent procurement processes and engaging in effective negotiations with suppliers in relation to prices and service levels
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ensuring effective ordering, stock control, and distribution systems to minimize theft and wastage of key supplies
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undertaking planned preventive maintenance and programmed replacement of equipment and buildings.
Can Public-Private Interactions Improve Efficiency?
In the context of this discussion, privately owned hospitals that provide subsidized care to public patients, such as nongovernmental organization and mission hospitals, are regarded as public hospitals. Private refers to for-profit hospitals that are generally funded by paying patients and are minimally subsidized. Few studies have been undertaken of how private hospitals operate in developing countries (see, for example, Muraleedharan 1999). Although the exact balance of and relationship between the public and private health sectors varies greatly from country to country at all levels of the health system, a common theme in almost all low- and middle-income countries is that private hospitals do not follow the pyramidal referral form that public hospital systems have adopted almost universally. Most private health sectors do not clearly delineate district, secondary, or tertiary hospitals. Different private hospitals may offer different services and facilities on a more or less idiosyncratic basis, with independent medical specialists practicing and admitting patients at various different hospitals.
In most systems, scope exists for both positive collaboration and competition between public and private hospitals, especially for secondary and tertiary services. Competition between public and private sectors obviously has the potential to be beneficial by driving quality up and costs down, but it may also have negative effects by encouraging a duplication of services and resulting in the underutilization of fixed capital by creating perverse incentives for physicians and patients and by competing with the public sector for scarce human resources. In some settings, the private sector may be able to offer services that the public purse cannot afford to provide, thus allowing patients who could not afford private care some chance of accessing sophisticated treatments through the government's paying private providers or by some pro bono provision of treatment for poor patients.
In many countries, government hospitals are establishing private wards as a vehicle for income generation. The fees for such units are lower than those at private hospitals, offering access to private facilities to patients who may not be able to afford private hospitals. The link with academic medicine often adds to the appeal of such facilities. However, as is the case in South Africa, effectively only tertiary hospitals and a handful of secondary hospitals are felt to be attractive enough to private patients to offer genuine opportunities as preferred providers. The mass of district and regional hospitals are unlikely to be attractive to private patients; therefore, the positive spinoffs of these initiatives may be limited in their scale and reach.
Contracting out services to private providers, particularly high-cost, low-volume services, may be an efficient way to offer such services to public patients. For example, the government of Barbados contracts out surplus demand for dialysis to a private facility on the island. In some provinces of South Africa, expensive imaging such as MRI has been contracted out to private radiology practices. South Africa is also experimenting with contracting out the management of some academic referral hospitals to a private hospital group that is assumed to have greater management expertise and is free from certain public sector constraints, such as salary scales for senior managers. It is too early to judge the success of this arrangement, but in all cases it is imperative that contracts be carefully regulated, monitored, and enforced. For a comprehensive review of contracting, see Bennet, McPake, and Mills (1997).
Particular problems may arise where the same doctors provide care in both public and private hospitals. Under fee-for-service arrangements, physicians may focus on their more lucrative private patients to the disadvantage of public hospital patients, refer patients with adequate insurance to their private practices and private hospitals, and transfer patients with expensive diseases or inadequate insurance to public hospitals.
Improving the Functionality of Referral Systems
An ideal referral system would ensure that patients can receive appropriate, high-quality care for their condition in the lowest-cost and closest facility possible, given the resources available to the health system, with seamless transfer of information and responsibility as that patient is required to move up or down the referral chain. Although few referral systems anywhere in the world live up to this ideal fully, it does provide a target in relation to improving the current situation. Improving the effective functioning of referral systems broadly requires progress in three areas: referral system design, facilitation of the smooth transfer of patients and information between levels, and what Walford and Grant (1998, 38) refer to as effective "referral discipline."
Improving referral system design must start with a detailed attempt to assess which services should be provided at which level of care, encompassing community- and home-based care, primary health care, district hospitals, secondary hospitals, tertiary hospitals, and specialized hospitals. Such an assessment must take local circumstances into account, requires a significant analytical and consultative effort by planners and clinicians if it is to be credible, and must explicitly be open to revision in light of practical experience. After such an exercise has identified which services can appropriately be provided at each level of care, adequate resources must be dedicated to strengthening lower levels of care to make them attractive and credible in the eyes of patients. This effort will require significant investment and funding to ensure the availability of appropriate staff members and supervision, to ensure continuous drug supplies, and to provide basic laboratory tests (Walford and Grant 1998, 38). Given the pervasiveness of inappropriate use of referral hospitals for primary health care problems by urban residents, both urban and rural primary health care and district health systems must be adequately strengthened. Financing strategies that redistribute funds from urban to rural regions may unwittingly hamper such strengthening of the referral system by failing to allow for the development of appropriate lower-level facilities for urban residents. This risk is especially high when a country is pursuing a redistributive agenda against a background of limited or zero overall growth in expenditure.
From a physical planning perspective, planners should consider providing primary health care and district hospital walk-in ambulatory services (emergency and general outpatients) in a physically distinct facility sited immediately next to the referral hospital. This arrangement not only enables triage and filtering of less severe cases (while proximity ensures that severe emergency cases can be transferred rapidly) but also enables rigorous enforcement of a referral-only policy within the referral hospital.
The development of effective patient transportation arrangements is also critical, not only to ensure that patients from remote areas have a fair chance of being successfully referred to a center of excellence (bearing in mind that most referral systems will almost certainly need to increase referral rates from rural areas), but also to ensure that patients can be discharged in a timely and well-planned fashion.
Perhaps more challenging is the concurrent need to align the incentives of referral hospitals, district hospitals, and primary health care services. This goal may or may not be achievable by means of an integrated management structure, but it certainly requires a good deal of communication, collaborative planning, and collaborative development of shared care protocols, and senior personnel need to be given responsibility for coordination and liaison across key interfaces of the referral network. A single, global budget controlled by an authority that is concerned with optimizing the cost-effectiveness of health care delivery would seem to be a necessary condition to achieve alignment across service levels; however, a consideration of financing mechanisms is beyond the scope of this chapter.
At the patient level, a number of mechanisms to improve referral discipline can be considered. In situations in which eliminating nonreferred patients entirely from the referral hospital is impossible, queuing systems should be redesigned to separate referred patients from nonreferred patients so that referrals can be fast-tracked. Explaining to nonreferred patients why other patients are being fast-tracked past them is important to encourage them to seek referral in future. Ideally, they should be diverted to an on-site primary health care facility where they can be treated more quickly than in the referral hospital. Another possibility may be to institute bypass fees for nonreferred patients, charging them a penalty fee for failing to use the referral system. Such a decision requires careful consideration and planning. Credible lower-level care must be readily available, and substantial efforts to communicate the new policy to the public will be required if this approach is to be seen as fair. More broadly, intensive public communication and education will be essential to inform the public how, where, and when they should seek health care at different levels and to build their confidence that lower-level facilities really will be able to offer acceptable quality care when they need it.
