Profits and Health Care Delivery

Article excerpt

Clarifying the debate

THE QUESTION OF THE APPROPRIATE MIX BETWEEN PUBLIC AND private in health care has become a topic of considerable heat, both within Canada and internationally. Advocates of more "privatization" claim that it is needed to encourage innovation, efficiency, competition and choice. Opponents point to a host of difficulties they fear will arise from greater use of the "private sector" for delivery, including worries about quality of care and the compatibility of the values inherent in health care with those underlying markets. Policy initiatives such as Alberta's desire to approve for-profit surgical clinics or Ontario's to open more private MRI clinics have become emblematic of the disputes over the appropriate role of for-profit delivery within a publicly funded system.

Understanding the debate has been complicated, in part because both sides have been talking past one another, using similar terms to mean very different things. There is remarkably little disinterested information, and a plethora of papers stating positions without benefit of supporting evidence. Such evidence as exists is often contentious, since it depends on assumptions about what client populations different providers are serving. Before evaluating the evidence about public and private delivery, then, let us stop to define our terms.

Who pays, who delivers?

Health care systems are commonly divided into several components. Although different writers may use slightly different nomenclatures and break down these functions in slightly different ways, they all note the importance of distinguishing between how services are paid for, which we will term financing, and how they are organized, managed and provided, which we will call delivery. Health care systems may also explicitly incorporate other elements - such as planning, monitoring and evaluating - or leave these to the workings of market forces. "Privatizing" a health care system may accordingly involve changes in financing (e.g. transferring costs between public and private payers by such mechanisms as user fees or deinsurance) or in delivery (e.g. moving the delivery of a service from within government to outside providers through contracting out, public-private partnerships and the like).

The "missing link" connecting financing and delivery, which has sometimes been termed allocation, refers to the incentive structures set up to manage how funds will flow from those who pay for care to those who deliver it. These allocation approaches can be placed on a continuum. At one end, "patients follow money" as funders allocate global budgets to providers. For example, government may fund a limited number of open heart surgery programs, where anyone needing such care must go. At the other end, "money follows patients" as providers depend on attracting clients for their revenues. For example, physicians will receive payment only to the extent that they attract patients; nursing homes will be paid only for filled beds. Unfortunately for those wishing clear reform prescriptions, there is no one best allocation model that can simultaneously ensure cost control, client responsiveness and delivery of high-quality appropriate care; instead, one is often faced with policy tradeoffs.

I focus here on delivery rather than on financing or allocation - that is, on the best way to deliver health care services, regardless of how they are paid for. However, researchers have found that certain forms of delivery may prove to be more compatible with certain approaches to financing; the questions of financing and delivery prove to be separate, but linked.

In addition, whereas approximately 70 per cent of Canadian health expenditures come from public sources, these have been heavily concentrated in particular sectors. Those services falling under the comprehensiveness provisions of the Canada Health Act receive almost all of their expenditures from public sector sources; the Canadian Institute for Health Information estimates the public share at 99 per cent of expenditures for physician services and 90 per cent of expenditures for hospital care. …