Health care services are not like other essential services, for example electricity or telecommunications, where consumers can easily measure the quality of the service supplied. This problem is linked to an absence of information. Patients may often not have the information with which to judge the quality of a diagnosis made or of the care recommended or provided. 1 Health care providers generally have more information than patients, resulting in an information asymmetry problem and concerns that providers may take advantage of vulnerable patients. There is also a concern, however, that providers themselves lack good information about the effectiveness and cost-effectiveness of many health care services. A lack of information also means that it is difficult and costly for government to directly regulate the quality of health care services.
In response to the perceived costs and difficulties of direct quality regulation most systems have devolved regulatory responsibility to health care professionals themselves. Thus, the medical profession and other health care professionals are generally self-regulating professions. Through legislation they are given powers to set conditions on the training required to enter and remain in the profession, to establish ethical codes and professional standards, and to discipline those members of the profession who do not comply with the relevant codes and standards. By contrast, there has been a greater reliance on direct regulatory control of hospitals. Requiring hospitals to operate on a non-profit basis is another tactic adopted to ensure that quality is not sacrificed in the pursuit of profits and that providers do not take advantage of vulnerable patients. Some jurisdictions, like New Zealand and the UK, have nationalized most hospitals. The implicit assumption in these countries is that public sector management will work in the best interests of patients and, ultimately, in the public interest. Most systems also rely upon the deterrent effect of medical malpractice actions to ensure quality in the delivery of care by health care providers, hospitals and other institutions. Moreover, historically it was thought that the quality of care provided by health professionals and hospitals was assured by the fact that public and private insurers indemnified health care providers on a fee-for-service basis. Thus, hospitals and health professionals had no incentive to reduce or restrict the range, effectiveness, or volume of services supplied.