Different Challenges - Similar Responses
Prepared by John J O'Brien| July 2005
with funding from the sponsors of the Ian Axford (New Zealand) Fellowships
in Public Policy
John O'Brien is director of acute care
policy studies at the Center. In this capacity, he manages the Center's
work in Medicaid managed care policy, financing and evaluation, health
plan performance assessment, and encounter data collection and analysis.
Mr. O'Brien directs the Center's ongoing analysis and assessment of
HealthChoice, Maryland's Medicaid managed care program. He managed
the HealthChoice evaluation and co-authored an article on evaluation
findings in The Milbank Quarterly. Prior to joining the Center he
was a Senior Associate at Health Systems Research Inc.
He was based at the Ministry of Health where he worked on a project
titled Comparing Health Care Performance Measurement in the US and
New Zealand: Do we ask the same questions, and what influences the
answers? O'Brien studied New Zealand's methods for assessing healthcare
system performance and contact them with similar efforts by state
Medicaid programs in the US. The focus of his research was specific
elements of each country's healthcare delivery system: Primary Health
Organisations (PHOs) in New Zealand, and Medicaid Managed Care Organisations
(MCOs) in the US.
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Executive Summary
Health care presents significant challenges to the measurement of public
programme success. The inputs are many (health habits, sanitation, drugs,
doctors, technology, etc.) and the outcomes (longer life, reduced illness)
not usually traceable to a single effort. Still, the need to measure performance
in health care is as great, or greater, than almost any public sector
activity. Health care, or the lack of it, affects nearly every citizen
and the public investment in health care is enormous.
In the last decade both the Maryland Medicaid programme and the New Zealand
Ministry of Health embarked on ambitious restructurings of their respective
health service delivery systems. In Maryland Medicaid developed in 1997
the Maryland HealthChoice programme that relied on Managed Care Organizations
(MCOs). In New Zealand the Primary Health Care Strategy, which relies
on the similarly named Primary Health Organizations (PHOs), began enrolling
individuals in 2002.
Comparing New Zealand with the Medicaid programme also highlights the
tremendous differences in the structure of health care service delivery
in each country. The Medicaid programme accounts for only 17 percent of
total health care funding in the United States, and targets that funding
at low income and disabled populations. The New Zealand government's role
in the health care is almost the opposite. In New Zealand public dollars
account for 78 percent of all health care funding, and those funds are
intended to serve the entire population. The differing funding structures
lead to vastly different positions of market power. Maryland Medicaid
is an important but small purchaser of services and must set prices and
programme rules with the knowledge that providers, such as doctors and
hospitals, can and do survive without Medicaid funding. In New Zealand
the Ministry of Health is a monopsony, a single dominant purchaser negotiating
with many small sellers.
From these very different starting conditions Maryland and New Zealand
have implemented very different models of health service organization.
They do however share two key features: prospective payment to providers
on a per capita basis, and the creation of an enrolled population for
whom the organization is responsible. Beyond these similarities however
PHOs and MCOs are starkly different. This begins with the process of approval
for operation: extensive and costly for MCOs while limited and economical
for PHOs, and extends to the level of financial risk each bears to the
methods used to calculate payment rates. It is notable therefore that
both New Zealand and Maryland have invested considerable effort and resources
in performance measurement systems.
New Zealand and Maryland are not alone in their interest in performance
measurement. Other countries are developing ways to address the same issue.
Performance measures in Maryland and New Zealand along with performance
indicator efforts in Australia and the United Kingdom have been examined
and commonalities identified. The four countries have different structures
for health care financing and are using performance measurement on very
different entities, yet the following significant commonalities emerged:
· Emphasis on primary care. In all systems primary care measures
such as immunization and proven screening tests had a prominent role.
· Inpatient measures notably absent. Even in systems such as Maryland
and the United Kingdom that make organizations responsible for inpatient
care, measures to assess inpatient services were few.
· Use of patient satisfaction surveys as a measurement tool. Incorporating
direct feedback from the population served is common across systems.
· Lack of financial measures. Financial performance, such as success
against outside set targets is not regularly used, although it is in New
Zealand.
· Infrastructure measures. Performance measurement schemes used
by the selected countries address key system elements that policy-makers
see as essential (such as IT, contracting practices, etc).
While the ways that performance is measured across different systems
is surprisingly consistent, there are a range of responses to the question,
what is it for? The diversity of responses is inherent in the nature of
performance measurement. Performance measurement is not a single tool
designed to address a specific need; rather it is an evolving set of metrics
that can be applied for a variety of purposes. These include:
· Payments and Rewards. Performance rewards are, especially in
the United States, a prime goal of performance measurement.
· Reporting and Evaluation. Standard performance measures allow
a tool for reporting back to policy-makers and the public in a consistent
manner.
· Benchmarking/Monitoring. Performance measurement creates a system
that allows organizations to assess their position relative to their peers.
· Quality Improvement. Measuring performance and providing feedback
is at the heart of a philosophy of continuous quality improvement and
central to the New Zealand approach to performance measurement.
· Effective Governance. Good information is essential to good governance.
· Contracting. As PHOs mature performance measurement will play
a greater role in contract negotiations and processes.
These are not mutually exclusive and policy-makers and programme managers
may use performance measurement to address all of the issues. In comparing
performance measurement in the United States and New Zealand the primary
differences are not of type but of emphasis. For example, New Zealand
stresses the quality improvement aspect far more than the Maryland Medicaid
programme.
Comparing Maryland and New Zealand offers a window into the biases and
habits of thought of policy-makers in each system. By looking at them
side by side several lessons emerge.
From New Zealand, Maryland can learn:
· Change at the clinical level is important if systems of care
are to improve. The fragmented nature of the United States' financing
system often causes policy-makers to despair of ever directly influencing
medical practice, and thus limit their efforts to properly aligning financial
incentives. New Zealand policy-makers are far more ambitious in their
goals for influencing practice behavior. While Maryland and the United
States face challenges in efforts to influence practices, they should
not concede this issue.
· Incentive payments do not need to be targeted at the top. Maryland
Medicaid efforts to implement incentive payments have focused on incentive
payments to the parent MCO, and, thus far, have led to incentives too
small to motivate significant change. Targeted incentives at primary care
(like New Zealand), or specialized providers for high-need populations,
may yield better results and more effectively use state funds.
· There is more to effective delivery than access to a physician.
Out of fear that poor Medicaid recipients will be given second-class care
the Maryland Medicaid programme places significant emphasis on assuring
that recipients have access to physician services. This may lead policy-makers
to discard, or undervalue approaches to service delivery that de-emphasize
physician care in favour of nurses or other alternatives.
From Maryland, New Zealand can learn:
· Public funding implies public access to data. The debate between
the representatives of General Practice and the Ministry of Health regarding
the provision of practice fee information strike an American observer
as odd. Both liberals and conservatives would tend to argue that pricing
information should be widely available.
· PHOs need a greater scope of control to succeed in achieving
their goals. At present PHO budget holding is extremely limited. If PHOs
are to develop and evolve to meet their stated purpose they will need
to assume responsibility for a broader range of services.
· Managing PHO competition presents opportunities and challenges.
The large number of PHOs in operation is likely to continue. This should
encourage the development of a competitive environment among PHOs that
can have positive effects. New Zealand policy-makers will need to consider
what kinds of competition (for practices, for enrollees) to allow and
how to manage that competition.
 Table
of contents
Acknowledgments
Executive Summary
Introduction
Chapter 1: Structural Differences in Health Care
Delivery Systems
Chapter 2: Maryland MCOs and New Zealand PHOs: History
and Structure
Chapter 3: Performance Indicators: Conceptual Issues
and Practical Challenges
Chapter 4: Lessons for Maryland and New Zealand
Conclusion
Bibliography
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