Exposing care services to competition effects on quality
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Exposing care services to competition – effects on quality. Work in progress Astri Drange Hole Bergen University College, Norway. Motivation. Demography Adverse change going on in the demographic structure The elderly dependency ratio in Europe is expected to double by 2050

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Exposing care services to competition – effects on quality

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Exposing care services to competition effects on quality

Exposing care services to competition – effects on quality

Work in progress

Astri Drange Hole

Bergen University College, Norway

New Directions in Welfare II - Paris 2011


Motivation

Motivation

  • Demography

    • Adverse change going on in the demographic structure

      • The elderly dependency ratio in Europe is expected to double by 2050

    • Generational accounting in Norway from 1994

    • Petroleum fund 1996/Government Pension Fund 2006

      • Owns just over 1 percent of all global stocks

      • 3.200 billion NOK – more than 0.5 million N0K per capita

      • Strict policy rule: 4 percent real rate of return can be used per year

  • Resource scarcity

    • Necessary to consider efficiency matters

    • Minimize cost whilst maintaining a good quality

New Directions in Welfare II - Paris 2011


Focus

Focus

  • Elderly long-term care is a municipality matter in Norway

    • Home based or institution based?

      • Focal point to provide a good quality of care

  • Municipal economic viability is important

    • Allocation policy to achieve cheaper services and increased focus on quality

      • Exposure to competition

  • This paper examines empirically if exposing the nursing home industry to competition is a means to achieve increased focus on quality in the industry

New Directions in Welfare II - Paris 2011


Tentative conclusion

Tentative conclusion

  • Prominent predictors of quality in the nursing home industry seem to be; number of staff, education of staff, workload, competition, centrality, unrestricted income, and required and real capacity in the region

  • More likely that an increase in quality will take place in public nursing homes than in nursing homes exposed to competition

  • Increase in workload, education, and centrality, which predict a positive impact on quality, seems to be more likely to take place in nursing homes exposed to competition than in public nursing homes

New Directions in Welfare II - Paris 2011


Outline

Outline

  • Theory

    • Welfare economics

  • The Norwegian care sector

  • Data

    • Sources and restrictions, proxies, variables

  • Analysis

    • Descriptive statistics

    • OLS regression with cluster

    • Multinomial logistic regression

  • Concluding remarks

New Directions in Welfare II - Paris 2011


Theory

Theory

  • A properly working competitive economy generates a Pareto efficient allocation of resources

  • This efficient allocation is not necessarily socially desirable

  • The real world economy is not always “properly working”

    • A market economy is not always efficient, let alone equitable

    • Government intervention to enhance economic efficiency and modify the distribution of income might be recommended

  • Link between a competitive economy and social welfare

    • The care market is not working properly, hence there should be a link between allocation policy, like exposing this market to competition, and higher social welfare for the elderly

New Directions in Welfare II - Paris 2011


Theory1

Theory

  • Market failures in the market for human services

    • Asymmetric information

    • Weak consumer sovereignty

    • The actors do not behave rationally

    • The price mechanism is not working

      • The market demand is determined by the market supply

      • Always a demand surplus

  • Allocation policy – exposure to competition

    • The responsibility for providing care services is divided between the public authorities and private actors

      • The public authorities are responsible for the allocation efficiency

      • The private actors are responsible for the cost efficiency

New Directions in Welfare II - Paris 2011


Theory2

Theory

  • Exposure to competition

    • The public authorities specify the product and the quality requirements and provide the funding of the production

    • The private actors produce the services

  • Tender competition

    • The suppliers –both private and public – bid for a contract issued by the authorities for a limited number of years

    • Quality of care is the most crucial competitive factor

    • Important to specify both the product and the quality requirements

  • Hence, exposure to competition implies increased focus on both the product and the quality of the product

New Directions in Welfare II - Paris 2011


The norwegian care sector

The Norwegian care sector

  • Privatization of the elderly care sector is not an issue

  • Justice and equality are important concepts in the Norwegian society

  • Political agreement that the authorities should promote economic and social justice

  • This is also institutionalized in the Norwegian welfare state

  • Produce goods and services and transfers money to citizens based on demographic, social and economic criteria

  • The Norwegian welfare state is not a nanny state

  • Justice includes elements of individual responsibility

New Directions in Welfare II - Paris 2011


Data sources

Data - Sources

  • Statistics Norway

    • Institutional (micro) and regional data

  • No open access to the micro databases

    • Ethical guidelines developed by the National Committee for Research Ethics in the Social Sciences and the Humanities (NSD) must be followed

      • Permission from this Data Inspectorate is required

        • Anonymity and professional secrecy requirements

        • A data security agreement must be signed.

  • Limited data availability

    • Proxies are defined and applied in the analysis

New Directions in Welfare II - Paris 2011


Data proxies

Data - Proxies

  • Quality

    • NPR: Number of nurses in care per resident

  • Education

    • EduNwfR: Number of skilled nurses per total workforce

  • Workload – municipality average

    • WLR: Number of residents age 80+ per total number of residents

    • Competition - Herfindahl Index -The higher the index, the less competition

    • Market: Municipality

    • Market share: Number of beds in an institution per total number of beds in a municipality

  • Real capacity – municipality average

    • RCapR: Number of beds per population age 80+

  • Required capacity – municipality average

    • RqCapR: Population age 80 + per total population

New Directions in Welfare II - Paris 2011


Data provider category

Data – Provider category

  • Institutional (micro) data - 912 observations

  • Provider categories

    • Run by a municipality

      • Responsible for the allocation efficiency and the cost efficiency

      • 843observations (92.4%)

    • Exposed to competition

      • Responsible for the cost efficiency

      • 31 observations (3.4%)

      • 26 out of the 31 observations are run by a foreign company

    • Run by voluntary organisations or families

      • 38 observations (4.2%)

New Directions in Welfare II - Paris 2011


Data location centrality

Data – Location - Centrality

  • Centrality – 430 regions

    • Urban

      • Includes an urban settlement of more 50.000 citizens within a 75 minutes

        travel time from such an urban centre (467 observations – 51.2 percent)

    • Rural 2

      • Includes an urban settlement of 15.000-50.000 citizens within a 60 minutes

        travel time from such an urban centre (182 observations – 19.9 percent)

    • Rural 1

      • Includes an urban settlement of 5.000-15.000 citizens within a 45 minutes

        travel time from such an urban centre (80 observations – 8.8 percent)

    • Remote

      • Meets no requirements for travel time (184 observations – 20.1 percent)

New Directions in Welfare II - Paris 2011


Data location city

Data – Location - City

New Directions in Welfare II - Paris 2011


Data financial status

Data – Financial Status

  • Restricted costs - municipality average

    • Legally imposed costs spent on provision of minimum standard services

      and goods based on demographic, social and economic criteria

      • Cost index: restricted costs per citizen per national mean of restricted

        costs

  • Unrestricted income – municipality average

    • Total income minus restricted costs

      • Income index: income minus restricted costs pluss national mean of

        restricted costs per citizen per national mean of restricted income

  • RGAFO

    • Register for Government Approval of Financial obligations

    • Legal rules requiring state review and approval of financial obligations

    • 49 out of 430 municipalities in the 2011 register.

New Directions in Welfare II - Paris 2011


Descriptive statistics quality

Descriptive statistics - Quality

New Directions in Welfare II - Paris 2011


Descriptive statistics quality1

Descriptive statistics - Quality

New Directions in Welfare II - Paris 2011


Descriptive statistics education

Descriptive statistics - Education

New Directions in Welfare II - Paris 2011


Descriptive statistics size

Descriptive statistics – Size

New Directions in Welfare II - Paris 2011


Descriptive statistics

Descriptive statistics

  • The quality indicator NPR is highest on average in the public institutions and lowest in the institutions which are exposed to competitions

    • In Oslo this difference is 84 percent less than elsewhere

    • Much more variations in the public institutions.

    • The lowest NPR is in a public institution

  • In Oslo and in Bergen the education indicator is on average higher in the profit than in the public institutions

  • The biggest institutions on average are in Oslo and exposed to competition

New Directions in Welfare II - Paris 2011


Analysis ols regression with cluster

Analysis: OLS regression with cluster

New Directions in Welfare II - Paris 2011


Analysis results

Analysis - results

  • The more staff – carers, nurses and administrators - the better quality

  • The smaller institution the better quality

  • The higher education ratio the better quality

  • The more real capacity in a region the better quality in an institution

  • The less required capacity in a the region the better quality in an institution

  • The more unrestricted income in the region the better quality

  • The more competition the better quality, but this effect is not statistical significant

  • The higher workload ratio the better quality

  • The more centrally located the institution is, the better quality

  • Provider category has a negative impact on quality

New Directions in Welfare II - Paris 2011


Analysis multinomial logistic regression

Analysis: Multinomial logistic regression

New Directions in Welfare II - Paris 2011


Analysis results1

Analysis - results

  • It is more likely that an increase in quality will take place in a public institution than in a profit institution

  • The odds that an increase in the number of staff will take place in a profit institution is reduced compared to a public institution

  • It is more likely that an increase in the educational level of the staff will take place in a profit institution than in a public institution, but this result is not statistical significant.

  • The odds that an increase in workload will take place in a profit institution has increased compared to a public institution, but the result is not statistical significant.

  • The more centrally located an institution is, the more likely that it is a profit institution

  • The bigger the institution, the more likely that it is a profit institution

  • It is more likely that an increase in unrestricted income will take place in a public institution than in a profit institution

New Directions in Welfare II - Paris 2011


Concluding remarks

Concluding remarks

  • In the literature several ways to measure quality are identified

    • Total number of deficiency of care in an institution

    • Total number of deficiency of life in an institution

  • The final choice of variables in this study has been restricted by the availability of data

  • The importance of a high educational level of the staff in both the process and the outcome of elderly care is documented in the literature .

    • A high proportion of trained nurses in the staff protects health and ensures safety of the residents

    • Hence, NPR is applied as a proxy for quality in this study

New Directions in Welfare II - Paris 2011


Concluding remarks1

Concluding remarks

  • In the literature several ways to measure quality are identified

    • Total number of deficiency of care in an institution

    • Total number of deficiency of life in an institution

  • The final choice of variables in this study has been restricted by the availability of data

  • The importance of a high educational level of the staff in both the process and the outcome of elderly care is documented in the literature .

    • A high proportion of trained nurses in the staff protects health and ensures safety of the residents

    • Hence, NPR is applied as a proxy for quality in this study

New Directions in Welfare II - Paris 2011


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