Marianna Fotaki Professor of Business Ethics Warwick Business School The University of Warwick

1. Improving Quality and Efficiency of Health Services by Introducing Market Incentives, Competition, and Choice: Opportunities and Challenges19th April 2014, KermanKerman University of Medical Sciences, Iran Marianna Fotaki Professor of Business Ethics Warwick Business School The University of Warwick

2. The aim of the presentation • To understand the effects of introducing a market ethos and individual choice in public health services on: • Efficiency • Quality • Equity • Individual and institutional trust by users, • To propose an alternative approach to choice that is in line with patients needs’

3. Assumptions • Introduction of market tools into health service provision is expected to improve quality and efficiency in health care provision • It could improve equity for those who did not have access to health services • It is also an aspect of care that patients value

4. Policy shifts towards market-based consumerist patient choice • Reflexive welfare subject (Giddens, 1990) • Questioning the benevolence of civil servants: knights, knaves and pawns (Le Grand, 2003) • Governance by scrutiny mechanisms such as inspection and audit • Introduction of choice, competition, and decentralisation (New Public Management)

5. The logic of choice • In health policy world choice is a normatively and ideologically loaded concept (‘choice is a good thing!’) • It is mostly influenced by normative theories and advocacy, • and almost not at all by descriptive accounts of how choices are made in reality

6. Impact on efficiency 1 • In marketised health systems administrative expenses are higher while additional losses of efficiency occur due to gaming of the system • The evidence from other public health systems committed to universal health service provision (e.g. the Netherlands and Sweden) shows that implementing competition and choice is associated with an increase in costs

7. Impact on efficiency 2 • In marketised systems providers tend to compete on quality by introducing expensive technology (particularly when they do not face hard budget constraints) • This leads to higher costs and squeezes out cost-effective care

8. Impact on quality 1 • There are ways in which quality can be driven up in hospitals other than through competitive mechanisms • The impact of market choice and competition in terms of improved clinical outcomes is inconclusive

9. Impact on quality 2 • Many other factors besides competition influence the quality of hospitals’ services including: • price structure, • payment methods, • internal organisation • and pre-existing culture • in addition to quality regulation systems and protocols • In reality, any impact on quality will depend on the precise institutional setting and on the regime of regulation

10. Impact on equity 1 • Age, class, income, health literacy and family obligations affected patients’ ability to travel to a non-local provider, and therefore their choices • Although users may be generally attracted to the idea of having a choice, research shows that not all groups of patients are able to exercise it in an equal measure

11. Impact on equity 2 • The risk for creating new inequalities over and above those that already exist is real • Some patients could receive preferential access and treatment under certain schemes • Physicians are likely to modify their behaviour in order to fit the market

12. Do patients want choice? • Contrary to policy makers’ beliefs, patients tend to favour a provider they know and trust and opt for choice only when no such provider is available • Choice depends on the context and the condition • Retaining the public and universal aspects of the health system is a concern overriding any desire for choice for patients across the UK and the EU

13. Which patients choose? • Age – older patients over 65 are less likely to choose • Those with family commitments are less likely to choose • Less educated are less likely to choose • Those with income below £10,000 are less likely to choose Source: Burge et al (2005) London Patient Choice Project Evaluation. A model of patients’ choices of hospital from stated and revealed preference choice data.

14. Factors affecting patients choice • Patient individual characteristics • Availability of transport • Distance • Relatives/visitors • Car parking • Waiting lists • Performance of surgeon • Recommendation by GP • Continuity of care • Social services • Follow-up/emergencies

15. Therefore we need to explore • How communication in health care affects information provision which changes the way people make choices • Factors that impact on choices such as: • Beliefs about health and body, • Perceptions of risk, • Patient expectations, • Witnessing unsuccessful treatment, • A long experience of prejudice

16. Furthermore, “Choice, then, is not simply something which occurs after reasoned deliberation, most choices we make are made on impulse in urgent and contingent encounters in which we have to make on-the-spot decisions as our own and others’ needs, expectations, phantasies and feelings press in on us. Indeed, for much of the time we are not even aware of having made choices; it is as if they catch up with us later, often much, much later when the reasons for key choices in our lives - of partner, job, lover etc. – become clear to us. Or should I say, ‘some of the reasons’ for we can never quite seem to get to the bottom of the multitude-determined nature of our own life histories.” Hoggett, P. (2001), ‘Agency, rationality and social policy’, Journal of Social Policy 32(1):37-56.

17. Choice paradoxes • Choice has different meanings for different user groups in different life circumstances • It is constrained by the asymmetry of information between user and provider • Barriers of culture, language and education limit access to information and therefore to choice • Users of healthcare services are not rational utility maximisers

18. How is market choice affecting trust in health care? • Intangible factors (e.g. emotions, anxiety, vulnerability, powerlessness) involved in the medical encounters • Choice is not always desirable (derived utility from decisions deferred to the professional) • Doctor’s omnipotence is being replaced by user’s/market’s omnipotence

19. Conceptual relations between trust and choice • One advantage of conceptualising trust in terms of choice is that decisions are observable behaviours (Kramer, 1999) • The notion of trust-as-choice enables exploration of theoretical and empirical implications (March, 1994) • Trust has a moderating effect on patient decision making and is also likely to have an impact on patient choices in the future.

20. Trust paradoxes • There is a recent revival of interest in the role of trust in public and private sectors but • But there is also evidence of decline of public trust in institutions (Nye, 1997; Norris, 2002; O’Neil, 2002) • Surveillance and monitoring decreases trust but these mechanisms are increasingly relied upon in public service provision

21. Concepts of trust • Economist’s view • an important precondition of economic exchange (Arrow, 1974) • a substitute for imperfect information (Williamson, 1993) • Sociologist and political scientist’s view • constitutive part of an institutionalisation process (Zucker, 1987) • and ‘social embeddedness’ (Granovetter, 1985) • encourages civic engagement (Putnam, 1993; Fukuyama, 1995)

22. The role of trust in markets • Reduces transaction and negotiation costs • Makes contractual relationships possible • Improves quality of services and products • Reduces cost by lessening the reliance on monitoring and surveillance

23. Is trust in public sector different? • It is a more diffuse and a taken for granted concept • It is more closely associated with societal normative values and moral principles • Discourages litigation (e.g. health care)

24. The role of trust in public institutions • On a macro level – it is important for increasing social capability and political legitimacy of the state • On a meso-level – public organisations build their legitimacy when their norms and practices are underpinned by trust • Trust underpins many individual relationships and enables provision of public services (e.g. effective health care)

25. What is the role of individual trust in health care? • Counteracts asymmetry of information • Makes dependency on the ‘stranger’ possible/tolerable • Decreases the cost of the service provision by limiting surveillance and litigation

26. The role of organisational trust in health care? • It fosters collaboration among different professional groups • It encourages trustworthy behaviour of doctors towards patients and their trust in organisations • Reduces the incentives to game the system (for adverse effect in its absence see HMOs)

27. Do patients trade off choice for trust? • Contrary to policy makers’ beliefs, patients tend to favour a provider they know and trust and opt for choice only when no such provider is available • Because patients often lack the information needed to make informed choices about their care, they need medical professionals they can trust; this overrides their desire to ‘shop around’ • While choice may be desired, fairness of the system is more important than empowerment

28. Anticipating future developments • Trust could become less important as the deficits and access to appropriate information decrease • Exercise of agency will take priority over the significance of the trust towards an institution • Negative impact on trust brought by the market might improve users’ benefits by improving overall responsiveness

29. Policy implications 1 • Policies need to account for the social, cultural and context-specific factors guiding patients’ choices • Patients want to make choices together with trusted health professionals, rather than as consumers in the market place • Independence and choice are less important when compared to relationality and trust underpinning the ethics of care

30. Policy implications 2 • Policies must also foster public trust in the health system and health organisations, and protect trust between patient and doctor or nurse, without which care is impossible • Policy makers should draw on interdisciplinary frameworks and alternatives to market mechanisms in health care to design their policies

31. Conclusions • Market competition relies on old-school neo-classical economics and involves a significant narrowing of the concept of choice • Choice and independence are powerful concepts but they do not always apply in health care • Public policy has to protect the most vulnerable members of society