The organizational innovation reforms: the Spanish and Catalan experiences

For Spain as a whole, up to 2002, most of the organizational innovation has so far turned towards the hospital sector by extending the Private Foundations Bill (to newly built hospitals) and by issuing a new Public Hospital Foundations Bill (for already existing hospitals). Both are pieces of central state legislation to be implemented at the regional level and adopted on a voluntary basis by professionals.

The first case (new status for new hospitals) comes under the 1994 Law for the creation of Private Foundations (not just hospitals) and its extension in 1996 to cover new hospitals (half a dozen small to medium-sized hospitals). These are all publicly owned, but managed privately, employing staff according to general labour laws, purchasing supplies on the open market, and using private accountancy rules with ex post control of expenses. However, in practice, public and private interests are far from clear in the new legal status. For instance, the ‘Protectorado’ (the supervisory board) and ‘Patronato’ (the administrative board) are both in the same hands (today the regional health authority). There is no separate capital endowment for expenses (other than equipment, which is in fact bought with public funding). In deciding current revenues, the financer sits on the management boards, often appointing managers and representatives in the ‘Patronato’. Having said this, it is interesting to note that, despite criticisms, these Foundations (in Andalusia, Madrid, Valencia, and the Balearic Islands) have so far survived political pressures, with the single exception, at present, of Galicia, although we do not yet have a full appraisal of their performance. At first, they raised expectations for change with the highly motivated and, at that time, better-paid doctors in these Foundations, with less private practice and better access to new equipment. This shaped a new type of public management culture beyond the organizational change, which today has almost disappeared, as doctors in the old public hospitals have since been able to recoup former salary differences without changes to their working conditions. This has been done under the argument “to ensure equity in the public interest”.Footnote ¹

The Public Hospital Foundations Bill introduced in the Budget Law of 1999 allows for minor changes in existing hospital management in relation to purchasing goods, contracting new staff, and book keeping. However, they could not change pre-existing employment entitlements without the voluntary acceptance of health professionals. Even then, the threat of political change created strong disagreements between the medical trade unions and the opposition political parties. Under the central management of health care and after a long and sordid political debate, the efforts of the Minister of Health failed to achieve any change in hospital status.

In contrast to the Spanish situation, the Catalan experiences with health innovation after decentralization have proved more successful. Catalonia (with almost seven million residents, a strong sense of community, and a desire for self-governance) has introduced changes that are largely the result of the importance in the past of community involvement in social care. In fact, local authorities, the church, and private wealth endowments have complemented the initially poor services of a Bismarckian model of basic health care coverage. At devolution, instead of adopting a new status uniformly for all the existing facilities, diversity has been fostered. As a result, most inpatient care today is provided by a publicly financed network of non-profit-making private hospitals. Only 40% of the beds are under traditional social security management. Most of these hospitals are ‘public consortia’ of regional interests (local and provincial authorities), open to private non-profit-making participation. In addition, some private Foundations are also licensed for public provision. This allows health authorities to contract out health care on the basis of hospital activity, instead of just reimbursing actual expenses, and gives greater autonomy to hospital managers when deciding on salaries and working conditions. So far, lower pay scales and more flexible timetables compatible with private practice are the norm. Within the public network, no discrimination between patients is formally possible, and in practice risk, selection has never been an issue to date.

Consortia and private Foundations work under their own management rules. They differ in the rules under which they are created: Consortia from common public law, and Foundations from specific private legislation. However, in both cases, employment policies, managerial charts, and internal management are different from the older, social security hospitals. In the case of Catalan Hospital Consortia, differences are reflected in (i) the way they purchase goods (on the open market); (ii) how they contract professionals (outside the civil service) and set their working conditions (more flexibility and greater compatibility between public and private practices); and (iii) the capacity to create purely private organizations to achieve the consortia interests (provision of care for private insurers). They enjoy more managerial autonomy and own the assets, although their finances are still publicly controlled ex post and their policies are overseen by representatives of the community, although subject to a lower degree of political influence. So far, their management policies and manager teams have proved to be robust in the face of political changes. The ‘associated group of interests’ is usually chaired by a member of the local community with no direct involvement either in politics or in the health care sector as such.

The Catalan Hospital Foundations (eight important hospitals) are currently private organizations according to the rules under which they operate, but under a public protectorate. Their governing body is commonly open to representatives of civil society, people who risk their reputation and assume legal responsibilities for the privilege of leadership. Foundations own their assets and operate under private law in all aspects of their activity. They may borrow freely in the private market. Once they are contracted, given their non-profit status, they need to be licensed and monitored by the regulator in a similar way to the public sector.

As stated, this Catalonian hospital structure exists for historical reasons, because in the past, local provision of health care came to complement central provision, through a range of organizations, today integrated in a single publicly financed network. The Government of Catalonia has taken advantage of this, continuously favouring organizational changes and avoiding the administrative constraints that are otherwise imposed on a purely public health care system.

Away from hospital care, in primary care services, Catalonia has also avoided replicating the old model of salaried physicians working in Area Health Teams under the old administrative rules. Fourteen experiments are currently running with self-employed physicians, either under ‘Co-operative’ organizational forms or ‘Limited Responsibility Corporations’ for well-defined geographical areas. Following on from this, some of the Catalan Institute health centres have also begun to compete with and emulate the innovations being made, such as paperless records, better-adapted work schedules, the offer of complementary services, and so on. New teams are financed by capitation, with some elective inpatient care usually being included and with notional agreements on drug prescription costs. This means in reality that primary care in these areas is ‘indirectly’ publicly managed. They are awarded a license and they decide on their own working conditions and salaries, what they do with any budget surplus (within limits), incentives for joint production with peer controls to protect against moral hazard, etc. They offer more extended working hours and some of them have started to offer community premia or direct prices for some additional, so far minor, services out of the public ‘catalogue’ (such as some dental treatments, or chiropody).

At least 51% of the assets of these organizations have to be in the hands of their professionals. None of them may own more than 25%, and shareholding is prohibited for co-operatives (self-organized labour). Physicians who accept a change in status from the former social security primary care teams to the new forms do not lose their job in the public system for a certain period, although they do not have their particular post ‘reserved’. These organizations are subject to private law. They own the assets, and are sometimes supported financially by the Royal College of Physicians, a professional corporation which offers a sort of leasing contract to professionals willing to assume financial risk and managerial autonomy. In judging their performance, it has to be said that those physicians who have left the old regime are a biased sample, since they are usually more committed to the public provision of health care (no private practice is allowed there), have greater motivation (they are younger), and are probably tired of the old rules in which ‘someone from outside tells you what to do, and you get the same payment irrespective of the effort you put into the team’.Footnote ²

Finally, over the last five years, in order to improve the co-ordination of health services at the local level, the Catalan Health Authority has offered a new scheme of financing to regional associations of health providers, on a voluntary basis, paying the ‘holder’ under a new, virtually all-inclusive, capitation regime. This has so far been accepted by five larger regions (just below 10% of the Catalan population), which include diverse providers. It has allowed the creation of Health Consortia that operate under a virtual (rather than vertical) command (see Horn, Reference González López-Valcárcel and Barber1995; Williamson, Reference Rey and Rey1975). It has created new organizational incentives for health system integration in a geographical area. In this context, several providers with diversified status, different organizational forms, and positions in primary, hospital, and long-term care, integrate their equipment and facilities and co-ordinate strategies for fulfilling the Catalan Health Plan objectives with a greater sense of autonomy. No loss of finance comes from reducing activity, and it puts in place a more efficient co-ordination of primary and hospital care. Also, it can control the costs of drugs, since they are financed on a kind of risk-adjusted (still preliminary) population formula. Despite the fact that extending the system to the large metropolitan area of Barcelona seems difficult, the first evaluation recently published by the Generalitat of Catalonia is encouraging (Agustí et al., Reference Agustí and Ibern2006). At any rate, this new Catalan pilot scheme based on capitation follows the strategy of (i) not creating hierarchically uniform health providers, (ii) awarding greater autonomy to their professionals (extended internally within their institutions), and (iii) pushing for a better co-ordination of health care facilities and health strategies in focusing not so much on ‘who they are or what do they do, but on what they finally achieve in terms of health outcomes’.

Diversity in the organizational structures of regional health care provision has opened the discussion on how far ACs can go in reforming on their own the Spanish National Health Service. Moreover, regional health finance is today open ended with a central transfer that may be complemented by the ACs with their own resources through either new taxes or surcharges, or the rebalance of the previous expenditure priorities. Per capita expenditure is today greater, as is its variation across the regions (the differences are more explicit now than in the past under central management). In the opinion of some, this has brought a loss of social cohesion, which is under political discussion.

Assessing the changes

Of course, all the above-mentioned changes involve potential risks for day-to day practice. A full assessment of results has not yet been backed up by data: the importance of the transaction costs, the degree of financial responsibility effectively assumed, possible violation of the minimum pool for a credible transfer of risks, and the still prevailing culture against “too much talk of money in health care” may still create serious problems, though as time passes this looks less likely. From time to time, those caveats create a hostile political response from those who prefer the old system and they accuse some regional politicians and policy makers of privatizing the NHS (Sánchez, 2006). However, we believe that if public finance and public regulation are maintained, these claims are difficult to sustain. For instance, on the profit incentives it is clear that their denial does not mean that they are not there in ‘pure’ public systems in terms of bureaucratic fringe benefits, nor that patient welfare will not be exploited by producers, particularly when no free choice and local monopolies are established. Furthermore, some authors doubt the ability of the public authorities at the regional level in their new role; in this new context, the regulator needs to be more responsive and alert to any of the undesirable consequences of those changes, because in these new frameworks any mistakes will be more apparent than those made within the hierarchical rule of public organizations. Moreover, learning to live with diversity is needed in a regionally decentralized, quasi-federal state like Spain. This allows for emulating best practices, some forms of benchmarking, and regional ideologically led health reforms. It certainly makes for a more complex society but in several respects a more democratic one too.

In brief, in public health care systems, the confluence of incentives of the participants always favours the status quo under well-known working rules (Gibbons, 1998). A fully centralized health care system seems to protect them better. From this premise, it is relatively easy to relate existing conflicts of revenue allocation and prioritization in health care to the need for more resources and changes in the organizational structure of care. More resources may indeed protect against changes at the clinical managerial level with a larger dose of self-governance and financial risk-transfer to providers. Changing structures at the mezzo level is thought to avoid more drastic reforms at the micro level, i.e. the way that health care is delivered. But if the organizational reform is to be successful, it needs to change clinical management at the local level. Regional devolution, decentralization, and planned delegation of responsibilities have favoured in Spain the innovation strategies. The final test even for the apparently more successful Catalan experience is, however, to incentivate change at the clinical level. Organizational innovations may not offer sufficient conditions for this. It is easy for the conservative status quo to build a coalition with some patients’ groups and political parties to effectively halt the institutional changes. This has been clearly the case of the central state Spanish Public Foundations. In the Catalan case, the diversity of hospital providers is an aspect from the past that has so far proved resistant under decentralization management to the efforts to bring uniformity (rigid working conditions and wages), although it is far from safe. Pressures for equality in salaries and working conditions appear from time to time. More encouraging are the reforms in primary care and on territorial integration. The key to success here is the potential for self-governance and at least an attempt to transfer financial risk to the management teams.

The experience shows that organizational change on a radical basis makes for a very limited strategy for health care reforms, particularly in public systems where working conditions, providers’ autonomy, responsibility, and financial risks remain unchanged. It may be better to innovate on a local basis. It cannot be ignored that in the NHS, organizational changes do not accommodate stakeholders’ interests. In this sense, it is relatively easy to build on radical but selective – not general – changes, offering continuity as the Catalan experience shows. It may be much more difficult to reform ex-novo at the general level, as demonstrated by the Spanish experience.