Redefining quality through financial instrumentsFootnote 3

As Schut and van de Ven and Maarse and Paulus explain, the regulatory framework for Dutch (hospital) care encourages insurers to negotiate with care providers about the quality, cost and volume of care insurers wish to provide to their clients (the insured). In principle, this ought to lead to selective contracting, in which insurers only contract providers supplying the best quality care at the lowest cost. This, in turn, should constitute a powerful incentive for hospitals to improve their performance.

Prior to 2005, diagnosis treatment combinations (DTCs; the Dutch version of diagnosis-related groups) were developed to enable these insurer–hospital negotiations to take place. For the so-called A segment of hospital care, prices are fixed and insurer–hospital negotiations are intended to focus on quality and volume alone. For the B segment, insurer–hospital negotiations can also include price. Discussion about regulated competition usually focuses on the B segment, and the contributions to the present debate are no exception. However, there is no reason for limiting discussion about regulated competition to the issue of price competition, particularly given the prominence of values other than affordability. We therefore propose considering both the A and B segments as constituent parts of the regulated market, albeit recognising that they are subject to different rules.

As there are some 30,000 DTCs in total, it is impossible for insurers to negotiate on all of them with all hospitals. Even negotiating the close to 10,000 DTCs in the B segment is impossible. What happens in practice, therefore, is that insurer–hospital negotiations focus on a small set of DTCs that have been selected primarily on the basis of revenue and volume. As insurers had virtually no negotiating experience when the Health Insurance Act was introduced, their umbrella association, Health Insurers Netherlands (Zorgverzekeraars Nederland, ZN), began to publish an annual DTC purchasing guide. The guide includes only 200 DTCs. Produced in consultation with the scientific associations of medical specialists, and with input from patient organisations on some DTCs, this guide provides the framework for negotiations between individual insurers and hospitals. In fact, the guide has in some cases assumed a normative role, as hospitals use it to hold their specialists to account.

Thanks to the ZN guide, together with the fact that selective contracting rarely occurs,Footnote 4 rather than becoming more differentiated (as market theory would predict), hospital care is becoming increasingly standardised across providers, not only in terms of the care delivered but also in terms of price. The result of this is that insurer–hospital negotiations have come to focus more on volume than on price and quality.Footnote 5 In this sense, therefore, the differences between the A and B segments of hospital care are far smaller than they are commonly thought to be, with de facto standard prices in place for the B segment.

Schut and van de Ven argue that negotiations between hospitals and insurers barely focus on quality. In our empirical work we found this to be an overstatement of the case. However, it is largely true that quality is only an issue in negotiations when it saves money. That is, hospitals find it difficult to improve quality if higher quality means higher prices. Issues around the role of quality in insurer–hospital negotiations are generally assumed to relate to the absence of – or problematic – quality information (the ‘glass half full’ argument). It is assumed that improved information relating to quality, as this becomes available, will resolve the matter and allow negotiation around quality to play a greater role. But our research shows that even where quality information is available, if quality comes at a higher price, insurers do not seem to be willing to pay for it.

The inability of insurer–hospital negotiation as currently constituted to bring about high-quality/low-cost provision has led to some perverse activity on the part of hospitals. For instance, they are continuing to follow a strategy that was common before 2006 – getting rid of their ‘bleeders’ by referring them to other hospitals – and which has already sparked public debate, particularly when it became known that a particular university hospital wanted to get rid of patients who live in more remote areas and who require expensive treatment for some 50 diagnoses (e.g. repeated infections, allergies and repeated miscarriages). More importantly, there is disillusionment among hospital administrators and staff as they were hoping regulated competition would indeed allow them to sell better quality at both lower and higher prices.

ZN is currently planning to publish a purchasing guide for the A segment to allow for improved negotiations on the treatments provided under this category. Again, however, the guide will be defining quality in cost-saving terms, as the guide's starting point is that the fixed prices in the A segment are maximum prices. This development will further diminish the differences between the A and B segments, and will contribute to making much of the current discussion of the Dutch regulated market seem increasingly beside the point.

What all this tells us is that getting the regulated market in health care to work entails significant ‘invisible work’ (Star, Reference Star1991) towards creating infrastructure such as the purchasing guide, and that key public values are crucially (re)shaped within this process. Second, and counter intuitively, the invisible work involved makes health-care organisations look more similar than dissimilar, with certain forms of quality being much better ensured than others. Third, the promise that the situation will change with the advent of ‘transparent’ quality information requires a degree of trust on the part of individual patients in insurers as purchasers with a quality focus, and this is unlikely to be achieved. Last, discussion about ‘the market’ in Dutch health care mainly hinges on the question of whether or not to expand the B segment, and this blinds us to the possibilities for competition based on quality within the A segment.

The reputation market

For markets (even ‘regulated’ ones) to function, economists argue, actors have to have knowledge about the choice options available to them and about differences between suppliers. Since the early 2000s, Dutch health care has witnessed the creation of a whole new infrastructure to create transparency in health care, with regulators, insurers and patient organisations collecting data on the ‘performance’ of healthcare providers; public and private organisations publishing data to support consumer choice of insurer and provider alike; and healthcare organisations measuring all aspects of the care they provide. Thousands of people now work in the transparency business and discussions about comparability of data have led to the field becoming increasingly specialised, all the more so as regulators create an ever tougher performance regime (the ‘logic of escalation’; Pollitt et al., Reference Pollitt, Harrison, Dowswell, Jerak-Zuiderent and Bal2010).

Despite these enormous investments, both sets of authors argue that the current level of transparency in Dutch health care, especially concerning quality, is insufficient for the market to work properly. These authors are no exception; they echo the reports of the Ministry of Health and policy advisory organisations like the Council for Health and Healthcare (RVZ, 2010). However, as with discussion about the role of financial instruments like the DTC, little attention has been paid to the consequences of transparency at organisational and workfloor levels. It is simply assumed that transparency will be instrumental in giving substance to the public value of quality and in bringing about quality improvement.

The assumption that transparency will work to improve quality is grounded in the idea that healthcare organisations will somehow translate external information demands into quality improvement, either because of competition or due to internal drivers (Berwick, Reference Berwick2002). In practice, however, performance indicators are increasingly creating their own reality, transforming our understanding of what constitutes quality and making hospitals compete on the basis of reputation.

One example is the Healthcare Inspectorate's indicator for diabetes care, which asks hospitals to measure the average Hb1AC score of their diabetes patients. Since many hospitals have invested in integrated diabetes programmes to ensure that ‘stable’ diabetes patients are treated in primary care, they now mainly treat unstable patients. The mean Hb1AC score of their patients is therefore meaningless; instead, they are more interested in the variation of scores and in making sure GPs treat diabetes patients well. But now, with the new indicator, their reputation rests on attracting and treating patients with ‘good’ Hb1AC scores. The indicator has therefore presented providers with conflicting notions of quality (Jerak-Zuiderent and Bal, Reference Jerak-Zuiderent and Bal2011) which changes both the notion of quality and, potentially, the behaviour of hospitals.