Otto-von-Guericke Universität Magdeburg
Faculty of Management and Economics
Institute of Social Medicine and Health Economics

The Reform of the German Health Sector: Integrated Service Delivery Systems - Cost Containment and Quality Enhancement - Attaining Diverging Ends by Similar Means

David Wagner

Table of Contents

1. Introduction ... 1

2. Managed Care ... 3

2.1. What is Managed Care? ... 3
2.2. Instruments of Managed Care ... 4
2.2.1. Gatekeeping and Specialists ... 4
2.2.2. Case and Disease Management ... 5
2.2.3. Compensation Schemes and Incentives ... 5
2.2.4. Quality Control ... 6
2.3. Evolution of Managed Care ... 8
2.4. The Three Pillars of Managed Care ... 11
2.5. Applicability of Managed Care from the US to the German System ... 12

3. Integrated Service Delivery Systems ... 13

3.1.1. Current Deficiencies and Goals to be achieved ... 14
3.2. Development and Concept ... 16
3.2.1. Legal Aspects ... 16
3.2.2. Contracting Partners ... 17
3.2.3. Compensation ... 19
3.2.4. Financing IV Structures ... 20
3.3. Factors for Success ... 20
3.4. Organization and Management ... 22

4. Quality Management in the System of IV ... 27

4.1. Results of Empirical Research ... 27
4.2. Is the IV Approach suitable for Quality Enhancements? ... 29
4.3. Quality of Provision – Contractual Means ... 30
4.4. Outlook ... 33

5. Conclusion ... 34

Bibliography ... 36

Appendix ... 42

1. Introduction

With reforms in the years 2000 and 2004, respectively, the German government created a new playground for actors in Germany’s health sector. In previous years, a cumulative number of events were said to seriously impair the efficiency of the health system as it was established. The recent policy can be characterized by a shift towards rationing and standardization, in short, a trend towards Managed Care (MC).
This paper is supposed to take up the part of the reforms which are aimed at introducing MC practices in the German health sector. This comes mainly in the form of Integrated Service Delivery Systems (ISDS), which overcome the burden of the traditional sectoral splitting of prevailing institutions in the health economy. The state’s priorities have been cost containment and quality enhancement. Yet these goals were perceived to be unattainable at the same time due to their state of being. The primary focus of this work is to show how government outlines the compatibility of these measures and which legal context has been established to put them into practice.
The first section deals with the evolution of Managed Care, outlines its instruments, and tries to figure out why this structure seems to be particularly useful in reacting to market failures in the health sector. Information asymmetries, moral hazard and public good character are problems that need to be overcome. Policy means of information, communication, technology, and networking are suitable approaches to address the above disturbances. An attempt to examine the transferability of Managed Care from the Anglo Saxon to the German system is to be undertaken.
The main part of this work attempts to outline the development of ISDSs in Germany, of which the predominant version is the ‘Integrierte Versorgung’ (IV). The legal framework, contractual means, payment schemes, and possible partners in the IV system are to be analyzed just as well as factors for success of this rather new model of care provision. It follows an introduction to the concept of network organizations which will lead directly to management areas that are particularly important when setting up networks. Eventually, advantages and disadvantages for the main actors in the system of IV are listed.
The last part of the paper analyzes whether ISDS are able to smooth out imponderabilities resulting from the traditional system of provision. Particularly, the mix between cost containment and quality enhancement is reconsidered. Outcomes of empirical research will be presented. Quality criteria, as they are suggested in the literature, will be discussed, and measures for continuous improvement collected. As shown in this subdivision, the problem of data collection severely limits current options to evaluate quality. Measurable, clearly defined parameters are required to do so and have to be developed, consequently. Suggestions are being made as to which variables could be selected for further research. Other distracting factors are legal matters concerning the disclosure of IV contacts which considerably complicate the issue.
Another approach towards describing the changes in the health sector is the consideration of Williamson’s governance mechanisms¹. He stresses the importance of institutions and their effects on organizational and individual behavior. This fact is illustrated in Figure 1-1. By changing the institutional ‘health’ environment, various governance parameters for care providers are changed, one of them being the newly established freedom to contract between insurance companies and a selection of care providers. As a result, strategic partnerships or networks are going to be formed. Furthermore, a selection of MC instruments will also affect individual attributes, changing the propensity to consume services, inter alia.

Figure 1–1 A Layer Schema (only available in download-version)

2. Managed Care

2.1. What is Managed Care?

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1 Williamson (1996), pp. 326-328.