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

When health is absent, wisdom cannot reveal itself, art cannot manifest,

strength cannot fight, wealth becomes useless, and intelligence cannot be

applied.

Contents

List of Figures ................................................................................................................. V

List of Tables .................................................................................................................. V

List of Abbreviations ..................................................................................................... VI

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  NA  

IV

List of Figures

  Figure 1 1 A Layer Schema  2

  Figure 2 1 Resource Efficiency and the Choice of Positive and Negative Incentives  6

  Figure 3 1 Potential Partners in IV Structures  17

  Figure 0 1 Contract between the KVSA and AOK Sachsen-Anhalt  43

  Figure 0 2 Information Technology and Computer Applications in the Health Sector  45

  Figure 0 3 Registered IV Contracts by Region  46

  Figure 0 4 Actors in the Health Economy Traditional System  47

  Figure 0 5 Actors in the Health Economy IV System  47

  Figure 0 6 Care Providers in Currently Existing IV Contracts  48

  Figure 0 7 Porter s 5 Forces  49

  Figure 0 8 Porter s Value Chain  49

  Figure 0 9 Physician s Current and Prospective Use of Various Data Sources  50

  Figure 0 10 Dementia Decision Tree by knowledgeTools  50

  Figure 0 11 Quality Assurance in an IV contract by the GEK Brandenburg  53

  Figure 0 12 Quality Assurance Documentation ASQ1  54

  Figure 0 13 Quality Assurance Documentation for the Integra Network Magdeburg  56

  Figure 0 14 Possible Variables for Future Research  57

List of Tables

Table 2–1  Managed Care Instruments An Overview  8

Table 3–1  Advantages and Disadvantages for Main Actors in the IV System  26

Table 0–1  Advantages and Disadvantages of various Compensation Modes  44

Table 0–2  Checklist Regarding Quality Issues  51

Table 0–3  Quality Dimensions in IV contracts  52

V

List of Abbreviations

AEZQ Ärztliches Zentrum für Qualität in der Medizin – Agency for Quality in

Medicine

ASQ American Society for Quality

BQS Bundesgeschäftsstelle für Qualitätssicherung – Federal Agency for

Quality Assurance

CT Communication-Technology

DKG Deutsche Krankenhausgesellschaft - German Hospital Federation

DSS Decision Support Systems

G-BA Gemeinsamer Bundesausschuss – Federal Joint Committee

GEK Gmünder ErsatzKasse

GKV Gesetzliche Krankenversicherung – National Health Insurance

GMG GKV-Modernisierungsgesetz – National Health Insurance Modernization

Act

HMO Health Maintenance Organization

ISDS Integrated Service Delivery System

IT Information-Technology

IQWG Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen –

Institute for Quality and Efficiency in the Health Sector

IV Integrierte Versorgung – Integrated Service Delivery/Provision of Care

KBV Kassenärztliche Bundesvereinigung - National Association of Statutory

Health Insurance Physicians

KV Kassenärztliche Vereinigung - Associations of Statutory Health

Insurance Physicians

KVSA Kassenärztliche Vereinigung Sachsen-Anhalt - Associations of Statutory

Health Insurance Physicians Saxony-Anhalt

MC Managed Care

MCO Managed Care Organization

QM Quality Management

SGB Sozialgesetzbuch – Social Security Code

TI Transparency International

TQM Total Quality Management

VI

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.

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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 mechanisms. 1 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

Source: Williamson (1996), p. 326.

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

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2. Managed Care

2.1. What is Managed Care?

“There is no single valid definition of Managed Care up to this point”. 2 “The term encompasses a diverse array of institutional arrangements [and resembles] more complete contingent claim contracts”. 3 “Generally, Managed Care is understood to be a market oriented system of provision of services and insurances in the health sector, the goal of which is the efficient allocation of scarce resources”. 4 The development of the concept was driven by the desire to reconstruct the US health system in order to contain costs and ensure high quality standards of care provision. 5

The main feature of this theory is the guided or ‘managed’ provision of care through the insurer, which breaks up the traditional boundaries between units of medical care, administration and finances. The underlying incentive system works in two ways: Consumers sacrifice some of the freedom to choose care providers. This might be achieved through financial stimuli. Alternatively, a predefined range of providers might be offered and patients can select any of them from the given network. Co-payments to outsiders will be considerably higher. 6 The suppliers of medical services are directly controlled in terms of quantity regulations or guidelines determining the methodological standards. 7

In short, Managed Care Organizations (MCOs) “may intervene in the relation between the provider and the insured individual, limit service in particular circumstances, and may selectively contract with a defined set of providers”. 8 The contracts between insurers and individuals may be differentiated by their characteristics of the premium, the covered benefits, and the particular cost-sharing mechanisms. Mutual agreements

2 Seitz/König/Stillfried (1997), p. 5.

3 Glied (2000), p. 709.

4 Schwartz/Wismar (1998), p. 571 as quoted by Mühlbacher (2002), p. 42.

5 See Seitz/König/Stillfried (1997), pp. 4-6.

6 See Glied (2000), p. 713.

7 See Seitz/König/Stillfried (1997), p. 6.

8 Glied (2000), p. 709.

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between insurers and providers contain selection mechanisms, payment structures and methods to measure and monitor service utilization. 9

The most common form of a MCO is the Health Maintenance Organization (HMO), in which a given insurance premium allows for a predetermined spectrum of services to be used by the enrollee. Over time, different models have evolved, some of which are the Staff-Model, the Independent Practice Associations (IPAs), the Preferred Provider Organizations (PPOs), the Group Model or the Network Model. 10

2.2. Instruments of Managed Care

There are a variety of instruments available, which can be incorporated into MC contracts. This section aims at introducing the most important ones and concludes with an overview of all instruments. The particulars to be discussed are Gatekeeping/Specialists, Case Management, Compensation Schemes/Incentives, and Quality Control.

2.2.1. Gatekeeping and Specialists

Contrary to the traditional system of care, where general or specialized providers of services could be freely selected among the preferred population, there is a restricted access under MC. “Gatekeeper arrangements require enrollees to obtain a referral from a specified primary care physician before consulting a specialist”. 11 The Gatekeeper is responsible for the coordination of processes and ensures a provision of services on the lowest possible level 12 , e.g. “less costly services are substituted for more costly ones”, where applicable. 13 Gatekeepers are comparable to general practitioners in the traditional German system, yet, their duties increase under the system of MC as they also take the role of the case manager. Generally, Gatekeepers will treat patients according to their qualifications and transfer them to a specialist when additional abilities are required. 14 For a practical illustration of a Gatekeeper clause, see Figure 0-1, i.e. the contract between the AOK Sachsen-Anhalt and the Association of Statutory

9 Glied (2000), p. 711.

10 See Schmidt (1997), p. 14 as quoted by Mühlbacher (2002), p. 8.

11 Glied (2000), p. 717.

12 See Schwiedernoch/Özyurt (2004), p. 12.

13 Glied (2000), p. 713.

14 See Seitz/König/Stillfried (1997), p. 12.

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Health Insurance Physicians Saxony-Anhalt (Kassenärztliche Vereinigung Sachsen- Anhalt, KVSA), in the Appendix.

2.2.2. Case and Disease Management

This management tool includes two distinct features, specifically Case and Disease Management. “Where Case Management describes the coordination processes of individuals (e.g. stroke of Mr. Miller), Disease Management is more about patient groups (e.g. all patients with leukemia)”. 15 Both of them aim at the harmonization of prevention, diagnosis, therapy, rehabilitation, and care in order to cut costs and enhance quality. Similarly, they involve the integration of various care providers. With Case Management, the center of integration is the individual, whereas Disease Management Programs focus on specified diagnoses groups. To encourage all parties involved to cooperate, financial incentives are used. This is one of the reasons why MC should be attractive for insurers, providers, and users. Negotiations leave room for all potential partners to be better off; hence, Pareto improvements can be achieved. 16

The likelihood of their application increases with the cost-intensiveness of individual cases. Trends of outsourcing, or carving out, can be observed in this scenario as specialized knowledge is vital. 17

2.2.3. Compensation Schemes and Incentives

Incentives are the driving force behind service delivery in MC structures. They support the economically sound use of resources and help to achieve the desired levels of high quality given the appropriateness and the necessity of the treatment. Capitation, or fixed payments, are frequently applied in MC structures and replace traditional fee-for-service arrangements, which historically provided incentives for the overprovision of services. 18 Capitation payments will result in per-head revenues for care providers independent of the actual amount of time spent on the case. 19 Other alternatives are wages and case based lump-sum payments. For a complete study of advantages and disadvantages of potential compensation modes available in MC structures, consult Table 0-1 in the

15 Schwiedernoch/Özyurt (2004), p. 12.

16 See loc. cit., p. 13.

17 See Seitz/König/Stillfried (1997), p. 15.

18 See Seitz/König/Stillfried (1997), p. 13 and Cutler (1994), p. 15.

19 See loc. cit.

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Appendix. “Plans may combine these mechanisms, as well as bonuses, withholds, and other incentives, into tailored incentive schemes”. 20

The primary goal of every scheme should be a mix of compensation elements that enhances the quality of the provision structure in the desired way. Thus, providing the right amount of positive and negative incentives to ensure a treatment that is medically necessary and appropriate, yet avoids the waste of resources. For the distinction of positive and negative incentives see Figure 2-1.

Figure 2–1 Resource Efficiency and the Choice of Positive and Negative Incentives

Source: Augurzky et al. (2004), p. 34 (RWI Analyse).

2.2.4. Quality Control

“The qualification and reputation of care providers as well as the size of the corresponding panel are of utmost importance for the success of a HMO”. 21 With the help of Utilization Reviews and Quality Management Committees, the provision of care can be evaluated, this holds for the quality of provision as well as for the appropriateness. 22 Additionally, there are a variety of external management tools, such as feedback mechanisms, or continuous quality improvement programs that can be applied. 23 Yet, institutional arrangements in Germany regarding quality measurement and evaluation are rather young, which can be proven by the establishment of the

20 Glied (2000), p. 714.

21 Seitz/König/Stillfried (1997), p. 11.

22 See loc cit., p. 16.

23 See Glied (2000), p. 716.

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Agency for Quality in Medicine (Ärztliches Zentrum für Qualität in der Medizin, AEZQ) in 1995 or the Institute for Quality and Efficiency in the Health Sector (Institut für Qualität und Wirtschaftlichkeit im Gesundheitswesen, IQWG) in 2004. As a comparison, the American Society for Quality has been in place for roughly 60 years now. 24

Within MC, quality is supposed to be a crucial competitive factor. Providers are likely to follow either a cost leadership or a differentiation strategy. 25 In the former case, suppliers will aim at increasing service provision as much as possible and exploit economies of scale. In the latter, firms might prefer specialization on particular fields of indications and the development of a brand name. 26 Differentiation efforts are likely to have a positive impact on quality. An integration of services can be expected to take place as providers of services are likely to join forces and offer a full array of benefits. 27 A more detailed discussion on integration of services is provided in Chapter 3.

Many HMOs contain departments for the evaluation of new technologies. Due to the fact that technological innovation was one of the driving forces behind the recent cost increases in the health sector, these departments perform cost-benefit analyses for the adaptation of large scale projects. 28 The increased use of technology can, generally, be associated with quality enhancements; however, they have to be compared to the resulting costs.

Insurance companies now take on a more active role in the provision of care which leads to an increase of authority or a relative improvement in the status-quo, whereas the providers of care will be worse off in terms of bargaining power. The insurance companies will be in the position to dictate treatment schemes and physicians will have to sacrifice part of their autonomy. 29 This might lead to a potential hold-up problem. The corresponding effect on quality might be ambivalent, as the discussion on the use of evidence based guidelines shows. 30 These guidelines have been used for outpatient

24 See ASQ (2006a).

25 See Porter (1985), p. 11-14.

26 See Klein/Leffler (1981) as quoted by Glied (2000), p. 725.

27 See Schwiedernoch/Özyurt (2004), p. 21.

28 See Seitz/König/Stillfried (1997), p. 17.

29 See Schwiedernoch/Özyurt (2004), p. 12 and Ray (2005).

30 See Hoffmann (1998).

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treatment and recently their compliance has been shown to tie in to the financial incentive system. 31 Despite having introduced the most commonly applied MC instruments in this section, a more extensive overview is provided in Table 2-1. Table 2–1 Managed Care Instruments – An Overview

2.3. Evolution of Managed Care

“Managed Care has a long history”. 32 Early notations date back to 1849. 33 Nevertheless, the surge in importance and growth [in the US] has not taken place until recently. Reformers suggested prepaid practices already in the 1930s, yet, there was strong resistance and regulatory practices were largely successful. In 1973, the US government passed the HMO Act, which encouraged growth and provided start-up funding. Until the 1990s, the HMO was predominantly a phenomenon of the private sector. In the late 1980s, the government started to open the market to federally-qualified HMOs as well. Despite remaining contractual barriers to these organizations, MC is well established in the US today. 34

31 See Glied (2000), p. 717.

32 See loc. cit.

33 See Friedman (1996) as quoted by Glied (2000), p. 717. 34 See Glied (2000), pp. 717-721.

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