1. Decentralisation without choice and competition: how we can make health systems work better without markets Ian Greener Durham University 1

2. Outline How choice and competition are meant to work Problems with choice Problems with competition Getting healthcare organizations to work better without markets (or at least, despite them) – extrinsic and intrinsic rewards Conclusion 2

3. How choice and competition are meant to work The standard economic theory of markets suggests that ▫Informed consumers make choices ▫Resources attached to their choices go to the providers they choose ▫The best providers thrive as they get chosen, and poor providers fail as they are not ▫So there is an incentive to provide good services for providers, which drives up quality The problem is, it doesn’t work in healthcare 3

4. Problems with choice If consumers don’t make the right choices, we have a big problem In healthcare, we have asymmetric information – those receiving care find it very difficult to judge how good the care is This means they judge other aspects of the service they receive – how easy it was to park their care, how nice people were But there is also evidence from psychology that we don’t judge the whole experience – only the most memorable highs and lows. We misremember quite badly 4

5. All this points to a real problem – given a free choice of healthcare provider, who do you choose? ▫Short waiting time (what is wrong with them?) ▫Long waiting time (they are popular! But do you really want to wait?) ▫Lowest mortality figures (but perverse incentives for treatment) The problem here is that there is no real basis for making any kind of informed choice that isn’t contestable… 5 Problems with choice

6. Problems with competition If patients aren’t making the right choices about providers, then there is little incentive for providers to improve their service to attract them… Indeed there may be perverse incentives for them to… ▫Build bigger car parks ▫Hire attractive staff ▫Restrict their care to only minor cases 6

7. The only way competition might work is by providers believing they need to provide better care, even if they don’t actually have to ▫And then they will find they might lose out to a competitor who has built a bigger car park anyway! 7 Problems with competition

8. Getting healthcare organizations to work better without markets If we aren’t going to us markets (or are going to do something that works even if there are markets) then how do we incentivise staff to improve? 8

9. Extrinsic incentives ▫More pay! ▫Doesn’t work. Virtually no good evidence that extrinsic rewards actually motivate staff to provide a better service in anything but extreme short run Intrinsic motivation ▫Much better evidence that appealing to people’s professionalism much more likely to work – and that is surely why they started doing healthcare in the first place, isn’t it? 9 Getting healthcare organizations to work better without markets

10. Conclusion - Getting healthcare organizations to work better without markets So what we need are self-organising teams, setting evidence-based goals which they are monitored against, and which are set within a framework of system-level goals (which again, need to be evidence-based rather than politically motivated). 10

11. And this is far more likely to work than misplaced ideas about choice and competition If we don’t do this – choice and competition will lead to a huge waste of resources, and mindless targets will be ‘gamed’ – we will ‘hit the targets but miss the point’ 11 Conclusion - Getting healthcare organizations to work better without markets