The governance of primary care quasi-markets: a case study of the Stockholm region in Sweden

BACKGROUND: In the latter part of the 20th century, several European countries introduced quasi-markets in their public healthcare systems. The introduction of quasi-markets is designed to give patients a choice of the service provider that meets their needs, among competing providers, including, in some cases, privately owned providers. In quasi-markets, as “money follows the patient”, often in the form of fee-for-service payments, providers have an incentive to increase technical efficiency (to generate higher surpluses from the payment they receive) and service quality (to attract more patients and therefore generate more revenues), in comparison to a traditional planned resource allocation structure. Whether these improvements in efficiency and quality occur in practice, however, depends on the “rules of the game” in the market: what we in this thesis label the quasi-market’s governance system. The thesis aims to provide an analysis of a specific quasi-market — the primary care quasi-market in Stockholm, Sweden — from the perspectives of key stakeholders who work in or are affected by the relevant governance arrangements. The focus is on how the governance system operates and performs, with specific reference to the achievement of fair competition among providers with different ownership characteristics and the attainment of quality of care for patients. METHODS: A literature review was conducted to identify the existing base of knowledge to which the thesis aims to contribute. The main body of the thesis consists of an embedded case study that analyses how the regional authorities in Stockholm seek to exert influence on primary care providers, publicly and privately owned, and how, in the perception of key stakeholders, the mechanisms deployed impact on the achievement of fair competition and service quality. Key informants included those with the formal authority to govern (e.g. officials/employees of the region’s Health Committee and Health Care Office) alongside those who are subject to the resulting governance arrangements (the accredited service providers). Data was generated from 39 semi-structured interviews with senior professionals in relevant organisations, undertaken between February and November 2018. In addition, a documentary analysis of nine strategic/policy documents was carried out to further understanding of the governance system, and its impacts on the main outcomes of interest (competition/quality), with triangulation across sources. RESULTS: The results were organised to address the three key objectives of the thesis, as follows: (i) What mechanisms are used to govern the quasi-market and how do these influence the incentive environment in which primary care providers operate? According to the key informants interviewed, a range of specific mechanisms have been employed by public authorities to exert performance pressure on accredited providers. These include the payment mechanism, market entry/exit criteria, performance monitoring, the use of knowledge management, and a range of sanctions. Of these mechanisms, many informants perceived the payment mechanism to have the greatest impact on incentives. However, they also perceived the effect of this to be moderated by other variables. Primary care providers tended to perceive their actions as being shaped by the actions of different principals — e.g. public authorities, organisation owners, and their professional ethics — resulting in different (and sometimes competing) pressures. When reflecting on the resulting complexity of performance pressures, care providers tended to emphasise the pre-eminence of their values and professional ethics in determining their actions. Care providers also expressed frustration with those who set the rules of the game in the market because of limited opportunities for policy dialogue, and often found command and control-style directions from public authorities to be unhelpful and, in their view, contrary to the advancement of the patient/public interest. (ii) How do stakeholders perceive the impact of the governance system on the achievement of competition across providers in a context of diverse ownership characteristics? The “rules on paper” (manifested in a standardised contract and an associated rulebook) are designed to ensure that all providers — public and private — operate within the same market conditions, i.e. to ensure that there is fair competition. Yet, according to key stakeholders, the rules in practice lead to a situation in which providers with different ownership characteristics (a) serve different segments of the market (with publicly owned providers serving as providers of last resort) and (b) operate in different market conditions. Providers with small private owners perceived market conditions to be unfair to them, while public authorities expressed concern over the performance of providers with small private owners. Indeed, the results highlight the extent to which ownership matters in quasi-markets. This is not simply a matter of public versus private, but also the types of private ownership. In particular, larger private owners (often private-equity companies), for whom short-term profit maximisation is a key goal, are perceived to more often pursue profit maximisation strategies that could be inimical to patient welfare, such as unnecessary referral of patients to associated business units in secondary care facilities. These findings highlight the importance of considering ownership characteristics, and particularly the nature and scale of the owner, as determinants of providers’ behaviour in the primary care quasi-market and thus an important variable for governance systems to recognise and regulate. (iii) How do stakeholders perceive the impact of the governance system on the quality of primary care services? Service providers tended to be sceptical that the outcomes from primary care services are appropriately measured by public authorities. There is a widespread perception among managers of provider organisations that public authorities focus on the “wrong things” — especially those things that are easy to measure (e.g. rapid access to care), as opposed to factors that are less easily measured but are more important from a quality perspective (e.g. continuity of care). In addition, in the absence of robust data on outcomes, public officials tended to perceive the governance of quality to be weak, and highly dependent on trust — in other words, a reliance on providers not engaging in opportunistic behaviours to maximise surpluses/profits at the expense of patient welfare. CONCLUSION: This thesis provides critical insights into the governance of primary care quasi-markets and the challenges involved. Key challenges include: (i) the creation of appropriate incentive structures in the context of multiple (and sometimes competing) accountability relationships; (ii) the complexities and risks of establishing and maintaining fair competition in the context of diverse ownership characteristics; and (iii) establishing accurate measures of service quality and the limitations and risks of reliance on trust. In future reform efforts (in Sweden and elsewhere), health policymakers who wish to achieve the benefits of choice and competition can learn from the Stockholm experience to generate a more granular understanding of the costs and risks involved, and how to mitigate them in practice, noting the additional challenges in governing to achieve public interest objectives in the context of widespread ownership of large for-profit providers