Production of Healthcare - Contestability and Measurability

Contestability and measurability of goods and services are influenced strongly by the elements of systemic environment. The environment itself is directly affected by the policies of the government. Consequently, the structure of the market to which organisations are exposed bears a critical influence on the behaviour of healthcare goods and service producers. The environment therefore directly determines the strategies to be adopted for the generation of increased revenue. Some of the major policy initiatives which contribute to increasing the contestability of firms in the market are:

(i) Unbundling large bureaucratic structures (i.e. modification in governance);

(ii) Outsourcing certain functions to specialised providers (i.e. modification in payment system);

(iii) Exposing the public and private actors to the same potential benefits and losses attributable to market exposure;

(iv) Decreasing barriers to entry caused by political interference or unwarranted trust in public production (i.e. modification in market structure); 

(v) Explicitly separating  contestable commercial functions and non-commercial social objectives.

Likewise, measurability can be enhanced by:

(i) Relying on quantifiable results (i.e. output or outcome indicators) for accountability and performance targets rather than emphasising on inputs and procedures;

(ii) Shifting from difficult-to-define long-term relationships (e.g. employment or service arrangements) to shorter-term but more specific contractual arrangements;

(iii) Using quantifiable monetary incentives rather than non-monetary incentives like consideration of ethics/ethos/status which are more difficult to measure; 

(iv) Tightening the reporting, monitoring and accountability mechanisms.

Thus, when reforms to organisations such as hospitals entail a shift to earning revenue through the delivery of services in a market, the nature of the emerging market is crucial. In order to derive maximum gains from reforms (that expose the public sector to competition with the private sector) adequate steps should be taken to ensure neutrality. This requires:

(i) Monetisation of social functions (e.g. explicit subsidies that adequately cover costs plus a reasonable margin in the delivery of services to non-paying or non-insured patients; and

(ii) Achieving standardisation in the fee structure and cost of capital for both the public sector and private sector.

Transition from an environment of inefficient public sector to a system of buying services from the private or non-governmental providers needs to be effected in phases. The process should be accompanied by capacity-building in areas such as contracting, regulation and the coordination of non-governmental providers.