NEW FORMS OF PROVIDER IN THE ENGLISH NATIONAL HEALTH SERVICE

ABSTRACT 1 : A wide ranging set of reforms is being introduced into the English National Health Service (NHS). They are designed to increase the market‐like behaviour of providers of care with a view to improving efficiency, quality and responsiveness of services. This paper is concerned with one aspect of those reforms: namely the policy to increase the diversity of types of providers of care to NHS patients. In this context, increasing diversity means that providers will not all be standard publicly owned NHS organizations. They can be publicly owned but autonomous, or independent (both in for‐profit and not for profit). The paper discusses the wide range of organizational forms available, analyzing their governance structures It then discusses the small amount of evidence currently available about the performance of diverse providers of health care.     

Can't buy me love? Subsidizing the care of related children

This paper uses a reform in Illinois that reduced the monthly subsidy offered to relatives asked to provide foster care as a plausibly exogenous change in the cost of caring for related children. Families offered a 30% lower wage were 15% less likely to provide care, with especially large declines for children who require mental health services, infants and teenagers. One innovation is a sample selection model that uses the foster care placement tendency of child protection investigators to predict entry into the sample—an instrument that should be unrelated to family characteristics due to a rotational assignment process that effectively randomizes investigators to families. Meanwhile, child health, education, and placement outcomes do not appear to suffer following the decline in the subsidy offer, consistent with similar quality levels among marginal kin and non-kin caregivers.     

BENEFITS AND COSTS OF INTENSIVE FOSTER CARE SERVICES: THE CASEY FAMILY PROGRAMS COMPARED TO STATE SERVICES

The foster care system attempts to prepare children and youth who have suffered child maltreatment for successful adult lives. This study documents the economic advantages of a privately funded foster care program that provided longer term, more intensive, and more expensive services compared to public programs. The study found significant differences in major adult educational, health, and social outcomes between children placed in the private program and those placed in public programs operated by Oregon and Washington. For the outcomes for which we could find financial data, the estimated present value of the enhanced foster care services exceeded their extra costs. Generalizing to the roughly 100,000 adolescents age 12-17 entering foster care each year, if all of them were to receive the private model of services, the savings for a single cohort of these children could be about $6.3 billion in 2007 dollars. ( JEL D61, H75)     

Quality, reputation and the choice of organizational form

This paper revisits the hypothesis that nonprofit organizations emerge in markets that are characterized by contractual incompleteness because they ensure consumers against opportunistic behavior. We extend the Glaeser and Shleifer [Glaeser, E., Shleifer, A., 2001. Not-for-profit entrepreneurs. Journal of Public Economics 81, 99–115] framework, which studies an entrepreneur’s optimal choice of organizational form and service quality when quality is non-contractible into a repeated interaction setting. The main result is that when reputations can be sustained, then for-profit status is the preferred organizational form and high quality services are ensured. This finding suggests that existing explanations of nonprofit organizations that focus entirely on contractual imperfections in the producer/consumer relationship may be inadequate.     

DOES THE MISSION OF PROVIDERS MATTER ON A QUASI‐MARKET? THE CASE OF THE BELGIAN ‘SERVICE VOUCHER’ SCHEME

ABSTRACT 1 : In 2001, the Belgian government introduced a ‘service voucher’ scheme in the field of domestic (housework) services, following a quasi‐market mechanism which fosters competition between providers of different types as regards sector (for‐profit, public, third sector) and mission (seeking profits, home care provision to vulnerable groups and work integration of the unemployed). Empirical evidence suggests that third sector organizations focusing on a social mission recognized by a tutelary regulation are the best performing with regards to the quality of jobs and service organization, leading to a better ‘triangulation’ of the service relationship. On the other hand, for‐profit providers, especially temporary work agencies, seem to favour their capacity of adaptation to the desiderata of their clients and costs’ minimization to the detriment of the quality of jobs which are made as flexible as possible.     

Une comparaison entre divers établissements de services de première ligne en santé au Québec (Canada)

This paper presents an empirical and comparative investigation of four types of organizations providing primary health care services: private clinics, community centres, health coops and community associations. Case studies were done following a common design for data collecting and analysis, taking into account the organizations' context of creation, their institutional dimension (structure of power and political system), their organizational dimension (co-ordination and production of health care), and their main paths of development. Results show that organizations present many differences when it comes to delivering universal, accessible, and complete health care services. Non-profit organizations offer more promising perspectives for patients and health care workers by encouraging them to participate in their management. Health coops' openness depends on their nature: while consumer coops encourage patient participation, producer coops allow employees to make decisions. In this sense, patients and employees in collective health care organizations seem to have more political advantages than in private organizations.     

Spillovers,integrated production and the theory of the firm

Recent econometric literature has demonstrated the existence of significant technological spillovers within and around groups of advanced (R&D-intensive) firms. I demonstrate thatcompetence blocks of advanced firms operate as technical universities and research institutes, unintentionally providing free educational and research services, often in areas where such services are not supplied by existing educational institutions or where the nature of competence makes traditional educational institutions incapable of supplying them. I demonstrate that the competence that diffuses from such competence blocks is botheconomic andtechnological, that it only diffuses under particular market circumstances, notably characterized by competition, and that the outcomes are typically experimental.Integrated production is an organizational technique to coordinate complex production in mechanical engineering industry within firms and over specialized consultants and subcontractors in the market. Such organizational competence is typically tacit and difficult to communicate outside its production context. Hence, such a production organization often functions as a competence block that spills knowhow throughout the industry. This organizational form is also very useful in illustrating the nature of the firm, the nature of the organizational competence that forms the backbone of western industrial technology and how that competence generates economic growth through the intermediation of firms. I use Swedish aircraft industry as a case illustration.     

Perceived quality of public services, liquidity constraints, and the demand of private specialist care

In this article we offer direct evidence on the role of perceived quality differences in publicly provided health care services, in determining the incentive to opt out for private services and, for poor individuals, short-run credit constraints in the access to these services. We concentrate on private specialist care, a category of services for which disparities in the access are highest. We use Bank of Italy—SHIW data to first study the determinants of demand for private and public specialist care, estimating probit and bivariate probit models, and ZIP models. We then apply the Carneiro–Heckman procedure to identify the share of people constrained and study how perceived quality of public services affects the percentage of people short run constrained. Our estimates suggest the presence of large territorial differences, as for the role of income and the quality of public services.     

MEASURING QUALITY IN SOCIAL CARE SERVICES: THEORY AND PRACTICE

ABSTRACT 1 : Measuring and assessing service quality in the social care sector presents distinct challenges. The ‘experience’ good properties of social care, for instance, and the large influence played by subjective judgements about the quality of personal relationships between carer and user and of process‐related service characteristics make it difficult to develop indicators of service quality, including those of service impact on final outcomes. Using some of the key features of the ‘Production of Welfare’ approach, the paper discusses recent developments in the UK of the theoretical and practical frameworks used for assessing quality in social care and for understanding the final impact of services on the wellbeing of their recipients. Key current and future challenges to the development of such frameworks include difficulties in disentangling the impact of social care services on final outcomes from the often dominating effects of other, non‐service related factors, and the generalization of consumer‐directed care models and of the ‘personalization’ of care services. These challenges are discussed in the context of the different possible applications of quality indicators, including their role as supporting the service commissioning process and their use for assessing the performance of service providers.     

ECONOMIES OF SCALE AND SCOPE: THE CASE OF SPECIALTY HOSPITALS

The recent growth of physician‐owned hospitals specializing in orthopedic and surgical specialty services in the United States has generated considerable controversy, yet there is little understanding of the economic logic of organizing hospital services around these single specialties. This article takes a multiple output hospital cost function approach to an empirical investigation of whether single specialty hospitals (SSHs) exhibit economies of scale and economies of scope as keys to new insights into that logic. We applied generalized estimating equation techniques to a sample of 80 SSHs and 883 general hospital competitors over the 1998–2008 period. Results indicated large underlying scale differences across the organizational types. Simulation analysis revealed the potential for exploitation of economies of scope gained from shifting output from SSHs to general hospitals. (JEL I18, L23)     

NEW INSIGHTS INTO THE STRUCTURE OF THE WORLD ECONOMY*

The United Nations' newly completed study of purchasing power parities covering 34 countries varied in region, income level, and form of economic organization shows the systematic differences between the usual view of the structure of the world economy arising out of international comparisons based upon foreign exchange rate conversions and the structure one sees when actual prices are available. The real per capita GDP of developing countries is understated relative to developed countries when exchange rates are used in converting countries' national income accounts to a common currency, with the degree of understatement for any two countries being inversely related to the per capita income difference between them. The reason for this is that relative prices in the non-traded goods sector are lower relative to traded goods prices in low income countries. The systematic pattern observed in the 1975 data of the 34 countries has been extrapolated over time and space to get estimates of GDP for other years and countries. In the absence of detailed price data, the real shares of final expenditures devoted to particular components of the total can only be estimated as the proportion of own currency total expenditure devoted to the components. The observed differences in the pattern of prices of poor countries relative to rich for different components makes this clearly wrong for international comparisons, and in systematic ways. For example, (i) the relative price of services compared with commodities in poor countries is lower than in rich; so the apparent tendency of the share of services to rise as a country's income rises disappears when real quantities are considered; similarly, (ii) the relative price of capital goods is greater in poor countries compared with rich ones, so the difference in investment ratios out of GDP between rich and poor countries is understated.     

The Challenge of Obtaining Quality Care: Limited Consumer Sovereignty in Human Services

Abstract

This paper offers a conceptual analysis of the problem of quality in human services: in elementary school, psychiatric care, and the health and social care of children, the elderly, and the intellectually disabled. Geriatric nursing home patients are used as a case. These care recipients cannot enforce their legal right to quality service; their quality-effective demand is low. Formal economic analyses often characterize the weak position of the care recipient as an information asymmetry problem. An additional obstacle, however, is the recipient's inability to safeguard her personal interest due to physical, mental, or social incapacities; that is, “limited consumer sovereignty.” Incapacitated individuals cannot enforce quality even when quality information is available. This creates a fundamental incentive problem in the monitoring of quality. They also depend on services that are complex and non-verifiable, making external monitoring difficult. This paper presents a typology of measures to increase the quality pressure facing providers.     

Quality and quantity in primary care mixed‐payment models: evidence from family health organizations in Ontario

Abstract We study the impact of a mixed capitation model (the Family Health Organization, FHO) on quality and quantity outcomes among primary care physicians in Ontario. Using a panel of administrative data covering one year before and two years after the FHO model was introduced, we find that physicians in the FHO model provide about 6% to 7% fewer services and visits per day, but are between 7% and 11% more likely to achieve preventive care quality targets. These results suggest that the mixed capitation model with contractible quality indicators may be welfare improving relative to the FFS model.     

Higher Education in the United States: Laissez-Faire,Differentiation, and Research

The U.S. higher education system stands out in three dimensions. First, it has the highest number of leading research universities. Second, it displays significant differentiation: multiple types of institutions offer services that differ in cost, prestige, etc. Third, it has a laissez-faire/free-market orientation: private and public entities are free to open schools and compete; essentially all schools enjoy substantial autonomy. This paper makes the case that these features are systematically related. The development of the American higher education market—which allowed market forces to operate and lacked centralized planning—contributed to the emergence of differentiation and a set of leading research universities.     

Regulating internal markets for hospital care

Internal markets have been created in an attempt to shift power from producers to consumers in a context where consumers have very weak incentives to seek out low-cost producers and have little knowledge about the quality of health care. The idea is that by establishing public agencies to act as the sole purchasers on behalf of consumers in their area of jurisdiction, the asymmetry of information can be moderated and a more competitive environment created in which costs will be minimized and quality enhanced. Whether these aspirations can be fulfilled will depend on how the internal market is organized. In this article the cost-minimizing properties of alternative market structures where hospitals do not share the same objectives are examined. The scheme is designed from the standpoint of a benevolent regulator that provides services using two hospitals with fixed locations. The paper shows that price discrimination is a superior instrument. Finally some market forms are always dominated and should be avoided.

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Semicollusion vs. Full Collusion: The Role of Demand Uncertainty and Product Substitutability

We examine the profitability of two different cartel organizational forms: full collusion, under which firms collude on both price and quality, and semicollusion, under which firms collude on price only. We show that, in the presence of demand uncertainty that cannot be contracted upon in the cartel agreement, firms may be better off limiting their collusive agreement to price only. However, a positive relationship between demand uncertainty and the relative profitability of semicollusion exists only for low levels of demand substitutability. The converse is true for high levels of demand substitutability. Therefore, if demand substitutability is sufficiently high, no level of demand uncertainty will make semicollusion the optimal organizational form. In contrast, semicollusion is guaranteed to be optimal for a sufficiently low level of demand substitutability. The market structure described is motivated by and closely parallels that of shipping cartels. Received September 29, 2000; revised version received December 10, 2001 Published online: November 11, 2002     

Human Fallibility, Complementarity, and Fiscal Decentralization

This paper examines economic growth properties under alternative fiscal organizations when a bureau's decisions are fallible. A country consists of J jurisdictions, which need a public service. In a centralized government, one authority decides on services in every jurisdiction. In a decentralized government, J authorities are in charge of each public service. An authority can have high ability or low ability, and an authority with high ability draws a good project with higher probability. We first show that the decentralized government provides the same average quality of public services, with lower variance, than does the centralized government. We then apply this result to an economic growth model where the value of the Solow residual is a constant elasticity of substitution (CES) function of public services. We show that there is a critical value of the degree of complementarity below which fiscal decentralization is more desirable than fiscal centralization for an expected economic growth, and the decentralized government has a lower variance of GDP growth.     

Measuring Variety and Quality of Products with Trademarks

Abstract

The variety and quality of products has a great importance in the analysis of international trade flows. Several theoretical models show that larger and richer economies produce and export goods characterized by higher variety and quality. Accordingly, empirical studies have tried to quantify this relationship by investigating directly the composition of trade. In this paper we propose the use of trademarks to estimate the variety and quality of goods and services. We consider the Community trademark applications filed by 120 countries and distinguish the variety of the underlying products across classes (extensive margin) from the variety within classes (intensive margin). Then we estimate the quality of a country's goods and services observing how much its trademarks are extended on multiple classes (quality margin). The empirical analysis consists of simple cross-sections of the ‘applicant’ countries. The extensive margin is found to account for about 40% of the higher number of entries of larger and richer economies, while differences in quality seem to explain about 10% of national differences in trademark applications. These findings partially confirm those of previous empirical studies, although the nature of the data and the methods of classification lead to some quantitative discrepancies and to a different interpretation of the results.     

Organizational form and output quality

This paper re‐examines the relationship between a firm's organizational form, not‐for‐profit versus for‐profit, and its output quality. The Arrow‐Hansmann theory of hidden action on the part of providers predicts higher quality for not‐for‐profit suppliers. This prediction has a puzzling lack of support in the empirical literature. We propose a theory that resolves the empirical puzzle and generates additional testable implications. The theory starts with the traditional assumptions of hidden action and supplier altruism. It then incorporates two additional features of real‐world markets: hidden information on supplier ability to provide high quality and a variation across buyers in the degree of informational asymmetry. The central prediction of the theory is that quality has a higher variance across for‐profits than across not‐for‐profits. Preliminary evidence from the US market for hospital care is consistent with this prediction.     

Considering endogeneity and heterogeneity–a hierarchical random parameters approach to measuring efficiency

Modelling efficiency in healthcare with stochastic production frontiers (SPF) is complicated because of the immeasurable elements, quality of care and casemix as well as complex data structures. This analysis considers a SPF approach to estimating efficiencies for organizations in the Republic of Ireland that supply GP services outside of normal working hours. These organizations are run out of a number of primary care centres. The daily payroll for the centre is the output in the SPF and the services offered by these centres enter the production function as inputs. It is argued that these services are exogenous variables and are determined by patient characteristics and reported conditions and not the staff within the centre. A characteristic of the data used is a two-tier structure emanating from a centre lying within a co-op. To account for this tier structure the analysis considers a random parameters approach. The analysis also considers proxies for quality of care and casemix and incorporates them into the SPF. The sensitivity of efficiency values to the excluding the random parameters, quality of care and casemix variables is examined by estimating three reduced forms of the model which ignore each of these elements.