Competing Hospitals and Providers Work Miracles

Commentary, Healthcare & Welfare, Johan Hjertqvist

As one who has actively promoted Swedish-style healthcare reforms in Canada for years, I was happy to see Mark Kennedy’s article in the Post about the Kirby-Keon report, which advocates competition for patients among Canadian hospitals and increased staff mobility. These proposals are reminiscent of the policy changes in the Stockholm region during the early 1990s. I would add just a few comments, one of them cautionary.

The two senators are perfectly right. To make hospitals depend more on the income they generate by attracting patients and performing treatments has a radical “psychological impact” on the organization. The introduction of distinct incentives that focus on the delivery of treatment rather than the building of waiting lists generates a strong increase in productivity. From 1992 to1993, public hospitals in the Stockholm region, spurred by the changed incentive stream, delivered no fewer than 16 percent more services for the same money. Within a few years, the waiting lists more or less disappeared.

The fear at the time in Sweden was that such incentives would open the door for “US-style health care”, a political bogeyman in Canada as well. Today, reforms like reimbursement related to performance, hospitals turned into corporations (although still publicly owned and funded), direct competition for service provision and a modern “scope of practice” are generally accepted pillars of Stockholm’s healthcare system. The elected County Council funds it, but welcomes competition and decentralization.

As I have repeatedly told astonished Canadians, Swedish healthcare trade unions now all advocate this kind of “market influence.” In Canada, nurses seem to be ready to strike to prevent change; in Stockholm, they would go mad if somebody threatened to take them back to the pre-reform style of doing things. They have good reasons: nurses in Stockholm have not only been able to develop further professionally under the new rules, they also make more money than their counterpoints in unreformed parts of Sweden.

Finally, a warning. There is no doubt that better productivity helps to improve access and quality, that is clear from the performance data out of Stockholm. But in the long run a system that is ready to deliver more operations and other treatments will cost more money. Although improvements in productivity can hold back some of the increase, in the long run overall spending will go up. This reflects consumer demand which the system before could not satisfy. To handle such a situation, you must have a clear strategy and administrators with competence to run the system. Both have been lacking in the Stockholm region, where today waiting lists are growing again, as the County Council does not want- or know how- to use all options for service provision.

But that is another story. Perhaps the fact that the consumer-based American system spends more money than any other in the world is a reflection of the real level of medical demand, suppressed in socialized countries by rationing and waiting lists. The lesson from Stockholm is that competition and a split between providers and purchasers improves productivity, access and quality. But meeting medical needs previously neglected will cost more money.

Johan Hjertqvist is Director of the Timbro Health Consumer Policy Centre in Brussels/Stockholm and a member of the Frontier Centre for Public Policy research advisory board.