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Skip to 0 minutes and 5 seconds Hello. Here, we are going to talk about the organisational changes that are taking place in health systems around the world. This is what I referred to earlier as the meso level, how these health systems are being restructured and reorganised. Perhaps the good place to start here is to think about how these services were traditionally organised in most countries, especially those where health was substantially publicly funded and publicly owned and managed, the command and control systems. These systems were characterised by if you like, a top-down bureaucracy. There was vertical integration between primary care, secondary care. The focus was on planning things, managing things in a centralised way.

Skip to 0 minutes and 57 seconds Increasingly, there have been growing pressures on politicians and policymakers around the world to reform this system of health organisation, indeed, of public services more generally. It’s argued that it isn’t fit for purpose, given growing cost pressures on health services. And it’s believed that more bureaucratic ways of organising things are not fit for purpose to meet these demands. This has also gone along with new ideas about how we organise and manage public services. And broadly, these ideas can be described by the umbrella term, the New Public Management, or the NPM. So what do we mean by the New Public Management? Perhaps the easiest definition comes from Christopher Hood from the London School of Economics.

Skip to 1 minute and 47 seconds He distinguishes between the New Public Management and what he calls traditional public administration, the old bureaucratic way in which services were managed. The New Public Management is distinctive in two ways. First of all, it implies a convergence between the public and the private sector, in management practices, goals, and priorities. So, just as efficiency and competitiveness is important in the private sector, under the NPM, it’s also important in the public sector. So we’re talking about the need for improved choice, quality, the interest of consumers, all of this kind of language enters into the public sector.

Skip to 2 minutes and 28 seconds The second distinction that Hood makes is that whereas before, public sector administration was hemmed in by rules and procedures and processes, under the New Public Management, the emphasis is on giving managers more power, more freedom to deliver change, essentially to empower managers, let managers have the right to manage. So those are key principles of the New Public Management. Now, practically speaking, this means a series of reorganisations in health services and in other public services. And it’s possible here to identify four key issues. So first of all, is the privatisation of some public services, of some health services.

Skip to 3 minutes and 17 seconds Now this could mean a move from tax-funded services to services that have to be paid for, out of pocket, or additional fees that people might pay, for example, to visit a GP. That’s something that’s happened in some countries, for example, Spain recently. However, privatisation usually means the privatisation of provision, allowing private firms or nonprofit organisations a greater freedom to provide some services paid for by the taxpayer, and still free at the point of delivery. Examples of that in the English NHS include the development of independent treatment centres for routine procedures. More recently, the government in the UK has announced that private firms, or what they call any qualified provider can deliver health services to the English NHS.

Skip to 4 minutes and 13 seconds So those are examples of privatisation. A second change, however, is to reform those parts of the public sector which still remain under sort of public ownership and public control. One way of doing this is to decentralise responsibility and break up public bureaucracies. So an example of this is the move to more autonomous hospitals with their own boards of directors. In England, these are called foundation trusts. But many other countries have experimented with this. So for example in Norway we have what are called enterprise organisations. Similar developments in countries like Portugal, Spain and Italy. The whole thrust is to give hospitals more independence to manage themselves while they remain still under public ownership.

Skip to 5 minutes and 3 seconds A third big change is in the funding of services. Whereas before in a bureaucracy, services were top-down, planned, and funded through block budgets, increasingly the idea now is to make funding more variable, linked to performance or actual levels of activity. Lastly, there’s been a move to divide public health systems into organisations that purchase and provide services. Or sometimes the distinction is made between those organisations that commission services and those that provide. So an example of this in the English NHS is the introduction of clinical commissioning groups. Ran, or at least theoretically ran, by general practitioners, these groups hold a substantial share of the budget, and the idea is that they will contract for provision from hospitals and other provider agencies.

Skip to 6 minutes and 3 seconds The idea of this is to have a more rational system of delivery, linked to the needs of populations, but also to introduce competition and contract discipline into health services. What does all of this mean? Essentially, what we have seen are some quite radical changes in the organisation of health systems. These apply more to those systems that are substantially publicly funded than those funded through private or third party insurance. But even in those cases, one sees parallels. The New Public Management, broadly speaking, has reduced the level of bureaucracy within public organisations and moved us closer to market systems, competitive systems that still remain publicly owned.

Skip to 6 minutes and 51 seconds However, this has had some unintended consequences, as we will explore in the next case looking at the Victorian… Australian Victorian health system. These consequences are around the fragmentation of health delivery, where decisions are dispersed between different organisations. This makes systems more hard to coordinate, hard to plan in a coordinated way. Another consequence, are rising transaction costs associated with the administrative expense of writing contracts and checking up on them between those agencies that provide services and those agencies that commission services. So all of these are problems.

Skip to 7 minutes and 33 seconds And it’s in this context that some academics and policymakers have said, well, we have to find a way of coordinating these more fragmented services, and perhaps the way forward is develop networks based on trust and collaboration between providers and purchasers or different hospitals. So there is a lot of talk of moving from if you like, a market system or a quasi-market system after the reforms to a more network-based trust-based system.

New Public Management (NPM) and the re-structuring of health systems

Here we look at how health systems around the world are currently undergoing major re-organisation, moving from the model of hierarchy to markets and networks.

You are asked to listen to a short lecture by Professor Ian Kirkpatrick outlining the way in which, in recent years, governments and other key stakeholders have sought to reform healthcare organisations. The lecture begins by noting how, in many countries, hierarchy (bureaucracy) was and, in many key respects, remains the dominant mode of coordination. However, it then goes on to explore a series of reforms that fall under the banner of the new public management (NPM), and how these are dramatically altering the funding and management context in which healthcare services are delivered.

For more information on this topic also consult the supporting document on NPM reforms (below).

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Leadership for Healthcare Improvement and Innovation

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