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Hospital reforms in France: what can we learn?

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Hospitals in France deliver services for acute care. Except for surgery, the consumption of hospital care is predominantly public. The sector accounts for half of the national consumption of medical goods and services and is mostly funded through the Health Insurance system.

The public hospital sector has been facing recurrent deficits over the last three decades, associated with weak managerial print and uneven performance. Since the 80s, global budget was the norm, leading to rent seeking within and across public Hospitals in the absence of incentives for quality and efficiency. Thus, the French Government launched a massive reform initiative starting 2004 to strengthen hospital efficiency and quality of care in a resource-constrained environment.

These were some of the revealing facts that I came across while leading a recent hospital study tour in France. With eminent health sector specialists from the World Bank, the OECD, Japan and the UK in the team, it was a unique opportunity to take a page from France’s healthcare delivery reforms.

The introduction of DRGs: a panacea?

In 2007 a Diagnosis-Related Groups (DRG) payment system was introduced both in public and private Hospitals with the objectives of improving efficiency and creating a ‘level playing field’ for payments to public and private hospitals.
Although barely measurable, the new payment system resulted in a quasi-systematic boost of activity volume and increased productivity and efficiency in public Hospitals. It also played a catalyst role on governance and care organization. Following the introduction of DRG, resource-pooling across medical units (e.g nursing staff) and cross-subsidization (between high and lower cost activities) led indeed to service rationalization in public Hospitals.

However, this activity-based payment is not a seamless process and comes also with some mixed results. Tools and matrix for cost evaluation are considered opaque and relatively irrelevant by the Hospital managers we met (actually based on a limited sample of historical data from voluntary Hospitals), while the coding system was reported complex to use (2297 codes with 4 levels of severity). At the macro-level, the new system has not yet demonstrated its ability to contribute to expenditure control, though tariffs are used as an adjustment variable and thus revised periodically to fit national spending targets. A monitoring system still needs to be put in place to ultimately limit up-coding, miscoding and undue increase in high-costs services. Concerns derive also from the partial implementation of the reform process. Although a part of the original plan, a single fee schedule is yet to be in place for both public and private facilities. Tariffs currently continue to vary between public and private sector, which considerably limits the potential for aligning public and private performance.

During our visit, the MoH also disclosed that alternative models of payments were under discussion with the aim to address system fragmentation and weaknesses in the continuity and coordination of care that DRG may have contributed to reinforce. Hospital-centric payments could eventually be replaced by “bundled payments” for a complete chain of services from consultation to rehabilitation with an underlying incentive for health-orientated outcomes (recovery=no readmission). Technical feasibility and political adherence to this proposal, however, remains unclear.

A cultural revolution in corporate and public governance?

Change in corporate governance was also a key component of the Hospital reforms. In one of Hospitals that we visited, the reform translated into a New Deal between administration and medical management. Practical managerial measures were taken to better align teams to corporate goals including: expanding the authority of Directors, merging medical units into larger Departments for better coherence and efficiency, setting up joint managing boards, contracting with medical Departments and introducing performance-based bonuses. Effective change came from a mix of top-down measures and some very practical and incremental arrangements emerging from a convergent “medico-eco” vision within facilities.  As elsewhere, it was widely acknowledged that higher the medical community ownership of the changes was, the larger the gains were. “We [the doctors] understood that we all had to gain from this reform if we take part to it”, confessed a medical chief of one of the Hospitals in Paris.

On a less positive note, the expected shift in public accountability did not happen eventually. The initial reform provisions stipulated that the central regulating authority transfers powers to Regional Health Authorities with the view to provide more autonomy to public facilities and enhance performance through a contract agreement between regions and Hospitals. Though regional agencies are now well established and staffed (through the merging of previous administrative entities), lack of budget transfers seems to hinder the exercise of their stewardship role. Confusion still occurs in Hospital managers’ mind when they refer to the “State”, as the central level tend to keep control over strategic investments. It’s still a long road ahead.

Transforming national experience into global knowledge?

The tour gave us a unique opportunity to confirm the importance of gaining and sharing knowledge on the contents, delivery mechanisms, early effects and downsides of health policy reforms in diverse country settings, including developed economies. It remains the Bank’s role (i) to transform national experiences into global knowledge, and (ii) to cross-fertilize development solutions back to less developed countries. And in all these, the task of selecting the best channel is still central. As a follow-up to this tour, our proposal is to gather these lessons as a published study. But will it reach our targeted audience? Will it reach the right managers in rural China currently introducing DRG or a Brazilian DG looking for alternative accountability models? These issues go beyond dissemination; they embrace a full range of questions and may imply a shift from business as usual on the way we gain lessons, produce knowledge globally and influence policy dialogue at national level if we aim for development solutions.


Helene Barroy

Economist, Health, Nutrition & Population Team, World Bank

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