Ed Walsh                                                                                             20 November 2013

Misallocation of health resources has resulted in staffing levels that depart not slightly but starkly from international norms: too few in the front line….too many in offices.  International data highlights how far Ireland’s health system has strayed.  A recent study by Paul Redmond of Public Policy.ie, which took into account national age profiles, places Irish public expenditure levels as the highest in the OECD.[1]

In 2009, after the annual cost of running Ireland’s public health system had mushroomed to over €15 billion, it was ranked by the OECD as the most inefficient in the developed world[2]and having Europe’s most costly hospitals[3]. Since then some progress has been made and it is now costing €2 billion a year less. But, to reduce costs to the OECD norm would require further cuts of €1.7 billion.  Cuts of twice that amount would be necessary to compete with the world’s best: Switzerland or Australia.

However, building a health system comparable to Australia’s involves not only cutting cost but at the same time improving services.  A tall order.  Much more is required than tweaking Ireland’s over-funded and over-staffed public health system to bring it into line with good international practice.

The 8,300 HSE medics are outnumbered by over 15,000 managers and administrators, by 9,000 general support staff and 17,000 other patient and client-care staff.  The number of HSE nurses has been significantly reduced to about 34,000 since 2009, when the OECD published data indicating that Ireland had 51 percent more practicing nurses than the OECD norm.

While the total provision of doctors in Ireland happens to be exactly the international norm in the developed world (3.1 per 1000 people[4]) too few are based in the community as GPs and family doctors.  The proportion of doctors serving as GPs in primary care is only half the OECD norm and only a quarter of that in Australia and France[5]. In such countries, where primary care has been well developed, hospital is for serious incidents.   Whereas in Ireland many people have to make their way to hospital A&Es in order to get treatment for minor incidents. Costly hospital space, which in most other countries is reserved for those who are seriously ill, is occupied by people who should not be there.[6]

While it is core government policy to develop the primary care system the effort has faltered. GPs, who are central to the initiative, feel that they are being badly treated and forced, as private sector workers, to bear considerably harsher cuts than their colleagues in the public sector.  While hospital consultants’ pay was cut by 15% in 2010 payment for each medical card patient has been cut by some 30 percent[7]. Both the National Association of General Practitioners and the IMO report[8] that GPs have suffered income reductions of between 30 and 40 percent at a time when they are being called upon to play lead roles in reform of the health system and reduce the burden on hospitals.

The impression is given in the media that many individual GPs receive HSE funding in excess of €500,000 but failing to explain that these high payments are made to group practices where many doctors and support staff are paid from the single allocation. Apart from the private hospital system, GPs represent about the only part of the Irish health system that works effectively. It manages to deal with 22 million patient visits each year.[9]  Ireland’s 2,728 GPs[10] run their own private practices as any other small business and have to provide for the overheads of staff, premises and insurance from their own earnings.

With only 8,300 HSE doctors why was it decided that Ireland needed over 15,000 management and administrative people to support them?  Ireland didn’t.  No one did. The Ahern government shirked its duty to rationalise when the Regional Health Boards were disbanded and the HSE was created.  While the rest of the developed world has abandoned paper and installed sophisticated integrated IT health systems the government also failed to do likewise. The result is an organisation that is now difficult to manage and one that has vacuumed resources into its administrative innards; leaving the frontline hospital medics and GPs starved of resources.  No chief executive or minister… however competent….can adequately manage the Irish health system in its current form.

The government is now struggling to change it. Universal health care has been announced. Initial moves appear perverse.  Universal health care inevitably requires all to purchase basis health insurance.  Yet, in attempting to shore up public hospitals by siphoning off funding from the existing health insurance system thousands are abandoning insurance as premiums rise.  To remain solvent it is possible that some health insurers may have no option but to withdraw cover from public hospitals and restrict their policies to private hospitals.

However the government decision to move towards a new model for funding hospitals represents the most significant initiative taken in Irish healthcare for decades.  The system, pioneered in Australia in the 90s and now widely adopted internationally, is based on the ‘money-follows-the-patient’ principle. It is due to be phased in next year and when operational hospitals will have an incentive to treat more patients (rather than less, as now under the block-grant system).  Waiting lists should fall as well-run hospitals compete for patients from the less efficient.  The government can expect to be lobbied to ring-fence the public hospitals and prevent the private hospitals from participating in the scheme and competing for patients.  It would be unfortunate if the government succumbed: exposing public hospitals to competition from private hospitals is the surest way of stimulating necessary change.

A study[11] conducted at Stanford of some 10,000 organisations in 20 countries has highlighted that government-controlled organisations are the worst managed, while multinationals are the best.  Organisations that are subjected to marketplace competition tend to be more efficient and responsive.

Stimulating development of the private sector has been used with remarkable success by the health authorities in Sweden. There public must compete with private to survive.[12].  The government takes the view that as long as health standards are met it permits, indeed encourages, private organisations to compete for funding on the same basis as public organisations. Over 200 private health facilities have opened and now all of the public hospitals in Stockholm are managed under contract by the private sector.[13]  Forcing the public sector to compete with the private sector was central to the Swedish strategy of reforming a dysfunctional health system.  The policy was a remarkable success when introduced in 1994: waiting lists shrunk, unit costs were curtailed and patient satisfaction increased.

Placing the public and the private on the same competitive footing is the surest way of reforming and transforming the Irish health system.  Sweden did it.  We should try.

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[1] Paul Redmond, Expenditure and outputs in the Irish health system: a cross country comparison.  Public Policy.ie c 2013.  http://www.publicpolicy.ie/wp-content/uploads/Expenditure-Outputs-Irish-Health-System.pd[2] http://www.apha.org/NR/rdonlyres/7EE65F33-9F4E-4EBF-8554-DE29461A11F8/0/OECDhealthsystemscompare.pdf

Potential savings represent the difference between a no-reform scenario and a scenario where countries would become as efficient as the best performing countries.Source: OECD Health Data, 2009;

[3] Oliver O’Connor, SBP  24 Mar 13

[4] http://dx.doi.org/10.1787/888932315602  Health at a Glance 2011: OECD [5] http://dx.doi.org/10.1787/888932524089   Health at a Glance 2011: OECD

[6] Health at a Glance 2011: OECD

[7]www.oliveroconnor.co  and Susan Mitchell,  Sunday Business Post, 20 Oct 13

[8] ibid

[9] Michelle McDonagh, Irish Times. 20 Aug 13

[10] idem.

[11] www.stanford.edu/~nbloom/JEP.pdf

[12] http://www.theguardian.com/society/2012/dec/18/private-healthcare-lessons-from-sweden

[13] http://www.civitas.org.uk/nhs/download/SwedenBrief2013

Elliot Bidgood,  Healthcare Systems: Sweden & localism –an example for the UK? Civitas. October 21, 2013