Abolishing cantonal barriers in hospital market

• Abstract
• Characteristics of this policy
• Purpose and process analysis
• Expected outcome
• References

Featured in half-yearly report: G-politik in Industrieländern 9

Abstract

The long-lasting discussion on hospital financing has been enhanced by a new dimension. In March 2007 the National Council amended the draft bill of the Council of States and decided to gradually remove cantonal boundaries. It is assumed that free patient mobility across cantons will encourage structural change and quality competition in the hospital market, but the new law will bring about an additional financial burden for the public and is therefore opposed by the cantons.

Neue Entwicklungen

The reform of Swiss hospital financing has been open to debate for several years. The first ideas for the reform date back to the year 2000[see report #1 "Hospital Funding Competences Revision"].

The milestones of the new financing model are:

• the introduction of a national (full-costing) prospective per-case-payment scheme (SwissDRG), which would make hospital performance comparable across the 26 cantons and across hospitals with different ownership status (public versus private);
• the shift of focus from object financing to subject financing;
• a change in the proportion of hospital cost financed by (1) the mandatory health insurers, (2) the cantonal government (through tax revenues) and (3) complementary private insurance.

The draft of the law was prepared by the Federal Council in 2004 [see report #4 "Hospital financing reform (dual-fixed)"] and then modified by the Council of States in March 2006 [see report #7 "Back to the future in Swiss hospital financing"], after first considering an even more profound change in the system, then postponing it (since it was too radical and therefore premature) [see report #6 "Revolution of hospital financing reform plan"]. The more radical proposal aimed at introducing a monistic (single-buyer) system instead of the present dual financing of inpatient care, with a dramatic impact on the role played by the cantons in the hospital sector. If this direction had been taken, the cantons would have been obliged to participate in the total cost of the basic health care of their citizens with 30%, channeling public subsidies into single-payer arrangements of the health insurers.

In this way one of the main components of cantonal public expenditure (financing and managing hospitals) would have been transformed into a "matching contribution to social security", while health insurers (by playing the full role of purchaser of health care services) would also have acquired the right to manage a considerable share of public money (in addition to the traditional proceeds from compulsory insurance premiums).    

After the preparatory work done by the special commission in March 2007 the discussion continued in the National Council and gave rise to some significant changes with respect to the Council of States' draft bill. Among these we can find the application of the so-called principle of "Cassis de Dijon" in the context of hospital care, establishing the freedom for patients to choose any Swiss hospital which appears in the planning scheme of at least one canton and, as a result, abolishing the constraint of cantonal territoriality. [1]

Innovationsgrad	traditionell		innovativ
Kontroversität	unumstritten		kontrovers
Strukturelle Wirkung	marginal		fundamental
Medienpräsenz	sehr gering		sehr hoch
Übertragbarkeit	sehr systemabhängig		systemneutral
current    previous

Without doubt the most innovative aspect of the proposal is the suppression of cantonal borders. Although the time is not yet ripe for a constitutional reform, by means of which completely new competences would be assigned to the Confederation in the matter of health care provision, the law on hospital financing highlights the will of the legislator to overcome some obvious limits of federalism in a State of small dimensions such as Switzerland. Although it is divided between the liberal and conservative front, in favor of a greater opening of Swiss health care to market logic, and the left, which would prefer to reinforce the intervention of regulation and planning of the State in the health care ambit, parliament seems to agree on one point: competition and regulation both require the passage from 26 cantonal hospital systems to one single national hospital space if it is to function with more effectiveness. 

Purpose and process analysis

Current Process Stages

	Idee	Pilotprojekt	Strategiepapier	Gesetzgebung	Umsetzung	Evaluation	Veränderung/Richtungswechsel
Implemented in this survey?

Initiators of idea/main actors

• Regierung

• Parlament

• Leistungserbringer

• Kostenträger

Stakeholder positions

The new elements of the National Council's proposal  

The completely new aspect of the draft bill drawn up by the National Council concerns the suppression of the principle of cantonal territoriality. This is a measure which was proposed in the past by some members of Parliament, but it did not manage to achieve sufficient consensus. In the meantime political balance has changed, not least after the publication of an OECD report in October 2006 on the performance of the Swiss health system [2], where the suppression of the cantonal barriers in the hospital field is described as an inevitable part of a reform process able to make the Swiss health system cost-effective.

In the OECD document we can read:

"A unique feature of the Swiss system that strongly conditions the potential success of any reform is the current approach to regulating health care provision and insurance markets at the canton level. (…)This results in the duplication and inefficient organisation in supply (particularly for complex and uncommon procedures) across cantons. It also reduces the scope for active competition at the insurer and provider level because of the small number of provider units (…) resulting in an inefficient organisation of hospital supply that does not make a cost-effective use of available human and financial resources (…).. This calls for a progressive lifting of the barriers to inter-cantonal arrangements and a re-orientation of their responsibilities from the direct provision of care to enhanced responsibility for monitoring local health outcomes. This would require the development of a new general framework law and federal-cantonal agreement to set up an improved information base in order to enhance cost-efficiency."

The first person who decided to support this new vision was the Federal Minister of Home Affairs, Pascal Couchepin. The idea of free hospital choice was included in the draft bill by the Committee of Social Security and Health of the National Council in November 2006 [3].

The new version of article 41, which was approved in March, cites:

"In the case of a hospital stay the insured may freely choose among all the hospitals which appear on the hospital list of at least one canton" [4].

Essentially this is the spirit of the principle called "Cassis de Dijon": when a canton establishes that a certain hospital is necessary for the health care provision of its population, with this decision it makes the services of the institute of care accessible and completely covered (partly by the health insurer, partly by the canton of origin) also for citizens of other cantons. In fact, the law in force is quite different, based on the principle of cantonal territoriality. The dual financing of inpatient care is limited to public-interest hospitals in the canton of residence, while inpatient care in public hospitals out of the canton of residence benefits from public contribution only in cases where cross-border hospital care is necessary from a medical point of view, and it has been explicitly authorized by the office of the cantonal physician [for more details see 5].

Although some small cantons have inserted institutes situated in other regions of the country in their hospital planning schemes, thus guaranteeing free choice of these hospitals to all their citizens, in most cases the total cover of hospital expenses outside the canton is subordinate to an authorization being obtained. Those who wish to be treated outside the cantonal borders when there are no medical reasons for doing so (since a given treatment is also available in the canton's hospitals), must relinquish the public financing share and pay the difference out-of-pocket or through complementary insurances.  By choosing cross-border care a patient opts out of the system of universal coverage and pays out-of-pocket (or through private insurance) services that in the canton of residence would have been fully covered.

As shown in figure 1, in 2005 a large share of inpatient care occurred outside cantonal borders. However, a significant part (50%) represents the result of an opting-out decision (to have more choice) and is partially privately financed. According to cantonal estimates, the cost of this opting-out decision totals around 600 million CHF. Obviously the suppression of the cantonal borders, to be realized by 2010, will entail an increase in the public contribution and a relief for private insurances, since the cantons will be called on to co-finance all the out-of-canton hospital stays and not only those judged necessary from the medical profile.  

The second important change decided by the National Council concerns the distribution key of cost per case between sickness funds and cantons. Unlike the decision made by the Council of States, which allowed for a public variable contribution between 45 and 60% (depending on the level of premiums compared with the Swiss average) the National Council proposes a fixed share of 55% borne by the cantons and 45% by the insurers. The opportunity for a fixed distribution, which is equal in all the cantons, is justified even more so in the light of the decision made by the National Council to suppress the cantonal barriers.  

Finally it must be mentioned that, with minor changes compared to the Council of States' proposal, the principle has been anchored in the draft bill according to which the Confederation will be called on (1) to define unitary criteria for the hospital planning of the cantons (bearing the dimensions of quality, cost-effectiveness and guarantee of the basic provision duly in mind (2) to intervene in the coordination of first-rate medicine, if the cantons do not reach an agreement and (3) to promote and publish the benchmarking of the clinical costs and outcomes of Swiss hospitals. This decision also outlines the will of the legislator to create a single Swiss hospital space and, though still respecting federalism, to transfer a more explicit role to the central State in a sector (hospital provision) which has always been a constitutional mandate exclusive to the cantons.  

Stakeholder positions

The cantons are without doubt the stakeholders who oppose the free choice of hospitals most vigorously. The cantons have made it known through the Conference of the Cantonal Directors of Public Health that they are not prepared to accept two elements of the draft bill approved by the National Council, mainly for financial reasons: the principle of Cassis de Dijon (whose introduction will cause the cantons an increase of 600 million CHF) and the fixed share (45% to be borne by the health insurance, 55% by the cantons) of the cost per case (AP-DRG), which will entail a further transfer of financial burdens (approx. 800 million CHF) from the complementary insurances to the public hospitals [6]. The cantons would favorably view a return to the Council of States' proposal maintaining the principle of cantonal territoriality and a flexible share, which would be the result of each canton making a free choice between a minimum of 45% and a maximum of 55%. If the National Council's solution were confirmed, it cannot be excluded that the cantons would decide to launch a referendum.

A second stakeholder who might have an interest in holding up the introduction of the free choice of hospital all over Switzerland is santésuisse. In fact, the principle of Cassis de Dijon makes complementary insurance cover superfluous; at present this is quite common among Swiss citizens and sold by the health insurers themselves for the most part. It is a curious fact that santésuisse, who are usually in favor of all the changes which stimulate competition and the role of the market, have decided to remain silent in this case; in their first stance on hospital financing [on March 19 2007] no opinion on this surely important element of the reform was expressed. In a second stance [see 7], santésuisse declared themselves in favor of removing cantonal barriers but willing to postpone the implementation of this to a future reform step. On the other hand, the health insurers are in favor of the fixed share of expenses proposed by the National Council.

The Minister of Public Health and the Swiss Hospital Association [8] are among the stakeholders in favor of the National Council's version of the draft bill. Finally the supposition that patients would also favorably view the freedom to choose their hospital in all Switzerland is justified.

Figure 1: Share of hospital days delivered to patients living in a canton but treated outside the cantonal boundaries

Actors and positions

Regierung
Federal Health Minister	sehr unterstützend		stark dagegen
Cantonal Directors of Health Departments	sehr unterstützend		stark dagegen
Parlament
National Council	sehr unterstützend		stark dagegen
Council of States	sehr unterstützend		stark dagegen
Leistungserbringer
Swiss hospital association	sehr unterstützend		stark dagegen
Kostenträger
health insurers (santésuisse)	sehr unterstützend		stark dagegen
current    previous

Actors and influence

Regierung
Federal Health Minister	sehr groß		kein
Cantonal Directors of Health Departments	sehr groß		kein
Parlament
National Council	sehr groß		kein
Council of States	sehr groß		kein
Leistungserbringer
Swiss hospital association	sehr groß		kein
Kostenträger
health insurers (santésuisse)	sehr groß		kein
current    previous

Positions and Influences at a glance

Adoption and implementation

In order to bring the legislative procedure to an end the draft bill approved by the National Council will have to return to the Council of States in the summer session. Should the senators decide to emend part of the changes produced by the National Council, it will be necessary to eliminate the differences in the chamber of arbitration. However, it is probable that the law on hospital financing, which is forecast to come into force for 1.1.2008, will be finally passed by the end of June 2007.

A time limit of two years is foreseen to realize the free choice of hospital, the adaptation of the new cantonal planning schemes, the new key of expenditure distribution between the cantons and health insurers and the introduction of the AP-DRG, therefore the new system should come fully into operation by the end of 2010.  

Expected outcome

It is quite probable that the Council of States will also accept the free choice of hospital all over Switzerland. On the other hand it cannot be excluded that parliament will decide to comply with the cantons' requests, at least partly, accepting a reduction in the fixed share to be borne by the cantonal tax system (from 55% to 50%) or an adoption of a variable tax (as was considered by the Council of States a year ago). In any case the new law on hospital financing will compel the cantons to collaborate more and draw up an inter-cantonal and super-regional hospital planning scheme.

In the mid-term an even more radical change must be reckoned with. The health care system seems destined to become even more competitive and market-oriented than in the present situation. In fact, the National Council has approved motion 2006. 3009 of the Council of States with a large majority, granting the Federal Council an even wider interval of time, however (by 2010), to draw up a draft bill able to regulate the financing of outpatient and inpatient services in a unitary way, opening up the way for the introduction of a monistic financing system.

Impact of this policy

Qualität	kaum Einfluss		starker Einfluss
Gerechtigkeit	System weniger gerecht		System gerechter
Kosteneffizienz	sehr gering		sehr hoch
current    previous

What is the main advantage of the free choice of hospital and of the suppression of cantonal borders?

It is to enable comparison of quality between the hospitals of the various cantons as well as cost benchmarking and thus promote the specialization necessary in this sector. The Swiss cantons are too small to offer all the health care in loco, especially that with a high level of specialization. For this reason the risk exists that in some cantons the mandate to offer certain specialist services be awarded to one hospital only, which would enjoy a monopoly position by virtue of the principal of cantonal territoriality.

It is not realistic to assume that the opening of cantonal borders would cause impressive movements of patients from one canton to another. Obviously no patient wishes to be treated far from home. However, the patients of periphery cantons could accept a move and opt for a stay outside their canton provided that the centers of excellence in the cities can show that they really offer higher quality care, thus encouraging healthy competition between hospitals, beneficial especially with regard to quality but also to exploiting economies of scale and achieving greater efficiency. In the meantime the transfer of burdens borne by the tax system indicates an inversion in the trend compared to the last few years (marked by an increase in premiums superior to that of public contributions) and thus shows signs of an improvement in the equity of financing.

References

Sources of Information

Amtliches Bulletin (2007), Nationalrat - Frühjahrssession 2007 - Zwölfte Sitzung - 20.03.0708h00.www.parlament.ch/ab/frameset/d/n/4716/241831/d_n_4716_241831_242085.htm?DisplayTextOid=242086

OECD (2006), OECD Reviews of Health Systems: Switzerland. Paris: Organization for Economic Cooperation and Development.

Schweizer Parlament (2006), MEDIENMITTEILUNG: Neue Spitalfinanzierung. Nationalratskommission am Ziel - Für die freie Spitalwahl, 24.11.2006 www.parlament.ch/homepage/mm-medienmitteilung.htm?m_id=2006-11-24_999_04

Nationalrat (2007), 04.061 Bundesgesetz über die Krankenversicherung. Teilrevision. Spitalfinanzierung (Fahnen der Frühjahrsession 2007).

Crivelli, L. (1998), Grenzüberschreitende Patientenwanderungen: Eine mikroökonomische Analyse für die Schweiz, Bern: Paul Haupt Verlag, ISBN 3-258-05853-9.

GDK (2007), MEDIENMITTEILUNG. KVG-Revision: Spitalfinanzierung. Unannehmbare Kostenverschiebungen, 21.03.2007 www.gdk-cds.ch/fileadmin/pdf/Aktuelles/Medienmitteilungen/Medienmitteilung_20070321-f.pdf

Santésuisse (2007), Positionspapier zur Spitalfinanzierung vom 02.05.2007 www.santesuisse.ch/datasheets/files/200705011109390.PDF

Die Spitäler der Schweiz (2007), MEDIENMITTEILUNG. Landesweit freie Spitalwahl mit leistungsabhängiger Spitalfinanzierung, 21.03.2007 files.hplus.ch/pages/HPlusDocument7883.pdf

Reform formerly reported in

Hospital financing reform (?dual-fixed?) Process Stages: Gesetzgebung

Revolution of hospital financing reform plan Process Stages: Gesetzgebung

Back to the future in Swiss hospital financing Process Stages: Gesetzgebung

Author/s and/or contributors to this survey

Luca Crivelli (proof-reading by Iva Bolgiani and Mary Ries)

http://www.unisi.ch/personal-info?id=424

Empfohlene Zitierweise für diesen Online-Artikel:

Luca Crivelli (proof-reading by Iva Bolgiani and Mary Ries). "Abolishing cantonal barriers in hospital market". Health Policy Monitor, April 2007. Available at http://www.hpm.org/survey/ch/a9/2