Elsevier

Health Policy

Volume 119, Issue 3, March 2015, Pages 333-340
Health Policy

The impact of New Public Management on efficiency: An analysis of Madrid's hospitals

https://doi.org/10.1016/j.healthpol.2014.12.001Get rights and content

Highlights

  • We deploy a bootstrapped DEA to compare hospitals’ governance models in Madrid.

  • We do not find evidence that new management formulas are more – or less – efficient.

  • Results suggest that what matters is the management itself not the management model.

Abstract

Madrid has recently become the site of one of the most controversial cases of public healthcare reform in the European Union. Despite the fact that the introduction of New Public Management (NPM) into Madrid hospitals has been vigorous, little scholarship has been done to test whether NPM actually led to technical efficiency. This paper is one of the first attempts to do so. We deploy a bootstrapped data envelopment analysis to compare efficiency scores in traditionally managed hospitals and those operating with new management formulas. We do not find evidence that NPM hospitals are more efficient than traditionally managed ones. Moreover, our results suggest that what actually matters may be the management itself, rather than the management model.

Introduction

New Public Management (NPM) policies have been introduced into public healthcare across most OECD countries from the 1980s, in response to concerns about rising healthcare expenditures, fueled by technological and medical advances in treatment, as well as an aging population [1], [2]. In Spain, NPM reforms were first introduced into the healthcare system from the early 1980s, in parallel with political decentralization.1 Decentralization allowed Spain's 17 regional governments to gain autonomy as regards decisions to introduce or reinforce NPM into healthcare, including the adaptation of new hospital management models, such as different forms of public private partnership (PPP) [3]. Since then, regional governments in Spain have increasingly introduced NPM reforms into healthcare, particularly in Catalonia and Madrid [4]. However, vigorous NPM-related reform of the Madrid healthcare system has been highly controversial.

This paper focuses on the reform of hospitals belonging to the Madrid Regional Health Service (henceforth, SERMAS). Emulating healthcare reforms in the UK, Madrid vigorously implemented the use of new hospital management formulas, through the implementation of purchaser/provider split, use of PPPs, contracting out and the introduction of competition between hospitals. Moreover, reforms in Madrid gained increased traction during the ongoing economic and financial crises. Nevertheless, the implementation of healthcare reform has proved controversial and witnessed widespread protest by citizens and healthcare professionals. In particular, the attempt to contract out clinical services delivery in six public hospitals sparked popular criticism [5]. A popular movement formed by doctors, nursing staff and citizens – the so-called “white tide” – took the streets in Madrid several times from November 2012 [48]. Despite this massive popular opposition, the contracting out bidding process went ahead. However, in January 2014, the regional government abruptly declared it would halt the contracting out plan, soon after the Madrid High Court suspended the process [6].

Policy-makers and scholars have argued that NPM techniques would increase efficiency in the health care sector, by introducing criteria from private sector management into traditional methods of public administration [7]. In the Spanish context, policymakers have used repeatedly the efficiency improvement argument to introduce new management formulas in healthcare delivery [8].

Theory suggests that NPM-related policies may enhance the efficiency of public service delivery, such as healthcare provision (for a comprehensive overview of NPM and efficiency, see [9]). However, the benefits of NPM-related tools in healthcare delivery have been already questioned from an international perspective (see, for example, [10], [11], [12], [13]). Moreover, there is no clear evidence supporting efficiency gains as regards the use of new management formulas in Spain,2 which is adding fuel to an already heated debate in relation to the pros and cons of introducing new management formulas in public hospitals.

The central aim of this paper is to evaluate whether the NPM reforms implemented in the SERMAS hospitals’ network are indeed associated with efficiency gains. To do so, this paper carries out a comparative analysis of the performance of traditionally managed hospitals and those adopting new management formulas, for hospitals belonging to the SERMAS in the year 2009. We assess the relative hospitals’ efficiency by means of standard data envelopment analysis (DEA) techniques and a DEA-bootstrap approach, followed by a second-stage consisting of a statistical analysis to assess differences in efficiency scores between the two groups by means of a Mann–Whitney U test and an analysis of DEA bootstrapped confidence intervals.

To the best of our knowledge, this is the first study to analyze efficiency differences between traditionally managed hospitals and those ones operating under new management formulas in Madrid. Thus, this paper sheds new light on the current debate about the use of new forms of public hospitals’ management in Spain. One reason for this lack of empirical evidence may be the opacity of the Spanish NHS; although there is a considerable amount of information on Spanish hospitals in public databases, data is anonymized, making it difficult to identify hospitals and thus, to identify the management model. To overcome this problem, we crossed two different databases to extract individual hospital information (for a detailed explanation see Section 3.2).

The rest of the paper is organized as follows. Section 2 synthesizes the main NPM-style policies implemented in Spanish hospitals, with a particular focus on Madrid. Section 3 describes the data and the methodology used for inference. Section 4 reports the analysis results and interprets them. Section 5 concludes, summarizing our findings, their policy implications and possible directions for further research.

Section snippets

New hospital management models

Though the Spanish public health system had contracted out some services to private hospitals for decades [15], the legislation passed during the second half of the 1990s introduced new managerial formulas to govern publicly owned hospitals, significantly reshaping the healthcare landscape. At the central government level, Law 15/1997 was particularly important, since it enabled the implementation of a wide array of new hospital management models. Previously, during the first half of the 1990s,

Methodology

When talking about public sector efficiency, and thus public healthcare efficiency, one may distinguish three dimensions of efficiency; allocative, distributive and productive or technical [9]. Clearly, a full-scale, comprehensive evaluation of the efficiency of new management formulas in the healthcare system would require evaluation of all three efficiency dimensions but, because of lack of reliable data, we focus only in one of those dimensions for which we have enough data; productive or

Results and discussion

Table 3 shows results for the standard and bootstrapped DEA models.10 For each model the first column shows the estimates of the relative efficiency scores without bias correction for each hospital (βi), while the second column shows bootstrap bias-corrected efficiency scores estimates (bias βi). Table S3 (provided as Supplementary data) reports estimated

Conclusions

As a consequence of rising healthcare expenditures and the ongoing economic crisis, the issue of public healthcare sector efficiency is once again at the top of the policy agenda across many regional governments in Spain. Despite of the lack of conclusive empirical evidence, the adoption of NPM-related policies in healthcare management is still on the rise, particularly in regions such as Madrid, which underwent deep reform of its public healthcare services from the 2000s.

This paper sought to

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