March 2008 · Number 120 A regular series of notes highlighting recent lessons emerging from the operational and analytical program of the World Bank`s Latin America and Caribbean Region. Hospital Performance in Brazil 44690 The Search For Excellence1 Gerard M. La Forgia and Bernard F. Couttolenc Hospitals are at the center of the health care universe class centers of excellence; they serve the minority, the in Brazil. When ill, many Brazilians go straight to the well-off. "Substandard" best describes most hospitals, hospital for want of a "family doctor" or primary care the ones serving Brazilians who cannot pay out of pocket network. Hospitals are a critical part of the government's or afford private insurance. These hospitals, many de- budget, absorbing nearly 70 pendent on public financing, deliver percent of public spending on inefficient, poor-quality care, judging health. Hospitals influence the ebb from the available data. and flow of politicians' careers-- when hospital mishaps hit the Hospitals, though the de facto health headlines or the limelight falls care delivery system in Brazil, have on high-performing hospitals. received scant attention as health care Hospitals are at the forefront of organizations from either policy mak- policy discussions in Brazil. The ers or researchers until recently. Since discussions reflect their promise the mid-1980s, the development of as centers of technological health policy in Brazil has focused on innovation and medical advances decentralizing service delivery, reduc- as well as widespread concern ing financial disparities, and achieving about their cost and quality. universal access to basic care. Issues Brazilian hospitals are important of hospital performance, however to many people for many different defined, have been left mainly to the reasons. What makes hospitals individual facility. important is easy to understand. What makes hospitals deliver In 2004 a publication by the Minis- quality care efficiently--or not-- try of Health (Ministério da Saúde, is much harder to grasp. MS) on hospital reform sounded the call for change. It was the first MS Challenges to Brazil's Hospital System document to focus entirely on the hospital sector. The publication opened a national discussion on hospital Brazil's hospital system is pluralistic. An array of finan- problems, performance, and potential. The document cial, ownership, and organizational arrangements encom- outlined broad policy "directions" that are aligned with pass both the public and private sectors. Brazil has a long a subset of policy recommendations specified in the tradition of public financing of private facilities. The sys- current study. The MS called upon research and hospi- tem is also highly stratified. A few hospitals are world- tal communities to collaborate with it to strengthen the 1 Extracted from (2008, forthcoming) "Hospital Performance in Brazil: The Search for Excellence" by the same authors. Volume prepared for the World Bank's Human Development Department, Latin America and the Caribbean Region analyses and help develop a vision and a strategy for hospital reform. . It is in this spirit of collaboration that this volume is produced Main PoliCy MeSSageS 1. enhancing the autonomy and accountability of Public Hospitals Any efforts to improve the quality and ef- ficiency of public hospitals will rely on in- creasing the motivation and "proactivity" 2. Wielding Funding Power to influence Hospital Behavior of their managers. Under current conditions, even the best-motivated and trained managers will have a tough Government and private payers of hospital care are time raising performance. Too many key decisions are not using funding to its fullest potential to influence made outside the hospital. Rigid constraints on manage- hospital behavior. In some cases, funding arrange- ment undermine efforts to increase accountability. To ments hamper performance. Most funding is unlinked bring autonomy to the vast majority of public hospitals, to performance and gives no incentive to cost con- it will be necessary to develop and test hospital conver- sciousness. Although no payment system is perfect, sion strategies (to autonomous organizational arrange- many countries have linked payments to treatment ments) against Brazilian and international experience. costs based on diagnosis, adjusted for severity. In the Though a necessary ingredient, autonomy alone cannot United States, the diagnosis-related groups (DRGs) drive performance in public hospitals. Also needed are payment system has been found to improve efficiency service contracts, contract enforcement, performance- and control costs. based financing, flexible human resource management, and a robust information environment. Brazil's Authorization for Hospitalization (Autoriza- ção de Internação Hospitalar, AIH) system can serve as a foundation for a DRG-based hospital payment What can be done? system. In moving toward DRGs, the first order of Enhancing the Autonomy and Accountability of business is to align AIH rates with costs. Developing Public Hospitals a robust DRG-based payment mechanism would also reduce distortions from the fragmentation of payment · Develop a strategy, regulatory framework, and systems--if private (and public) payers switch to the implementation plan to convert direct and indirect same payment basis. However, accountability for administration facilities to alternative organiza- hospital performance requires more than performance- tional arrangements that possess autonomous au- based funding (or autonomy). Contracting arrange- thority and flexible human resource management. ments are needed to define the content of funding ar- rangements and thereby link funding to performance. · Formulate an investment policy that promotes the Also, successful hospital contracting requires contract application of autonomous organizational arrange- management and enforcement. Global budgeting ef- ments in any new public hospital. forts combined with contracting are underway in a handful of states and municipalities. These promising · Establish a public-private program to strengthen initiatives have been shown to raise performance. governance arrangements in private hospitals under contract with the SUS, including regulatory reform and enforcement, strengthening of con- tracting, and stimulating competition. 2 · March 2008 · Number 120 mechanisms. These experiences can provide the basis for What can be done? effective coordination. To reduce duplication and waste Enhance leverage of funding flows to increase of infrastructure and equipment, two final elements are efficiency, cost consciousness, and quality. needed, a policy-based investment strategy and a system for vigorous technology assessment and allocation. Enhance leverage of public funding flows (SUS) by: · Implementing new payment systems (such as What can be done? global budgets linked to performance) for public hospitals that replace the line-item budget and Pursue systematically service coordination and ca- build in strong incentives for quality and efficien- pacity configuration. cy enhancement. · Improving contractual arrangements by applying · Develop and implement state-level master plans instruments that specify volume and type of ser- for care coordination and establishment of regional vices and priority targets, linking a proportion of networks. payment with performance, and enforcing compli- · Strengthen national strategy for rationalizing hos- ance with agreed targets. pital supply, including transformation or closure of · Upgrading AIH / SIA system, aligning payment small hospitals. with costs, and gradually converting it to DRG- · Strengthen policy-based investment financing for like system. hospitals, based on regulatory approval or invest- · Improve regulation of private health plans / ment master plans. insurer --to constrain cost shifting (enhance · Develop a national system for technology assess- cost containment and fiscal discipline), payment ment and allocation. system consistency, and incentives for hospitals / managers. 4. Raising Service Quality to acceptable Standards in all Hospitals 3. improving Coordination among all Providers Government is responsible for ensuring quality in all Coordination--among hospitals and between hospitals hospitals, public and private alike. Quality standards and other types of providers--is critical to improving already exist in the form of licensure requirements and quality. It will also raise efficiency and broaden equity by government-sanctioned accreditation systems. Unfortu- rationalizing the supply of hospital beds and expensive nately, their implementation has been meager. To gain medical technologies. Coordination is handicapped in compliance, the SUS and private health plans could in- Brazil by: the decision-making and financial indepen- stitute time-bound funding conditionality, linking financ- dence granted to states and municipalities; the absence ing to licensure and accreditation, following the example of ties with private providers outside the Unified Health of a number of countries that use the power of the purse System (Sistema Único de Saúde, SUS); fragile public in this way. administration; and general ineffectiveness of coordi- nating instruments such as Integrated and Negotiated Achieving standards, however, does not in itself guar- Programming (Programação Pactuada e Integradad, antee quality. Many critical actions needed to improve PPI). Considering the monetary and quality costs of this quality of hospital services take place at hospital level fragmentation, Brazil would benefit greatly by applying under the leadership of hospital management. These mechanisms to enhance coordination related to hospital include establishing continuous quality improvement services. Coordination can be pursued through funding- programs involving performance assessments, effective based contractual arrangements, pooling funding and teamwork, use of information technologies, incorporation creating regional command structures with decision-mak- of evidence into practice, development and use of clini- ing authority over resource allocation across municipali- cal guidelines, and coordination of care within the hos- ties, or by tightening regulations governing relations pitals as well as with providers at other levels. Hospitals among providers. Some states and municipal consortia acting alone may not get far with these elements. Con- are already experimenting with one or more of these tinuous quality improvement requires a systematic ap- March 2008 · Number 120 · proach with a solid national support system that includes cont'd policies and strategies to enhance quality, support for · Support modernization of management structures systematic research on patient satisfaction and evaluation and practices in public and nonprofit hospitals. of clinical practices, and the establishment of institutions · Develop nationwide benchmarking and a public through public-private partnerships to measure, monitor, report card system focused on efficiency and and benchmark quality and provide guidance and support quality. to individual hospitals. Finally, there is a need to address the low quality of some medical schools and strengthen institutional capacity to address medical malpractice. Conclusions Brazil's challenge is not unique. Implementing hospital What can be done? reform policies is notoriously difficult and more difficult Raise quality standards in all hospitals. still when hospital ownership, governance, and payment mechanisms take as many different forms as they do in a · Develop and implement a three-pronged national federal state like Brazil. Yet the pluralistic nature of these strategy for quality assessment and improvement arrangements is also a strength of the Brazilian hospital founded on system support, accountability mecha- sector. As revealed throughout this study, Brazil has no nisms, and organizational development. shortage of approaches, ideas, innovations, and initiatives · Institute a rigorous national licensing exam for for addressing the shortcomings of underperforming facili- medical school graduates. ties. The foundations for change to raise performance are present throughout Brazil's hospital system. Will these ideas and innovations be generalized and woven into the fabric of the system? That is the question. 5. improving the Reliability of Basic Managerial information Can Brazil improve the performance of its hospitals? The The absence of reliable information about quality, ef- evidence presented in this volume suggests that the answer ficiency, and costs of hospital services underlies all is- is yes. However, it will take strong leadership, coordinated sues and hampers any effort to improve performance. efforts of federal, state, and municipal governments, direct Without this information, policy makers as well as public engagement with the private health sector, and systematic and private payers are flying blind. This situation is un- but continuous vision, policies, and actions. Such enabling tenable. There is an urgent need to develop and install factors have been generally weak or absent in the Brazil- standardized systems to measure costs and quality. These ian health system. Promising initiatives have often been systems should focus on essential information for deci- gutted or scrapped after changes of government. sion making and be designed with the needs of the local manager in mind. At the same time, the systems should be based on standards to allow cross-hospital and cross- about the authors state benchmarking. Bernard Couttolenc is a health economist at the University of São Paulo, Gerard La Forgia is a Lead Health Specialist (LCSHH) in the Latin America and the Caribbean of the What can be done? World Bank. Strengthen the institutional environment for re- The Ministério da Saúde (MS), Agência Nacional de source use and performance management. Vigilância Sanitária (ANVISA), Fundação Oswaldo Cruz (FIOCRUZ), and Organização Nacional de Acreditação · Promote effective use of information technolo- (ONA) collaborated in the preparation of background gies to support performance and outcome mea- papers. surement, cost collection and analysis, access to The Study referenced in this summary was commissioned clinical information, clinical decision making, and by the World Bank and received additional financial coordination across medical care organizations support from Department for International Development and teams. (DFID) / Brazil "en breve" is produced by the Knowledge and Learning Team of the Operations Services Department of the Latin America and the Caribbean Region of the World Bank - http://www.worldbank.org/lac · March 2008 · Number 120