Health System Performance Measurement: New Zealand and Maryland

About the author

John O’Brien is the Director of Health Care and Insurance at the Office of Personnel Management in Washington, DC. In this position he oversees the insurance programs for federal employees including the Federal Employees Health Benefit (FEHB) program, which provides health insurance to over 8 million federal employees, retirees, and their dependents. In addition, he leads the team implementing OPM’s responsibilities under the Affordable Care Act (ACA) including the development of multi-state plans for state exchanges.

During John’s Ian Axford Fellowship exchange to New Zealand he was based at the Ministry of Health in Wellington, where he researched New Zealand’s methods for assessing healthcare system performance, and contrasted them with similar efforts by state Medicaid programs in the US.

John passed away on 28 May 2019.

Executive Summary

Health care presents significant challenges to the measurement of public programme success. The inputs are many (health habits, sanitation, drugs, doctors, technology, etc.) and the outcomes (longer life, reduced illness) not usually traceable to a single effort. Still, the need to measure performance in health care is as great, or greater, than almost any public sector activity. Health care, or the lack of it, affects nearly every citizen and the public investment in health care is enormous.

In the last decade both the Maryland Medicaid programme and the New Zealand Ministry of Health embarked on ambitious restructurings of their respective health service delivery systems. In Maryland Medicaid developed in 1997 the Maryland HealthChoice programme that relied on Managed Care Organizations (MCOs). In New Zealand the Primary Health Care Strategy, which relies on the similarly named Primary Health Organizations (PHOs), began enrolling individuals in 2002.

Comparing New Zealand with the Medicaid programme also highlights the tremendous differences in the structure of health care service delivery in each country. The Medicaid programme accounts for only 17 percent of total health care funding in the United States, and targets that funding at low income and disabled populations. The New Zealand government’s role in the health care is almost the opposite. In New Zealand public dollars account for 78 percent of all health care funding, and those funds are intended to serve the entire population. The differing funding structures lead to vastly different positions of market power. Maryland Medicaid is an important but small purchaser of services and must set prices and programme rules with the knowledge that providers, such as doctors and hospitals, can and do survive without Medicaid funding. In New Zealand the Ministry of Health is a monopsony, a single dominant purchaser negotiating with many small sellers.

From these very different starting conditions Maryland and New Zealand have implemented very different models of health service organization. They do however share two key features: prospective payment to providers on a per capita basis, and the creation of an enrolled population for whom the organization is responsible. Beyond these similarities however PHOs and MCOs are starkly different. This begins with the process of approval for operation: extensive and costly for MCOs while limited and economical for PHOs, and extends to the level of financial risk each bears to the methods used to calculate payment rates. It is notable therefore that both New Zealand and Maryland have invested considerable effort and resources in performance measurement systems.

New Zealand and Maryland are not alone in their interest in performance measurement. Other countries are developing ways to address the same issue. Performance measures in Maryland and New Zealand along with performance indicator efforts in Australia and the United Kingdom have been examined and commonalities identified. The four countries have different structures for health care financing and are using performance measurement on very different entities, yet the following significant commonalities emerged:

Emphasis on primary care. In all systems primary care measures such as immunization and proven screening tests had a prominent role.

Inpatient measures notably absent. Even in systems such as Maryland and the United Kingdom that make organizations responsible for inpatient care, measures to assess inpatient services were few.

Use of patient satisfaction surveys as a measurement tool. Incorporating direct feedback from the population served is common across systems.

Lack of financial measures. Financial performance, such as success against outside set targets is not regularly used, although it is in New Zealand.

Infrastructure measures. Performance measurement schemes used by the selected countries address key system elements that policy-makers see as essential (such as IT, contracting practices, etc).

While the ways that performance is measured across different systems is surprisingly consistent, there are a range of responses to the question, what is it for? The diversity of responses is inherent in the nature of performance measurement. Performance measurement is not a single tool designed to address a specific need; rather it is an evolving set of metrics that can be applied for a variety of purposes. These include:

Payments and Rewards. Performance rewards are, especially in the United States, a prime goal of performance measurement.

Reporting and Evaluation. Standard performance measures allow a tool for reporting back to policy-makers and the public in a consistent manner.

Benchmarking/Monitoring. Performance measurement creates a system that allows organizations to assess their position relative to their peers.

Quality Improvement. Measuring performance and providing feedback is at the heart of a philosophy of continuous quality improvement and central to the New Zealand approach to performance measurement.

Effective Governance. Good information is essential to good governance.

Contracting. As PHOs mature performance measurement will play a greater role in contract negotiations and processes.

These are not mutually exclusive and policy-makers and programme managers may use performance measurement to address all of the issues. In comparing performance measurement in the United States and New Zealand the primary differences are not of type but of emphasis. For example, New Zealand stresses the quality improvement aspect far more than the Maryland Medicaid programme.

Comparing Maryland and New Zealand offers a window into the biases and habits of thought of policy-makers in each system. By looking at them side by side several lessons emerge.

From New Zealand, Maryland can learn:

Change at the clinical level is important if systems of care are to improve. The fragmented nature of the United States’ financing system often causes policy-makers to despair of ever directly influencing medical practice, and thus limit their efforts to properly aligning financial incentives. New Zealand policy-makers are far more ambitious in their goals for influencing practice behavior. While Maryland and the United States face challenges in efforts to influence practices, they should not concede this issue.

Incentive payments do not need to be targeted at the top. Maryland Medicaid efforts to implement incentive payments have focused on incentive payments to the parent MCO, and, thus far, have led to incentives too small to motivate significant change. Targeted incentives at primary care (like New Zealand), or specialized providers for high-need populations, may yield better results and more effectively use state funds.

There is more to effective delivery than access to a physician. Out of fear that poor Medicaid recipients will be given second-class care the Maryland Medicaid programme places significant emphasis on assuring that recipients have access to physician services. This may lead policy-makers to discard, or undervalue approaches to service delivery that de-emphasize physician care in favour of nurses or other alternatives.

From Maryland, New Zealand can learn:

Public funding implies public access to data. The debate between the representatives of General Practice and the Ministry of Health regarding the provision of practice fee information strike an American observer as odd. Both liberals and conservatives would tend to argue that pricing information should be widely available.

PHOs need a greater scope of control to succeed in achieving their goals. At present PHO budget holding is extremely limited. If PHOs are to develop and evolve to meet their stated purpose they will need to assume responsibility for a broader range of services.

Managing PHO competition presents opportunities and challenges. The large number of PHOs in operation is likely to continue. This should encourage the development of a competitive environment among PHOs that can have positive effects. New Zealand policy-makers will need to consider what kinds of competition (for practices, for enrollees) to allow and how to manage that competition.

Health System Performance Measurement: New Zealand and Maryland

About the author

Executive Summary

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