Managed clinical networks

Discussions of hospital organisation focus a lot on how particular services should be arranged in order to provide high quality care without sacrificing on equity. Many studies, looking at a wide range of different procedures, have identified a benefit from volume. Those units that perform more of a certain procedure generally have better outcomes. As such there have often been calls for greater centralisation of services (e.g. see here). However, a regional, centralised service would reduce equity of access for many as the distance required to reach the hospital is increased, this could also have adverse effects on outcomes in the case of emergency operations.

One study by Gaynor et al looked at the benefits of volume in relation to coronary artery bypass grafts. They firstly found a benefit to volume of procedures. They also found that the direction of causality runs from volume to outcome by using an instrumental variables strategy which exploited the exogenous preference of people to go to their nearest hospital. They then asked why. There are two reasons why volume could affect outcomes. One is through ‘learning by doing’ – the intrinsic (see here) human capital of the staff is increased through experience, the other is through returns to scale. Using lagged volume (to see whether past volume affects present outcomes) the authors determined that the volume-outcome relationship is driven primarily by economies of scale. Another very similar and more recent study also found there to be no experience effects for this procedure. However this study also found the volume-outcome effect to be much smaller. The authors concluded that studies of patient quality should focus on more than just volume.

Standard microeconomic theory would say that if we have increasing returns to scale then we should expect there to be a point at which there are constant and decreasing returns to scale. Many studies looked at this (e.g. this, and this). This would imply then that there is a limit to centralisation.

Managed clinical networks (MCNs) could represent an organisational structure that provides the benefits of centralisation without the disadvantage of decreasing equity. Basically, a MCN is comprised of a large central unit that provides the highest intensity care and smaller peripheral units that provide lower intensity care. The network will have a strategy to get patients to the central unit if required that may entail a dedicated transport system. The ethos of a MCN is that it is the network that provides care and not an individual unit.

Besides equity and returns to scale, there are other arguments that support the use of managed clinical networks such as a more efficient use of highly specific assets. However, the key commodity to allow such a network to exist is trust; trust reduces transaction costs enough to make networks competitive against hierarchically structured units. Without it units may fear not being correctly reimbursed or they may worry that patients won’t be transferred correctly as a self-interested stakeholder holds onto lucrative patients or won’t use his slack capacity to help another unit. This would lead to excessive bureaucracy and high transaction costs.

MCNs already exist in neonatal services, some cardiac services, and diabetes primary care among others. Provided there is trust, this system of organisation could represent an efficient and equitable system of hospital organisation.

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