COORDINATING HEALTHCARE UNDER A PLURALISTIC HEALTH INSURANCE SYSTEM: THE CASE OF SLOVAKIA.

• Author: Nemec, Juraj

1. Introduction

   There is a generally shared agreement among experts that healthcare is at least in part a collective good that cannot be solely the individual responsibility of the citizens. Arguments supporting state intervention are based on the allocative activities and redistributive functions of government (Stiglite, 2000; Maly, 1998). Feldstein (1993) argued that healthcare is an impure public good; subject to information asymmetry, externalities, uncertainty, and complexity. Because of information asymmetry, the most important factor limiting individual demand for health services is the inability to pay for such services individually, while from a social perspective, the general opinion, at least in developed Europe, is that all people are eligible for basic healthcare services, independent of their ability to pay. This opinion is demonstrated in, for example, the European Charter of Social Rights.

   However, there are increasing difficulties in keeping healthcare affordable. In addition to contextual developments, such as the greying of society, the cost increase in healthcare is caused by the complexity of its network. As in all networks, this one is characterized by tension between the goals of each level involved in coordination of inpatient care and the presumed goals of the network as a whole, a strong resource dependency between the organizations involved, a complex of incentives that varies among the organizations involved and is contradictory from the perspective of the network of organizations, transaction costs that are largely determined by extensively monitoring and evaluating the performance of each of the constituting organizations, and opportunistic behavior among each of the organizations involved. Theories on inter-organizational relations are concerned with explaining the nature and consequences of specific types of relationships among organizations and the coordination thereof. The relationships may be defined in terms of their structure, i.e. alliances, partnerships, and networks, although many other connotations also exist (Cropper et al., 2008). Overviews of theories in inter-organizational relations are found in Van de Ven (1976), Galaskiewicz (1985), Oliver (1990), Barringer and Harrison (2000) and Cropper et al. (2008).

   However, while theorizing about the coordination and management of networks is still concerned with questions such as how to govern such complex networks in practice (Kenis and Provan, 2007), some governments have opted for a pragmatic solution that is, simply reducing the complexity of the network. This is, of course, easier said than done, and especially in healthcare it could have serious negative consequences. Nevertheless, this was the solution of the Slovak government, as well as the Hungarian government, in order to make the healthcare system manageable and affordable.

   The goal of this paper is to analyze the way in which Slovak central and regional governments accomplish the task of optimizing the network of inpatient health services in Slovakia, and to evaluate the effects of this change on healthcare services. The paper focuses on this pragmatic solution, compared to the multitude of theoretical suggestions to coordinate complex networks, by presenting a case study of Slovakia, where 'healthcare network' is rather decentralized: most healthcare providers are privately owned establishments, and most healthcare finance is in the hands of a network of at least formally competing public and private health insurance companies.

   The Slovak solution to the issue of physical access is largely based on an interesting coordination tool: the 'minimum network of providers'. In the core part of this paper, we investigate how this minimum network has been defined in the subsystem of inpatient care (specialized hospitals excluded), and closely examine the policy implementation aspects. Our focus is on how the minimum network of inpatient care has been achieved through the coordinated activities of the state, at both the central and regional levels. Before that, we present an overview of the developments in complex network management theories (in our case such complex network is the network of coordination and delivery bodies described in the later text), of which it is remarkable that simplifying the complexity of networks seems to have never been considered. The final part of the paper displays current results in the area, analyses the pros and cons of intervention, and presents several important observations on the policy-making and implementation capacities of the Slovak government, and on the complexity of coordinating pluralistic service-delivery systems (1).

   The main method used to draft this paper is the secondary analysis of existing data and information. Brief interviews with regional politicians, administrators and academic experts helped to frame the text.

2. Developments in complex network theories

   The first systematic studies about networks, networking, and building coalitions in organizations are from the late 1950s and 1960s (Dill, 1958; Levine and White, 1961; Evan, 1965, 1966). This classical research described interactions between people across organizations who aim to create networks for getting things done and for exchanging information. These interactions often go beyond the formal structure of the organization and are assumed to accomplish more than could be accomplished by only going through formal channels. To create a network is seen as a rather simple task; it involves simply identifying people who could be helpful in the process of achieving the desired objectives, establishing their reliability, and then actively seeking their cooperation. Literature on this subject shows that a shared aim, i.e., 'getting things done in an organization' is involved in creating alliances i.e., 'getting agreement on a course of action with other people and joining forces to get things done' (Armstrong, 2006; Bolman and Deal, 2003). According to Evan (1965), social science research had previously been concerned primarily with networks understood as intra-organizational phenomena. During this time, the theory and methodology impeded research on inter-organizational relations. To solve this problem, Evan suggested two methodological tools that could prove useful in the development of empirical research on inter-organizational relations: graph theory and input-output analysis. The first tool was developed in research dealing with network visualization; the second is known as transaction cost economics [TCE], focusing on control phenomenon in inter-organizational relations.

   During the 1980s and 1990s, scholars and practitioners (Perrow, 1992) described a growing interest in the networks and multi-organizational relations that are usually created to solve the complex problems that occur mainly in the private sector but also in the public sector. A network was defined as a 'group of more or less independent organizations that have a relatively stable and long-term cooperation' (Grandori and Soda, 1995 apud Jacobsen and Thursvik, 2002). The core position was that networking can essentially support and promote projects, programs, ideas, and sharing knowledge (Nohria and Eccels, 1992; Alter and Hage, 1993; Borgatti and Foster, 2003).

   Provan, Fish and Sydow (2007) scrutinized contemporary articles dealing with inter-organizational networks in industry. According to their study, it would be an exaggeration to say that empirical studies have successfully created a theory about networks. The research on networks and inter-organizational relations instead constitutes fragmentary empirical studies focused on some important aspects of a network, but not examining the whole network. In organizational life, everybody talks about networks, but Provan, Fish and Sydow (2007) argued that researchers are still unable to effectively define this phenomenon. According to them, researchers who focus on business and business relations even avoid the concept of networks. Instead, they talk about 'partnerships, strategic alliances, inter-organizational relationships, coalitions, cooperative arrangements or collaborative agreements'. Other scholars interested in resource dependency theory (e.g., Pfeffer and Salancik, 2003), transaction cost economics (e.g., Williamson, 1991) or investigating inter-organizational contracts (e.g., Arino and Reuer, 2006) often pay attention only to organizations and social relations between concrete actors involved in cooperating on behalf of their organizations, which cannot be perceived as research on networks as a whole (Provan, Fish and Sydow, 2007).

   2.1. The coordination of network complexity

   How networks are managed is a crucial aspect of network analysis. Classic theory (for a summary, see for example Kickert, Klijn and Koppenjan, 1997) suggests that hierarchy and steering is needed to manage a network. This theory is currently disputed, because there is a dilemma involving trust and governance in which too much governance steering and state responsibility can be costly and redundant because of the justified trust, but too little steering can be as costly because of inadequate safeguards in reducing opportunistic behavior (discussed for example in Groeneveld and Van de Walle, 2011). Those responsible often try to minimize the second failure and therefore opt for steering even though it can be redundant and costly. Theoretical arguments for 'massive' state interventions in modern healthcare systems are widely accepted by the current logistics of healthcare systems in developed countries, and to a large extent in developing countries as well: normally the state is responsible or co-responsible for all the most important aspects of healthcare delivery, specifically for financing (accumulating and distributing resources), quality, and access assurance.

   The ways in which such 'state responsibility' is executed vary significantly among countries...