Transcript NHI: Preparing for an Era of Major Change

INDEPENDENT MARKET ANALYSIS:
PREPARING FOR AN ERA OF MAJOR
CHANGE
Moore McDowell
ECU Ltd
NHI Annual Conference November 15, 2012.
ISSUES TO BE ADDRESSED
Can we predict demand/need and on that basis
rely on planned approach to development of LTC?
 What is required for a market driven response to
a changing environment?
 How do the current and proposed approaches to
financing and regulating LTC score in terms of
the above?
 What should policy makers, stakeholders inc NHI be
looking at in terms of the policy for the sector?

THE SHAPE OF THINGS TO COME.
 Conventional
forecasting of demand for
NH care on the basis of demography is
only feasible for about 15 years maximum.
 In any case applies only to LTC.
 Secondly, demographics is only one of the
influences on demand.
THE SHAPE OF THINGS TO COME
Public policy is the other major demand determinant
(e.g., switch to independent living support).
 Hence importance to NHI of influencing policy
development, and also public opinion.
 Cultural, economic and sociological factors are of major
importance.
 CARDI (2012) just touches on this.
 For example: Family size, work patterns, household
incomes, housing patterns, gender mix.

HOW TO PREPARE : THE MARKET MODEL
 The
key is not to predict in detail and
prepare, but to ensure that the sector can
respond effectively to changes in its
environment.
 Prediction helps set the likely broad
development of the sector and its
environment in focus.
HOW TO PREPARE : THE MARKET MODEL
We know that under present policy parameters
demand for LTC in NHs will rise dramatically
over the next 10 – 15 years.
 The state has signalled its intent to reduce its
involvement in meeting demand.
 We know, therefore, that if demand is to be met
this can only come from expanded
private/voluntary sector capacity.

HOW TO PREPARE: THE MARKET MODEL
Meeting demand, therefore, requires that this
sector’s capacity can expand as needs dictate.
 This faces present and new NH operators with a
choice: to be the managing agents of a state
funded “private” system, or
 Ensuring that they can fund expanded capacity
as required.
 This is a MARKET SOLUTION on the supply
side.

HOW TO PREPARE: THE ROLE OF THE FINANCE
MECHANISM
Ability to finance development is the key.
 The necessary condition is that suppliers must be
financially viable, financially stable, profitable
and not merely cover variable costs.
 This means accepting that there will be winners
and losers. Suppliers must accept market
discipline.
 Operators cannot expect state or other finance for
inefficient operations.

A MARKET SOLUTION REQUIRES PROFITS
To earn profits to service capital requirements
implies prices set to secure an adequate return
on capital employed.
 Implications for the pricing of care?
 First, and before looking at the overall structure
of payment for LTC, price capping must go.
 Secondly, the regulatory regime will have to be
changed. The squeeze must go.

IMPLICATIONS FOR THE FINANCING OF
PROVISION OF CARE
The current Fair Deal structure, designed to
ensure equitable access to care must be changed.
 The principle of co-payment, already accepted,
will have to become an instrument of finance
rather than a matter of equity.
 Means related direct payments to consumers
(vouchers??) should replace FD payments to
providers.

IMPLICATIONS FOR THE FINANCING OF
PROVISION OF CARE


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LTC and STC are embedded in a health care structure; we
are committed to a move to universal health insurance.
The implication is that we should move to compulsory
LTC care insurance to enable individuals to purchase a
pre-determined level of LTC care should they need it.
Care in excess of this predetermined level can be left to
individual choice.
This is the demand side of a MARKET SOLUTION.
IMPLICATIONS FOR REGULATION
 The
present regulatory structure is
dysfunctional
 It has two components: price setting
(NTPF purchase structure); setting
service quality standards (HIQA).
 These operate independently and are
incompatible with an efficient market
solution to the supply problem.
IMPLICATIONS FOR REGULATION
Price setting/fixing/capping is not compatible
with a market driven supply response to demand
changes.
 It is not necessary in a competitive market.
 HSE/NTPF financial intervention is economically
inefficient, and reflects a preoccupation with
short term budgetary concerns rather than
efficient operations of the LTC market.

IMPLICATIONS FOR REGULATION
Quality regulation can be justified to deal with
information asymmetries and potential standard
of care problems.
 The case for the current HIQA stance of forcing
the pace on improved quality is difficult to
understand.
 There is little or no evidence of cost/benefit
analysis, and effective Regulatory Impact
Assessment.

IMPLICATIONS FOR REGULATION
HIQA’s technical capacity to analyse information
flows is questionable (see 2012 report).
 There is a predisposition to uniform prescription
and micro-management in HIQA’s regulations on
nursing home operations

REGULATION: THE NEED FOR REFORM
 Instead
of prescribed format requirements
HIQA should establish performance
indicators and rank
 The structure of HIQA’s approach to
implementation of regulation is good:
publication of findings.
 A higher level availability of overall
performance would be helpful.
NHI: LOOKING FORWARD.



1: While it is necessary to lobby for improvements in how
current financing and regulation are operated, NHI and the
stakeholders should also be thinking about long term
development models and the triggers required to make this
happen
2: The structure of the sector is changing as the HSE
capacity contracts and will continue to contract.
3: Consolidation of operators in the sector private/voluntary
sector likely and should be accepted by the sector.
NHI: LOOKING FORWARD


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4: Changes in the delivery of care generally in the
healthcare sector have implications for the complexity of
need and range of services provided by nursing homes
(increased specialisation).
5: The NH sector needs to be able to adapt to possible
sociological trends in terms of provision of informal care.
6: The sector needs to be sure that day to day reactions to
budget derived changes in demand do not distract public
attention from longer term and deeper changes that will
affect the sector.