HEALTH ECONOMICS

Health Econ. 8: 87–90 (1999)

BOOK REVIEWS

BOOK REVIEWS

Purchasing population health. Paying for results byDAVID A. KINDIG. University of Michigan Press, AnnArbor, 1997. No. of pages: 194. ISBN: 0-472 10893-X.

Population health improvement will not be achieveduntil appropriate financial incentives are designed forthis outcome. This, in a nutshell, is David Kindig’ssolution to the dilemmas facing the US population andits health care providers and purchasers. His objectiveis to address and inform the wide range of people whoinfluence both public and private policy in his country.His book certainly meets that challenge, managing toimpart a considerable amount of specialized knowledgefrom the health services research literature and avoidingthe common mistake of patronizing a lay audience.

What, then, lies at the heart of his thesis? Like manyother critics, he starts by berating his compatriots fortolerating a health care system that is both very expen-sive and, he claims, achieves lower than expected out-comes. He dismisses the option of doing nothing anddeclares that all recent attempts to tinker with thesystem, such as managed care, have been ineffective.Instead, he argues, what is needed is a new healthoutcome purchasing standard not only for medical carebut for all other health-promoting sectors, such aseducation, environmental regulation and social care.

To achieve an outcome-based system, Kindig identi-fies four key steps. First, there is a need for a genericmeasure of health gain. The one he happens to favouris health adjusted life expectancy (HALE). Second,information is needed on the cost-utility of all possibleinterventions which are thought to improve people’shealth. Third, the system needs to make explicit ra-tioning decisions based on those cost-utilities, bothwithin the health sector and across sectors. And finally,mechanisms need to be developed to facilitate co-ordi-nation of decisions and action across sectoralboundaries to ensure equity.

Few people would dissent from the pursuit of pay-ment by results, a method which the Greeks weresupposedly familiar with over 2000 years ago. Rathermore, I suspect, may have concerns as to the practical-ities of Kindig’s vision and some aspects of his underly-ing assumptions.

While all may not be well with health care in the US,criticizing it for failing to reduce mortality more thancountries which spend a much smaller proportion of

their GDP on health care assumes that health care is amajor influence on mortality. A small proportion ofhealth care expenditure is devoted to acute treatmentswhich are immediately life-saving, such as emergencyroom care and treatment of some leukaemias. Manyother treatments may postpone death, such as the useof drugs to control hypertension and cholesterol levels,but much of health care is about reducing disability anddistress and improving people’s quality of life. It is nosurprise, therefore, that expenditure and mortality arepoorly correlated in international comparisons. In addi-tion much of the additional expenditure in the USarises from higher medical prices which can be ex-plained by general cost of living differences (commonsurgical operations are nearly four times more expen-sive than in the UK private sector).

Despite these reservations, US health care clearlyfaces major problems of cost-containment and equity.So will Kindig’s proposals solve these? In theory theymight, but their success may be jeopardized for fourreasons, two political and two practical. A key aspect isthe need for a universal measure of health gain,HALEs. But this implies the use of some universalvaluations of health states and a consensus about dis-counting. Where will these come from? Experts, pa-tients, carers, the healthy population? Kindig is awareof these issues but his response is to put off dealingwith such problems until ‘future stages’. But to head offdown a track in full knowledge of the certain dangersthat lie ahead and have no contingency plans seemsover optimistic or even foolhardy.

The proposal is also very demanding of data. It ismost unlikely that we will ever have sufficient evidenceto be able to construct comprehensive cost-utility tablesthat cover not only the whole of health care but thecontributions of all other relevant sectors. The dangeris that those interventions that can be and are evaluatedin this way will find favour in purchasing decisions overthose for which there is little or no scientificinformation.

Armed with all this information, purchasers will beexpected to ration resources explicitly on utilitarianprinciples. He is not the first to make such a suggestion.Indeed there are many supporters of such a rational,corporate approach throughout the world. Few of themare successful politicians! Even supposing such an ap-proach was practical, which affluent society would

CCC 1057–9230/99/010087–04$17.50Copyright © 1999 John Wiley & Sons, Ltd.

BOOK REVIEWS88

countenance closing down all renal dialysis or cervicalcytology because greater benefit could be gained bydevoting the resources to smoking cessation advice inprimary care? And in Kindig’s proposal we could, intheory, see all current health care resources shifted topublic health strategies or social care.

Finally, while the challenge he sets complex organiza-tions to collaborate across diverse sectoral boundariesis admirable, experience in many countries confirmshow difficult this is.

This review could be seen as terribly British—pes-simistic bordering on nihilistic—in contrast to the bookwhich in many ways is very American—optimistic witha can-do attitude. But the more I read, the more I feltthat this book has to be judged in the US context. MostEuropeans do not need persuading that a market is notan adequate mechanism for financing, purchasing orproviding health care. Sweeping, wholesale change mayindeed be needed in the US but in the social democra-cies of Europe fine-tuning is arguably more appropri-ate. Having said that, it would be fascinating if acountry or a state took Kindig’s advice and tried toenact his prescription. We would all learn a lot if onedid.

NICK BLACK

Department of Public Health & Policy,London School of Hygiene & Tropical Medicine, UK

Casemix for all edited by H. SANDERSON, P. ANTHONY

and L. MOUNTNEY. Radcliffe Medical Press, 1998.ISBN: 185775 217 1.

One of the dangers of writing a book review during theWorld Cup is a tendency to football metaphors. How-ever, this is literally a book of two halves; chapters 1–4are written by the editors and chapters 5–10 are casestudies from other contributors. For the target audienceof health service managers and clinicians with manage-ment responsibilities, the second half of the book isgoing to have most relevance.

The case studies deal with general practitioner pur-chasing, contracts and resource management, perfor-mance management and audit, purchasing, clinicalmanagement and the use of health benefit groups.Taken together, these examples provide a reasonablepicture of the varied uses of casemix measures and theirimportance. The individual studies will provide a usefulstarting point for managers facing similar issues. Un-fortunately, the same cannot be said of the first half ofthe book.

The first chapter deals with the philosophy and con-cepts of casemix. This will be quite hard going for mostof the target audience, particularly if they are temptedto skip the excellent preface (which might have beenbetter as an introductory chapter). The authors discuss

principles of classification and grouping before intro-ducing the purpose of casemix. This is surely in thewrong order for anyone coming new to this topic.Terms such as HRGs and HBGs are introduced with-out explaining what they are and although there is aglossary in the back of the book, it is distracting tohave to look these terms up.

Experts in the field of outcome measurement wouldfind fault with the examples of outcome and processindicators which are used in the example at the end ofthis chapter. These are limited to what is readily avail-able without discussion of what should ideally be used,e.g. quality of life, reassurance, information. Similarly,‘efficiency’ measures are limited to costs of activity orintermediate outputs.

Chapter two relates the history and development ofcasemix, and would make a better starting point forthose new to the field than the discussion in chapterone. The explanation of how cases are assignedto groups could have been improved by the additionof a flow diagram/tree diagram to illustrate the pro-cess. Some of the material appears to be rather techni-cal for the proposed audience. For example, the useof Reduction in Variance is not explained in termsthat would make its relevance apparent to managersand so would perhaps have been better to have beenleft out.

For health economists, one of the most worryingaspects of the book is the discussion of activity-baseddefinitions of casemix. The authors express concernthat when DRGs/HRGs are based on diagnosis theyare poor predictors of costs because the package ofactivity varies. This begs the question of what areDRGs being used to discover if it is not variations inactivity for the same diagnosis? There is a feeling herethat the introductory chapters are driven by the pursuitof statistical perfection in the construction of casemixvariables rather than the utility of the measures that arederived.

Chapter three continues this theme in relation tocondition groups, which can be used to predict theintervention required or the outcome. In respect of theformer, the authors state that groupings will be basedon ‘clinical opinions and expertise, and where available,evidence-based practice’. Whilst it may be necessary torely on clinical expertise in the absence of better data,the inherent dangers are not really pointed out. Varia-tion in clinical practice appears to be accepted, whereasthis may be precisely what should be investigated.

Chapter four deals specifically with casemix in men-tal health and sits rather oddly with the rest of the firsthalf of the book. However, it provides a usefuloverview for managers and clinicians in this field.

The objectives of the book are set out in the preface.They are to:

� help the reader to a better understanding of theprinciples and purposes of casemix;

Copyright © 1999 John Wiley & Sons, Ltd. Health Econ. 8: 87–90 (1999)

BOOK REVIEWS 89

� explain the way in which these concepts have beenturned into practical casemix groupings;

� provide practical examples of how the application ofcasemix groupings to patient data has helped themanagement of services;

� identify the future potential to exploit better datafrom clinical systems.

Overall, the case studies in the second half of thebook go some way to meeting these objectives but thecontribution from the earlier chapters is disappointing.These chapters could have been written more clearly inthe context of the questions that mangers and cliniciansneed to answer and with a more critical approach to theexisting data underpinning the casemix measures.

ANNE LUDBROOK

Health Economics Research Unit,Uni6ersity of Aberdeen, Aberdeen, UK

Nuffield Occasional Papers: Health Economics Series.Series Editor, Alan Maynard, The Nuffield Trust, Lon-don, 1998.

No. 1 Mergers in the NHS: Made in Hea6en or Mar-riages of Con6enience? Maria Goddard and Brian Fer-guson, 1997.No. 2 De6ol6ed Purchasing in Health Care: A Re6iew ofthe Issues. Peter C. Smith, 1997.No. 3 Going for Gold: The Redistributi6e Agenda BehindMarket-Based Health Care Reform. Robert Evans,1998.No. 4 A Social Contract for the 21st Century: ThreeTier Health Care with Bounty Hunting. Uwe E. Rein-hardt, 1998.No. 5 Who Pays for and Who Gets Health Care? Equityin the Finance and Deli6ery of Health Care in the UnitedKingdom. Carol Propper, 1998.No. 6 Future Hospital Ser6ices in the NHS: One SizeFits All? Peter West.No. 7 Economic E6aluation and Health Care. JohnCairns, 1998.No. 8 Managed Care: Panacea or Palliation? AlanMaynard and Karen Bloor, 1998.

In his introduction to this series of occasional papers,Alan Maynard is surely correct in pointing out that tomany non-health economists health economics is allabout economic evaluation. Like statisticians broughtin to do the sample size calculation after the data hasbeen collected, most health economists will have hadthe dispiriting experience of being asked to ‘do somecosting’ on the back of a clinical trial following areferee’s comments about the lack of any ‘economicevaluation’. But of course, health economics is muchmore than cost effectiveness analysis . . . isn’t it? Part of

the justification for these papers is to show that healtheconomics is more than the sum of its (discounted)parts, and that it has something important to say abouta wide range of health policy issues—even if that‘something’ is merely (sic) to say how complex andenduring are the issues.

As its title suggests, Mergers in the NHS examinesregulatory and economic issues involved in reachingdecisions about whether or not hospitals should merge.Despite the shifting macro health policy framework inthe UK (goodbye competition, hello co-operation)Goddard and Ferguson’s review of the tensions anddifficulties in assessing the costs and benefits of mergersremains pertinent. Peter West takes a more historicalperspective on the pattern of hospitals in Britain, not-ing their ancient roots—St. Barts in Rochester startedin 1078, and its London namesake in 1123—and theircharitable roots. Despite policy shifts towards a ‘pri-mary care-led NHS’, West concludes that political andeconomic factors are likely to endorse the traditional,centralised district general hospital.

Peter C. Smith grapples with the superficially mun-dane, but on closer inspection, crucial question ofsetting budgets for purchasing organisations within theNHS. The 1991 reforms of the NHS introduced GPfund-holding, which, through a period of evolution,spawned variants as practices merged their purchasingactivities. And now, the NHS is looking forward toprimary care groups (PCGs)—smaller than health au-thorities, bigger than GP fund-holders—to carry for-ward the march to devolved purchasing. The problemsSmith identifies with devolution of budgets springpartly from technical considerations (where is the datato construct formulae to slice up the resource cakeequitably?) and partly from a dearth of evidence toindicate how purchasing behaviour will change as newfinancial arrangements are introduced.

Bob Evans—always good value for money—pro-vides the usual refreshing, poke-in-the-eye counter-blastto those who proclaim markets and market-type mech-anisms as the efficient answer to all health care’s effi-ciency problems: it is not really about efficiency, it ismore to do with equity—who pays and how? Whoreceives health care? In essence, markets do not alwaysdeliver what we want them to deliver in terms of thefundamentally political objectives we set for health caresystems. Moreover, to ignore the distributional agendalurking beneath the veneer of the ‘market solution’ is tomiss the point. Evans argues for the central role ofgovernment in ensuring that equity, efficiency, effective-ness and cost containment objectives are met—but isopen to a pluralistic combination of methods in achiev-ing these goals. In the concluding section to his paper,Uwe Reinhardt attempts to extract some lessons forother countries from recent reforms in the US and inthe process confirms the underlying distributionalagenda noted by Evans. Reinhardt points out that it isthe lack of social solidarity in the US that has allowed

Copyright © 1999 John Wiley & Sons, Ltd. Health Econ. 8: 87–90 (1999)

BOOK REVIEWS90

so much experimentation with the finance, organizationand in particular regulation of health care in the States.What can we learn from all this change? Well, not asmuch as one might think in terms of direct application,but interesting tangential illuminations of the power ofprivate regulation, for example.

Meanwhile, back in the UK, Carol Propper’s paperprovides a useful round-up of the evidence concerningthe equity issues involved in financing and delivery ofhealth care in the UK. She concludes that the 1991reforms of the NHS have left the financing of healthcare more or less inequitable in favour of the poor (theUK has a mildly progressive taxation system fromwhich the NHS is funded). An unsurprising conclusiongiven the basis of the original reforms. Evidence ofinequity or otherwise on the delivery side is, however,less clear—although Propper suggests that at a veryaggregate level the internal market has had little im-pact. At the disaggregated level of GP fund-holding,hard evidence may be sparse, but the anecdotes allpoint one way (no prizes for guessing which way).

It is perhaps unfortunate that Maynard did notreword his universal introduction to this series when it

came to John Cairn’s paper on, er, yes, economicevaluation. Cairns points out that health economistshave been successful in promulgating the need foreconomic evaluations, but that there remain significantmethodological and data holes in this exercise.

The final paper—from Alan Maynard and KarenBloor—returns to the issues surrounding managed careaddressed by Reinhardt, and argue that it is not apanacea for all the ills exhibited by many health caresystems, and re-emphasise Evans’ views about the im-portance of equity in health care and the unacceptabil-ity of the managed care model for the UK.

By and large, this series does give an indication thatthere is more to health economics than economic evalu-ation. And in general, the contributions are well writtenand accessible. Although the series was cut short in itsprime, it would have been interesting to have had viewsand experiences from countries other than the UK andthe US.

JOHN APPLEBY

The King’s FundLondon

Copyright © 1999 John Wiley & Sons, Ltd. Health Econ. 8: 87–90 (1999)