The Management of Health Care

Technology in Ten Countries

October 1980

NTIS order #PB81-144628
Library of Congress Catalog Card Number 80-600162

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, D.C. 20402 Stock No. 052-003 -00783-5
Foreword

This report was developed as part of OTA’S study on the use of cost-effectiveness

analysis to evaluate medical technologies. Recognizing a common international concern about the costs and benefits of medical technologies, OTA commissioned papers

describing the health care systems of nine countries and the mechanisms these countries use for managing the diffusion and use of medical technologies. Whenever possible, the authors included data on five specific medical technologies: the computed tomography scanner, renal dialysis, coronary bypass surgery, cobalt therapy, and automated clinical laboratory services. Equivalent information for the United States is presented and compared to that for the nine other countries in the summary and analysis

(ch. 11), which was prepared by OTA staff and Louise Russell, Ph. D., of The Brookings Institution.

Initial drafts of the nine papers on the management of medical technologies in

other countries were reviewed by Dr. Russell and OTA staff. Helpful comments were

also provided by Henry Aaron, Ph. D., of The Brookings Institution. On November

1, 1979, most of the authors met for a l-day workshop in Washington, D. C., to discuss their papers and the implications of their findings. In the following weeks, they

completed their revisions. Helpful comments on the Japan paper were given to OTA

by Dr. John Bowers of the Macy Foundation and Professor Daizo Ushiba of the International Medical Information Center, Tokyo. Dr. Irv Asher of the Food and Drug Administration furnished specific information on drug and device regulation in several

countries, and Dr. Peter Frommer of the National Heart, Lung, and Blood Institute

provided helpful comments on coronary bypass surgery. A draft of the entire volume

was reviewed by two OTA advisory bodies: the Health Program Advisory Committee

and the Advisory Panel on the Implications of Cost-Effectiveness Analysis of Medical

Technology. OTA is grateful for the many contributions of all these individuals.

As a background study, this volume does not include policy options. It should be

noted that since international literature in the area of evaluating and managing medical technologies is sparse, firm conclusions are difficult to reach—only a few conclusions are stated in chapter 11. The many different approaches to medical technology in

other countries do offer a fruitful testing ground for new ideas, however, and OTA

hopes that this report will stimulate further activity, including comparative research.

Director

111
Advisory Panel on The Implications of

Cost= Effectiveness Analysis of Medical Technology

John R. Hogness, Panel Chairman

President, Association of Academic Health Centers

Stuart H. Altman

Dean

Florence Heller School

Brandeis University

James L. Bennington

Chairman

Department of Anatomic Pathology and

Clinical Laboratories

Children Hospital of San Francisco

John D. Chase

Associate Dean for Clinical Affairs

University of Washington School of Medicine

Joseph Fletcher

Visiting Scholar

Medical Ethics

School of Medicine

University of Virginia

Clark C. Havighurst

Professor of Law

School of Law

Duke University

Sheldon Leonard

Manager

Regulatory Affairs

General Electric Co.

Barbara J. McNeil

Department of Radiology

Peter Bent Brigham Hospital

Robert H. Moser

Executive Vice President

American College of Physicians

Frederick Mosteller

Chairman

Department of Biostatistics

Harvard University

Robert M. Sigmond

Advisor on Hospital Affairs

Blue Cross and Blue Shield Associations

Jane Sisk Willems

VA Scholar

Veterans Administration
OTA Staff for Background Paper #4

Joyce C. Lashof, Assistant Director, OTA

Health and Life Sciences Division

H. David Banta, Health Program Manager

Clyde J. Behney, Project Director

The Implications of Cost-Effectiveness

Analysis of Medical Technology

H. David Banta, Study Director, Background Paper #4

Kerry Britten Kemp, Editor

Shirley Ann Gayheart, Secretary

Nancy L. Kenney, Secretary

OTA Publishing Staff

John C. Holmes, Publishing Officer

Kathie S. Boss Debra M. Datcher Joanne Mattingly
HEALTH PROGRAM ADVISORY COMMITTEE

Frederick C. Robbins, Chairman

Dean, School of Medicine, Case Western Reserve University

Stuart H. Altman

Dean

Florence Heller School

Brandeis University

Robert M. Ball

Senior Scholar

institute of Medicine

National Academy of Sciences

Lewis H. Butler

Health Policy Program

University of California, San Francisco

Kurt Deuschle

Professor of Community Medicine

Mount Sinai School of Medicine

Zita Fearon

Consumer Commission on the Accreditation of

Health Services, Inc.

Rashi Fein

Professor of the Economics of Medicine

Center for Community Health and Medical Care

Harvard Medical School

Melvin A. Glasser

Director

Social Security Department

United Auto Workers

Patricia King

Professor

Georgetown Law Center

Sidney S. Lee

Associate Dean

Community Medicine

McGill University

Mark Lepper

Vice President for Znter-institutional Affairs

Rush-Presbyterian Medical School

St. Luke’s Medical Center

Frederick Mosteller

Professor and Chairman

Department of Biostatistics

Harvard University

Beverlee Myers

Director

Department of Health Services

State of California

Mitchell Rabkin

General Director

Beth lsrael Hospital

Kerr L. White

Rockefeller Foundation

v i
Contents

Chapter

I. Introduction. . . . . . . . . . . . . . . . . . . . . .

2. The Management of Medical Technology

Barbara Stocking

3. The Management of Medical Technology

jack Needleman

Page

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

in the United Kingdom . . . . . . . . . . . 11

in Canada . . . . . . . . . . . . . . . . . . . . 27

4. Australian Health Care Systems and Medical Technology . . . . . . . . . . . . . . . . 57

Sydney Sax

5. Medical Technology in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Joel 1-1. Broida

6. Policy for Medical Technology in France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Rebecca Fuhrer

7. Technology Assessment and Diffusion in the Health Care Sector in

West Germany ., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...119

Karin A. Dumbaugh

8. Medical Technology in the Health Care System of the Netherlands, . ........141

L.M.J. Groot

9. Medical Technology in the Health System of Iceland . . . . . . . . . . . . . . . . . . . . 157

David Gunnarsson and Duncan vB. Neuhauser

10. Controlling Medical Technology in Sweden . . . . . . . . . . .................167

Erik H. L. Gaensler, Egon ]onsson, and Duncan vB, Neuhauser

II. Summary and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 191

Appendix—Description of Other Volumes of the Assessment. . . . . . . . . . . . . . . . . 22 I
Introduction
Page

Rising Medical Care Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

The Diffusion of Medical Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Description of This Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Description of Five Medical Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5

Chapter l References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7

TABLE

Table No. Page

1. Annual Percentage Increase in the Consumer Price Indexand Health Care

Expenditures in Eight Industrialized Countries . . . . . . . . . . . . . . . . . . . . . . . . . . 3

FIGURE

Figure No. Page

l. Stagesin the Development and Diffusion of Medical Technologies. . . . . . . . . . . 4
1

Introduction;

RISING MEDICAL CARE EXPENDITURES

the rapid rate of growth in health expenditures

can be stemmed simply by eliminating technologies and services that do not provide any benefit. Unfortunately, however, this is not an adequate solution to the problem of rising costs.

The reason is that most new technologies do appear to have at least some benefit, however

small or costly. Examples of technologies that

fall into this category are “halfway” technologies such as organ transplantation, artificial

organs, many cancer therapies, and current

treatment for coronary artery disease (11).

Since the growth of resources used for medical care, over and above the effects of economywide inflation, is the primary reason for rapidly

rising costs, nations seeking to control health

care costs must effectively control the growth

and/or use of new resources. Inevitably, this effort will involve them in controlling the processes by which technologies are developed, evaluated, adopted, and used. And fundamentally,

this means that they will be forced to choose

among beneficial technologies, providing some

to the fullest extent, others to a limited extent,

and still others not at all.
4 ● Backround Paper #4: The Management of Health Care Technology it Ten Countries

THE DIFFUSION OF MEDICAL TECHNOLOGIES

Public intervention to control the diffusion

and use of specific technologies is likely to be related to one or another of the four theoretical

stages in the process of development and diffusion of medical technologies shown in figure 1.

The first stage, basic research, produces new

knowledge about the biological mechanisms underlying the normal functioning of the human

body and its malfunction in disease (6). In the

second stage, applied R&D, this basic information is used to create new solutions to problems

in the prevention, treatment, or cure of disease.

The next stage, clinical investigation and testing, involves the testing of new medical technologies in human subjects. This stage encompasses

a range of activities from first human use to

large-scale clinical trials and demonstration projects to demonstrate efficacy and safety (s). Efficacy is the benefit from use of a technology;

safety is a measure of the risk of a technology.

Finally, as a new technology appears to be of

value, clinicians begin to use it and patients

begin to ask for it. As more and more physicians

use the technology on more and more patients,

the extent of its use increases. This is the process

of diffusion, Diffusion may end with the technology’s attainment of an appropriate level of

use. Alternatively, it may end with the technology’s being abandoned, either because it was of

no value or because a more effective technology

Figure 1 .—Stages in the Development and Diffusion of Medical Technologies

SOURCE. Office of Technology Assessment, U S Congress, Development of Medical Technology Opportunities for Assessment (Washington, D C U S Government

Printing Office, 1976) (6)
has been developed, or with its being used too

much or too little.

The model sequence depicted in figure 1 is attractive because it offers a way to understand

the process of development and diffusion of

medical technologies such as drugs, devices, and

procedures. In reality, however, medical technologies emerge from a process that is far less

systematic than the model implies. In the ideal

model of diffusion, for example, scientific evaluation of efficacy and safety is an integral part

DESCRIPTION OF THIS VOLUME

All industrialized countries have begun to experiment with the kinds of mechanisms that will

be necessary to effect changes in development,

diffusion, and use of medical technologies. The

general and specific public policies that affect

the development and diffusion of medical technologies in nine industrialized countries are discussed in chapters 2 through 10 of this volume:

the United Kingdom (ch. 2), Canada (ch. 3),

Australia (ch. 4), Japan (ch. 5), France (ch. 6),

West Germany (ch. 7), the Netherlands (ch. 8),

Iceland (ch. 9), and Sweden (ch. 10). In chapter

11, U.S. policies pertaining to the development

and diffusion of medical technologies are compared to the policies of the other nine countries.

Also compared are the United States’ and other

countries’ experience with five specific technologies: 1 ) computed tomography scanners,2) renal

dialysis, 3) coronary bypass surgery, 4) cobalt

therapy, and 5) automated clinical laboratories.

Generally, each chapter begins with an introductory section in which the author briefly describes the country’s form of government and

of the diffusion process. In the real world of

medical care and health care policy, however,

such evaluation is often not done (5). Epidemiological and statistical methods have been developed to measure scientifically the benefits and

risks of a technology under controlled conditions. Increasingly, these methods, and especially the controlled clinical trial, have been proposed as the basis for decisions concerning medical technology.

economy. Following this is a section in which

the country’s medical care system is discussed.

In the third section of each chapter, the country’s policies concerning the R&D, evaluation,

and regulation of medical technologies are examined. Along with institutions for biomedical

research, government funding of research, and

priority areas of research, government policies

toward and support of the evaluation of medical

technologies are discussed. Also covered are

safety and efficacy regulation, health planning

and related investment controls, utilization review, and both general health care financing arrangements and financing arrangements specific

to technologies.

To help illustrate the application of the country’s general policies, in the fourth section of

each chapter the country’s treatment of five specific technologies is examined. As background

for the policy discussions in the remaining chapters of this volume, these five technologies are

defined below, and their uses and costs briefly

identified.

DESCRIPTION OF FIVE MEDICAL TECHNOLOGIES

Computed tomography (CT) scanners.—The

CT scanner is a diagnostic device that combines

X-ray equipment with a computer and a cathode

ray tube (television-like device) to produce images of cross-sections of the human body (7).

The first machines were “head scanners, ” designed to produce images of abnormalities within the skull (e. g., brain tumors). These machines

were developed in Britain in the late 1960’s.

“Body scanners” able to scan the rest of the

body as well as the head have been developed

more recentlv.

- J
6. Backround Paper #4: The Management of Health Cure Technology it Ten Countries

Following its development, the CT scanner

was quickly hailed as the greatest advance in

radiology since the discovery of X-rays. CT

scanning was rapidly and enthusiastically accepted by the medical community. More recently, however, three factors—the rapid spread of

CT scanners, the frequency of their use, and the

expenditures associated with them—have combined to focus attention on the contribution of

CT and other diagnostic medical technologies to

the recent growth of medical care expenditures.

The concern over expenditures has also caused

decisionmakers to examine policies pertaining

to other medical technologies. In 1979, a CT

scanner cost, on average, more than $500,000 to

buy and $400,000 to $500,000 a year to operate.

That year, the United States had more than

1,200 scanners, so the cost of scanning in 1979

was more than $500 million.

Renal dialysis.—Hemodialysis and renal

transplantation are two life-extending therapies

that were developed in the early 1960’s for victims of end-stage renal disease. End-stage renal

disease is a clinical condition reached when a

person has such a degree of deterioration of kidney function that without treatment he or she

will soon die.

Hemodialysis is the process of removing toxic

waste products from the blood by means of an

artificial kidney. The first dialysis machine was

built in Holland in the early 1940’s, but could be

used only for short periods of time (6). Longterm dialysis became possible when Scribner

and his colleagues developed the “Scribner

shunt. ” This device, a semipermanent apparatus

that linked an artery to a vein, could be used to

connect a patient to a dialysis machine, without

surgery for each session of dialysis. A patient

generally requires dialysis about three times a

week.

Renal transplantation is a surgical procedure

whereby a healthy kidney from a living person

or a person who has recently died is substituted

for an individual’s nonfunctioning kidney.

Transplantation has become more and more reliable, but is still in a somewhat experimental

stage. The recipient’s body tends to reject the

kidney graft, and drugs are necessary to suppress this rejection.

Concerns about the treatment of end-stage

renal disease in both the United States and other

countries have focused on costs. In the United

States, it was estimated in 1975 that the average

annual charge for dialysis received in a hospital

was $30,500; $27,500 for nonhospital dialysis;

$14,000 for the first year of dialysis at home,

and $7,000 for successive years (8). Transplantation charges averaged about $12,000. The

treatment of end-stage renal disease has been

covered under the medicaid program since 1972,

and cost the program $573 million in 1976.

Costs in 1979 were expected to exceed $1 billion.

Coronary bypass surgery.—Coronary bypass

surgery is a surgical procedure in which a graft

is placed between the aorta and a coronary artery to bypass a constricted portion of the artery

and thus improve oxygen supply to the heart

muscle (5). The surgery is used as a treatment of

coronary artery disease, a disease caused by

narrowing and blocking of the arteries that supply blood to the heart. This disease is the number one cause of death in the United States. In

1975, it caused 642,719 deaths.

Coronary bypass surgery came into practice

in the early 1970’s. Approximately 25,000 operations were performed in the United States in

1973, and perhaps 100,000 in 1978. In 1977, the

total cost of coronary bypass surgery in the

United States averaged $15,000 per patient. If

100,000 operations were performed in 1978, the

aggregate costs to the Nation were more than

$1.5 billion.

The benefits of coronary bypass surgery for

all classes of patients with coronary artery disease have not been clearly demonstrated.

Cobalt therapy.—Cobalt therapy is a form of

radiation therapy (9). Radiation therapy is used

almost exclusively for the treatment of cancer,

either to cure it or to alleviate its symptoms. In

the United States, there are approximately 300

new cases of cancer per 100,000 population each

year. Including both new and previously discovered cases, 430 people per 100,000 population

are treated for cancer each year.

About 70 percent of those who are treated for

cancer receive radiation therapy at some point
during their illness. It is difficult to evaluate the

benefits of radiation therapy. Not only is it

generally used in combination with other therapies, but its benefits must be weighed against

sometimes serious side effects. Furthermore, the

therapeutic goal is often to alleviate rather than

to cure.

In 1975, the cost of purchasing a cobalt therapy unit was about $90,000 to $125,000. Construction costs are high because of the need to

shield staff and the surrounding population

from dangerous radiation.

The issue with cobalt therapy, as with many

other large and expensive technologies, concerns the number and distribution of units.

Most experts believe that, like many expensive

technologies, cobalt therapy should be centrally

located to ensure access and located in a specialized medical center to permit optimal use.

Automated clinical laboratories.—The primary function of the clinical laboratory is to

analyze and provide data on samples of body

tissues or fluids. By correlating these data with

firsthand observations and results of other tests,

physicians are better able to make accurate diagnoses and to determine the proper therapy for

their patients. Appropriate and reliable data

from clinical laboratories are essential for current medical practice.

CHAPTER 1 REFERENCES

1. AHA Indexes, “Growth in Laboratory Tests Indicative of Increase in Service Intensity, ” Hospztak 53:46, 1979.

2. Altman, S., and Wallack, S., “Technology on

Trial–Is It the Culprit Behind Rising Health

Costs? The Case For and Against, ” in Medical

Tech )Iology: Tile Culprit Belli)ld Health Care

Costs? edited by S. Altman and R. Blendon,

DHEW publication No. (PHS) 79-3216 (Hyattsville, Md: National Center for Health Services

Research, and Bureau of Health Planning, 1979).

3. Cohn, V., and Miluis, P., “They Make Good by

Making Well, ” Waslzi)lgto)z Post, January 7,

1979.

The automation of clinical laboratories began

in the late 1950’s with the marketing of the

continuous-flow blood analyzer, a machine that

performs multiple tests on a single sample of

blood. Newer machines have improved on the

original blood analyzer, and clinical laboratory

functions in addition to blood analysis have

since been automated. By 1972, more than 50

percent of U.S. hospitals had automated their

hematology and/or chemis try laboratories.

Automating clinical laboratory functions

both lowered unit costs for laboratory tests

improved the reliability and validity of the

has

and

test

results. At the same time, however, the ready

availability of automated equipment has stimulated the use of laboratory tests and increased

the total volume of tests performed—to such an

extent, in fact, that the value of much of this

testing is now in question.

In 1975, 5 billion laboratory tests were done

in the United States at an estimated cost of $15

billion (6). The number of tests was increasing

both for hospitalized and ambulatory patients.

Between 1969 and 1976, the average number of

tests provided per patient per day in the hospital

rose from 2.3 to 5,0, an average annual increase

of 11.1 percent (1). During the same period, the

average cost per test rose by $0.22, from $1.34

to $1.56. In 1976, it was projected that the total

volume of laboratory tests nationally would rise

at the rate of 11 percent a year (6).

4. Fineberg, H. V., “Gastric Freezing—A Study of

Diffusion of a Medical Innovation, ” in Medical

Teclz~lology and tlze Healt)l Care Systet}l (Washington, D. C.: National Academy of Sciences,

Committee on Technology and Health Care,

1979) .

5. Office of Technology Assessment, U.S. Congress, Assessing the Efficacy and Safety of Medical Technologies, GPO stock No. 052-003 -

00593-o (Washington, D. C.: U.S. Government

Printing Office, September 1978).

6. , Dezlelopment of Medical Techtlology:

Opportu)lities for Assessment, GPO stock No.

052-003 -00217-5 (Washington, D. C.: U.S. Gov-
7<

8.

ernment Printing Office, August 1976). 9.

Policy Implications of t}?e Computed

To)nog’raphy (CT) Scar?ner, GPO stock No. 1 0 .

052-003 -00496-8 (Washington, D. C.: U.S. Government Printing Office, August 1978).

Rettig, R., ln?plet~le)ltitlg the E) Id-Stage Re/zal

Disease Program of Medicare, draft report for 11.

Health Care Financing Administration, grant

No. 18-P-90742/9-01 (Washington, D. C.:

RAND Corp., 1979).

Russell, L., Tech) zology i}z Hospitals (Washington, D. C.: Brookings Institution, 1979).

Simanis, J. G., and Coleman, J. R., “Health

Care Expenditures in Nine Industrialized Countries, 1969 -1976,” social Secz{rity Blllleti)l 43:3,

1980.

Thomas, L., T//e l.i~~es of a Cell (New York ,

N. Y.: Viking Press, 1974).
2.

The Management of

Medical Technology in

the United Kingdom

Barbara Stocking

London School of Hygiene

and Tropical Medicine

London, England
—

The United

The Health Care System. . . . .

Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ● *..*.** .

Mechanisms for Managing Medical Technology. . . . . . . . . . . . . . . . . . . . . . . . . . .

Research, Development, and Evaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Purchase of Equipment.

Planning . . . . . . . . . s . . . . .

Specific Technologies. . . . . . . . .

CT Scanners . . . . . . . . . . . .

Renal Dialysis. . . . . . . . . . .

Coronary Bypass Surgery . .

Cobalt Therapy. . . . . . . . . .

Clinical Laboratory Testing:

Concluding Remarks . . . . . . . . .

Chapter 2 References . . . . . . . . .

Table No.

1. CT Body Scanners Installed or

TABLE

11

12

15

15

16

17

18

18

19

21

21

22

23

24

Page

on Order in the United Kingdom . . . . . . . . . . . . 18

FIGURE

Figure No. Page

1. Framework of the NHS Structure in England . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
2.

The Management of Medical Technology

in the United Kingdom

Barbara Stocking

London School of Hygiene

and Tropical Medicine

London, England

THE UNITED KINGDOM: COUNTRY DESCRIPTION

The United Kingdom, with a total population

of 55.5 million (23), consists of four countries:

England, Scotland, Wales, and Northern Ireland. It has a constitutional monarchy with government by a two-tier Parliament (the House of

Commons and the House of Lords). All four

countries are directly governed by Parliament at

Westminster, though Northern Ireland has, in

the past, had its own Parliament. Despite direct

rule, a certain amount of power has been devolved to the separate countries, producing

some differences, for example, in how the health

services are managed. In recent years, both

Scottish and Welsh nationalism have increased

and will almost certainly lead to further devolution of power. The idea of separate assemblies

for these countries, however, was rejected in a

recent referendum.

The two major political parties in the United

Kingdom are Labour and Conservative, although a number of other parties (e.g., the Liberals, the Scottish Nationalist Party, etc. ) are

represented in Parliament. Members of the

House of Commons are elected democratically,

with each Member representing a particular

constituency. The government is formed by the

party with the majority of Members of Parliament in the House. The Prime Minister is the

leader of that party, and he/she forms the

Cabinet from the Members of that party in the

Houses of Parliament. The various government

departments and ministries are headed by Secretaries of State or Ministers, a subset of whom

form the Cabinet. All departments and ministries are led by individuals from

party in Parliament, so there is no

the executive and legislative

government.

the majority

separation of

branches of

The House of Lords is composed of hereditary

peers, as well as peers appointed for life. It is the

privilege of the Prime Minister to select a certain

number of individuals for life peerages each

year; those selected tend to be individuals who

have had distinguished careers in various walks

of public life. The House of Lords is of less importance than the House of Commons, but does

provide a useful check on parliamentary legislation and can initiate bills itself. There is agreement from both major parties, however, that

some reform of this body is due.

The economy of the United Kingdom is

mixed. A number of major services and industries are nationalized (e. g., British Rail, the

British Steel Corp., etc.). In many cases, these

industries are managed, not directly by Parliament, but by independent corporations whose

leadership, composition, and powers are laid

down by Parliament. The National Health Service (NHS) is an exception in that a Secretary of

State for Social Services in Parliament does

head the corresponding government department, i.e., the Department of Health and Social

Security (DHSS). ’ In recent years, particuiar]y

under Labour governments, the number of na-

‘The Ministry of Health was combined with the Ministry of

Social Security in 1968, when it became DHSS.

11
tionalized industries has increased. In addition,

where industries have particular importance to

the economy, the government has stepped in to

support firms in the free enterprise sector (e. g.,

Rolls Royce, Chrysler).

Britain’s relative lack of productivity, as compared to its European, American, and Japanese

competitors, has been blamed on a number of

factors. The management side of industry is

blamed for not modernizing its equipment and

for not being willing to risk involvement in new

ventures. These problems are, in turn, blamed

on the government, which is said to have produced a lack of incentives for investment or for

entrepreneurial activity. On the workers’ side,

the unions are blamed for strikes, for enforcing

rigid demarcation rules, and for overmanning.

There would seem to be truth in the statements

that each of these factors has contributed. Nevertheless, the sum of all of these factors, not any

particular one, has caused Britain’s decline relative to other countries.

The problems of British industry give some

insight into the attitudes towards technology.

New technology is often rejected by the unions,

not for itself, but because it will lead to a reduction in jobs. Management may be fearful of a

confrontation with the unions or may not be

willing to invest in innovations. The result is a

fairly conservative attitude towards technology

THE HEALTH CARE SYSTEM

A national insurance system that covered the

health care of most of the working population

was initiated early in the century, but it was not

until 1948 that Britain established its NHS.

World War II changed many public attitudes

and fostered the belief that a postwar social

order should be created that ‘would include

health care as a right for all. Although the

Beveridge plan for NHS was drawn up during

the war, legislation creating NHS was not

passed until 1946, and the Service was not finally begun until 1948. Funds for NHS come from

national insurance contributions and from general taxation. All health care is provided to pain Britain, despite the very high quality of science and technology research carried out in British universities and research institutions.

In discussing British attitudes towards technology, a somewhat different point should also

be made. Although science and academic research in Britain are of high status, technology

has for a long time been considered somewhat

second rate. This attitude, perhaps, can best be

exemplified by the status of engineers. Engineers

in the United Kingdom do not receive the same

respect as other professionals; in comparison to

the status of engineers in other countries, their

status is low, The large gap between the development of inventions and innovations in research institutions and their actual implementation or production by industry very likely

reflects the predominant attitude toward

technology.

Recently, concern over Britain’s declining

economy has led to a slow recognition that industry, technology, and innovation must be

given increased status and more incentives. In

particular, the previous Labour government

took steps to ensure that Britain would not get

left behind in the microprocessor revolution.

Whether these steps are adequate and whether

more fundamental attitudes towards technology

can be changed remains to be seen.

tients free of charge (apart from small payments

for drugs, spectacles, etc.).

The basic tenets of the 1946 Act creating NHS

still hold, although the Service, particularly its

organization, has been modified by various

laws passed since. The most major change came

in 1974 with the reorganization of NHS. Until

that time, hospitals had been managed by regional hospital boards responsible to DHSS and

ultimately to the Secretary of State in Parliament; community care, including district

nurses, school health services, etc., however,

had been the responsibility of local government
authorities. In 1974, the various facets of health

care were unified under one authority.

Currently, the unified NHS in England is

organized in a number of tiers. (See figure 1.)

The bottom tier is the “district,” serving perhaps

a quarter of a million population. All hospital

and community services are the responsibility of

a district management team. The district is part

of a larger “area” (although some areas contain

only one district). The area has a team of officers who are actually employed by the Service

but who are responsible to an Area Health Authority appointed by the Secretary of State for

Social Services. The areas are overseen by “regions.”2 A regional team of officers carries out

‘There are 14 regions in England, The other three countries in

the United Kingdom are comparable in size to an English region

and are therefore organized slightly differently: Scotland has 15

Area Health Boards; Wales has 8 Area Health Authorities; Norththe day-to-day activities, but is responsible to a

Regional Health Authority. Statutory authority

for NHS is vested in the Area and Regional

Health Authorities (all of whose members, apart

from the chairmen, serve unpaid). In Scotland,

although the organization of NHS is similar,

there are three tiers.

One or two points need to be made about the

structure of NHS. It is envisaged that actual

management of health services should take

place at the lower levels, with the upper levels

providing a coordinating and policymaking

function. There have been considerable difficulties in the Service about the role of each of

the tiers, however, and there is some consensus

ern Ireland has 4 Health and Social Service Boards. Northern Ireland is different from the other countries in that health and social

services are combined,

Figure 1 .—Framework of the NHS Structure in England

—o —

----- -

\

\

\

\

\

\

\

\

of State I

1 .

SOURCE Office of Health Economics, The Reorganised NHS (London White Crescent Press. 1977) (19)
that there is probably one tier too many. Because much upheaval resulted from the 1974 reorganization of the Service, however, further

disruption is not likely to be undertaken lightly.

Despite the position of DHSS at the top of the

hierarchy, it is repeatedly pointed out that, subject to conforming with general policy, the regions and areas are free to manage NHS as they

see fit, and in particular, to allocate resources

according to their own judgment. Nevertheless,

there is some confusion about how binding

DHSS’ advice is—confusion that is seen both in

the purchase of medical equipment and in other

activities. In one sense, DHSS is quite outside

the Service in that it is the Regional and Area

Health Authorities rather than the Department

who actually employ NHS staff. Since DHSS

holds the purse strings and distributes money to

the regions, however, it obviously has considerable powers of persuasion.

According to DHSS, NHS spending for fiscal

year 1979-80 (excluding central services) was

18.1 billion ($17.8 billion). ’ The Office of

Health Economics estimated that in calendar

year 1978, NHS expenditures were running at

5.7 percent of the gross national product

(GNP).4 Apart from government expenditure on

health, an additional small but increasing

amount of money is spent on private health

services. There is also separate funding for biomedical research through the Medical Research

Council (MRC).

How NHS funds should be distributed is a

topic that has recently come in for considerable

scrutiny. Concern about inequality in the provision of health services led to the setting up of the

Resource Allocation Working Party (RAWP).

RAWP recommended that resource allocation

should not be based on existing facilities per se,

since these tend to generate their own demand;

instead, money should be allocated to regions

on a population basis modified by various factors that might indicate the need for health care,

such as standardized mortality ratios (11). The

formula RAWP recommended is quite complex

and has generated much controversy, not least

because full implementation of the recommendations would lead to a decrease in funds for the

Thames regions (which cover the whole of London) to provide for increases elsewhere. In fact,

the previous Secretary of State for Social Services, in office until 1979, took more of a middle

road, giving increases in funds to all regions but

with the amount of growth proportional to each

region’s relative under- or over-provision. It remains to be seen how the present Conservative

Secretary of State will handle this problem.

The resource allocation problem has highlighted the difficulties likely to be faced in the

next few years. As in other developed countries,

health care costs in the United Kingdom have

risen (although here they have been comparatively well restrained, perhaps at the expense of

the quality of the Service). Since it is clear that

this situation of rising costs cannot go on indefinitely, NHS is in for a period of little or no

growth. During that period, it will be hard to

remove inequalities.

Finally, on NHS funding, it should be pointed

out that the Health Authorities operate on a system of cash limits. Each year they must remain

within these limits, though some allowance is

made subsequently for inflation. Major salary

increases negotiated at the national level and

taking effect in the budget year in progress make

it difficult for Authorities to plan their budgets

to remain within these limits. In some cases, this

difficulty has led Authorities to underspend during the year, and then at the end of the year to

use their surplus funds for major purchases such

as medical equipment.

To complete this section, a brief summary

should be given of some of the other descriptors

of NHS. Unfortunately, in government documents, some figures are given for England and

Wales, some for Great Britain (which includes

Scotland but not Northern Ireland), and some

for the United Kingdom (including all four

countries). This should be kept in mind when

reading this section.5 In 1976, there were

‘The information in this section is taken from two publications

of DHSS, Annual Report 1977 (4) and Health and Personal Social

Services for England (s).
479,359 hospital beds in Great Britain, of which

about 300,000 were nonpsychiatric and the rest

psychiatric beds.

The latest figures available on staff are for

1975, when a total work force of 914,068 was

given for Great Britain, with something under

half of this total being nursing and midwifery

staff. For 1976, a full-time equivalent figure of

37,257 medical staff was given for hospital and

community services. General practitioners

(GPs), who provide the bulk of medical staff in

the community, are not included in this figure,

since they are not NHS employees but work on

contract to the Service through family practitioner committees. (See figure 1.) Since GPs act

as the front line for much of the Service and are

responsible for referrals to hospitals, consultants, etc., they play a major role in Britain.

There were 26,418 GPs in Great Britain in 1976.

To give some idea of the utilization of NHS,

some figures for 1977 can be cited. In England,

5.3 million inpatients were treated in the country’s approximately 376,000 hospital beds. The

average length of stay was 20.9 days, but reduces to 9.2 days if pyschiatric, geriatric, and

younger disabled units are excluded. The total

attendancies of outpatients at consultant clinics

was 33 million, not including accident and

emergency departments, and there are also active day patient programs in psychiatric and

geriatric units. On the average, a patient visits

his or her GP three times a year.

MECHANISMS FOR MANAGING MEDICAL TECHNOLOGY

Research, Development, and Evaluation

In Britain, much technological innovation in

medicine has stemmed from university and

medical school research, particularly in bioengineering or medical physics departments. The

pharmaceutical industries have always undertaken their own research, but the medical equipment industries have tended to develop inventions and ideas from academia. As more medical industries, particularly those in diagnostic

equipment, are setting up their own research

laboratories, however, this situation may be

changing.

Funds for research in academia may come

from a variety of sources—from university

overheads, from government-funded research

councils, and quite commonly in the medical

field, from a number of trusts and foundations.

At the development stage, a number of routes

can be taken: The invention may be taken up by

industry; the National Research and Development Corporation may provide funds for development work or may find a suitable firm to take

up the idea; or DHSS, through its Scientific and

Technical Branch, may provide “pump-priming” funds for inventions which it feels may be

especially useful to NHS.

The processes for the evaluation of medical

technology are generally more haphazard. For

new drugs, however, a rigorous code of practice

is followed. Trials of new drugs are usually

sponsored by the drug manufacturer after animal trials have been completed and found acceptable by the Committee on Safety of Medicines. The clinical trials tend to take place in the

NHS setting, although doctors are not paid for

their involvement. Before a drug may be marketed, approval by the Committee on Safety of

Medicines is required.

There are no formal procedures for the evaluation of medical devices. Two agencies, however, do exert some oversight: 1) the Scientific

and Technical Branch of DHSS, and 2) MRC.

MRC is responsible for most of the clinical trials

of new procedures in the United Kingdom (apart

from trials sponsored by pharmaceutical manufacturers). MRC has a well-earned reputation

for the quality of its clinical trials, but does not

evaluate all new procedures and treatments.

Evaluation of a particular procedure or piece of

equipment may be suggested by the committees,

units, or council of MRC, may be suggested independently by a particular researcher in a

grant application, or may be requested by

DHSS. How many of these triaIs actually take
16 ● Backround paper #4: The Management Of Health Care Technology in Ten Countries

place depends on their importance in comparison to other uses of MRC funds; there is no

fixed budget for clinical trials. Britain is in a

very favorable position for carrying out clinical

trials, however, because the costs of patient care

(including salaries of staff, etc.) are already being borne by NHS. The actual costs of a clinical

trial, then, are low, “particularly in comparison

to the costs of trials in the United States. MRC

tends to emphasize randomized trials of new or

existing treatments rather than the evaluation of

diagnostic or other procedures, or on medical

equipment more generally.

The Scientific and Technical Branch of DHSS

exerts a more general overview of the field than

MRC. The evaluation activities of this branch

tend to focus on the safety of equipment and its

performance and reliability in clinical settings.

Although the branch may provide funds for

purchase of machines to be tested in the clinical

environment, it is not involved in randomized

clinical trials. It may suggest to MRC, however,

that such trials are needed.

Thus, clinical performance, and to some extent clinical trials, of medical technology are the

major facets of evaluation in Britain. There is

virtually no emphasis on evaluating the more

general social and economic impacts of innovations. Any such work that does take place probably arises independently in universities around

the country, although it may be supported by

DHSS-controlled research funds or perhaps by

the Social Science Research Council.

The Purchase of Equipment6

The structure of NHS was discussed earlier,

but it perhaps needs to be reiterated here that it

is Regional and Area Health Authorities who

decide how money should be spent, and it is up

to them to decide what equipment is needed and

which make should be purchased.7 Thus, although there is a nationalized health service in

Britain, there is much more scope for variability

than one might at first suspect. Consequently,

“Much of the information in this section was taken from “Medical and Scientific Equipment in the NHS, ” Brit, Meal, J. 1(6120):

1160, 1978 (16).

7This is apart from the small amount of equipment purchased directly by DHSS for evaluation.

too, the introduction and diffusion of medical

technology are not so well managed as might be

thought.

The main reason that Britain has not had the

pressures for more control which are in evidence

in the United States is not so much that technologies are well managed as that NHS budgets are

very tight and there are many competing claims

on a Health Authority’s funds. Through the

NHS budgetary system, Britain has had some

protection from the cost explosion of new technologies seen in other countries.

The controls over medical equipment purchasing are quite variable in NHS. Some equipment (e. g., X-ray apparatus, renal dialysis

machines, and automated laboratory equipment) is purchased under central contracting arrangements. DHSS—again Scientific and Technical Branch or its counterpart in Wales, Scotland, or Northern Ireland—negotiates contracts

with the supplying firms, and this equipment is

produced to DHSS specifications and evaluated.

Since DHSS does not directly place orders for

equipment, however, there is no guarantee to a

manufacturer that its equipment will be purchased by Health Authorities. Purchase will depend on whether an Authority decides it needs

new equipment, and even if an Authority decides that it does, it may buy from another manufacturer (although the fact that the equipment

has been built to certain standards and specifications is an incentive to use the firm with the

DHSS contract).

Even within the central contracting arrangements, there is some variability according to the

type of equipment. Orders for X-ray and radiotherapy equipment are placed through DHSS.

With other equipment, such as automatic analyzers, the central contracting is for a base price,

and individual Authorities negotiate with and

purchase equipment from the firms directly.

There have been complaints about the central

contracting arrangements both from manufacturers, who have no guarantee of a number of

sales and yet are selling at prices favorable to

NHS, and from Health Authorities, who would

like more freedom to negotiate with firms.
Ch. 2— The Management of Medical Technology in the United Kingdom ● 17

Apart from the central contracting arrangements, supplies, including medical equipment,

are in the hands of the Health Authorities themselves. The cheaper equipment (under 15,000

($11,000)) comes out of revenue expenditure

and is handled through hospital budgets. If it

costs more than 5,000, equipment is considered a capital expenditure and may be handled

in a variety of ways depending on the area or

regional policy. In some regions, a budget is set

aside for equipment and there are committees

set up at the regional level to decide on equipment (e.g., for radiology, for pathology, etc.).

This system may have advantages in that the

supply of equipment is rationalized throughout

the region and the actual purchase decided on

by specialists who understand the highly complex machinery.

In other regions, there may be no special

budget for equipment; instead, areas may be

allowed to decide how much of their minor capital allowance to spend on it. Devolving the decision downwards in this way has the advantage

that money is not automatically spent on equipment, i.e., without comparison of that need to

other needs for capital. On the other hand, the

region may lose out on discounts for bulk buying and there may be other problems such as

duplication of equipment. It should be pointed

out that requests for equipment in these various

systems tend to originate with clinicians;

whether requests are successful will depend to

some extent on clinicians’ ability to argue their

case in the face of other competing claims on

resources.

Clearly, there is great variability in how NHS

handles the purchase of medical technology.

The general question of supplies for NHS, of

which medical equipment is one facet, has been

under examination recently by the Salmon

Working Party. There is agreement that all is

not well with the current mechanisms, and the

working party recommended setting up a Supply Council to set policy, including policy for

the evaluation of medical equipment (6). How

far the working party’s recommendations are

implemented and how they will affect NHS

await to be seen under the new government.

Planning

To complete this section on medical technology management, something must be said about

the NHS planning system. Since the 1974 reorganization of NHS, a highly complex planning system has been initiated. Under this planning system, the lowest tier (i.e., the district)

prepares a 3-year operational plan which is

passed up to the higher tiers and incorporated

(with appropriate discussion and modification)

into the higher tiers’ larger operational plan. In

addition, areas prepare 10-year strategic plans

which are incorporated into regional strategic

plans. These strategic plans are revised every 4

years. In theory, by a process of passing down

information about policy from the top and receiving these plans upwards from the bottom, it

is hoped that a region, and ultimately DHSS

and the Secretary of State for Social Services,

can guide NHS in appropriate directions. Although this planning system is in its early stages

and is having teething troubles, it is necessary to

mention it, particularly in the context of capital

expenditure. Since capital will form an important part of a regional strategy for modifying its

service provision, it should be through these

plans that modifications of capital stock are

approved.

Capital budgets are allocated to regions in a

way similar to that described for resource allocation of revenue costs (i. e., the RAWP formula

discussed above) (11). Although regions— and

also areas, if decisionmaking is devolved downwards—are free to decide on how capital funds

should be spent, it is likely that major capital

developments (e.g., new hospitals) will have

been thoroughly discussed with DHSS and approved by the Secretary of State. As an interesting aside, it is noteworthy that hospital bed

closures cannot be made without the approval

of community health councils, the community

“watchdogs” of NHS. When these councils and

a Health Authority disagree, the final decision is

made by the Secretary of State.
18 ● Backround Paper #4: The Management Of Health care Technology in Ten countries

SPECIFIC TECHNOLOGIES

CT Scannersg

In 1967, G. N. Hounsfield, working on pattern recognition studies at British manufacturer

EMI’s central research laboratory, built a crude

scanning device which produced pictures of inanimate objects. Although similar devices had

been produced by others, particularly, W. H.

Oldendorf and A. M. Cormack in the United

States, their ideas had not been taken up by industry. It was Hounsfield’s success in persuading EMI of the medical importance of his invention which led to the manufacture of the first

computed tomographic (CT) scanner.

DHSS was involved from a very early stage.

EMI approached DHSS about the usefulness of

Hounsfield’s idea, and as a result, DHSS provided funds for the first prototype brain scanner. The Department also arranged in 1971 for

this scanner’s clinical evaluation at Atkinson

Morley’s Hospital in London (1). During 1973,

two additional first-production machines were

purchased out of the Department’s R&D funds

and sited in well-known hospitals. Subsequently, DHSS purchased three more machines for

further evaluation.

Early on, it became obvious that CT brain

scanning was a remarkable breakthrough. The

results of evaluation studies furnished to DHSS

in 1976 by the six institutions with scanners led

to the Department’s recommendation that each

region purchase at least one brain scanner. By

August 1978, 33 brain scanners had been installed or were on order in England and Wales.

The number did not increase greatly thereafter,

because of Authorities’ tendency to buy body

scanners for both brain and body purposes. By

January 1, 1979, there were 39 head scanners,

and 1 more was added during 1979.

Meanwhile, EMI had succeeded in decreasing

the scan time from 5 minutes to about 20 secaMuch of the information for these case studies was derived

from particular individuals. These sources are given, but the individuals concerned are not responsible for any mistakes or misinterpretations.

9A fuller discussion of CT scanning in Britain is given in B. M.

Stocking and S. L. Morrison, The Image and the Reality: A Case

Study of Medical Technology, 1978 (22).

ends, thereby making body scanning a possibility. DHSS was much less involved with the development of body scanners, and EMI provided

its own funds for the first prototype. This

machine was installed in Northwick Park Hospital in 1975. Although DHSS did not take part

in the evaluation of the machine, it did advise

Health Authorities to be cautious about purchasing scanners until the evaluation was further advanced.

In fact, events overtook the evaluation. With

resistance to purchase of body scanners in official channels, other sources of funds for such

scanners were apparently sought. In a number

of areas, various philanthropists donated scanners to NHS; in other areas, appeals were set up

to raise the necessary funds. Table 1 shows the

Table 1.—CT Body Scanners Installed or on Order

in the United Kingdom (October 1979)a

Location Source of funds for machine

England and Wales

Northwick Park

Brighton

Manchester (Medical School)

Birmingham

Bristol

Royal Marsden, Sutton

London (St. Thomas’)

London (University College)

London (St. Bartholomew’s)

London (Middlesex)

Leeds

Conventry

London (National Hospital)

London (Great Ormond St.)

London (Charing Cross)

Manchester (Christie)

Guild ford

Scotland

Edinburgh

Glasgow

Northern Ireland

Belfast

Outside NHS

BUPA

Midhurst

DHSS

Donor

University and NHSb

Donor

Donor agency

Cancer research campaign

and additional sources

Endowment funds

Donor

Endowment funds

Endowment funds

Appeal

Appeal

DHSS, donors, and

additional sources

Appeal

Donor

Appeal

DHSS and NHS

NHS

NHS

NHS

Donor

Donor
Ch. 2–The Management of Medical Technology in the United Kingdom . 19

sources of funds for the capital costs of all body

scanners installed or on order in October 1978.

Eighteen body scanners were operational by

January 1, 1979, and another five became operational during 1979.

Early on, DHSS had set up a committee to

monitor the body scanner’s evaluation, but it

was not until August 1978, when a large number

of body scanners were already in use, that

DHSS issued a paper saying that whole-body

scanning did have a place in diagnostic radiology (7). This letter went on to say: “In a few

centres it is likely that general purpose scanners

will need to be provided primarily for the body

role. ”

Whole-body CT scanning has raised a number of important questions in the United Kingdom. The central issue concerns how new technologies should be evaluated. A number of diagnostic techniques have been tried out in clinical settings before large-scale diffusion; CT

scanning is unique in that questions have been

raised about the usefulness of this as compared

to other techniques and the need for randomized

clinical trials of diagnostic equipment has been

recognized.

The important issue of the role of philanthropy in NHS has also been raised. In a number of

cases, Health Authorities have been put into an

embarrassing position. Scanners have been offered to them, but individual Area Health Authorities have had to provide the operating costs

(and probably eventually the funds for replacement machines). Operating costs are estimated

at 50,000 ($110,000) per annum, and given

current tight budgets, these Authorities might

prefer to use their funds for other purposes.

There are also other consequences of philanthropic gestures. Because local consultants have

usually been the stimulus behind appeals and

the local community itself has raised the funds,

the local community expects to benefit by having the scanner in its own hospital. This may or

may not be the best location for it. It is certain

that some of the early scanners donated by philanthropists did not go into the most appropriate

locations for a proper clinical evaluation. Even

now, DHSS recommends that priority for body

scanners should be given “to those centres

prepared to undertake further clinical evaluation” (11). The hospitals that are getting scanners as a result of appeals, though, are not necessarily the most capable of evaluating them.

Thus, although it is accepted that philanthropy

can provide a very useful source of funds for

NHS, in the case of CT scanners, philanthropy

has produced a number of difficulties.

Renal Dialysis10

For patients with chronic renal failure, treatment by dialysis or the receipt of a transplant

may be alternatives or may be complementary.

Thus, in the following discussion, figures are

given for both dialysis and transplant services.

Britain became involved in the provision of

renal dialysis for chronic renal failure in the

mid-1960’s. The British Government, through

the then Ministry of Health, became directly involved in establishing dialysis units and in

evaluating the technique. By the end of the

decade, the current network of dialysis centers

was established, and Britain was leading the

way in Europe in the provision of this service.

(Britain no longer holds this lead.)

The Ministry of Health was also involved in

setting up the network of transplantation units

alongside the dialysis units after a working party on the subject had reported in the early

1960’s. Finally, central funds were used to setup

the National Organ Matching and Distribution

Service and the National Tissue Typing Reference Laboratory (referred to jointly as “UK

Transplant”).

After these early initiatives, the Ministry of

Health handed over the responsibility for financing the now 49 dialysis and transplant units

in England and Wales to the Regional Authorities. Particularly since reorganization of NHS

in 1974, DHSS has emphasized that resource allocation decisions are in the hands of the Regional and Area Health Authorities.

10Much of the information for this case study was taken from a

1978 publication of the Office of Health Economics, Renal Failure:

A Priority in Health? (18) and from discussion with author William Laing (15).
20 ● Backround Paper #4: The Management Of Health care Technology in Ten Countries

Despite this devolution of responsibility,

renal dialysis has reached sufficient prominence

in public debate for the British Government to

become involved again. In particular, in late

1977, funds were provided through the special

medical development (SMD) earmarking system

for extra dialysis machines for children. The

SMD money is for the initial stages of new programs. The conditions set are that the object of

expenditure should be just emerging from the

experimental stage and that the period of direct

financial support should be short term. No provision was made for recurring revenue costs

with the pediatric dialysis machines. Thus, Regional Authorities already battling with very

tight budgets were not enthusiastic about the offer of machines. In fact, in some cases, the machines were not accepted.

More recently, in the 1978 budget, the British

Government again entered the scene, this time

quite outside its stated policy of minimal intervention in resource allocation. In the budget,

3.5 s million ($7.7 million) was allocated to

cover the costs of treating 400 extra patients,

with provision for the running costs for at least

2 years. It is unclear whether these machines

were ever purchased, and if so, whether they are

in fact in use.

The British Government has always been involved in the transplant service, because this

service is a nationally based system. In particular, DHSS has taken initiatives to increase the

numbers of cadaver kidneys available for transplant through the use of kidney donor cards. In

current law, in the absence of any clear statement of the potential donor’s wishes, the person

lawfully in possession of the body must make

reasonable inquiry to ascertain whether the

deceased, the spouse, or any surviving relative

objects to the organ donation (with all the

attendant problems of securing their approval).

Kidney donor cards signed by the potential

donor, if carried by a large number of the population, would therefore be expected to increase

the number of kidneys for transplantation. In

1978, DHSS intensified its campaign to bring

the existing donor card system to the public’s attention, hoping to increase the number of cards

carried.

There has, then, been considerable British

Government intervention in renal dialysis and

transplant services. To understand why the British Government has felt obliged to take specific

action, it is necessary to look at the figures for

the service provision with estimates of need. In

the late 1960’s, three major surveys were undertaken in the United Kingdom to estimate the levels of chronic renal failure in the population.

From these surveys resulted the often quoted figure that 40 new patients per 1 million population aged 5 to 60 years would need treatment

per year. Even this must be considered an underestimate, since it is now accepted that people

who were excluded from the treatable category

because of associated conditions (e.g., diabetes)

could now be treated. Also, there are obviously

many individuals over the age of 60 who need

treatment, and it is a matter of priorities about

whether and at what age treatment should no

longer be offered.

The figures reported for the United Kingdom

for 1978 (2) show that 2,946 patients were alive

on dialysis machines (about two-thirds of whom

were on home dialysis). For the same year, 820

live or cadaver transplants were reported. The

transplant rate of 15.3 per 1 million population

per year compares well with the 4.7 per 1 million population average for Europe as a whole.

The overall rate for all patients being treated by

dialysis or with a functioning transplant in the

United Kingdom in 1978 was 92.3 per 1 million

population. The number of new patients accepted for either form of treatment in 1978 was

19 per 1 million population. If this figure of 19

patients per 1 million population is compared to

the survey figures of an estimated 40 new patients per 1 million population per year, a serious shortfall in the number of patients who are

receiving treatment compared to the estimated

number of patients who could benefit is apparent. These figures, linked to the publicity

there has been on the subject, are clearly reasons

why the British Government has felt obliged to

step in.

The questions raised by by the situation regarding the treatment of patients with kidney

failure are quite unusual, because it is one of the

few instances in which a directly lifesaving pro-
Ch. 2— The Management of Medical Technology in the United Kingdom ● 21
22 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Nuclear Energy (now incorporated in TEM Instruments) sold machines in Britain, and these

machines, too, were purchased with NHS regional hospital board funds, although the then

Ministry of Health was involved in central contracting arrangements. Central R&D funds were

not used to develop equipment and purchase

early machines for clinical evaluation. 14

At the time, there were 50 radiotherapy centers in England and Wales—a number of them in

the London teaching hospitals, others in major

cities around the country. Each of these centers

purchased a cobalt therapy machine; some, depending on their patient load, purchased more

than one. The decision to purchase machines

was in the hands of the hospitals designated as

radiotherapy centers, and there seems to have

been little call from other hospitals for these

machines.

In April 1979, there were 105 cobalt machines

in Great Britain, almost all of them of British

manufacture. This figure probably represents a

peak. Even though patient loads may increase,

and in addition replacement machines will have

to be purchased, there is a tendency to replace

cobalt machines with linear accelerators. The

advantages of linear accelerators are that: 1) patient throughput is faster, and 2) these machines

are easier to use, because the size of the source is

smaller and can be more readily pinpointed to

reach a tumor.

It is unlikely that linear accelerators will

replace all cobalt machines. Cobalt therapy may

be more suitable for some treatments, and cobalt machines are less complex to maintain and

also considerably cheaper than linear accelerators. At present, a cobalt machine costs about

4100,000 ($220,000), a linear accelerator about

double that price. Cobalt machines do require

purchase of new cobalt sources about every 4 to

5 years, however, and these cost about 15,000

($33,000).

Both types of machines are bought through

central contracting arrangements, but there is

no policy on whether accelerators or cobalt ma14with DHS now commonly involved in the development of

equipment and purchase of early machines for clinical evaluation,

current practice represents a departure from this.

chines should be purchased. The current policy

guidelines (8) state only that each designated

radiotherapy center should have a minimum of

two megavoltage machines. In fact, the centers

are quite variable. Four of the five Scottish

centers, for example, have chosen accelerators,

whereas the fifth has decided to use only cobalt

machines.

Clinical Laboratory Testing:

Laboratory Automation 5

The first single-channel automated laboratory

analyzers became available at a time when there

was much concern about the increasing workloads in pathology laboratories in the United

Kingdom. The then Ministry of Health’s response to the first commercially available machine, the Technicon system, was to ask hospitals not to buy these analyzers. Because of the

pressure of the workloads, a number of teaching

hospitals and regional hospital boards did go

ahead and buy machines in the early 1960’s,

despite the Ministry’s request. Meanwhile, by

providing funds for development and offering

guarantees of purchase as an inducement, the

Ministry of Health attempted to encourage British manufacturers. The one machine that resulted from this encouragement was not very

successful.

By the mid-1960’s, two-channel and then multichannel machines were becoming available,

and it was at this time that the Ministry of

Health began working with Vickers to produce

a multichannel analyzer. It was already being

suggested that laboratory services should be

centralized, and it was with this aim in mind

that the Vickers development was supported.

Vickers did produce a satisfactory machine. The

Ministry of Health purchased 22 Vickers machines for NHS, and Health Authorities then

paid their running costs. Health Authorities

subsequently purchased additional Vickers machines, as well as analyzers produced by other

manufacturers. The figures on exactly how

many single-channel and multichannel analyz-
Ch. 2— The Management of Medical Technology in the United Kingdom ● 23

ers are in NHS are probably not known. A reasonable estimate is that there are about 19 to 20

multichannel machines in each English region,

making a total of perhaps 280 for England

alone.

DHSS is still involved in automated analyzers

in that it negotiates central contracts with manufacturers. As described earlier, however, this

negotiation does not guarantee any sales; it

merely sets a base price. Health Authorities are

then able to negotiate directly with manufacturers for a particular machine and purchase it

directly.

One major policy that has affected the number of machines purchased is the centralization

of laboratories, a policy set out in a health circular in 1970. The aim is that each district (the

lowest tier in NHS, serving about a quarter of a

million population) should have only one laboratory for clinical chemistry. Again, because of

the potential for automation, hematology is also

centralized. Histology and microbiology have

CONCLUDING REMARKS

Britain’s fairly conservative attitude towards

technology has been noted; notwithstanding

this attitude, in the health sector, calls for the

latest equipment are common from the public

and doctors alike. In fact, a certain amount of

dissatisfaction is felt by health workers because

they do not have the latest technologies available to them. The reasons for the lack of availability throughout the country of the newest generation of each technology have already been

described: NHS operates on a budget set by

Parliament, and choices between one technolbeen centralized to some extent, but since they

are much less machine-oriented, there has been

less pressure on these branches of NHS.

Some concerns have been raised about the

implications of the increased volumes of data

produced by automatic analyzers, and DHSS

funded a study to investigate the question. ”

This study indicated that the increased information was marginally beneficial, but the issue is

still frequently raised.

Another question concerns the reliability and

safety of machines and the accuracy and reproducibility of the data they produce. DHSSfunded evaluations of new automated equipment address these questions, as well as the total

costs of purchasing, operating, maintaining,

and manning the machines in relation to laboratory workload (10).

ogy and another or between equipment and

other uses of the funds must be made in the context of this overall budget. Because these choices

are rarely stated explicitly, however, there is a

sense in some quarters that technology gets priority funding over some of the less glamorous

NHS activities, particularly, the so-called “Cinderella” services such as care of the elderly, the

handicapped, etc. The relatively slow growth of

NHS in the next few years is likely to sharpen

the whole debate on technology and its role in

British health care.
24 ● Background paper #4: The Management of Health Care Technology in Ten Countries

CHAPTER 2 REFERENCES

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

Ambrose, J., and Gooding, M. R., “EMI Scan in

the Management of Head In juries,” Larzcet

1:847, 1976.

Brunner, F. P., et al., Proceedings European Dialysis and Transplant Association 16(3), edited

by B. Robinson (Tunbridge Wells, England: Pitman Medical, 1980).

Connally, C., Regional Scientific Officer,

South-East Thames Regional Health Authority,

Croydon, England, personal communication,

1979.

Department of Health and Social Security,

Annual Report 2977, Cmnd. 7394 (London:

HMSO, 1978).

Health and Personal Social Services for

England (London: HMSO, 1977).

“Health Service Management Report of

the Su’pply Board Working Group, ” DHSS

health circular HC(78), June 21, 1978.

letter to Regional Medical Officers,

Aug. 25, 1978.

“Organisation of Radiotherapy Services

for the’ Treatment of Cancer, ” NHS development circular, October 1978.

Priorities for Health and Social Services

in Engl;nd (London: HMSO, 1976).

“Procedure for Determining Test Costs

in Pathology Laboratories” (London: HMSO,

1975).

Report of the Resource Allocation

Worki~g Party (London: HMSO, 1976).

The Way Forward (London: HMSO,

1977). ‘

13

14$

15.

16,

17,

18.

19.

20.

21,

22.

23.

24.

English, T., Secretary, Society of Cardio-Thoracic Surgeons, Papworth Hospital, Cambridge,

England, personal communication, 1979.

Kidney, D., Department of Health and Social

Security, London, personal communication,

1979.

Laing, W., consultant to Office of Health Economics, London, personal communication,

1979.

“Medical and Scientific Equipment in the NHS,”

Brit. Med. J. 1(6120): 1160, 1978.

Oakley, C., Hammersmith Hospital, London,

personal communication, 1979.

Office of Health Economics, Renal Failure: A

Priority in Health? (London: White Crescent

Press, 1978).

The Reorganised NHS (London: White

Cresce;t Press, 1977).

Riley, C., Royal Sussex County Hospital, Brighton, England, personal communication, 1979.

Stocking, B., “X-Rays Highlight the Doctor’s

Dilemma,” New Scientist 81(1137):84, 1979.

Stocking, B. M., and Morrison, S. L., The Zrnage and the Reality: A Case Study of Medical

Technology (Oxford: Oxford University Press

for the Nuffield Provincial Hospitals Trust,

1978).

Whitaker’s A/manack (London: J. Whitaker and

Sons, Ltd., 1978).

Whitehead, T. P., and Wootton, I. D. P., “Biochemical Profits for Hospital Patients, ” Lancet

2:1439, 1974.
3.

The Management of

Medical Technology in Canada

Jack Needleman

Lewin and Associates, Inc.

Washington, D.C.
Contents

Page

Canada: Country Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27

The Health Care System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

National Health Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

Provincial Management of the Health Care System. . . . . . . . . . . . . . . . . . . . . 30

Mechanisms for Managing Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34

Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35

Regulation and Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...-38

Specific Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Renal Dialysis.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cardiac Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Radiotherapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Clinical Laboratory Equipment and Automation. . . . . . . . . . . . . . . . . . . . . . .

Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 3 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LIST OF TABLES

Table No.

I. Percent of GNP Directed to Personal Health Care in Canada and the

48

48

50

50

51

52

53

54

Page

United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33

2. Guidelines for Special Services in Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
3.

The Management of

Medical Technology in Canada

Jack Needlemanl

Lewin and Associates, Inc.

Washington, D.C.

CANADA: COUNTRY DESCRIPTION

Canada has a population of 23 million people.2 Although its land area is second only to

that of the Soviet Union, it is basically an urban

country, with 56 percent of its population in

metropolitan areas of over 100,000 population.

Most of Canada’s population lives along the

“fourth North American coastline,” the Saint

Lawrence River and Great Lakes, and on the Pacific coast, and much of the prairie population

lives fairly close to the Canadian/U.S. border.

Settled initially by both the French and British, Canada in the 18th century was an arena of

imperial competition between them. The country continues to have separate French- and English-speaking communities, each with its own

educational, social, and religious institutions,

and is officially bilingual. For many years, the

English-speaking community has dominated the

national economy. Even in Quebec, where the

French community is concentrated (approximately 80 percent of the population is francophone), the English were economically dominant until recently. There has been extensive immigration to Canada and the country is ethnically diverse, but the split between the Englishand French-speaking communities remains a

central factor in Canadian society. It has been

1The author gratefully acknowledges the invaluable assistance

of Roger LeCompte of Lewin and Associates, Inc.

‘According to Statistics Canada (14), the estimated population

of Canada in 1974 was 2,334,000. The two largest Provinces were

Ontario, with a population of 8,063,000, and Quebec, with

6,119,000. The next largest Province was British Columbia, with

only 2,382,000. The smallest was Prince Edward Island, with

116,000. Two territories—the Yukon and Northwest Territories—

combined had an estimated population of 56,000.

accentuated in recent years by the growth of the

Quebec separatist movement and election of a

separatist government in that Province.

Canada is a confederation made up of 10

Provinces and 2 Territories. Confederation,

agreed to in 1867 and embodied in the British

North America Act, was an essential compromise necessary to address the political conflict

between the French and English communities

and to pave the way for independence from England. 3 Governments at both the Federal and

Provincial levels are parliamentary in form.

Compared to the constitutional division of responsibilities in the United States, the constitutional division between the Federal Government

and the Provinces in Canada is more clearly

defined and more strictly observed. In addition

to the formal wording of the British North

America Act, social and political factors create

continued pressures to maintain this separation.

Social programs, including health programs

for the general population, fall within the sphere

of activities reserved for the Provinces.4 In order

to overcome the constitutional bar to Federal

administration and bring Federal resources to

bear on social problems, a pattern has developed in Canada in which the Federal Govern3Canada is an independent nation, but its constitutional ties to

the United Kingdom are still strong. For example, the Queen of

England is formally head of state and appoints a Governor-General to represent her. The constitution, the British North America

Act, is at Westminster.

4

Formal Federal responsibility for health care is limited to such

public protection activities as food and drug regulation, regulation

of radioactive materials, quarantine, and providing health services

to special groups such as Indians and Eskimos.

27
28 ● Backround Paper #4: The Manangement Of Health Care Technology in Ten Countries

ment shares the costs of many provincially administered social programs. Federal legislation

defines the services for which costs will be

shared, the population that must be covered,

other conditions of participation, and the costsharing formula. Provincial legislation is enacted consistent with the Federal conditions.

The Canadian economy is a diversified private enterprise economy, with manufacturing,

THE HEALTH CARE SYSTEM5

The Canadian health care system—with both

private and public components, in which private providers of care and public financing predominate—is similar to that of the United

States. In 1975, personal health expenditures in

Canada were $452 per capita (14). Of this

amount, 46 percent went to the country’s approximately 1,200 hospitals, and 18.5 percent

went to the country’s approximately 35,000

physicians (157 per 100,000 population). Expenditures on personal health care were 6.2 percent of the gross national product (GNP), compared to 7.6 percent for the United States in the

same year.

Almost all hospitals are nonprofit institutions. A substantial number of the hospitals

have been established by local governments,

under separate board of trustees, with local

responsibility for budget deficits. In 1975, there

were 6.8 beds per thousand population, 5.2

acute care beds, 1.5 long-term beds (3). Average

length of stay was 11.5 days overall, 8.8 days in

acute care units. Admissions to acute care units

were 162.4 per thousand population, and total

days of care in these units were 1,445 per thousand. Average acute bed occupancy was 76.1

percent.

‘Much of the overall presentation on the Canadian health care

system that appears here is based on the following study conducted by the author and others: Lewin and Associates, Inc., Government Controls on the Health Care System: The Canadian Experience, 1976 (11). The information from that study has been updated to reflect changes in financing and other events since the

study was completed. Extensive interviews were conducted in several Provinces for the 1976 study. For the paper presented here,

Ontario and Quebec were revisited to assess changes in patterns of

technology management and to review specific technologies.

finance, farming, trade, and extractive industries comprising major areas of economic activity. Within the private enterprise economy, there

is acceptance of government ownership at both

the Federal and Provincial levels. In general,

there is greater public acceptance of government

efforts to direct economic activity in Canada

than there is in the United States.

The development of national health insurance

and the organization of Provincial activities to

manage the health care system are briefly reviewed in the discussion that follows. Each

Province exercises considerable autonomy in

the health area, and in the remainder of this

chapter, Ontario and Quebec are used as principal examples. b

National Health Insurance

Over the past 25 years, the major change in

the Canadian health care system has been the introduction of national health insurance. National health insurance was debated immediately after the Second World War, but no action

was taken at the time. A program of national

health grants for health facility construction and

manpower training was enacted in 1948, however, and it is likely that this program helped

create pressure for health insurance by developing a supply of health care resources which the

private insurance programs could not adequately finance.

Health insurance was enacted piecemeal—

hospital insurance was enacted first in 1957 and

b

The use of Ontario and Quebec as principal examples is not

meant to imply that their experience is typical. Those familiar with

Canada have indicated since the first draft of this paper that the experience of other Provinces has been different both because of their

smaller, more manageable health care systems and the availability

of more complete data. Ontario and Quebec were selected for focused study because of the author’s previous work (11) and because they are the largest Provinces. (Their combined 14 million

population constitutes over 60 percent of the total population of

Canada (I), ) It was also believed that Ontario and Quebec would

have the most complex technology issues and be applying more

resources than other Provinces to their resolution.
Ch.3. 3—The Management of Medical Technology in Canada ● 29

medical insurance a decade later in 1966. In

both cases, rising costs were critical factors in

the decisions to develop government programs.

Several economists have noted that the major

increase in supply of hospital beds and physicians occurred before the programs were

enacted (1).

The patterns of development of the hospital

and medical insurance programs were similar.

In the period from 1945 to 1950, after proposals

for a national health insurance program had

been shelved, three Provinces, Saskatchewan,

British Columbia, and Alberta, independently

developed their own hospital insurance programs. A fourth, Newfoundland, had a partial

insurance program. By 1955, a consensus for

hospital insurance had developed, and discussion of the topic at a Federal-Provincial conference being held at the time was requested by

the Provinces.

In 1956, the Federal Government made a concrete proposal for a phased-in insurance program, beginning with insurance for hospital

care. This proposal received the general support

of the Provinces, and the Hospital Insurance

and Diagnostic Service Act was enacted in 1957.

Five Provinces entered into the program at its

inauguration in 1958, the four with existing programs and Manitoba. Prince Edward Island,

Nova Scotia, and Ontario entered in 1959, and

Quebec in 1961.

Medical insurance developed in a similar

manner, alhough there appears to have been less

consensus among the Provinces to take this next

step in the phased-in program that the Federal

Government had proposed in 1956. In 1961, a

Royal Commission on Health Services (the Hall

Commission) was appointed to review the medical insurance situation. Several Provinces acted

on their own before the Hall Commission reported. Saskatchewan introduced compulsory

Provincial medical insurance in 1962, and although this led to a physicians’ strike, a compromise that retained the public program was

reached, In 1963, Alberta increased the regulation of the contents of medical insurance contracts and provided premium subsidies for those

unable to pay. This program covered 70 percent

of the population. The Government of British

Columbia began making nongroup medical coverage available in 1965, when the only nonprofit

carrier providing this type of coverage failed.

In 1965, the Hall Commission released its report calling for the establishment of a Federal

program. The Medical Care Act was passed in

1966 for implementation in 1968. In July 1968,

only two Provinces—Saskatchewan and British

Columbia—were prepared to enter the Federal

program. In 1969, five more entered—Newfoundland, Nova Scotia, Manitoba, Alberta,

and Ontario. Quebec and Prince Edward Island

joined in 1970, and New Brunswick in 1971.

Both the hospital and medical insurance programs follow the general Canadian policy of

establishing minimum standards to make a Provincial program eligible for cost sharing but

leaving the actual administration of the program to the Provinces. Compared with the detailed programmatic and administrative requirements that are imposed in U.S. Federal-State

programs such as medicaid or aid to families

with dependent children, the conditions imposed for cost sharing in Canada are limited and

general. The Hospital Insurance Act and regulations combined are only 19 pages; the Medical

Insurance Act is 9 pages. Although there are requirements that specific administrative functions (such as setting payment rates, licensing

and inspection of hospitals, planning and development of hospital resources) be performed,

and that the agreement with the Federal Government describe the arrangements for them, the

Federal regulations do not specify or place conditions on how these activities are to be carried

out. The greatest detail is in the sections detailing the costs that would be eligible or excluded

from Federal cost sharing, which in each program were to be approximately 50 percent of the

Provincial costs. ’ Beyond establishing the general framework of the programs and cost-sharing formula, Federal involvement has been limited to establishing mechanisms for coordination and joint Federal-Provincial program review, and to providing technical assistance to

Provinces when they request it.

7The cost-sharing formula for both programs involved some redistribution of costs to the poorer Provinces, with the medical insurance formula more favorable than the hospital insurance

formula.
JO . Background Paper #4: The Management of Health Care Technology in Ten Countries

During the rapid inflation in health care costs

in the late 1960’s and early 1970’s, the Federal

Government became increasingly uneasy over

its fiscal exposure in a program whose costs it

could not control. After several years of negotiation and considerable conflicts with the Provinces, the cost-sharing formula was changed.

Beginning in 1977, the basis of Federal contributions to the hospital and medical insurance programs was shifted so that Federal contributions

effectively were indexed to the rate of growth in

GNP.a These arrangements have increased the

flexibility of the Provinces in allocating medical

care funds among services, but also put the

Provinces completely at risk for expenditure increases higher than the growth of the Federal

contribution.

Several other general trends have developed

with respect to Federal involvement in the

health care system over the past several years.

One is a growing concern over manpower issues, particularly increases in physicians, which

has led to substantial changes in immigration

policy. A second trend has been toward major

emphasis on health promotion and disease prevention activities. The rationale for this emphasis was outlined in a 1974 report by the Minister

of Health Marc Lalonde (10).

Provincial Management of

the Health Care System

Provincial involvement in the Canadian

health care system is extensive. Provincial

responsibilities include manpower licensure,

public health activities, and direct provision of

some health services. In terms of expenditures,

the Province’s primary involvement is in administering the hospital and medical insurance

programs.

Organization for Health Systems Management

Largely as a result of the hospital insurance

program, the Provinces play a large number of

‘The mechanisms to introduce this indexing involve transfers to

the Provinces of Federal income tax credits, with equalization

among the Provinces and some cash payments. Additional cash

contributions to the Provinces are to be made to contribute to Provincial programs for nursing home care, adult residential care, the

conversion of mental hospitals, home care, and ambulatory

services.

roles for institutional providers of health care.

They are regulators and inspectors, providers of

consultant services, and health system planners.

There are nine major functions that the Provinces perform:

●

●

●

●

●

●

●

●

●

budget review and financial management

consultation;

administrative consultation to improve

general management and performance in

special areas such as dietary, nursing, and

laboratory;

inspection of facilities;

institutional bed need planning;

other health services planning and project

review;

review of construction plans and supervision of construction;

research and statistical analysis;

medical review of the appropriateness of

institutional care; and

health sector labor relations.’

Most commonly, a Province groups the functions of budgeting, administrative consultation,

planning, and inspection into an institutional or

hospitals division. This is what Ontario has

done. Under this type of arrangement, the research and statistics functions and medical consultation office are outside the institutional division as general service and support activities for

the entire health department program.

Quebec has a radically different arrangement

from Ontario’s. The Quebec Ministry of Social

Affairs is a combined health and social services

department. A functional organization was

adopted in a reorganization of activities in 1970.

Health and social service orientations were to be

integrated within each function. Thus, the major divisions for both health and social programs were planning, operations and programing, finance, labor relations, and inspection. A

more recent reorganization has modified this

slightly, establishing separate units for the areas

of health, social programs, and income security,

along with separate planning, programing, fi-

‘Most Provinces have only recently become involved in labor

relations issues, and the situation in this area is in flux. In Ontario,

for example, the Ministry’s personnel unit has been involved with

the issues, but has not sat at the negotiating table.
Ch. 3—The Management of Medical Technology in Canada . 31

nance, labor relations, and capital budgeting

functions for each.

Despite considerable variation among Provinces in the administration of the hospital insurance, medical insurance, and nursing home

benefit programs, in each Province there initially was substantial decentralization. As the

Provinces have begun viewing their individual

health activities as elements of a general strategy

toward ensuring adequate health services, however, they have attempted to bring the units

administering these activities into greater

proximity.

The degree of integration of these activities

within each Province reflects in part the degree

of acceptance within the Province of the concept

of the Provincial government as medical system

administrator. In Quebec, this concept has been

eagerly embraced. In Ontario, the concept has

been generally accepted, but Provincial responsibility is viewed as being shared with the medical community and public. Indeed, since extensive political pressure forced the Ontario Ministry of Health to back away from ordered bed

closings in 1974 and 197s,10 the Ministry has

hesitated to take actions to direct the development of the hospital system, relying instead on

general budgetary and fiscal constraints to control institutional demand for new beds and services, and on its consulting process to encourage

change.

The key to the programs of institutional control with respect both to overall expenditures

and service levels and investment in new or upgraded services and equipment is the Provincial

system for reimbursement.

Hospital Budgeting Arrangements

The Canadian Provinces have been administering hospital insurance programs for approximately 20 years. At the start of the hospital insurance program, the intent was to leave the

hospitals privately managed and free to make

10This was done in such a way that some of the projected savings

accrued to the Province. In some cases, beds were closed. In

others, beds remained open, but an amount estimated to equal the

savings was taken from institutional budgets. In still other cases,

the closings were canceled.

independent decisions about administration and

services they would offer. Hospital budget

review by Provincial governments was designed

only to forecast the costs of the hospital insurance program and to exclude costs not

covered by the Hospital Insurance Act.

This arrangement proved unstable. Provincial governments quickly came to review every

detail of administration to assure that Provincial moneys were to be well spent. Budgets were

reviewed and set on a line-by-line basis. Each

staff position had to be justified in the operating

budget, and the basic operation of any department was subject to review. In the capital budget, the purchase of a new wing, a sterilizer, or a

desk might require Provincial approval. Hospitals could not deviate from the approved budget

without Provincial authorization.

To administer the wide range of oversight responsibilities, Provincial hospital insurance programs recruited staffs with expertise on each

phase of hospital administration. Provincial

staffs included financial experts and accountants, general administrators, nurses, and dietitians. These individuals, generally called “consultants” by the Provincial governments, served

as budget review personnel, as health service

planners, as consultants to hospitals on operations, and as Provincial licensing inspectors.

In the late 1960’s, many Provinces began to

feel that the existing budgeting systems were

awkward to administer and unduly restrictive

to hospital management. Efforts were made to

develop systems that would allow hospital administrators and boards greater flexibility in

running their institutions. The systems that

were developed have been called generically

“global budgeting.” Under global budgeting, an

institution can shift funds among categories of

expenses, so long as its overall budget is not exceeded. In some Provinces, the initial global

budget or parts of it are still fixed by detailed

line-by-line review; in others, flat percentage increases are applied to previous budgets or costs.

In the 1960’s, Provincial governments generally made funds readily available for hospitals. Hospital programs were popular, because hospitals were visible and could serve as
32 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

sources of local employment, and the Federal

Government paid half the costs. Since funds

were readily available, if an institution could

make a reasonable case for new staff or a

remodeled wing or some other expenses, the request was usually granted. Budgets were determined prospectively, but it was understood that

funds would generally be available at the end of

the year if difficulties were encountered; risk,

therefore, was minimal. This decade was also a

period of catchup for hospital employees’

wages, a process in which few Provinces interfered.

A growing concern over the costs and effectiveness of hospitals and health care began to

emerge in the late 1960’s. The health insurance

plans had become the largest component of the

Provincial budgets, and the rapid inflation in

the health sector burdened Provincial revenues

and hindered initiatives in other areas. In

response to these problems, the Federal Government initiated a study of the costs of health services in Canada. The report of the Task Force on

the Costs of Health Services in Canada, completed in 1969, discussed a wide range of issues,

including the dispersion and utilization of new

technology (8). Almost every Province did comparable studies, examples being the study of the

Commission of Inquiry on Health and Social

Welfare (Castonguay-Nepveu Commission) in

Quebec, the Manitoba White Paper, the Llewelyn-Davies-Weeks Studies in New Brunswick,

the report of the Health Planning Task Force in

Ontario, and the Foulkes report of the Health

Security Program Project in British Columbia.

Beginning about 1970, partly as a result

of these studies and partly concurrently with

them, Provinces began implementing hospital

constraint programs. The introduction of global

budgeting was accelerated by the concern over

costs. By applying an overall increase to budgets that matched or was lower than the projected

inflation rate, Provinces could avoid debating

individual line-item cuts. They could encourage

greater efficiency without being required to

identify areas where it could be achieved. Generally, the inflation estimates were tight but

realistic. The hospital constraint programs the

Provinces introduced appear to have had a substantial impact on the rate at which resources

float into the health care system. As table 1

demonstrates, the percentage of GNP directed

toward personal health services in Canada has

declined slightly since peaking in 1971.

Each Province developed its own constraints,

but Ontario’s mechanisms are typical of the

range of approaches available. Introduced over

a period of 4 to 5 years, these controls have

included:

●

●

●

●

●

●

●

●

●

refusing to budget for inpatient volume increases, except in areas of rapid population

growth;

refusing to budget for additional laboratory and radiology services for inpatients;

refusing to budget for increases in outpatient volume;

imposing a moratorium on physical plant

construction and renovation;

requiring hospitals to find the funds for

new, approved services within their existing global budget;

mandating bed closings; 1

1

limiting the amount of a salary and pension

increase that would be funded by the Province; 12

reducing each hospital’s budget in 1 year by

an amount equal to 60 percent of depreciation and in another year imposing a 2-percent reduction in the base; 13 and

manipulating the inflation projection .14

Some Provinces, including Alberta (which
Ch. 3– The Management of Medical Technology in Canada ● 33

Table l.— Percent of GNP Directed to Personal Health Care

in Canada and the United States (1960-76)

Personal health care Hospitals Physicians

United United United

Year Canadaa States b Canada States Canada States

1979 (2)

ever, hospitals have confronted a decline in the

amount of real dollars available for public programs. It is in this more restrictive context that

most discussions of expanded technology have

occurred.

The specific trends in capital financing and

service development show similar patterns. In

the 1960’s, capital investment by the Provinces

was heavy, 15 with most of this investment going

into renovations or bed construction to match

population growth. There was little effort to improve the efficiency of capital use by limiting

construction to increase occupancy levels. It is

difficult to judge whether specialized services

were expanded to the point of oversupply, because there are no general inventories of units or

overall assessments of their efficiency. Discussions with Provincial authorities and hospital

administrators, however, suggest that efforts

within individual Provinces to avoid extensive

duplication were generally successful, although

there was some duplication of highly prestigious

services.

As part of the more recent effort to constrain

costs, the Canadian Provinces have begun looking much more critically at capital expansion.

15The Federal Government did not share the cost of construction

or fixed equipment as part of the hospital insurance program. It

did establish some direct grant programs for construction of hospitals, medical education, and research facilities, however, and did

share the cost of movable equipment.

Construction has been curtailed, in some cases

sharply. l6 Provinces that had previously routinely approved all capital funds requested have

had either partial reductions, or in some years,

all new projects cut from the budget. Hospitals

have been told no funds would be available for

new services-and that such services would have

to be begun within the global budget. In the

capital budgeting process, the Provinces are trying to move from single-year to multiple-year

projections, Some of these trends and the management of capital investment in technology are

discussed further in the next major section of

this chapter.

Physician Reimbursement

The primary mode of physician reimbursement in Canada is fee-for-service payment. Initially, the Provinces adopted a modification of

the existing fee schedule established by the medical societies and generally used for Blue Cross

reimbursement. In all Provinces but Quebec, increases in overall fee levels and other conditions

of participation are negotiated between the

Province and medical associations. In Quebec,

physicians are represented by three unions, one

for general practitioners, one for specialists, and

16In Quebec, for example, the new Minister of Social Affairs

entered office in 1970 and ordered all health construction—with a

total value in excess of $400 million—halted. After a lengthy review, a limited number of projects were allowed to continue.
34 ● Background paper #:4 The Management of Health care Technology in Ten Countries

one for residents and interns. The negotiations association, although this too can vary. The

have been marked by varying degrees of conflict treatment of new procedures is discussed in the

from Province to Province and year to year: context of regulation and reimbursement in the

The size of fees for individual procedures are next section of this chapter.

generally developed by the Provincial medical

MECHANISMS FOR MANAGING MEDICAL TECHNOLOGY

Canada has a large and well-trained medical

community, and the medicine practiced is technically advanced. The major issue in the management of medical technology in Canada is the

speed of diffusion of cost-increasing technology

that appears to offer some potential benefit to

patients. Although fiscal constraints introduced

over the last several years have made this issue

more acute, nowhere in Canada have medical

services been withheld because the associated

expense would be too high.

In reviewing Canada’s experience with regard

to managing medical technology, four points

are critical to providing a context for understanding the operation of the system:

●

●

The Provinces’ protection of their authority

against Federal encroachment has left almost all decisions in this area at the Provincial level. Even in the area of technical assistance, Federal activity is limited and conducted cooperatively with the Provinces.

Most technology management decisions related to the diffusion of technology are

made in the context of the hospital budgeting process. Indeed, for the hospitals, the

technology issues are subordinate to the

budgeting process. In recent years, because

of economic conditions, most Provinces

have introduced considerable fiscal constraints into their programs. Thus, unlike

supply controls in the United States, which

operate independently of the financing system in an environment in which funding is

relatively easy to obtain, supply controls in

Canada are initially linked to fiscal control,

and—particularly in Ontario and Quebec

—have recently operated within an environment of extremely limited resources.
Ch. 3– The Management of Medical Technology in Canada ● 35

(5). Federal expenditures accounted for approximately $69 million. Over half of these Federal

health research funds were spent through the

Medical Research Council, an independent body

reporting to Parliament through the Department of National Health and Welfare. Most of

the remaining Federal funds were directly provided by the Department of National Health

and Welfare, and a substantial portion of these

went to manpower development and construction of research facilities.

The other Federal support for extramural

medical research came from the Department of

Veterans Affairs for support of research on

chronic diseases, the National Research Council, and the Defense Research Board. The Department of National Health and Welfare also

pursued a modest intramural research program

in areas including pharmacology and pharmaceutical chemistry, nutrition, pesticides,

food additives, clinical laboratory procedures,

epidemiology, and physical fitness. In recent

years, Federal support for medical research has

declined because of a general tightening of Federal spending that has affected all Federal research activities.

In addition to the Federal Government, some

Provinces support medical research. The most

stable Provincial support is in Quebec. The

Quebec Medical Research Council receives

much of its revenue from the Quebec Medical

Insurance Board, which is mandated to pay the

Research Council 0.2 percent of the total

amount paid Provincial physicians.

Another major source of medical research

funds in Canada are national voluntary agencies, These include the National Cancer Institute, Canadian Arthritis and Rheumatism Society, Canadian Cystic Fibrosis Foundation, Canadian Association for the Mentally Retarded,

Muscular Dystrophy Association of Canada,

and Multiple Sclerosis Society of Canada. Such

voluntary agencies attend meetings of the Interdepartmental Committee on Medical Research,

which provide a forum for sharing information

on medical research support (7).

Evaluation

The evaluation of new medical technology in

Canada, like that in the United States, is substantially a matter of independent clinical research and experience reported through the professional literature and discussed at professional

meetings. Indeed, Canadian clinical evaluation

activities are integrated with U.S. activities

through the literature and professional meetings, and because of the difference in size between the U.S. and Canadian medical systems

and research efforts, Canada draws substantially on research done in the United States. For the

most part, work has focused on assessments of

efficacy. An increasing but still limited amount

of work, however, is focusing on cost-effectiveness and cost-benefit assessments.

Two types of evaluations that are particularly

important in terms of the decisions that Provinces address on a daily basis are discussed

below. First are assessments of the appropriate

rate and degree of diffusion of medical technology. Second are evaluations of the appropriateness of individual pieces of equipment,

Guidelines for Special Services

Provinces have felt a need for Federal assistance in developing guidelines for reviewing proposals for new and expanded services in hospitals. Their primary need has been for guidance

on the appropriate organization and physical

space and equipment needs for a new service.

Their second need has been a basis for assessing

how many units are needed in an area.

In accord with the general pattern of developing a joint Federal-Provincial committee or

working party to address these types of issues, a

working party on special services was created in

1972. This group had representation from the

Federal and Provincial agencies administering

the hospital and medical insurance programs.

The first guidelines prepared by the Working

Party on Special Care Units in Hospitals were

published in 1975 and covered nine units or programs—intensive care, coronary care, dialysis,
36 ● Backround Paper#4: The Management of Health Care Technology in Ten Countries

cardiac surgery, nuclear medicine, physical

rehabilitation medicine, narcotic addition treatment, patient hostel, and burn (9). Guidelines

have since been developed for additional services, and some of the original guidelines have

been revised. A list of the guidelines currently

available is presented in table 2.

For the development of guidelines on a specific service, a task force of several Federal officials, several Provincial officials, and medical

Table 2.—Guidelines for

Special Services in Hospitals

The following guidelines have been prepared by the Federal-Provincial Working Group on Special Services in Hospitals. These guidelines were requested by the Federal-Provincial Advisory Committee on Health Insurance, Ottawa.

Some of the guidelines are updated versions of guidelines

previously published by the Working Group.

Expected publication date—November/December 1979

burn unit

Day surgery unit

Dental care units in hospitals

Detoxification unit

Diabetic day care unit

Narcotic day addict ion treatment unit

Nuclear medicine in hospitals

Patient hostel unit

Rehabilitation medicine unit

Respiratory technology services unit

Expected publication date—December/January, 1979-80

● Diagnostic ultrasound facilities in hospitals

● Geriatric day hospital

. Geriatric unit in a hospital

● Intensive care unit

. Total parenteral nutrition

Expected publication date—April/May 1980

. Adult psychiatric services provided by general hospitals

● Child and adolescent psychiatric services provided by

general hospitals

● Cardiac care faciIit ies and services:

—Ambulatory elect rocardiography monitoring

—Cardiac care

—Cardiac catheterization

—Cardiac surgery

—Cardiovascular nuclear medicine

—Cardiac pacemaker

—Cardiac stress testing

—Echocardiography

—Intermediate cardiac care

—Noninvasive laboratories

—Phonocardiography

● Perinatal intensive care unit

. Regional renal failure program

● Spinal cord injury unit

NOTE. A report on emergency services in Canada IS also available.

SOURCE: Health and Welfare Canada, Ottawa, personal communication, 1979,

(6)

consultants is formed. A typical

components:

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

patient load;

bed requirements;

recommended distribution

 guideline has 10

on of units;

administrative policy, procedures, and

control;

staff establishment and coverage;

staff training and qualifications;

specific supporting departments and services;

space allocation,

design features;

equipment; and

relationship with

utilization, and specific

other departments and

services.

As this list makes clear, considerable emphasis

is given to issues of organization, staffing, and

program quality. Planning guidance is usually

contained in the discussion of patient loads and

recommended distribution of units. In some

cases, the recommendation is quite specific. 19 In

other cases, the guideline is more general. None

of the guidelines explicitly considers the economics of alternative configurations of services.

Once the Federal-Provincial guidelines are

developed, the Provinces are free to adopt or

modify them as they see fit. Ontario and Quebec have both made many changes in individual

guidelines, and such changes have served as the

basis for subsequent revision by the FederalProvincial working party.

The introduction to the Ontario guidelines,

published in 1976, describes the process used in

the Province (13):

In considering the means by which the guidelines might be reviewed, it was evident that a

conventional task force approach would repeat

much of the work done by the federal-provincial

working party. It was decided that the ideal

situation would be evaluation and modification

based on the comments of all those directly

involved—clinically or administratively—in the

operation of the units throughout the province,

If this could be achieved, the degree of multidisciplinary involvement would be maximal and
Ch. 3— The Management of Medical Technology in Canada ● 37

province-wide participation would be assured.

A questionnaire was devised to evaluate the

guidelines for each unit. With the endorsement

of both the Ontario Hospital Association and

the Ontario Medical Association, all of the active treatment hospitals in Ontario were invited

to participate in the evaluation process. The acceptability of the approach was indicated by a

response rate which ranged from 88 percent up

to 100 percent for the various types of units.

The task force used the responses as the basis

for modification of the guidelines. A provincially acceptable adaption—not a rewrite—was the

intended goal. The degree of acceptability of the

guidelines varied according to the unit. For

some, only minor changes were required. In the

case of nuclear medicine, the responses indicated

that the guidelines would require major revision

for use in Ontario; therefore the Task Force

sought the assistance of the OMA. The section

on nuclear medicine appointed an ad hoc committee which, guided by responses of 46 departments of nuclear medicine, drafted a new set of

proposed guidelines. These were then recirculated to the hospitals and the resulting comments

were used in preparing the final version.

To adapt the Federal-Provincial guidelines or

to assess appropriate service distribution independently, a Province will often establish a

study committee. Such committees are usually

expert professional panels charged to address

specific planning or operational issues (e. g., the

appropriate distribution of units for a given

service) or to conduct an assessment of existing

hospital programs and recommendations on

programs to be closed,

The performance of these study committees

has been mixed. In Quebec, for example, a committee comprised of nuclear medicine specialists

(a separate specialty from radiologists in Canada) concluded that nuclear medicine was an established, proven, and basic diagnostic service

that should be available in all institutions with

over 100 beds and with adequate staff, and that

80 to 100 new cameras should be added within

the Province.

The Quebec Government had strong reservations about the committee’s findings. Provincial

officials felt that, although the committee had

been charged with assessing whether nuclear

medicine was a basic diagnostic service or a referral service, the committee had given this

question short shift. The Province had also

wanted an assessment of the relative efficiency

of nuclear medicine vis-a-vis other imaging

services, but that assessment was not provided.

Currently, there is a freeze on the expansion

of nuclear medicine in Quebec, although existing units have been allowed to upgrade equipment on the basis of the recommendation of a

separate committee. The Provincial government

would like to resolve the issue and allow more

diffusion if it is appropriate, however, and will

probably take several steps in this direction.

First, it will probably form another study

committee, this one including radiologists, internists, and surgeons, that is, representatives of

alternative specialty services and of the principal “consumers” of these services. One clear

lesson of the earlier experience is that advisory

committees should be organized in such a way

that conflicts and differences in professional

judgment are surfaced rather than hidden.

Second, it will probably tie approval of a new

nuclear medicine unit to the creation within the

hospital of an imaging department that will

combine the radiology, nuclear medicine, and

ultrasound capacities. The creation of imaging

departments that combine these capacities,

coupled with the continued fiscal pressures that

force hospitals to budget more tightly, is seen as

one way of moderating the competition among

specialties and encouraging the development of

an appropriate mix of service capacities by making the tradeoffs and overlaps among alternative techniques clearer.

Third, Quebec will probably require the creation of a formal evaluation protocol for the

nuclear medicine service to provide information

on the appropriate use of the service and its role

relative to other services. This was an idea that

was suggested 4 years ago, but never implemented. The expressed view of the Provincial

planning officials was that a formal evaluation

process as was originally conceived is almost

impractical for a new technology such as nuclear medicine, because the technology itself is undergoing development and change, and because

physicians using the technology are learning
38 ● Backround Paper #4: The Management of Health Care Technology in Ten Countries

and continually modifying their practice patterns. Provincial officials believe that evaluation for purposes of assessing the extent of appropriate diffusion is possible, but that it should

be limited in scope, geared to incremental assessment (of the impact of the procedure and

judgments on diffusion), and repeated as appropriate over time. Critical to the process of evaluation is framing the questions to ensure that

the right issues are addressed at the proper level

of detail.

Selection of Specific Equipment

Somewhat removed from the question of

overall services distribution or rate of diffusion

is the question of the specific equipment that

should be purchased for a unit. This becomes an

issue, because since a Province reimburses capital expenditures, it must approve the specific

selection.

Most Provinces have an equipment specialist

whose primary responsibility is to review individual equipment requests. These individuals

are often quite knowledgeable and may also

have access to technical experts in such areas as

radiology or laboratory; however, the information they have about the relative operational

performance of different equipment may be

limited.

One advantage of the development in some

Provinces of regional bodies to review capital

budget requests (which is discussed in the next

section of this chapter) has been the provision of

additional information to hospitals making

equipment decisions. In Ontario, for example,

the Province requires all laboratory equipment

purchases over $5,000 and all general equipment purchases over $20,000 to be reviewed by

local organizations. These local organizations

have generally set up provider advisory committees to review the requests, and the experts

on these committees will often share their experiences and discuss alternative equipment

choices as part of the review. Comparable

discussions take place in Quebec.

Several years ago, a proposal was circulated

calling for the establishment of a Federal unit to

compile information on the performance of al-
Ch. 3— The Management of Medical Technology in Canada ● 39

When a new drug is to be placed on the market, the manufacturer is required by law to provide specified information, including a quantitative list of all ingredients, evidence of clinical

effectiveness, the formulation of dosage forms,

and reports of any adverse effects. This information is evaluated by the Health Protection

Branch to assess whether the drug is safe and

effective.

Once a new drug is on the market, its sale can

be banned by the Health Protection Branch if

the adverse drug reaction program indicates

that the drug is unsafe and injurious to health.

The drug quality assessment program aims at

producing objective evidence on the quality of

drugs already on the Canadian market and disseminating this information to members of the

health professions, governments, and the general public.

Another major activity of the Health Protection Branch is designed to allow greater price

competition for drugs. This activity involves inspecting manufacturing facilities, assessing

claims and clinical equivalency of competing

brands, and providing information to concerned professionals and to the general public.

Also, the Health Protection Branch has a Bureau of Medical Devices that conducts a program for medical devices analogous to that of

the U.S. Food and Drug Administration (FDA).

Unlike the U.S. program, which includes an extensive premarketing approval process, however, the Canadian program is principally a

postmarketing effort. The difference between

the two countries’ programs in part reflects the

fact that the United States is a manufacturing

country, whereas Canada is an importing

country.

The postmarketing system in Canada is

judged by those operating it to function well. It

involves responding to user concerns, some literature review, and contact with U.S. regulators, since problems generally appear in both

countries. The program is not bound by specific

procedures, and when problems are identified,

the Canadian Government may require modification or withdrawal of the product. Hospitals

are generally alerted to identified problems.

Program administrators feel that a strict postmarketing approach may be inappropriate with

respect to new technology. For certain types of

new products, they are requesting voluntary

participation of manufacturers in monitoring

the scope of diffusion and identifying clinical investigators studying these products. The products subject to this premarketing review include

implants, cardiac pacemakers, intrauterine devices, intraocular lenses, and long-wear contact lenses.

All Canadian applications of radioactive isotopes are controlled and licensed by the Atomic

Energy Control Board (AECB).21 The Radiation

Protection Bureau of the Department of National Health and Welfare serves as a health and

safety advisor to AECB. Medical approval of

license applications is required from the Bureau.

The physician named on the license is personally responsible for the use of particular radionuclides. Each license is set out for the physician, specifying—on the basis of AECB’S assessment of the training and qualifications of the individual physician—the types of radionuclides

the physician can use, their application, and

their dosage.

Provincial Health Planning Processes

The Canadian Provinces have not invested resources in health services planning separate

from the regulatory processes. Most efforts to

develop bed need projections, criteria for special

care units, or statements of Provincial goals

with respect to the organization and distribution

of specific services have been made in response

to project applications. As has happened frequently with U.S. health planning agencies, the

first request in a given area triggers the process

of developing standards and criteria and a Provincial plan for the service.

The standards development process, as noted

above in the section on guidelines for special

services, involved both joint Federal-Provincial

efforts and strictly Provincial activities. It also

tended to be informal and to involve Provincial

21The description that follows is adopted from Health and Welfare Canada, Working Party on Special Care Units in Hospitals,

Special Cure Units in Hospitals, 1975 (9).
40 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

officials and selected medical consultants. The

general public has had little opportunity for participation or comment, but that situation is

changing somewhat. The three largest Provinces—British Columbia, Quebec, and Ontario—all have some local regional organizations

that are involved in both planning and review of

specific project requests. The organizations’

level of activity and degree of involvement vary

in each Province.

British Columbia was divided into regional

districts in 1957, and regional planning boards

(essentially councils of municipal government)

were established in each. One subfunction of

these regional planning boards was health. In

1967, “regional hospital districts” coterminus

with the general planning districts were created

as administrative mechanisms to authorize

bonds to support hospital construction and establish taxes to repay the bonds. (A separate organization was required constitutionally to

allow for taxing authority. ) The regional hospital district boards and the regional planning

boards are identical, although most districts

have established advisory committees of hospital representatives and, in some cases, laypeople.

The net effect of the establishment of these

boards in British Columbia appears to be that

greater attention is devoted to regional health

planning. The districts have been developing regional plans specifying the role of individual institutions, and in the absence of a Provincial

health plan, these serve as key planning documents. Most boards have little independent

health planning capacity and rely heavily on

Provincial government staff for advice and support. Only two districts have their own staffs

and are particularly active. One of these,

Greater Vancouver, has reported some conflict

with the Province over specific projects.

The Province of Quebec has been divided into

12 regions, and each region has a regional health

and social services council (CRSSS). The regional councils began operation in 1972, their first

responsibility being to oversee the elections for

a provincially mandated reorganization of hospital boards. The responsiblities of the councils

are conceived as evolving to include considerable authority over the regional medical and social service system.

Initially, the councils were involved in planning for emergency medical services, handling

consumer complaints about health services, assisting institutions to establish common services

and group purchasing, and reviewing and commenting on individual institutional projects and

Department of Social Affairs’ statements of regional and Provincial health and social service

priorities.

Beginning in 1976, the regional councils’

scope of authority was dramatically increased.

Quebec changed the basis for financing capital

(discussed below) and gave the councils authority over the expenditure of substantial funds.

Several of the councils, most notably that in

Montreal, have responded not only by reviewing specific project requests, but also by developing more general mechanisms for reviewing

patterns of service delivery and encouraging

change. These efforts have generally been dominated by hospital representatives sitting on a

separate commission within the council structure. The program of fiscal constraints and the

potential cost savings associated with consolidating services, however, have helped the councils achieve some restructuring.22

Quebec’s regional councils are currently involved in a major planning initiative mandated

by the Provincial legislature. This is an examination of the distribution of medical staff expertise and activities among teaching hospitals,

a two-phase project in which the councils are

working with the hospitals and universities and

in which the Quebec Ministry by law cannot

participate. The first phase has required the

university-affiliated hospitals to specify a

medical staff organization and identify the

range of services and expertise they have available. During the second phase, these plans will

be reviewed and recommendations will be made

concerning adjustments to the distribution of
Ch. 3– The Managment of Medical Technology in Canada ● 41

medical expertise and services, with concomitant proposals for shifting staff.

The planning initiative in Quebec is being

pursued deliberately and with extensive participation from all parties. Such an effort is virtually inconceivable in any other Province.

Apart from the integrating effect of the medical

schools, one factor that makes this planning initiative possible in Quebec—and unlikely in

other Provinces—is the legal domination of hospitals by the Quebec government. The passage

of legislation mandating a complete restructuring of hospital governance in Quebec reflects a

level of acceptance of Provincial control that is

unmatched in other Provinces. Furthermore, in

Quebec, there has developed general acceptance

by both physicians and government of the legitimacy of negotiations between them regarding

not only insurance payment rates, but other

conditions of work. In other Provinces, the legitimate scope of negotiation is often viewed as

more limited.

It should be noted that the initial development

of 12 councils with advisory power in Quebec

represented a weakening of a more extensive decentralization proposal. The original proposal

was for three regions with extensive authority to

determine institutional operating and capital

budgets. After considerable debate about

whether Provincial authority should be delegated, a legislative compromise was reached.

Since then, the Provincial government has delegated authority on an administrative basis.

A similar debate occurred in Ontario, where

district health councils are currently being

organized. In 1972, the Ontario Ministry of

Health was reorganized to achieve one goal—

the development of a capacity to develop integrated community health delivery systems and

planning capacity. Central to the development

of such a capacity was the concept of local

bodies with extensive health planning and

health systems management responsibility that

would receive staff support and expertise from

the Provincial level. This concept became enmeshed in a general Provincial debate on regional government. Because the local organizations were not established, the Ministry was reorganized again that same year to reestablish

centralized centers of activity. Since then, efforts have been underway to establish district

health councils with advisory responsibiIities.

The first district council was established in

January 1974, and approximately 20 district

councils have now been formed.

There is no district health council established

in Toronto. Two hospital organizations share

what would be the council’s responsibilities—

the University Teaching Hospital Association

for university-affiliated hospitals, and the

Hospital Council of Metropolitan Toronto for

community hospitals. These organizations share

an executive director and staff. That hospital

associations are playing the role of district

health councils in the largest Provincial metropolitan area, although not a comment on the

quality of work done by these organizations, is

indicative of Ontario’s attitude regarding the

importance of public participation (as well as

Toronto politics regarding the selection of appropriate public representatives).

The district health councils in Ontario were

conceived of as providing advice in the areas of

personal health and hospital services, community health services, mental health, environmental

health, and linkages to social services. Their

potential role as managers of the local health

system was left undefined, but they were to be

given considerable authority to review local

capital spending plans.

The Ontario Ministry of Health did not want

the councils to become bureaucratic, so it attempted to avoid the development of extensive

staffs in each district. Each council has an executive director. To provide technical staff support and to provide contact points within the

Provincial government, the Ministry established

area planning coordinators and created area

health teams. The area teams consist of individual members of the staffs of each Ministry division who have been assigned responsibilities for

specific districts or groups of hospitals.

Because of their involvement in other functions, area planning coordinators have not

served as an effective bridge between the district

health councils and area health teams. The area

teams appear to have been effectively estab-
42 ● Backround Paper #4:: The Managment of Health Care Technology in Ten Countries

lished, however, and are a major source of formal organizational linkage across functional

lines. One effect of this has been to facilitate

hospitals’ access to the Ministry on the operational level by establishing clear contact points.

Ontario’s district health councils have not yet

assumed the full range of activities or role in the

system originally contemplated for them. They

are doing almost no planning separate from reviewing and making recommendations on service and capital expenditure requests. Although

the Province has approved many of the changes

developed for Windsor, approving not only the

perinatal unit, but also development of two

chronic care units and the purchase of a new

computed tomography (CT) scanner, the guidance the district health councils have received

from the Ministry on reviewing service and capital expenditure requests has been late—and because of the fiscal constraints, no action has

been taken on the councils’ recommendations.

Hospital Budgeting and the Diffusion

of Technology

As noted above, the hospital budgeting process is the central process in which resource

allocation decisions are made. This process has

two components. One is establishing the operating budget for the hospital, which may contain an adjustment to provide additional operating funds for new services or to staff new equipment. The second is establishing the capital

budget, with provision for spending on plant,

fixed equipment, and movable equipment.

There is enormous variation in the methods

different Provinces use to provide funds for

capital investment. Part of the reason for this

variation is that the Federal Government has

not shared the cost of construction and fixed

equipment through the hospital insurance program. Although separate funds have been available from the Federal Government for hospital

construction and construction to support medical education, the costs of plant and fixed equipment have generally been Provincial responsibilities. Movable equipment has been eligible

for cost sharing, and Provincial governments

have had the option of expensing grants each

year or paying depreciation.
Ch. 3— The Management of Medical Technology in Canada ● 43

Almost no funds have been provided for

equipment projects and new services in Ontario.

The Province has approved acquisitions but

told hospitals that they will not have their

depreciation or operating expenses increased to

reflect the addition, a situation characterized as

“approved but not funded. ” Of the seven approved CT scanners in metropolitan Toronto,

for example, only two were funded by the Ministry. The remainder had to be funded out of

global budgets or philanthropy.

One exception, in terms of the provision of

capital funds, has been a program under which

the Ontario Ministry will provide 100 percent of

the capital funds for projects that will recover

their costs in operating fund savings within 5

years. The hospital’s operating budget, however, is reduced by the savings. To make it more

attractive, the program will be changed so that

if a hospital provides the initial capital funds, it

will be allowed to recover these plus interest,

and subsequent operating savings will be shared

on an equal basis between the hospital and the

Province.

In Quebec, until 1976, all capital funds were

provided directly by the Province. As part of

the 1976 delegation of authority to the regional

health and social services councils, there was

major restructuring of capital financing that

shifted some financing to the regional councils

and hospitals themselves. Until 1976, hospitals

had been reimbursed by the insurance program

at a standard ward rate. When patients voluntarily sought semiprivate or private rooms, they

would be charged separately for them. 25 In establishing hospital budgets, Quebec had used

the revenues from preferred accommodation

charges to offset the amount needed from the

Provincial hospital insurance program. Under

the restructured system, hospitals were required

to place 45 percent of these funds into a special

fund for capital expenditures. Another 45 percent was to go to the regional council, and 10

percent went to the Provincial government to

redistribute to regions with less of this revenue.

25Blue Cross and other insurers remain active in a market for insurance covering these charges and other medical charges not

covered by the insurance program.

Hospitals in Quebec are expected to finance

minor equipment purchases out of the funds

generated by those preferred accommodation

charges or contributions. Construction and

other renovations under $1 million and purchases of specialized equipment are to be reviewed by the regional council, and approved

requests are funded jointly out of the council

funds and hospital funds. The council can contribute no more than 80 percent of the cost of

renovation of equipment and may in fact contribute less, requiring the hospital to fund up to

the entire amount of the project itself.

Certain types of equipment purchases, although they will be funded through the council,

must be approved by the Province. Included in

this category at one time were purchases of diagnostic radiology, therapeutic radiology,

nuclear medicine, data processing, laboratory

automation, and anesthesia and recovery equipment. The category now includes only purchases of computer applications and data processing equipment.

Construction projects over $1 million in Quebec are funded entirely by the Province. These

projects must be reviewed by the regional council and approved by the Province. Funds needed

for the operating expenses associated with new

capital or service charges are also reviewed and

could be added to the global budget by the Provincial government. Over the past 4 years,

however, no additional funds were added.

General construction funds have been tight in

Quebec over the last several years. In 1975-76,

they were $42 million. The accommodation

charge generated an additional $20 million.

When the new financing system was put into

place, the Province estimated the amount that

was being spent on equipment and renovation

under $1 million (the expenditure classes to be

funded by these charges) and set the charges to

realize this level of revenue. The charges have

since been increased but there has been no systematic analysis of whether current changes

provide a sufficient level of funding.

Discussions with individuals in Quebec suggest that the accommodation charge is providing only a marginal amount of funds. The 10-
44 ● Backround Paper #4: The Management of Health Care Technology in Ten Countries

percent fund for reallocation has been inadequate and the Provincial government has augmented it. The Montreal Council estimated that

it received $40 million per year in requests,

divided evenly between renovations and equipment, of which it authorized $15 million and directly contributed $6 million to $7 million. It is

receiving $3 of special equipment requests for

every dollar it authorizes.

Limited funds have required Provinces and

regional bodies to establish priorities among

projects. A variety of mechanisms have been

employed. In Ontario, beginning with fiscal

year 1978, hospitals were asked to submit their

proposed capital projects and proposed new and

expanded services to the district health councils.

No guidance was provided to the councils on the

priorities they should employ for their review.26

In addition to this lack of guidance on priorities,

the councils received no information from the

Province specifying which projects from the

previous year, if any, had been funded and

which should be reconsidered in the current

year. Because of these problems, for fiscal year

1981, the University Teaching Hospital Association refused to carry out a priority-ranking

process for new and expanded programs.

The Province of Ontario has expressed conflicting attitudes on the degree of autonomy the

district health councils will have. On the one

hand, it has reserved the right to change the

priorities coming from the district councils.

Along this line, Provincial staff indicate they

have developed their own priority-ranking system, including a set of numerical weights that

applies to project ranking. This system has not

been shared with the district councils or Provincial hospitals, but its general shape can be surmised from the guidance the Province has given

the districts. The guidance on capital spending

established 10 project categories: 1) correction

of hazards, 2) conversion from active treatment

to chronic care, 3) regional bed shortage, 4) improvements in services, 5) consolidation in services, 6) investments that reduce operating costs,

7) cancer treatment services, 8) crippled children’s services, 9) energy-saving investments,

and 10) other. Priority was to be given to projects in the first, third, and sixth categories.

Although the Province has reserved the right

to change district health councils’ priorities and

has established its own ranking system, however, Provincial staff indicate that, in reviewing

the councils’ priorities for funding in 1979-80,

they selected the top three to five projects from

each council in order to assure that the top

priorities from each would be represented, and

then established a ranking among these. Indeed,

no one contacted in the Ministry or hospital

community cites any case in which district

council priorities have been modified. There is,

however, one footnote to this priority-setting

exercise. For 1979-80, no new funds were made

available for new or expanded services, so all

projects approved in that year, regardless of

rank, had to be funded out of individual institutions’ global budgets.

In Quebec, because of the local council funding and institutional autonomy over spending

on specific activities, the arrangements for

establishing priorities are different from those in

Ontario, but their effect is comparable. Having

received guidance from the regional council on

its funding priorities, hospitals submit their

equipment and renovation priority lists to the

council. In Montreal, the lists are initially

reviewed by a commission within the council

consisting of two representatives each of the

medical schools, teaching hospitals, community

hospitals and chronic hospitals, and one representative of the psychiatric hospitals. This commission makes the final decisions within the

council on projects under $100,000. For projects

over $100,000, the commission makes recommendations, but the council makes the final

decisions.

The commission within the Montreal council

has conducted or sponsored studies on a variety

of issues. These have ranged from mundane but

economically costly issues of storm window replacement in hospitals to a review of regional

nuclear medicine facilities to determine which

departments would be allowed to update their
Ch. 3—The Management of Medical Technology in Canada ● 45

equipment. (Following the nuclear medicine

study, the council arranged for group purchase

of equipment at a discount. ) The priority-setting

process during the first 2 years of its operation

was reported by some participants to be extremely disordered and inequitable, in part because of council weaknesses, in part because the

hospitals failed to set priorities effectively.

There was a feeling that the process had improved, however, and that despite the low proportion of funded projects to total requests, the

hospitals were substantially satisfied with the

results.

As in Ontario, the Quebec government reserves the right to change recommendations

from the regional councils. There have been

only a few cases in which it has exercised its

right, partly because the councils have participated in the process by which the planning

parameters were set.

In closing this discussion, two outstanding

issues should be noted. The first is that the lack

of new program funds has been a major problem for Provincial hospitals. Despite discussion

of changes in the reimbursement system, the

global budgets of most hospitals have remained

substantially unadjusted for several years, and

in real terms, the base has in fact declined. This,

more than the capital limits, has affected the institutions’ capacities to mount new programs.

Although the lack of funds has encouraged internal economies, service adjustments, and consolidation of service as a means of coping with

tight resources, it has also prevented some consolidations by not providing a structure for

shifting resources to hospitals that have received

the consolidated programs.

The second issue is that the Provinces have

not developed a long-term basis for determining

the level of resources in health care. Indeed, a

global approach to this problem is not necessary. Some Canadians, for example, decided

that, in light of perceived excess capacity and inefficiencies and in view of other Provincial priorities, funds to the health system would be restricted. They did not attempt to determine the

optimal level, but instead began reducing services at the margin. Although this approach is

reasonable, as implemented it suffers from the

lack of any assessment of the marginal impact of

these decisions.

Those in Canada regularly point out that

decisions concerning the health system, particularly resource decisions, are political. The

introduction of assessment methods would not

change this. By highlighting the effect of the current decisions, however, it might inform judgments concerning how these decisions should be

modified in the future. There is the risk for

government that such evaluations, if public,

would fuel pressures for higher spending. The

Provincial governments are sensitive to constituent pressures on these issues, and several individuals in Ontario and Quebec reported increasing public pressure to expand resources in

the health sector .27

If decisions are made to increase the capital

funds available to the health sector, the formal

systems for establishing priorities to allocate

these funds appear to be in place in these Provinces. Until now, however, especially in Ontario, constraints have been so tight that choices

among priorities have been more formal than

substantive. One question confronting these

systems is whether they can in fact operate in an

environment of real allocation decisions, or

whether the increased funds and greater relevance decisions would generate a higher level of

conflict than the systems could absorb. Related

to this, a second question is whether Provinces

can marginally increase the level of investment

and cost growth, or whether, unable to do this,

they will move from famine to feast as they

moved from feast to famine in the early 1970’s.

Hospitals’ Responses to Investment

and Service Constraints

The fiscal constraints in general, and capital

and service constraints in particular, have significantly changed the environment in which

hospitals operate. Hospitals have reacted to this

in a wide variety of ways, some supporting public policy, some attempting to undercut it. Five

27 The front page headline in the July 24, 1979 Toronto Star, for

example, played to public concerns by announcing “Our Hospital

Nightmare: You Could Die Waiting. ” The next day, the Health

Minister’s response was headlined “I’ll Fight for Needy Hospitals—

TimbreIl. ”
46 ● Backround Paper #4: The Management Of Health Care Technology in Ten Countries

aspects of hospitals’ responses in the technology

area are particularly notable.

First, in addition to attempting to achieve

greater efficiencies to adjust to the constraints

and create internal funds for capital and service

expansion, hospitals have tightened the management of their capital and operational budgeting system. To respond both to the overall constraints on available funds for capital and new

operating expenses and to the requirement that

they present formal lists of priorities to regional

bodies, hospitals have had to define their priorities clearly.

One approach that hospitals have used to define priorities has been to establish budgeting

committees that include physicians from the

major departments, such as medicine, surgery,

radiology, and pathology. Such committees

change the decisionmaking process from one in

which the hospital’s administrators must respond to departmental requests individually to

one in which the competing claims on limited resources are reviewed and resolved in discussions

that include physicians representing the different interests. Thus, the establishment of hospital

budgeting committees represents a major reordering of decisionmaking in these institutions.

Among its effects are to reduce staff alienation

from the budgeting process, to broaden the

range of the expertise and perspectives brought

to bear in assessing relative priorities, to enable

more effective challenge of planning assumptions and project justifications, and sometimes

to generate unexpected solutions to problems. A

main force assuring the effectiveness of such

committees, however, is the reality of the external constraints.

A second element in the hospital response has

been an increasing acceptance of service consolidations and shared-service arrangements. The

obstetrics and pediatrics consolidation in Montreal and Windsor have already been noted.

Other examples that are cited by Canadians are

arrangements for the shared use of a CT scanner

by radiologists at Toronto General Hospital and

Mount Sinai Hospital (these facilities are across

the street from each other) and a similar shareduse arrangement between the anglophone

McGill-affiliated Jewish General Hospital and

francophone University -of-Montreal-affiliated

Hotel de Notre-Dame. Also cited is a growing

interest among hospitals in referring highly

specialized laboratory tests to other hospitals

rather than duplicating the capacity. Efforts in

Hamilton, Ontario, where hospitals have developed an in-common laboratory and agreed to

consolidate special services such as neurosurgery, cardiac surgery, and burn treatment at individual institutions, represent a notable example of this.

Within this small but growing movement

toward consolidation, the medical schools have

played mixed roles. There is general acceptance

in Canada that highly specialized services

should be centralized at teaching hospitals, but

the medical schools have varied significantly in

the degree to which they have acted to try to

achieve coordination of services among their

teaching affiliates. McGill and Laval in Quebec

were cited as examples of schools which had actively promoted coordination and consolidation. The University of Toronto and University

of Montreal were noted to be far less involved.

An area of fruitful future inquiry would be to

understand the factors that have led to these differences.

A third element that can be noted among

some Canadian hospitals is a renewed growth in

philanthropy and private development campaigns. Several hospital administrators view efforts in these areas as increasingly important;

they consider it a major need and challenge to

explain to the public why, even with a government insurance program, private contributions

are necessary. Philanthropy has made acquisitions possible when government funds were not

available. In Quebec, for example, funds for all

CT scanners in the Province were made available either by private philanthropists or from

hospital endowments. Purchases in Quebec

were all made with Provincial approval. In Ontario, by contrast, not only approved scanners

were purchased with philanthropic funds, but

several unapproved scanners, as well.

The fourth notable element of hospital response is the acquisition of unauthorized equipment. Such acquisition has occurred primarily

in Ontario, where in Toronto, for example,
there are three unauthorized CT scanners. Similarly, it was reported that when this Province

delayed decisions on ultrasound equipment,

many hospitals simply purchased it. The situation in Ontario in part reflects the fact that since

hospitals were being asked in most cases to fund

such purchases out of their global budgets with

no increase in funds, obtaining approval offered

no financial advantage. It also reflects hospitals’

belief that certain services are critical to maintaining quality and staff. (The hospitals with the

unauthorized CT scanners have referral neurology and neurosurgery services. ) Finally, it reflects their belief that the Province will not attempt to discipline or penalize the hospitals that

make unauthorized purchases. The Province of

Ontario has never ordered a hospital to sell off

or discontinue an unapproved service, and political pressures might make such an order infeasible. Furthermore, the Province continues to

pay radiologists the professional component of

their fees, and this practice further undermines

belief in the Province’s will to crack down.

Individuals in Quebec indicated that in that

Province a similar situation involving the acquisition of unauthorized equipment was extremely unlikely, because the Provincial government has previously demonstrated considerable willingness to deal aggressively with hospitals, and because regional councils’ control

over renovation and equipment funds provides

a clear disciplinary mechanism.

Finally, a fifth element of hospitals’ response

is represented by hospitals’ attempting to shift

expenses from their global budget outside to

other aspects of the health insurance system. As

part of their constraint programs, Ontario and

Quebec stopped adjusting hospital outpatient

budgets for higher volume. (In Ontario, however, the Province has given slightly higher

across-the-board budget increases to the outpatient budget than the inpatient budget. This is

intended to encourage and promote shifts from

inpatient to outpatient care. ) One institutional

reaction has been to refer ambulatory patients

to nearby private physicians for tests that will

be covered under the medical insurance program, These referrals have generated some interest among physicians in developing noninstitutional nuclear medicine facilities. Efforts to

expand the reimbursement in the medical insurance program to cover these facilities have been

resisted.

Professional Fees and the Issue of

Freestanding Units

The process by which professional fees are set

was described in the section on the health care

system in Canada. Several people involved in

the fee-setting process were sensitive to the issue

that fees can create incentives for higher utilization or abuse of services. To some extent, this

pressure is countered by the general concern

within the medical societies that incomes by specialty be equalized, and by the existence of one

interspecialty group that reviews the relative

fees for new procedures.

The Ontario Medical Association indicated

that, as a general rule, it tries to set an initial fee

that is based on the recognition that as the procedures become more routine, there will be less

physician effort. It also identified some procedures, such as chronic dialysis, for which the

original fee was reduced, and others for which

the fee increases were kept below average until a

more appropriate relative value was reached.

As noted above, the fiscal constraint program

has led to some interest among Canadian physicians in developing freestanding units for such

services as CT scanning, nuclear medicine, and

ultrasound. The principal Provincial control

over this private proliferation of high technology is the fee system, since unless there is a technical component to the fee as well as a professional component, the Provinces will not reimburse equipment and technician costs. In general, Provinces have held the line against such

freestanding units.

It can be argued that the development of freestanding units should not be resisted because

such units can better respond to outpatient

needs and may operate more efficiently. For the

Provinces to allow this development, however,

they would have to be assured that inappropriate utilization could be prevented and that the

insurance programs would realize some of the
financial benefits of a shift of diagnostic services

to an outpatient setting.

Utilization Controls

Utilization controls in the Provincial insurance system are limited. Most focus on outpatient care and are designed to identify fraud or

SPECIFIC TECHNOLOGIES

The preceding sections of this chapter have

attempted to present an overview of the management of medical technology in Canada, including the issues being addressed in the system

and the formal and informal processes involved

in making the technology decisions. In this section, an effort is made to shed additional light

on the earlier discussion through examinations

of specific technologies. The reviews presented

are not comprehensive, but do provide information on the number of units, basic planning approaches, and Provincial experiences that illuminate the technology management process.

CT Scanners

The original Federal-Provincial guidelines for

special care units did not address CT scanners.

In March 1977, a member of the Federal-Provincial working party drafted a report on CT scanning citing the EMI standard of one unit per

500,000 population. A definitive standard was

not attempted, however, because it was felt that

changes in the technology would quickly outdate it. Although an interim report was prepared, the working group recommended that,

because CT scanning technology had raised a

number of issues in radiology and nuclear medicine, the report not be issued and that a national

symposium on diagnostic imaging be held. A

symposium took place in October 1978. Since

that conference, a group has been working on a

draft guideline on CT scanning, and it was

scheduled to complete this work in May 1980.

The delay in Federal-Provincial guidelines left

the Provinces to address the issue of diffusion.

Most Provinces adopted an initial standard of

one unit per 1 million population or one per

high-billing physicians. Similarly, the in-hospital review systems run by the Provinces are limited. Despite the fact that the global budget incentive is to reduce length of stay and unnecessary admissions, many Canadians believe that

current hospital utilization is unnecessarily

high, and some hospitals have therefore begun

implementing internal review programs.

100,000 population. In 1978, there were 20 to 25

units in Canada. Among the major unresolved

issues for the Provinces in addressing the diffusion of the technology are: 1) how to reconcile

the population and volume-based projections of

units with patterns of neurological and neurosurgery practice and the demands for scanners

at hospitals providing these services, 2) how to

assess the relative utility of this CT equipment

vis-a-vis other services, and 3) how to assess the

utility of a whole-body scanner relative to a

head scanner. In general, while attempting to

obtain answers for these questions, most Provinces have moved conservatively, but not dogmatically, in limiting CT scanner services.

Ontario had 17 authorized scanners as of January 1, 1979. As of that date, three had not been

installed. The pattern of authorized expansion

of scanner services was as follows:

Total authorized scanners

1974 ......., . . . . . . . . ... , 1

1975 . . . . . . . . . . . . . . . . . . . . 2

1976 ..., ... , . . . . . . . . . . . . 6

1977 . . . . . . . . . . . . . . . . . . . . 8

1978 . . . . . . . . . . . . . . . . . . . . 10

1979 . . . . . . . . . . . . . . . . . . . . 17

Recently, a joint Ministry /Ontario-Medical-Association committee revised the criterion to one

per 500,000 population and recommended adding several additional scanners. Five of the approved scanners are located in Metropolitan Toronto. Two of these have restricted use—one at

the Hospital for Sick Children, the other at the

Princess Margaret Hospital, which is the Provincial cancer center. As noted above, in some

cases, patterns of sharing CT scanners have

developed.
In addition to the approved scanners operating in the Toronto area, there are three unauthorized scanners. Unauthorized scanners have

developed in Ontario for several reasons:

● Only two of the approved scanners in the

Toronto area were funded by the Ontario

Ministry; the others had to be financed out

of global budgets, The hospitals that installed unauthorized scanners were therefore at no more financial risk than the hospitals that installed approved scanners.

Furthermore, one unauthorized scanner

was donated and the benefactor guaranteed

that operating expenses would be met; a

second scanner was purchased used, therefore at reduced cost.

● Hospitals expect that at some point the Ontario Ministry will pick up the operating expenses on the unapproved scanners.

● With the Ministry considering hospital

closings or definitions of hospital roles,

possession of a scanner is viewed as important in terms of allowing an institution to

remain in the forefront, Hospitals believe

their position in a restructured system will

be based on the equipment and services

they offer—regardless of whether the

equipment and services have been approved.

. Ontario continues to reimburse radiologists

for the professional component of their fees

for CT scanning even at unapproved scanners, thereby making use of these scanners

attractive to radiologists.

. Scanners are attractive to hospitals in terms

of maintaining physician staff loyalty. Unlike cardiac surgery, a service which requires a cardiac surgeon, scanning is a basic diagnostic technique that many physicians want to have available.

The Ontario Ministry’s actions toward unauthorized scanners in Toronto have been inconsistent. The three hospitals with unauthorized

scanners were ordered to set up a separate cost

center for the scanner and segregate the costs

associated with it; the hospitals complied. Reportedly, CT scanner expenses are being excluded from their global budgets. (One hospital

with an unauthorized scanner announced that it

would make referral scans from other regional

hospitals available free of charge. Since the hospitals with approved scanners in the city are

charging for referral scans, this was seen as one

way of creating pressure on the Ministry. )

When one hospital with an approved scanner

had to close its scanner for several months and

contracted with a hospital with an unapproved

scanner to provide scanning services, however,

the Ministry sought an amendment to the Provincial law establishing scanners at specific

hospitals to permit reimbursement to the hospital with the unapproved scanner for the provision of scanning services of the approved

hospitals.

There is reported to be a 2-month backlog for

outpatient referral scans in Ontario. One observer thought that this backlog was an artifact

resulting from inadequate operating funds for

the scanners. Noting that many scanners are operating only 8 hours a day because of staff limitations, that observer suggested that the backlog

could be significantly reduced or eliminated if

the scanners were operating for longer periods.

Quebec has maintained tight control over

scanners. There are only seven units in the

Province, with two on order. The Montreal

Neurological Institute has two—one head, one

body. Of the remaining units, all are body scanners. There are procedures for referral and sharing among hospitals. The pattern of scanner expansion in Quebec has been as follows:

Head Body Total scanners in use

1973 ., . . 1 0 1

1974 . . . . 1 0 1

1975 . . . . 1 0 1

1976 . . . . 1 2 3

1977 . . . . 1 4 5

1978 . . . . 1 6 7

After receiving requests for three additional

scanners, the Province conducted a general review of its policy. Officials felt particularly

uneasy regarding two questions—the relationship of scanning to other diagnostic services and

the true utility of the whole-body scanner. Quebec has therefore decided to limit the scanners in

the Province to the current units and will not

consider adding to these units until the six have

an average annual volume of 2,800 examina-
50 ● Backround Paper #4: The Management of Health care Technology in Ten Countries

tions each, and a rigorous evaluation of scanning from both a health and economic perspective is completed, either in Quebec or some

other location. Both Ontario and Quebec are

considering sponsoring such an evaluation.

Renal Dialysis

Federal-Provincial guidelines and assessments

of renal dialysis place it in the overall context of

treatment of end-stage renal disease. Those documents place an emphasis on home dialysis to

maximize autonomy, and on kidney transplants

as a major service that should be available.

The Federal and Ontario planning guidelines

call for a hospital-based unit to support 25 to 50

new patients a year, a planning estimate that requires approximately six beds (9). The original

Federal guidelines state that the program should

be based on a population of no less than 1 million and that “depending upon criteria for selection and the aggressiveness of the case-finding

programs, this population base may be expected

to yield at least 25 new cases per year, and possibly many more” (9). The guidelines further

note (9):

If the treatment were wholly successful, the

program would obviously grow until patients

began to die of old age, or other causes. Assuming a death rate of 10 percent per annum of those

at risk, a program based on 25 new patients per

annum would increase to a total of more than

200 patients in 15 years and would not stabilize

until 250 patients were on treatment.

A revised Federal-Provincial Guideline on Regional Renal Failure Programs has been completed and is awaiting publication. The revised

guideline expands the discussion of renal transplantation and organ retrieval requirements.

In 1979, Ontario had 10 hospitals with inpatient dialysis units. Sixteen hospitals, including

some with important programs, provided home

dialysis. In the period from April 1, 1978 to

March 31, 1979, 9,394 outpatients and 1,854 inpatients received dialysis services. There were

201 transplants.

The Quebec planning documents analyze the

current dialysis and transplant programs in the

Province and call for specific changes (12). In

1978, there were 16 hospital-based chronic dialysis units, with 97 dialysis machines. There

were three acute dialysis units in other hospitals. All of these were inpatient based; there

were no outpatient dialysis units (12). Three

other centers provided for home dialysis and

had 52 dialysis stands. There are six hospitals

in Quebec doing approximately 125 transplants

a year.

Quebec’s dialysis goal established in 1978 was

to increase the proportion of home dialysis from

20 percent to 30 to 40 percent by 1981, a figure

comparable to rates in Ontario, the United

States, and Europe. This was to be done by expanding the efforts of the three centers for home

dialysis. Outpatient dialysis was to be substituted for inpatient dialysis, with one center

serving as a pilot project. The existing hospital

units were viewed as sufficient, particularly if

home dialysis and outpatient dialysis were developed. Transplants in Quebec were projected

to increase to 145 in 1981; the six transplant

units were viewed as sufficient to meet this demand. Indeed, by some planning standards,

that is more than the number of transplant facilities needed, but the Province announced as policy a decision not to seek a regrouping of the

current centers. In short, the Provincial plan

called for shifts in the modes of treatment for

end-stage renal disease, but no regrouping of the

hospitals providing these services.

Since Quebec’s planning was completed, the

demand for dialysis services has increased. Current facilities are, by general agreement, saturated. The Province has not yet determined

whether the prevalence of end-stage renal disease is increasing or if indications for dialysis

have changed. It seems prepared to meet the

needs imposed by the unexpectedly high demand, but views home dialysis and outpatient

dialysis as the areas to emphasize.

Cardiac Surgery

Coronary bypass surgery has been increasing

in both Ontario and Quebec. In Ontario, in

1977, there were 1,675 reported cardiac revascularization procedures; in 1978, this number

grew to 1,947. In Quebec, in 1977, there were

1,678 bypass procedures and 2,412 other open-
Ch. 3– The Management of Medical Technology in Canada . 51

heart procedures; in 1978, there were 1,891 and

2,690, respectively. A study of the effect of the

surgery in Quebec showed that of those receiving the surgery, 55 percent returned to activity

but 45 percent did not. The increase in this surgery was noted in both Provinces, but in neither

Ontario nor Quebec was the increase viewed as

a major problem.

More concern was expressed over the appropriateness of the distribution of cardiac surgery

units and the quality of care they render. Implicitly, it is assumed that appropriate controls

on the proliferation of units will control marginal surgery. The appropriateness of care at established units has been the subject of several

studies in each Province.

In Ontario, the problem has been treated primarily as a quality issue. Along this line,

guidelines have been established for a minimum

of 150 operations per year per unit; a staff of

two surgeons, two cardiologists, and 24-hour

coverage by residents or others; and affiliation

with a health sciences center. The guidelines in

use were reviewed and revised by a 1973 task

force on cardiovascular surgery. The task force

consisted of three surgeons, two internists, a

pediatrician, and three Ministry of Health staff.

It recommended the closing of one unit in Windsor and the establishment of a second unit in

London. Both these recommendations were

followed,

Currently, there are 10 hospitals in Ontario at

which cardiac surgery is performed; 4 are in

Toronto. Only one, at Sudbury, is not a teaching hospital. The Sudbury unit was established

in 1967, and its performance has been closely

monitored. A 1976 task force reviewed its performance, complication and mortality rates,

and approved the continuation of surgery there

for 2 years, but recommended that the team stop

elective valve surgery. Several other units with

low volumes are also examining the referral of

elective valve surgery.

A task force on cardiovascular surgery in

Toronto that will soon complete its work is expected to report that facilities there need to be

upgraded. If this task force follows the pattern

set by others, it will also have specific recommendations for each unit concerning the deficiencies that should be addressed. A conclusion

by this task force that services need to be expanded or upgraded will create pressures in the

Province for additional spending.

In Quebec, there are currently 11 cardiac surgery units. Cardiac surgery has been the subject

of three task force reports by the Province. The

first task force, consisting of cardiac surgeons,

was appointed in 1970 or 1971. Its report justified the existence of each cardiac surgery unit in

the Province, including two with workloads

well under 100 operations per year. One impact

of this report was to increase the Ministry of

Social Affairs’ distrust of the medical community, discouraging for several years the use of

practicing Provincial physicians on government

studies of medical services.

The most recent study was completed by a

task force chaired by a McGill University cardiologist and former dean of the medical faculty. That report set out criteria for evaluating

units, but made no recommendations on whether specific units should be closed. On the basis

of that report, the Quebec Ministry sent letters

to two hospitals requesting that they terminate

their cardiac surgery activities. One hospital terminated this service. At the other, two additional surgeons were recruited, and the rate of

surgeries went up over the 100-per-year level.

Radiotherapy

The situations regarding radiotherapy are

substantially different in Ontario and Quebec.

In Ontario, the expansion of radiotherapy has

been strictly controlled. The Canadian Cancer

Treatment Foundation, a nonprofit organization with Federal, Provincial, and voluntary

support, conducts a cancer research program

and has been given responsibility for coordinating treatment within the Province. In the

treatment area, it operates seven treatment

centers in the Province. Radiotherapy and implants are centralized at five centers. Other

hospitals may do chemotherapy, surgery, and

limited implants.

The Canadian Cancer Treatment Foundation

has always budgeted its own centers, including
52 . Background Paper #4: The Management of Health Care Technology in Ten Countries

selecting and purchasing equipment, and is not

reimbursed on a fee-for-service basis by the insurance programs. The foundation has usually

had a tight limited budget, so it has tended to

impose internal budgeting constraints. The Ontario Ministry is not involved in reviewing its

budget, but is convinced that the foundation has

handled its resources well. The Canadian Cancer Treatment Foundation has been a major coordinator of cancer treatment facilities in

Ontario.

In Quebec, as of March 1977, there were nine

hospitals with megavoltage radiotherapy services (most with orthovoltage equipment as well)

and one hospital with orthovoltage equipment

only. Three of the hospitals offering megavoltage services were outside the Montreal region,

the rest within it. Of the megavoltage equipment, 19 of 25 pieces of equipment were cobalt

60 units. There were eight linear accelerators.

After reviewing the number and quality of radiotherapy units in the Province, the Quebec

Ministry ‘concluded that there was sufficient

capacity in the area outside of Montreal to meet

the projected needs of new patients there. No

additional centers or equipment were to be authorized there. (Subsequent to arriving at this

conclusion, the Ministry reconsidered the assumptions it had made regarding the utility of

existing orthovoltage equipment; it has not yet

published a modification of its conclusions. )

In Montreal, the Ministry concluded ‘that

some units were underutilized, others operating

at full capacity. It called for a reorganization of

radiotherapy units to consolidate them into

units that would be able to better handle the

service demands and to regroup staff medical resources to upgrade both medical education and

treatments. The plan for this reorganization was

to be developed in consultation with the regional council and the universities, and a survey and

analysis by the regional council are underway.

Clinical Laboratory Equipment

and Automation

Detailed information was not available on the

number and distribution of automated laboratory equipment in either Ontario or Quebec.

Neither Province has formal policies regarding

the appropriate equipment levels in laboratories

or points at which automation should be allowed. Prior to the creation of regional review

bodies, decisions regarding both were made by

the equipment specialists in the institutional

units of the Provincial Ministries and were influenced by the relative availability of funds. As

a result, until the fiscal constraint program was

introduced, most projects that were even marginally justified were approved. One study done

in Quebec estimates that laboratory facilities are

used at approximately 64 percent of capacity.

The fiscal constraint program has introduced

additional discipline into the system, although

noneconomic decisions continue to be made.

With few new funds available to pay for additional equipment, facilities have been reviewing

their needs more closely. The equipment specialist in Ontario reported that hospitals have

slowed their purchases of new equipment and

have been retrofitting or replacing modules in

autoanalyzers to upgrade the equipment. The

limited budgets encourage automation where it

is less expensive, and in Quebec, unions are

becoming concerned with the threat of automation and job reductions encouraged by the constraint program.

Another accommodation that has emerged is

the development of in-common laboratories, in

which hospitals share the expense of joint facilities for some tasks. The lab in Hamilton has

been held out as a successful model. The Toronto in-common laboratory, however, has not

been a success. This laboratory was reported to

have management difficulties. In addition, a

major function the Toronto laboratory was

serving was to identify laboratory capacity for

specific procedures in individual hospitals and

to arrange for transportation of samples from “

other hospitals that needed those tests; once the

network was established, the laboratory organization was not necessary to manage the process. In both Quebec and Ontario, there is resistance to the network concept, and activities to

develop networks remain limited.

The introduction of the regional councils into

decisionmaking on this equipment has added

another element to hospital decisionmaking. In
Ch. 3– The Management of Medical Technology in Canada . 53

Ontario, the Province requires requests for all

pieces of laboratory equipment over $5,000 to

be reviewed by the local council. In Toronto,

this requirement has led to the creation of an

Advisory Committee on Laboratory Services

made up of pathologists from each of the major

hospitals. The committee has functioned reasonably well, in part, because it has also become

a source of consulting expertise to the individual

hospitals. Pathologists are able to share their experiences with specific equipment and to direct

individual hospitals away from equipment with

which they have been dissatisfied or which does

not really meet their need. There has been some

opportunity to review programmatic needs, but

this has been less systematic and effective than

the sharing of experience on specific equipment.

CONCLUDING REMARKS

This review of the management of medical

technology in Canada underscores several aspects of this issue as it has developed in that

country. The first is that there is no separate

medical technology policy. The factor that has

influenced the introduction and expansion of

technology is the overall level of funding of hospital services. The funding level, in turn, has

been determined in a political context in which

health services have been in competition for resources with other government programs and

with the private sector. Capital spending has

been limited and new technology rationed, but

only because of these general constraints—not

because of programs specifically designed to

limit new investments.

A second aspect of the experience of Ontario

and Quebec is the general acceptance of the legitimacy of resource decisions being made in the

public sector. There is conflict over the level of

funding, but for the most part hospitals and the

public accept the government’s role in determining it. There are exceptions to this, however.

The most notable example is evidenced by the

existence of unapproved CT scanners in Toronto. Another is evidenced by hospitals’ increasing

efforts to review and expand philanthropy. Significant constraints on hospital financing have

The consultation is not completely successful. A

survey of hospitals in the Toronto area revealed

that these hospitals purchased many items of

equipment whose purchase had been recommended against.

In Quebec, although final approval of laboratory equipment is at the Provincial level, the

regional councils review and advise on purchases. As a result, and given the involvement

of hospital administrators in this review, comparable opportunities for commenting on equipment choices and programmatic needs exist. Respondents could cite only one case in which a

piece of equipment was obtained after a negative recommendation.

been introduced only over the past 7 to 8 years,

and it remains to be seen whether augmentation

of government funding represents a permanent

new feature of the financing system or is a shortterm reaction that is part of a period of adjustment from times of generous to times of more

restrictive levels of public funding.

A third aspect of the Canadian experience is

the role that medical schools have played as integrating forces in consolidating services. That

role has been facilitated by the apparent acceptance in Canada of a hierarchical relationship

among university-affiliated hospitals and between university-affiliated and community hospitals. In the United States, where similar hierarchies do not exist, community hospitals are

often in competition with teaching hospitals for

new technology and sophisticated services.

Finally, it should be noted that the fiscal constraint program has had an influence on the decisionmaking processes in hospitals, a situation

that must exist if any long-term changes in the

hospital system are to occur. Among the most

notable changes is the structured involvement of

key members of the medical staff in the internal

review and evaluation of alternative uses of capital funds. The medical community is increasingly participating in establishing priorities for
54 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

capital spending by hospitals and appears

accepting responsibility for the impact of

CHAPTER 3 REFERENCES

to be

these

1.

2 .

3.

4 .

5 .

6.

7.

8 .

9 .

AndreoPoulis, S., National Health Insurance:

Can W; Learn From Canada? (New York, N. Y.:

John Wiley and Sons, 1975).

Gibson, R. M., “National Health Expenditures,

1978,” Health Care Financing Review l(l), summer 1979.

Health and Welfare Canada, Annual Report,

1974-1975: Hospital Insurance and Diagnostic

Semices (Ottawa, n.d.).

, Health Economics and Statistics Division, Review of Health Services in Canada, 1974

(Ottawa, 1974).

National Health Expenditures in Canada, 19’78 (Ottawa, April 1973).

personal communication, 1979.

; Review of Health Seruices in Canada,

2974 (Ottawa, April 1974).

, Task Force on the Costs of Health Services in Canada, Report (Ottawa, 1969).

Working Party on Special Care Units in

Hospit&, SpeciaZ Care Units in Hospitals (Otchoices on medical practice and the availability

of medical services.

10.

11.

12.

13.

14.

tawa: Health and Welfare Canada, Health Insurance Directorate, 1975).

Lalonde, M., A New Perspective on the Health

of Canadians: A Working Document (Ottawa:

Government of Canada, 1974).

Lewin and Associates, Inc., Govenzment Controls on the Health Care System: The Canadian

Experience (Springfield, Va.: National Technical

Information Service, 1976).

Minist&e des Affaires Sociales (Ministry of Social Affairs, Quebec), Guide I’Allocation des Resources: Services Spi?cialises et Ultra-Sp@cialises

(Quebec, 1978).

Ontario Ministry of Health, Guidelines for Special Services in Hospitals: Ontario Version (Toronto, 1976).

Statistics Canada, Ottawa, personal communication, 1979.
4.

Australian Health Care System

and Medical Technology

Sidney Sax

Special Adviser on Social Welfare Policy

Commonwealth of Australia
Contents

Australia: Country Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Health Care System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Development of Common wealth Health Benefit Schemes (1950-72) . . . . . . . .

Changes in Health Care Financing Since 1972 . . . . . . . . . . . . . . . . .

Public Policies That Affect Medical Technologies. . . . . . . . . . . . . . . . . . . . . . . . . .

Hospitals’ Cost-Sharing Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Regulation of Charges in Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Medical Fees and Third-Party Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Education and Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Specific Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Renal Dialysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Coronary Artery Bypass Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cobalt Therapy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Laboratory Automation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

TABLE

57

57

58

61

64

64

69

69

72

73

74

74

75

75

75

75

76

Table No, Page

1. Number and Distribution of CT Scanners in Australia . . . . . . . . . . . . . . . . . . . . 74
4 ●

Australian Health Care Systems

and Medical Technology

Sidney Sax

Special Adviser on Social Welfare Policy

Commonwealth of Australia

AUSTRALIA: COUNTRY DESCRIPTION

Australia is an island continent with a population of 14. s million and an area close to 3

million square miles. Its greatest east-west mainland distance is 2,400 miles, and its north-south

spread is almost as great. With an overall population density of 3.5 persons per square mile,

large areas of Australia are sparsely populated.

Huge, dry inland areas carry little, if any, population. More than 80 percent of the people live

in urban environments, which lie mainly along

the coastal fringe. Large and prosperous cities

along the southern and eastern shores of the

THE HEALTH CARE SYSTEM’

The Australian health care system is pluralistic, complex, and not tightly organized. It involves three levels of government (Federal,

State, and municipal), as well as public and private providers and institutions. In spite of the

increasing role for government in the financing

of health services, most medical and dental care

is provided by private practitioners on a feefor-service basis. This has been—and will continue to be—an important feature of Australian

health services.

Prior to 1946, most major health functions

were retained by the States, and the primary

‘Much of the descriptive information pertaining to the Australian health care system in this chapter is based on personal conversations with Australian health authorities or unpublished, confidential documents to which the author has access in his capacity as

Special Adviser on Social Welfare Policy for the Commonwealth.

For this information, specific references are generally not cited.

country are major ports of entry. These include

Sydney, with a population of 3.2 million, and

Melbourne, with 2.7 million.

Six States have been federated under the name

of the Commonwealth of Australia. The Commonwealth also includes two mainland Territories, one of which is self-governing. At the

time of federation in 1901, all governmental

powers other than those exclusively vested in

the Parliament of the Commonwealth by the

Constitution were retained by the States.

health functions of the Commonwealth pertained to quarantine and the health needs of veterans. consequent upon a 1946 constitutional

amendment, however, the Commonwealth was

given powers to make laws about pharmaceutical, hospital, and sickness benefits, and medical and dental services. In addition to these

powers, the Commonwealth also has used its

constitutional powers to make grants for health

purposes to the States and nongovernment organizations.

State governments have the major responsibilities with respect to the public provision of

health services. These governments are responsible for the public hospital systems, mental

health services, public health regulation, and

licensing. The statutory obligations of local

governments vary from State to State, but the

57
—

58 . Background Paper #4: The Management of Health Care Technology in Ten countries

major health responsibilities of these governments are in the area of environmental control

and in the provision of a limited range of personal preventive services.

Public hospitals in Australia are very heavily

subsidized by State governments. These, in

turn, are assisted by the Commonwealth, which

meets half of the approved aggregate net operating costs of public hospitals in each State. Public

hospitals accommodate both private patients

and public patients. Private patients are treated

by their own doctors on a fee-for-service basis

and charged inclusively (at subsidized rates) by

the hospital for accommodation and nonmedical services. Public patients are not charged at

all and are cared for by doctors engaged by the

hospital. Any patient who is not insured can

elect to be treated as a public (or “hospital”)

patient.

Private hospitals, established during the 19th

century for those who did not want to be admitted to the public hospitals, are run both commercially and by religious and charitable organizations. Patients at private hospitals are

treated by their own private doctors on a feefor-service basis.

The 790 public and 340 private hospitals in

Australia provide approximately 71,000 and

21,600 beds, respectively, totaling 6.5 beds per

1,000 population (11). In addition, 1,190 nursing homes supply 58,000 beds, or 4.1 beds per

1,000 population. In 1978, the Commonwealth’s

10 medical schools graduated 1,260 persons

with a first medical degree. The total number of

medical practitioners in Australia was 23,600,

yielding a ratio of 1 doctor to 600 persons. It is

predicted that by 1990 the ratio will have increased to 1 doctor to 500 persons (9).

Commonwealth medical and hospital benefits

schemes were introduced in the 1950’s. Since

1972, the Commonwealth Government has

made frequent and major revisions in health

care financing arrangements. The development

of Commonwealth benefits schemes prior to

1972 and the changes that have been made since

1972 are described in the next two sections of

this chapter.

Development of Commonwealth Health

Benefit Schemes (1950=72)

From 1950 to 1972, four major Commonwealth benefits schemes were introduced to assist patients to purchase health care. They concerned: 1) pharmaceutical benefits, 2) medical

benefits, 3) pensioner medical services (PMS),

and 4) hospital benefits. These schemes, along

with mental health services, health benefits for

veterans, and the Commonwealth Department

of Social Security, are discussed below.

Pharmaceutical Benefits

A pharmaceutical benefits scheme was introduced in the early 1950’s. Currently, about

1,000 items are listed in a Commonwealth pharmaceutical benefits schedule. Australian doctors

may prescribe items other than those listed on

the schedule, but government benefits on these

items will not be paid. For items on the schedule, ordinary patients contribute only $2.75 per

item, and pensioner patients pay nothing. Pharmacists bill the Commonwealth Department of

Health for the balance of their charges, which

are fixed in agreements.

There is no separate charge for pharmaceutical items supplied through public hospitals, because the public hospital’s bill is an inclusive one

that covers the costs of accommodation, nursing, and pharmaceutical supplies. For pharmaceuticals in private hospitals, however, patients

pay separately. Federal Government payments

for pharmaceutical services and benefits at present amount to approximately $320 million per

year (10).

Therapeutic substances in Australia are subject to close surveillance by the Commonwealth

Department of Health, which administers the

pharmaceutical benefits scheme.2 Drugs and

medicinal preparations are added to or deleted

from the schedule of pharmaceutical benefits

following recommendations from the Pharma2

Therapeutic substances of various kinds are subject to controlled clinical trials in the major Australian medical centers. Comparatively few prospective, controlled trials of surgical therapy,

however, have been done. The same might be said of changing

technologies in diagnostic mediums.
Ch. 4–Australian Health Care Systems and Medical Technology 59

ceutical Benefits Advisory Committee. The

Commonwealth Department of Health, which

provides technical services to the advisory committee, evaluates applications for listing. In

order to exert some control over the cost of the

pharmaceutical benefits scheme, the Department also negotiates with manufacturers on the

prices of products listed as pharmaceutical

benefits.

Responsibility for ensuring that therapeutic

goods comply with standards of safety and effectiveness rests with the National Biological

Standards Laboratory, which tests samples for

compliance with standards, evaluates manufacturers’ protocols, and inspects manufacturing

plants. In addition, the Commonwealth Department of Health exercises control over the importation of therapeutic goods with regard to

quality, safety, and efficacy. It maintains a

register of adverse drug reactions from reports

received from the professions in Australia and

from overseas. It also provides technical services for the Australian Drug Evaluation Committee. This committee is an independent group

established to evaluate specific drugs referred to

it and other drugs which it thinks require evaluations beyond that normally undertaken prior

to listing as a subsidized pharmaceutical benefit.

Reports concerning adverse reactions suspected

to be caused by prescribed medications are sent

to the Adverse Drug Reactions Advisory Committee, which examines the reports and assesses

the likelihood that a prescribed medicine was responsible for the observed symptoms. All doctors are promptly advised of the committee’s

findings.

Medical Benefits

A voluntary insurance scheme introduced in

the early 1950’s was intended to provide broad

coverage for medical expenses, while at the

same time preserving the traditional doctor-patient relationship. Payment of Commonwealth

medical benefits under this scheme was made

contingent on the patient’s membership in a registered medical insurance fund. Insured patients

chose their own doctors and were charged whatever fees these doctors thought appropriate. A

Commonwealth benefit was payable for each

item of doctor’s service. Having settled the doctor’s account, the patient submitted the receipt

of the bill to his or her insurance fund. The insurance fund paid the fund benefit and also

paid, as agent for the Commonwealth, the

Commonwealth benefit. For reimbursement of

the latter, the fund subsequently claimed on the

Commonwealth Department of Health.

A matter of concern to those who believed in

full coverage was the size of the copayment that

patients had to meet out-of-pocket under this

scheme. Originally, it had been intended that

the copayment would amount to about 10 percent of the bill. Although there were fluctuations, however, the amount did not fall below

30 percent until the medical benefits scheme was

amended in 1970.

The new scale of benefits introduced in 1970

was directly related to the fees most commonly

charged for specified medical services. Each

benefit was set so that the common fee for the

item of service would not exceed the total benefits by more than $5.00. In respect of general

practitioners’ services, the patient was expected

to meet very small amounts out of pocket.

Pensioner Medical Service

PMS commenced in 1951. It paid for medical

attention by general practitioners, without any

charge to the patients, for all recipients of age,

invalid, widow’s, and war service pensions, and

their dependents. The Commonwealth Government entered into an agreement with the Australian Medical Association (AMA) under which

doctors were paid reduced fees by the government for services provided to eligible pensioners

and their dependents.

Because the AMA repeatedly expressed dissatisfaction regarding the levels of reduced fees

and the enrollment in the PMS of pensioners for

whom the pensions means test had been progressively relaxed, after 1969 individuals who

qualified for pensions solely because of some

specified liberalization of means tests were excluded from automatic eligibility for PMS membership, pensioner pharmaceutical benefits, and

free treatment at public hospitals.
 60. Background Paper #4: The Management of Health Care Technology in Ten Countries

Hospital Benefits

A hospital benefits scheme was introduced in

1952. This enabled public hospitals, in State

public hospital systems, to introduce charges for

accommodation in public beds and to utilize

means tests to determine patients’ eligibility for

treatment in public beds. The Commonwealth

paid a small basic benefit (“ordinary benefit”)

for all public hospital patients, whether insured

or not, an “additional hospital benefit” for

subscribers to voluntary hospital insurance

schemes, and a benefit at or above the ordinary

rate for patients covered by PMS.3

Initially, the benefits paid from Commonwealth funds under this scheme made a substantial contribution towards the cost of maintaining patients in public hospitals. In 1958, the cash

benefits the Commonwealth paid in respect of

insured patients amounted to some 20 percent of

the total share for public ward accommodation

in all States. Because Commonwealth hospital

benefits did not keep pace with increases in hospital costs, however, State governments had to

pay increasingly larger subsidies to their public

hospital systems, and voluntary insurance funds

progressively raised their subscription rates to

provide coverage against higher charges.

When the hospital insurance scheme was first

established, insurance funds set subscription

rates at levels that were sufficiently low to be attractive to most people. They were able to set

such rates, because benefits were not payable

for chronic illnesses, for hospital treatment exceeding a certain period each year, or for ailments existing at the time a member joined a

fund. Since these exclusions debarred from benefit some of those who were most in need, in

1959 the Commonwealth introduced a “special

accounts” system, enabling registered funds to

offer benefits for subscribers in respect of claims

that otherwise would have been disallowed under the exclusion rules. Deficits incurred by

organizations operating special accounts were

covered by the Commonwealth. Initially, the

special account benefit scales were, in many in3

0nly patients who satisfied a means test at the hospital were

treated free in public hospitals; all others were required to pay.

The additional “hospital benefit” was intended to encourage people to buy insurance.

stances, less than the charges levied. In 1966,

however, the special accounts system was

amended so that hospital insurance subscribers

were guaranteed the payment of hospital benefit

at the full rates for which they were insured, up

to the amount of the hospital bill, irrespective of

the length of hospital stay.

In the original hospital benefits scheme, patients in approved and licensed nursing homes

were entitled to hospital benefits. In the early

1960’s, separate provision was made for the

payment of a Commonwealth nursing home

benefit.’ This benefit was paid without means

test on behalf of any person, whether insured or

not, accommodated in an approved public or

private nursing home. No insurance fund benefit was payable to nursing home patients, but

patients who had been contributing to a hospital

insurance fund now could receive the Commonwealth nursing home benefit. In 1969, a supplementary extensive care benefit was introduced

for those nursing home patients who were

deemed to require more extensive nursing care

than others.

Mental Health Services

Apart from some minor exceptions, services

for the mentally ill were originally provided by

State governments. Although psychiatric services have become better integrated with other

types of health care over the past 20 years or so,

the largest part of inpatient psychiatric care is

still provided in State mental hospitals. There

are some 90 State psychiatric hospitals in Australia, with about 25,000 available beds. These

hospitals treat a total of approximately 70,000

inpatients each year and also provide substantial outpatient and domiciliary care services.

More than 85 percent of these hospitals’ costs

are met from State funds. In two States, patients

in State mental hospitals may be charged for the

accommodation and services that they receive;

hospital charges to patients incapable of managing their own affairs may be met from the pa4The Commonwealth also entered a new field in the early 1960’s,

namely, the institutional care of physically and mentally handicapped children. A handicapped children’s benefit subsidized the

costs of accommodating handicapped children in homes maintained by religious or charitable organizations that employed nursing and special staff.
Ch. d–Australian Health Care Systems and Medical Technology ● 61

tients' estates. In other States, there are no

charges.

When insurance-based schemes of hospital

benefits were being introduced in the 1905’s,

mental hospital patients tended to be long-term

cases and were not recognized as good insurance

risks. Largely because of this, there was little

likelihood of their becoming subscribers to insurance funds; these patients, therefore, were

not generally eligible for insurance fund hospital

or nursing home benefits. More recently, however, there has been a sharp decline in the average length of stay in State mental institutions,

and mentally ill patients are being viewed as

better risks. In addition, an increasing number

of public general hospitals and also some pri-

 vate hospitals are providing psychiatric care.

Mentally ill patients in public and private hospitals, and in nursing homes, may receive Commonwealth and insurance fund benefits in the

same way as other patients in these institutions.

Health Benefits for Veterans

The Commonwealth Department of Veterans’

Affairs has major responsibilities in the health

field. It provides a wide range of cash benefits

and personal health services to those who have

served in war and to dependents of such exservice personnel, Treatment is provided free of

charge, either through departmental institutions

or through the general facilities available in the

community, for all disabilities that have been

recognized as due to war service.

The Department of Veterans’ Affairs administers six large general hospitals that provide care

for virtually all types of cases, excluding obstetrics. These hospitals are concerned mainly

with the management of acute episodes of illness. Patients who do not require the facilities of

a fully equipped general hospital are accommodated in the Department’s five auxiliary hospitals. There are 3,100 beds in veterans’ hospitals. At these hospitals, undergraduate and

postgraduate medical education is conducted in

association with university medical schools and

professional colleges.

The armed forces run six hospitals that are

maintained at the expense of the Commonwealth Government and staffed by service personnel. The peacetime bed complement of each

of these institutions is between 100 and 120.

Limited medical facilities also are available at

other service centers.

Commonwealth Department of Social Security

The Department of Social Security plays an

important role in the disbursement of a wide

variety of cash benefits. It also makes grants to

approved nonprofit organizations for a large

portion of the capital costs of residential and

nursing home type accommodations for the

aged and infirm, and for the provision of sheltered workshops and accommodations for the

disabled. In addition, the Department subsidizes

the States for the provision of home help services, senior citizen centers, and welfare officers,

and it runs the Commonwealth Rehabilitation

Service, which provides treatment and training

for selected disabled persons who are deemed

potentially able to work. Fourteen Commonwealth rehabilitation centers provide work

preparation and work adjustment services to

about 4,500 clients annually.

Changes in Health Care

Financing Since 1972

Since 1972, there have been major and frequent revisions of the medical and hospital benefits schemes previously described. The history

of changes in arrangements for financing health

care in Australia since 1972 illustrates the difficulties faced by Australian Governments in

seeking to provide universal health insurance

coverage, while also attempting to limit government outlays and inflation.

Introduction of Medibank by

the Labor Government (1972-76)

In December 1972, a reforming Labor government came to office, and the following year, legislated for a new health insurance scheme

known as Medibank.5 This scheme, which came

5

1n addition to Medibank, a community health program was introduced by the Labor government in 1973 to provide capital and

recurrent financial assistance to the States and nongovernment organizations to: 1) establish and improve community health and

health-related services, 2) promote disease prevention, health

maintenance, and rehabilitation, and 3) improve coordination of

health services in the community and their links with other health

and welfare services. Approximately 700 projects involved a Commonwealth expenditure of some $70 million in 1976-77 (1).
62 ● Backround Paper #4: The Management Of Health Care Technology in Ten Countries

into operation on July 1, 1975,6 was financed

out of general revenues. It provided for universal coverage entitling all Australian residents to

specified medical and hospital benefits. A

Health Insurance Commission was established

to operate the plan.

Medical benefits to all residents (including

pensioners who previously had had restricted

entitlements, and individuals who were covered

by workers’ compensation and third-party motor vehicle insurance) were paid at 85 percent

of schedule fees, subject to a maximum copayment of $5 for any item of service. Coverage

was extended to consultation involving eye refractions, whether performed by doctors or

optometrists.

The basic hospital benefit under Medibank

was a universal entitlement—without any

means test—to free standard ward care, including medical treatment, in recognized public

hospitals. Provision of this benefit involved the

negotiation of agreements between the Commonwealth and individual States.

Under these agreements, the Commonwealth

undertook to meet so percent of the aggregate

net operating costs of the public hospitals in

States that agreed to provide free medical treatment for “hospital patients” (public inpatients

and outpatients) at their public hospitals. Treatment for “hospital patients” was to be provided

free of charge by staff employed by public hospitals on a salaried or contractual basis. Patients

who chose to be admitted to public hospitals as

private patients were to be charged agreed on

daily fees. For patients in private hospitals, the

Commonwealth paid a daily benefit of $16 directly to the hospital.

Benefits available from the government could

be supplemented by private insurance, especially for private status in hospitals. Private insurance contributions in respect of supplementary service remained tax deductible.

Reform of Medibank by the

Conservative Government (1976-77)

At the end of 1975, the Labor government lost

office. The newly elected conservative governbMedibank came into operation on July 1, 1975, but agreements

with all the States were not completed until several months later.

ment was committed to the reduction of inflation, which at the time was running at very high

levels. In pursuit of its objective, it aimed to reduce Commonwealth expenditures so that budget deficits could be contained. In the area of

health, the new government sought to maintain

universal health insurance, but to concentrate

government expenditures on the needy.

An important feature of the new Medibank

health insurance plan which the conservative

government introduced in October 1976 was a

levy on taxable income at an annual rate of 2.5

percent, with ceilings of $150 for taxpayers

without spouses or dependents and $300 for

families. Exemptions were provided for persons

at the lower end of the income scale and for certain pensioners and veterans. Individuals and

families not otherwise exempt could “opt out” of

Medibank coverage and gain exemption from

the levy by buying private medical and hospital

insurance (both) to an approved level.

Levy payers and those exempted from the

levy (for reasons other than the purchase of private insurance) received medical benefits under

Medibank in the same way as they had under

the previous scheme. They also had the right to

accommodation and treatment as “hospital patients” free of charge in recognized public hospitals without being means-tested. An additional right to purchase supplementary “hospital

only” coverage privately at subsidized rates

enabled persons with little income to insure for

hospital benefits equal to the minimum fees

charged to private patients in public hospitals.

Persons so-insured could be treated at public

hospitals by their own doctors (rather than as

“hospital patients” treated by doctors engaged

by the hospitals). The assistance also helped

them to choose care in private hospitals.

The conservative government also introduced

new Commonwealth/State cost-sharing agreements on public hospital costs. Previously, the

Commonwealth had paid 50 percent of the net

operating costs of public hospitals in each State,

whatever these costs turned out to be. It now

came to exert leverage over public hospital costs

by paying 50 percent of only those operating

costs in each State which it had previously approved in the State’s aggregate budgets.
Ch. 4–Australian Health Care Systems and Medical Technology ● 63

A compulsory reinsurance pool replaced the

“special accounts” system for hospital care, and

the Commonwealth contributed a flat $50 million annually to that pool. This subsidy was far

less than the special account outlay would have

been and also imposed a firm ceiling on the

Commonwealth’s liability. The reinsurance subsidy was available only on objectively determined grounds: hospitalization for more than

35 days in a year. Special accounts in relation to

medical services ceased.

The regulation of private health insurance

funds was strengthened. Individuals who opted

out of Medibank had to be covered unconditionally, at least for levels of benefit equivalent

to those provided by Medibank. Private funds

could not reject or discontinue the insurance of

any subscriber; nor could they limit the payment of benefits from the basic tables. All tables

to which the funds could apply limitations and

exclusions had to be expressed as supplementary

tables. This requirement ensured that contributors to higher tables participate in the basic

tables and so share the risks of all other basic

contributors.

In 1977, the Commonwealth Government

agreed upon an insurable nursing home benefit.

This benefit was payable in each State at a level

which—when combined with a specified compulsory out-of-pocket patient contribution7—

would cover fully the Commonwealth-approved controlled fees charged to 70 percent of

patients in private (“nongovernment”) nursing

homes in each State. Hospital insurance organizations became liable for payment of the full

amount of nursing home benefits in respect of

their standard (basic) hospital benefit table contributors. The amount of benefit payable by the

private insurers in such cases was the Commonwealth basic benefit (about $25 a day) plus,

where appropriate, an extensive care benefit

(which was raised from $3 a day to $6 a day).

Uninsured nursing home patients, who were not

entitled to benefits from hospital benefits

organizations, continued to receive both the

basic and extensive care benefit from the Commonwealth Department of Health.

‘The out-of-pocket contribution amounted to about 90 percent

of the age pension.

Additional Reforms by the

Conservative Government (1978-79)

With the 1976 and 1977 health care financing

arrangements, the conservative Commonwealth

Government had gone some way towards

achieving its objective of reducing the proportion of expenditures from the Commonwealth’s

budget. It was still not satisfied, however, and

introduced new arrangements in November

1978. By this time, the government was concerned about the effect of health insurance arrangements on the consumer price index. It also

believed that the existing insurance arrangements were too complex.

The new scheme the government introduced

in 1978 was less complex than the previous one.

It abolished the health insurance levy and provided for the Commonwealth to pay a new universal medical benefit from general revenue.

The new medical benefit covered 40 percent of

schedule medical fees, subject to a maximum patient contribution of $20 for any one item for

which the schedule fee was charged, and was

paid through private insurance health funds, Although additional coverage was not compulsory, private health insurance funds were permitted to offer supplementary medical benefits.

They also continued to provide hospital

benefits. Funds were given considerable freedom and flexibility to devise attractive benefit

packages.

Accommodation in standard wards of public

hospitals with treatment by doctors engaged by

the hospitals continued to be made available

free of charge to those who were not privately

insured for hospital care.

For pensioners and their dependents who

were not privately insured, doctors continued to

accept reduced payments of 85 percent of schedule fees from the Commonwealth. People who

were unable to pay their medical bills could be

classified by their doctors as “disadvantaged. ”

For individuals in this new group, doctors billed

the Commonwealth Department of Health and

received 75 percent of the schedule fee in full settlement; they were not permitted to seek any additional payments from the patients themselves.
 60. Background Paper #4: The Management of Health Care Technology in Ten Countries .

All these new arrangements were estimated to

add $305 million a year to Commonwealth

budget outlays and to reduce receipts from the

health insurance levy by about $320 million in a

full year (2). Because the arrangements were

largely tax financed, their effect on the consumer price index was favorable.

Hardly 6 months had elapsed before the Commonwealth Government announced yet another

change. In May 1979, it decided to pay no universal Commonwealth benefit at all on small

bills up to $20 for any item of service, and to

pay the full amount in excess of $20 in respect of

the schedule medical fee for each item. Arrangements for pensioners and the disadvantaged

were continued. Because some 80 percent of

medical services attract a schedule fee of less

than $20, the upshot of this arrangement should

be a savings to the Commonwealth of approximately $200 million a year and a reduction in

the number of claims processed by the private

health insurance funds.

Rising Health Care Costs (1974-78)

For some time, but particularly during and

after the financial year 1974-75, Australian

health care costs had been rising rapidly. Total

public and private expenditures on health increased from $4.19 billion in 1974-75 to $7.15

billion in 1977-78 (7,8). As a percentage of gross

national product, they rose from about 4 percent in the mid-1950’s to 7.89 percent in 1977-78

(7,8). The rate of growth in expenditures has

been declining since1976.

PUBLIC POLICIES THAT AFFECT

The arrangements for financing health care in

Australia, described in the previous section of

this chapter, exert a considerable influence on

the supply and utilization of medical technology. These arrangements, a discussed below,

exert their effects through 1) hospitals’ costsharing agreements, which affect the supply of

public hospital facilities and staff and provide

opportunities for rationalization; 2) regulation

of charges in hospitals; 3) negotiation of fees

and salaries: and 4) regulation of Private health

Health care has always been financed to a

large extent by the public sector in Australia.

With the introduction of Medibank in 1975,

however, the public sector’s share of expenditures rose from 62 percent in 1974-75 to 72 percent in 1975-76 (7,8). By far the largest share of

the increase in public sector expenditure was

borne by the Commonwealth Government. The

Commonwealth’s share of total health expenditures rose from 30 percent in 1974-75 to 48 percent in 1975-76, while the States’ percentage fell

from 32 to 24 percent.

The changes the conservative government

made in health care financing in 1976 resulted in

a reduction in the Commonwealth Government’s share of total health expenditures to 42.6

percent in 1976-77 (7,8). The States’ share remained reasonably consistent at 23.6 percent for

both fiscal years 1975-76 and 1976-77, and private sector spending rose to over 35 percent

after the change. The share of health costs borne

by individuals has now returned to about the

same level it was at prior to the introduction of

Medibank.

Nearly 58 percent of all health expenditures in

1976-77 was for institutional care (7,8). Public

hospital costs continue to account for over onethird of all current expenditures on health care,

and other institutional care accounts for an additional one-fifth of health expenditures. By far

the largest share of institutional care, 70 percent

in 1974-75 and about 76 percent in the next 2

years, is financed by the public sector.

MEDICAL TECHNOLOGIES

insurance. Major policy decisions on these matters are made by the Commonwealth Government on the basis of recommendations submitted by the Minister for Health (5,13,14).

Hospitals’ Cost= Sharing Arrangements

Cost-sharing arrangements for public hospitals, since July 1, 1975, have been elaborated in

agreements between the Commonwealth and individual States. These bilateral agreements pre-
Ch. 4–Australian Health Care Systems and Medical Technology ● 65

scribe hospital services to be provided and cost

shared, categories of patients to be charged, and

processes for agreeing to hospital budgets and

rates of charges. Commonwealth and State officials meet formally twice each year in bilateral

negotiating sessions. At these sessions, they

discuss estimates of income and expenditures,

formulate budgets, and review experience in the

light of known revenue shortfalls or overexpenditures in relation to approved budgets, The

officials’ recommendations are submitted to the

Commonwealth Minister for Health and the

State Minister responsible for the particular

State’s health portfolio for their approval.

Negotiations take place in an atmosphere in

which there is no agreed on absolute ceiling on

the level of expenditure for medical care and

hospital services that the country can afford,

but in which there is doubt that marginal increases in the hospital budget will produce benefits comparable to those that will result from

similar outlays in other sectors. The Commonwealth need not approve the full level of subsidy

required to meet 50 percent of the aggregate net

operating costs experienced by one or more

States, and in the context of national budgetframing, when the Commonwealth decides how

much it is prepared to allocate to the public

hospital system, it has repeatedly rejected

budgets prepared by officials. Commonwealth

expenditures under the arrangements in 1978-79

are estimated at about $1,040 million. (Commonwealth subsidies to private hospitals totaled

$73 million (7).)

The formulation and development of hospital

cost-sharing policies, which are subject to ministerial endorsement, is undertaken by a National

Standing Committee comprised of senior health

officials from the Commonwealth and from

each of the States and Territories, and by State

standing committees established under Commonwealth/State administrative arrangements.

These standing committees provide a forum for

the exchange of views on budgetary matters and

on a range of hospital and related health policies

which the Commonwealth and the States use to

seek effectiveness, efficiency, and cost containment in the delivery of public hospital services.

These objectives are sought through continuing

review of hospital resources, standards, methods, and procedures; rationalization of existing

facilities and services; and evaluation of proposals for the upgrading or expansion of public hospital services, including the introduction of

high-cost technology.

Rationalization of Existing Hospital

Facilities and Services

In recent years, as government and insurers

have covered large proportions of incurred

costs, there have been few financial inhibitions

on the use of medical services. Knowing that the

marketplace is no longer effective as a rationing

process, State and Commonwealth officials aim

to replace it by conscious planning or the imposition of controls to change the behavior of

health professionals and the community.

HOSPITAL BEDS/DAYS

Because there is a generous overall supply o f

beds in public hospitals, there is no need to add

to the pool. When new facilities are provided,

they arise not because of shortages, but because

of the age or geographic or functional maldistribution of existing hospital facilities. Without

making any commitment, the Commonwealth

Government has proposed that public hospital

services should be reduced by the application of

two principles (11):

● as additional staffed beds are opened, every

effort should be made to achieve offsetting

closures of other staffed beds wherever that

may be feasible, and

● public hospital patient days should be reduced within 4 years from approximately

1,300 to approximately 1,100 days per

1,000 population per annum.

It is considered important that the rationalization program should cover all hospitals (public,

private, and veterans) and related facilities

(such as nursing homes and mental hospitals);

otherwise, contraction in one area could lead to

expansion in another. In the nongovernment

nursing homes area, growth control already applies. A guideline now used on a State or regional basis is that there should be not more

than 50 nursing homes beds per 1,000 population aged 65 years or more. It is not thought to
66 ● Background paper #4: The Management of Health Care Technology in Ten Countries

be necessary for the Commonwealth Government to take steps to discourage the transfer of

patients from recognized hospitals to mental

hospitals, because the States now carry the major burden in regard to mental hospitals and can

be expected to take whatever action is necessary

to avoid their expansion.

HOSPITAL UTILIZATION

Hospital utilization rates are high in Australia, with annual utilization approximating 1,600

patient days (about 1,300 patient days in public

hospitals and 300 in private hospitals) per 1,000

population (11). Some States provide satisfactory levels of care with far lower rates of hospital use. Evidence exists that many patients are in

hospitals because hospitalization is the most

convenient answer to a problem which may be

as much social, domestic, or financial as it is

medical (11).

There are large differences in length of stay

for the same illnesses and operations. These differences can be only partially explained by social and geographical factors. Surveys of customary practice also have shown large variations in surgery rates between different areas—

even after allowing for difference in age composition. For example, the highest rate for tonsillectomy is five times the lowest rate, the rates

for appendectomy and gallbladder removal

both show a threefold variation; and the rates

for hysterectomy show an almost fivefold variation (4,6).

Commonwealth and State Health Authorities

agree that hospitals should be influenced to reduce inappropriate inpatient utilization. Unnecessary inpatient care generates staff and technology costs almost as great as those generated by

essential care. The admission of patients who

could be treated at lower cost elsewhere contributes to excessive use of hospitals and of their

associated technologies.

It is generally agreed that, to monitor customary practice, it is necessary to have good medical record systems, prompt analyses of records,

and displaying of the results for consideration.

Attempts are being made by Health Authorities

to upgrade present record practices and procedures and to organize medical staff in hospitals

so that they can participate in reviews of hospital utilization.

Evaluation of Proposals for

Expansion of Public Hospital Services

Eighty percent of short-term acute hospital

care is delivered in public hospitals, which must

comply with conditions of subsidy determined

by State Health Authorities. These conditions

are increasingly likely to reflect the arrangements agreed to in Commonwealth/State discussions and negotiations with respect to the

hospitals’ cost-sharing arrangements.

In public hospitals, an item of new equipment

valued up to $50,000 can be treated as “expendable” and the cost of its purchase be regarded as

an operating cost. Thus, a good deal of medical

technology can be introduced and expanded

without being subjected to the acquisition scrutiny described below. All investments exceeding

$50,000, however, are treated as capital, and

State governments are the sources of funds.

Consequential growth in operating costs is

taken into account before State facilities are expanded, because there can be no assurance that

the Commonwealth Government will agree to

share these costs unless they have been specifically approved.8

STATE EVALUATIONS OF TECHNOLOGIES

Australian Health Authorities agree that the

most specialized facilities and services should be

concentrated in large units rather than dispersed

haphazardly because:

. large populations are required to support

specialist units of economic size, especially

in neurosurgery, thoracic surgery, radiotherapy, and plastic surgery (some of the

expensively

gies should

services);

equipped diagnostic technolobe included in this group of

‘In private hospitals, all capital charges are borne by the owners. Private hospitals, therefore, tend to invest in facilities and

equipment that assure a quick and good return. They tend to keep

away both from investment in training and emergency care facilities which require generous staffing and from investment in the

most sophisticated and expensive technologies. A high proportion

of private hospital work consists of common forms of elective surgery and of obstetrics.
Ch. 4–Australian Health Care Systems and Medical Technology . 67

. specialists require a regular and adequate

flow of patients to maintain their skills; and

● the provision of a comprehensive range of

specialists in a single site assists in the cross

referral of patients between specialists.

State Health Authorities discourage the provision by local or district hospitals of more than

a limited range of services (e. g., general medicine, relatively minor surgery, minor trauma,

physical and psychiatric rehabilitation, uncomplicated obstetrics, and outpatient consultations). Because these hospitals provide ready access for local communities, however, the Authorities support their staffing and provision.

In most States, advisory committees help the

State Health Authority determine criteria for

the provision of sophisticated services in public

hospitals. These advisory committees have been

particularly helpful in the process of rationing

sophisticated new technologies in a public hospital system subject to increasingly firm cost

controls.

In New South Wales, for instance, the assessment of a request for equipment to be purchased

by a particular hospital will take into account

factors which include:

●

●

●

●

The

guidelines for the provision of specialized

services,

the hospital’s capacity to make effective use

of the equipment,

the extent and state of existing equipment

in the hospital, and

the availability of similar facilities in other

hospitals in the area.

hospital’s capacity to make effective use of

equipment will depend on the availability of accommodations, the presence of enough trained

staff to manage the technology, and a sufficient

workload to justify the purchase of new equipment. Policy guidelines for the provision of cancer services, open-heart surgery, neurosurgery,

and other highly specialized services have been

published and widely distributed by the Health

Commission of New South Wales.

Similar activities in other States have resulted

in the establishment of the following 11 stages

for the acquisition of technology equipment by

public hospitals:

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

initiation of a request to the State Health

Authority,

justification of the proposal,

technical assessment,

allocation of funds,

preparation of specification,

invitation of tenders or quotation,

technical evaluation of tenders,

financial evaluation of tenders,

approval of funds,

acceptance of tenders, and

evaluation of practice.

Public hospitals are generally under the immediate administrative control of boards of

directors incorporated under State laws. Public

hospital boards consist of both elected and appointed members, several of whom wield considerable influence in their communities. They

see their task partly in terms of determining

policies for the management of hospitals in accordance with the conditions of subsidy determined by State Health Authorities and partly in

terms of acquiring resources. g

In pursuing ‘resources, the boards frequently

find allies among the doctors using the public

hospitals. Jointly with these doctors—and usually supported by the medical and local communities seeking the best and the brightest in an environment in which taxpayers foot most of the

bill—public hospital boards are able to exert

strong pressures on governments. With public

hospital charges fixed at uniform rates, the acquisition of additional facilities and staff will

not be reflected in a particular hospital’s bill,

but such facilities will attract better qualified

specialists and add to the prestige of the hospital’s board of directors. In this atmosphere,

guidelines for the rationalization of medical

technology are subjected to political processes

and may be set aside, particularly as the earn9

1n some States, approval for the acquisition and installation of

expensive new equipment in a public hospital is conditional on the

hospital’s raising a substantial share of the capitaI by voluntary

local effort. This system operates to the advantage of affluent communities, however, and is therefore in the process of being discarded.
68 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

ings derived from the technology by doctors

using it will come largely from the Commonwealth and health insurance funds.

NATIONAL EVALUATION OF TECHNOLOGIES

Awareness of the need for some national system of evaluation, in addition to the technology

assessment procedures that are now applied to

technologies used in the public hospital systems

of individual States, has grown.

In 1978, the Commonwealth Committee on

Applications and Costs of Modern Technology

in Medical Practice identified the folIowing as

issues needing examination in the development

of criteria for the location and use of technology

services (3):

.

●

●

●

●

whether the current availability of the various technologies is appropriate;

whether essential resources or support services are available to ensure adequate standards in the provision of a particular technological service;

whether it is possible to determine optimum sizes of population services by highly

specialized technologies;

whether it is possible to indicate the patient

throughput per year that is desirable to

maintain professional expertise and an efficient service; and

whether limits should be imposed on the

provision of any technology. ‘

This committee suggested that policy guidelines

for rationalizing technologies should be developed by consultative advisory committees in

each State and that these committees should

have a formal link to a national advisory committee in order to achieve uniformity throughout Australia. It further suggested that duplication of resources in any specialty should be

avoided unless need could be demonstrated and

the cost justified.

The Commonwealth Committee on Applications and Costs of Modern Technology in Medical Practice recommended both the establishment of an expert national advisory panel on

medical technology and the creation of a central

repository of technical information (3).

The expert national advisory panel would advise on questions pertaining to new technologies, such as (3):

●

●

●

●

●

whether a new technology is for broad general use or for use by specific types of patients;

whether medical benefits should be paid for

the new technology, and if so, whether the

technology should be restricted to specific

locations;

whether benefits should be paid for use of

the technology in an extended experimental

evaluation period (if there are doubts about

its efficacy);

whether the introduction of the new technology into the benefits schedule might affect national health expenditures in significant ways; and

whether there is likely to be a change in the

patterns of use of related technolog=s.

The central repository of technical information

●

●

●

would (3):

receive reports from the expert national

panel;

collect information on:

—the effects of technological services on

patient outcomes,

—the economic effects of technical services

on the health system and the public, and

—the winding down of displaced or ineffective technologies; and

supply information to the States or other

interested bodies as required.

The Committee on Applications and Costs of

Modern Technology in Medical Practice has

proposed a sequential process for using the

R&D process as a method of regulation. The

main components of the proposal are (3):

●

●

●

modification of the operation of the medical benefits schedule in such a way that the

experimental nature of and doubts about

the effectiveness of some technologies are

recognized;

initiation of carefully designed evaluation

studies of all new medical technologies; and

establishment of a system to oversee and

monitor the development, introduction,

and diffusion of new technologies.
Ch. 4–Australian Health Care Systems and Medical Technology ● 69

pitals have much higher charges for high standards of amenity.

As some 50 percent of the beds in public hospitals are used for treating private patients, the

comparatively low charges for private care in

public hospitals have an indirect effect on

charges in private hospitals. To maintain their

competitive position, private hospitals have to

hold their charges down. Another indirect effect

is to hold down the cost of hospital insurance

subscriptions; this, in turn, holds down potential rises in the general consumer price index,

which is seen by the Commonwealth Government as a desirable objective, because wages are

indexed. A perverse effect of artificially low

charges in private hospitals, however, is the

stimulus such charges offer entrepreneurs who

own the hospitals to generate revenue by expanding their technological equipment to take

advantage of leasing and hiring arrangements

with doctors who are paid by fees for services

rendered through use of that equipment.

Medical Fees and Third-Party Coverage

With the high levels of third-party coverage

that Australia has experienced since 1970, the

price elasticity of demand at the margin has

been negligible. The medical profession has

strenuously protected this position by advocating that fee increases should always be followed

by increases in subsidized insurance benefits,

and at the same time by insisting that it has the

sole authority to determine fees. This does not

mean that fees have ever been determined at the

national level by AMA. Representatives of local

AMA branches and specialist societies have

shared in the function of recommending fees.

The recommendations of these groups ultimately led to the adoption of a schedule of “recommended” fees in each State, but individual doctors were not bound to follow this schedule.

In recent years, AMA has used a formula for

adjusting fees in accordance with changes in

unit costs. This has guaranteed gains from any

growth in productivity (e.g., achieved by reducing home visits and so providing more office

services per day, or by technological advances

in diagnostic procedures) or from extensions in

the capacity to earn income (e.g., by abolition
70 ● Backround paper #4: The Management of Health Care Technology in Ten Countries

of the honorary system in public hospitals) .11

Furthermore, in issuing their fee recommendations, State branches have usually gone beyond

the formula-indicated percentage changes by

rounding off upwards or by seizing opportunities related to foreshadowed increases in insurance benefits. All these factors have combined

to establish systematic and consistent fee variations between States.

Prior to 1970, specialist fees were not the subject of AMA’s recommendations. Some specialist bodies circulated fee lists, but these did not

enjoy the same authority as the recommendations for general practitioners published by

AMA. Individualism in fee setting was particularly blatant in the field of surgery, where, for

example, in April 1967, the insured charges for

appendectomy ranged from $35 to $180, the

most common fee being $60 (14). This dispersion of specialist fees, while possibly increasing

the price elasticity of demand, was inconsistent

with the objectives of those who believed that

the central purpose of health insurance was to

remove random fluctuations in consumers’ disposable incomes caused by medical care expenditures.

With absence of a proper relationship between doctors’ fees and medical benefits being

seen as the “fundamental deficiency in the medical benefits scheme” (14), the concept of a schedule of common fees for all items of service

evolved. The intention was that variance

around the central fee would diminish; the

dominant issue, therefore, became the amount

of the central fee. Related to this were questions

about who would determine the central fee and

by what process, as well as about what sanctions would ensure the fee’s application.

llprior to 1975, Australia had an honorary system for providing

hospital care to public patients. Originally, it arose from association between charity to the sick poor and medical education (14).

The teaching hospitals were staffed at senior levels by leaders of

the profession who spent part of their time in unpaid teaching and

in caring for indigent patients. Similar arrangements were adopted

in other hospitals, despite the appointment of increasing numbers

of salaried specialists and resident medical officers. The honorary

staff derived benefit by treating their private patients in public hospitals on a fee-for-service basis and by coming to the notice of referring practitioners.

Under threat in 1970 that the Commonwealth

Government would introduce a “participating

doctor scheme,” under which only the fees of

doctors who agreed to charge the “common fee”

would attract insurance benefits, the profession

agreed to formal mechanisms for determining

fees for benefits purposes. An independent arbitral body, recently headed by a judge, has reviewed and determined these fees ever since.

The price that the doctors—particularly the specialists—exacted for conceding to the government on this matter was acceptance of their fee

proposals unchanged. Before agreement was

reached, they were promised a maximum copayment of $5, provided the common fee was

charged. The rise in fees and benefits resulted in

the immediate growth of Commonwealth medical benefits from $54.9 million in 1969-70 to

$127.1 million in 1971-72 (14).

The increase in the amount being paid to doctors was not accompanied by any assurances

about the effective level of coverage that insured

people could expect, because the government,

the professional associations, and the insurance

organizations were given no authority over individual doctors’ fees. A parliamentary committee’s previous proposal that doctors should

agree to inform their patients of their own fees

and of the established common fee was rejected.

In 1975, an attempt was made under Medibank

to induce doctors’ adherence to common fees by

making available to patients the alternative of

receiving free treatment from public hospitals

(for both inpatient and ambulatory care). Doctors engaged by the hospitals on a salaried, sessional, or contractual basis to provide such

treatment, however, were not at any time appointed in sufficient number to have much impact, and the policy was not pursued with any

vigor after the demise of the Labor government

in 1975.

So the country was left with a system in

which there was no effective power countervailing that of the doctors and no built-in control of

usage, but in which there was a high level of

subsidized underwriting of private medical fees

through health insurance. This system stimulus

was sure to give impetus to the growth of expenditures. Neither patient nor doctor had
Ch. 4—Australian Health Care Systems and Medical Technology . 71

reason to base treatment decisions on the cost of

services rendered, so doctors increasingly

tended to perform or request any procedure that

had diagnostic or therapeutic possibilities irrespective of its cost. Medical technology was

set to diffuse rapidly in such an environment,

and this it did.

The situation has been aggravated by the

granting of rights of private practice to salaried

public hospital specialists. The salaries and conditions of service of these doctors are determined by industrial courtsl2 and are generous.

Rights of private practice are usually allowed on

the basis that up to about one-fifth of the specialist’s hospital salary can be earned in private

practice as an additional personal income. Any

amount in excess of that portion is paid into a

trust fund which finances travel, study, and research activities of the specialist group at each

hospital.

When expensive hospital equipment and staff

are used by the salaried specialists exercising

their rights of private practice, the hospital is

paid a share of the fees earned. Thus, in radiology and pathology, it is not unusual for the public hospital to take 60 percent of the fees earned

by its salaried specialists in private practice.

There can be no sharper conflict of interests for

a hospital management wishing to limit excessive utilization of diagnostic tests and procedures than that which arises when the hospital is

paid a substantial portion of the fees that are

earned from them—especially when the management knows that increased utilization will

generate income for the hospital without making any real call on patients’ disposable

resources.

Recent changes in health insurance arrangements were aimed at restoring price as a factor

to be taken into account. The abolition of Commonwealth medical benefits for fees up to $20

for any item will apply to all persons who are

not pensioners or designated “disadvantaged. ”

The disincentive to excessive provision for pensioners and disadvantaged persons is that the

12Industrial courts have been established for all industries in

Australia and are concerned with the salaries and conditions of

service of employees.

benefits paid by the Commonwealth on their behalf amount, respectively, to 85 and 75 percent

of the common fee. All other persons pay the

copayment out of pocket or insure to cover it.

Because a high proportion of these individuals

do insure, expensive, excessive, and inefficient

use of technology is likely to persist.

Administration of the medical benefits

scheme, however, can be used to influence the

costs, utilization, and quality of medical services. One mechanism that is infrequently used,

although its availability may exert influence, is

a system of Medical Services Committees of Inquiry. Committees are set up under law to inquire into the practice of doctors who are believed to provide excessive and unnecessary

services in private fee-for-service practice.

Rules can be devised by the Minister to modify the level of fees, and accordingly, the benefits payable, under various circumstances depending on the type and nature of the service.

The Commonwealth Medical Benefits Schedule

Revision Committee makes recommendations in

regard to the inclusion of new items into the

benefits schedule, the deletion of items, amendments of the description of items, and the combination or grouping of items of service. It also

recommends appropriate fees for benefits purposes for new items and investigates anomalies

in fees.

The Commonwealth Medical Benefits Advisory Committee considers claims for increased

fees in cases in which a service is of unusual

length or complexity. It also considers whether

professional services rendered in specified circumstances should be excluded from payment of

medical benefits. Medical benefits for tomography, for example, have been restricted to services rendered in the management of gIaucoma.

Medical benefits for health screening services

are not authorized unless the Minister for

Health directs otherwise. Medical consultations

for medical checkups in the course of normal

practice do qualify for benefits. Benefits are not

payable for mammography unless the patient

has been referred to a specialist radiologist and

the referring doctor has reason to suspect the

presence of malignancy.
72 ● Backround paper #4: The Management of Health Care Technology in Ten Countries

The fee level for an item is intended to provide a fair and reasonable return to the doctor

for the rendering of that service in most circumstances. Adjustments to common fees are made

regularly. Factors which have a direct bearing

on the need to review and restructure items include evidence of the reduced capital cost of

equipment, cheaper alternative equipment, and

increased throughput. As a result of recommendations made recently by the Committee on

Medical Technology (3), fee levels are being examined in accordance with the concept that they

should reflect efficient use of facilities.

Special arrangements have been made for

pathology services. A new schedule of services

and fees for pathology services has reduced the

number of individual pathology items, adjusted

fees to stimulate the reasonable use of modern

cost-saving technology, and generally improved

the rules relating to multiple testing of the

pathology specimens. Requests for pathology

services must be in writing and the requesting

practitioner must be clearly identified. Providers of services must retain the requests for a

specified period to enable examination in connection with Medical Services Committees of

Inquiry. Medical benefits for most pathology

services will not be payable unless the practitioner providing the service has been approved

as a provider by the Minister for Health, and

before approval is granted, the provider is required to give an undertaking to abide by a code

of conduct prohibiting fee-splitting and other

undesirable practices.

It is not yet clear to what extent patients will

cover themselves by insurance to meet their bill;

nor is it clear whether the recent health insurance amendments will have any effect on the use

of technology. Nevertheless, total health expenditures in Australia, which had been growing very rapidly during the brief period when

tax-financed universal coverage was provided,

did show progressively lower rates of growth as

the proportion of public sector expenditure

dropped. For instance, in 1975-76, when a basic

level of universal coverage was provided out of

tax revenues, total expenditures on health rose

by 36.6 percent over the previous year (9).13 In

the next year, the rise was only 14 percent and

in 1977-78 it was 10.7 percent (12).

Education and Research

Material related to the value and utility of

specific diagnostic procedures has been prepared by the Commonwealth Department of

Health for circulation to medical colleges and

societies to generate discussion concerning the

cost effectiveness of the related technological

services. In a similar vein, officers of the Department of Health and AMA have approached

the Australian medical schools with a view to

having medical students exposed to some information about the cost effectiveness of technological services.

AMA has been awarded specific grants to develop and implement peer review systems

throughout the nation. A period of some 2 years

was taken up in informing the profession at the

grassroots level about the concept. A resource

center has now been established, and peer review (including utilization review of work done

in the hospital) is slowly becoming accepted as a

formal goal by the medical profession.14 Informal review activity has always been undertaken

at the larger teaching hospitals.

The Commonwealth Department of Health

has approximately $1.5 million a year available

to it to fund health services research studies and

health service development projects. In addition, health services research funds are available

in the States and to a limited extent at universities. Some examples of current studies and

projects are:

“Other factors were involved when overall cost rises were so

steep. These included a very rapid escalation in labor costs in hospitals at a time of sharp inflation. Population growth accounted

for only a small proportion of this rise in expenditures (12).

14 Peer review of medical services was requested by the Commonwealth Government at the time of introducing health insurance amendments in October 1976. The Australian Medical Association was subsidized to set up voluntary systems, and was advised that failure to respond satisfactorily within 3 years could result in some kind of compulsory program. Both peer review and

hospital accreditation had been resisted in Australia, although

numerous informal review activities were common. Hospital accreditation was not seen to be necessary by State Authorities,

who, in fact, maintained close supervision of most hospitals

through their conditions of subsidy of public hospitals and licensing of private hospitals.
Ch. 4–Australian Health Care Systems and Medical Technology ● 73

● Accreditation of Australian hospitals. —To

develop standards of accreditation for Australian hospitals, including a series of pilot

studies to refine the methodology.

● Medical administrative standards in hospitals. —To develop medical administrative

standards by conducting a survey of the

formal organization of medical staff in

Australian hospitals, and analyzing the effectiveness of the organizational patterns.

● Cost effectiveness of treatment of end-stage

renal disease. —To analyze the treatment of

end-stage renal disease with special emphasis on the available alternative methods of

treatment.

● Evaluation of the role of specialist medical

units in a teaching hospital. —To compare

and evaluate the treatment received by patients with similar disorders who are admitted either to specialist units or general

medical wards at random.

. Prospective evaluation of coronary care in

two States. —To undertake a pilot study involving selected hospitals in Queensland

and New South Wales on the effectiveness

of a range of facilities in treating certain

coronary conditions.

● The autopsy in quality insurance in hospital practice. —To use autopsy data to examine the effectiveness and quality of care and

services.

. An evaluation of the cost effectiveness of

surgical and related hospital services. — T o

develop a cost accounting system which

will identify and analyze the cost differenSPECIFIC TECHNOLOGIES

●

●

●

●

●

tials between the surgery units at two Melbourne hospitals.

Retrospective evaluation of coronary care

in Queensland. —To study various levels of

intensity of coronary care with respect to

intrahospital survival and cost to the community.

The impact of computed tomography (CT)

in Australia. —To evaluate CT services,

with particular attention to cost effectiveness and cost efficiency, and to develop

guidelines for patient selection.

Evaluation of CT and ultrasound. —A prospective clinical evaluation of the parallel

and complementary use of CT and ultrasound in diagnostic imaging of the body,

excluding intracranial examinations.

An educational program to reduce excessive use of clinical biochemistry laboratory

tests within hospitals. —To reduce the overuse of pathology tests in hospitals by the

use of an educational program aimed at influencing doctors responsible for ordering

tests.

Evaluation of a large-scale screening programs. –To evaluate a multiphasic health

testing service (study completed under the

auspices of the University of New South

Wales).

These studies raise a number of questions.

Should all technologies be evaluated? If that is

our belief, there are substantial resource implications. Even when evaluations are well

done, a remaining question is this: Will anybody be influenced by the results?

achieved outside the public hospital system, in

private office practice, or in private hospitals.

Against the background of intention and

practice outlined in the preceding section of this

estimated to be due to population changes, about 60 percent to

higher prices and wages, and 32 percent to increased volume and

intensity of usage. Most of this growing volume and intensity of

usage is attributable to the comparatively less sophisticated technologies, such as chest X-rays, audiometry, electrocardiography,

electro-encephalography, respirometry, and endoscopy.
74 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

chapter, Australia’s experience with specific

medical technologies is presented below.

CT Scanners

CT scanners were introduced to Australia in

the mid-1970s. By December 1978, there were

28 in use and 1 on order. They were distributed

among the States in public and private facilities

as listed in table 1. Scanners are identified as

“head” and “general purpose” scanners (rather

than “head” and “body” scanners), because 75

to 85 percent of examinations carried out on the

body scanners in Australia are head scans.

With 29 scanners, there will be approximately

1 CT scanner per 500,000 population. Since 15

of the scanners are located in Sydney and Melbourne, the peripheral populations of large

States have difficulties of access. Governmentsubsidized aerial ambulance services and other

subsidized transport schemes for those living in

remote areas are designed to overcome these

problems.

As a noninvasive technique with high diagnostic accuracy, CT scanning has caught the

imagination of Australia’s medical profession.

Nevertheless, in recent years, special concern

has been shown about the effectiveness and

economics of CT scanning. Its role in patient

management and its advantages and effects on

other neuroradiological investigations have

been under review in all States. Because improvement in patient outcome and advantages

over isotope scanning have not been satisfactorily demonstrated, State Health Authorities

have rigidly curtailed the introduction of CT

scanners into public hospitals and do not support an expansion of this technology at present.

In addition, the New South Wales Health Commission has determined that referrals of patients

for CT scanning in public hospitals should be restricted to those made by clinical specialists in

disciplines relevant to the examinations being

conducted.

In the private sector, these direct restraints

are not possible. Private installations are not

regulated. Medical benefit arrangements have

been reviewed recently, however, and as a result

of the review, fees have been reduced so that

profits will not be so high as to encourage a

rapid expansion of CT scanning in the private

sector.

Renal Dialysis

Renal dialysis maintenance programs were instituted in 1964, 1 year before the first successful

renal transplant. Since then, the capacity to

treat patients with renal failure has been progressively expanded. A total of 1,124 patients

are alive with functioning kidney grafts, a rate

of 78 per 1 million population. The rate for patients on dialysis is 77 per 1 million population.

A national policy for the management of

chronic renal insufficiency was developed by the

National Health and Medical Research Council,

and this policy has been accepted and implemented on a voluntary basis. Transplantation is

seen as the objective for all potentially suitable

recipients, but both dialysis and transplantation

Table I.–Number and Distribution of CT Scanners in Australia (1979)

Distribution of scanners in

Number of scanners by type public and private facilities Total number of

State/territory Head General purpose Public Private scanners/facilities

New South Wales . . . . . . . . . . . 1 9 5 10

Victoria. . . . . . . . . . . . . . . . . . . . 2 3 2 3 5

Queensland . . . . . . . . . . . . . . . . 2 2 2 2 4

South Australia . . . . . . . . . . . . . 1 2 2 1 3

Western Australia . . . . . . . . . . . 1 3 2 2 4

Australian Capital Territory . . . — 1 1 — 1

Tasmania ., . . . . . . . . . . . . . . . . — 1 1 1

Northern Territory. . . . . . . . . . . —

—

1a 1a — 1

Total . . . . . . . . . . . . . . . . . . . . 7 22 16 13 29

aOn order.
Ch. 4–Australian Health Care Systems and Medical Technology ● 75

are used in an integrated combined approach to

the management of renal insufficiency.

Renal dialysis units are located exclusively in

the public hospital system, where they are subject to controls on expansion and where State

Health Authorities are committed to a policy of

rationalization. Home dialysis is coordinated

and supervised at major hospital units. Cooperation and coordination among dialysis units has

been remarkably close.

Coronary Artery Bypass Surgery

Coronary artery bypass surgery was introduced

in 1971 and has been limited to nine public

teaching hospital units which are subject to the

rationalization policies of State Health Authorities. As the following figures for annual operations show, the controlled diffusion of this technology in Australia has been quite rapid.

Year Number of operations

1971 . . . . . . . . . . . . . . . . . . . . . . . 158

1972 . . . . . . . . . . . . . . . . . . . . . . . 283

1973 . . . . . . . . . . . . . . . . . . . . . . . 366

1974 . . . . . . . . . . . . . . . . . . . . . . . 621

1975 . . . . . . . . . . . . . . . . . . . . . . . 1,070

1976 . . . . . . . . . . . . . . . . . . . . . . . 1,506

1977 . . . . . . . . . . . . . . . . . . . . . . . 1,978

At this stage, further diffusion to additional

units in public hospitals is not proposed. There

are indications, however, that a private hospital

may enter the field; this entry cannot be controlled under present legislation.

Cobalt Therapy

Cobalt therapy was introduced to Australia

in 1959. It is centralized in each State at selected

CONCLUDING REMARKS

In conclusion, it must be said that there are

being heard in Australia some voices that question medicine’s extravagant support of lives of

suffering and torment. The major question is

whether society should not dispute the proposition that life should be maintained regardless of

other factors. Some claim that resources should

be diverted to other pressing, and possibly more

teaching public hospitals; and State policies are

to maintain their principles of regionalized radiotherapy facilities. In New South Wales, an effort is being made to include cobalt therapy in

an integrated and planned oncology program

based in public hospital units.

Laboratory Automation

Laboratory automation has quite a different

character from the technologies discussed

above. Major laboratory automation was introduced to Australia in 1960, and its acquisition

by public hospitals is subject to the general rules

for equipment purchases previously described.

Rationalization of some services occurs without formal government intervention through the

use by several hospitals and private practitioners of particular services provided by large public hospital laboratories. All State Health Authorities promote and facilitate cooperative arrangements, and these Authorities have established some major regional biochemistry services. In all cases, participation in regional or

area services is optional. Technical advisory

committees assist the Authorities in planning integrated or cooperative arrangements.

Outside public hospital and government laboratories, automation has been very widely diffused. It is found in private hospitals, in university laboratories, in both single and group private medical practices of pathologists, and in

large commercial laboratories. In these situations, the major influence on the amount of testing is that exerted by specially designed codes of

conduct that supplement the influence of health

insurance arrangements.

rewarding, efforts aimed at improving the organization and coordination of services and the

prevention of disease and disability.

A large proportion of patients suffer chronic

diseases, disabilities, discomforts, and worries

that will seldom go away quickly. These patients endure more and more encounters with
76 . Background Paper #4: The Management of Health Care Technology in Ten Countries

specialists, technical personnel, and machines,

while perceiving less and less continuity of care

and coordination of interests on their behalf.

They often leave the technical services disillusioned—with little change in their problems—to

find themselves in a community served by splintered sources of help that leave unbridged gaps

between the health and social services that the

patients require.

What about, for example, the thousands of

handicapped children in remote areas of Australia who do not receive sufficient help? Can a

clear case not be made for studies in communication and transport technology which would

be of assistance to such children? To take another example, is the prevalence of child abuse in

our society not an indictment of our inept handling of a problem which could be eradicated?

CHAPTER 4 REFERENCES

1.

2 .

3 .

4.

5 .

6 .

7.

Annual Report of the Director-General of

Health 2976-77 (Canberra: AGPS, 1977).

“Budget Speech, 1978/79” (Canberra: AGPS,

1979).

Committee on Applications and Costs of Modern Technology in Medical Practice, report

(Canberra: AGPS, 1978).

Gadiel, D., “Private Medical Insurance and

Elective Surgery: The Experience With Hysterectomy, ” paper presented at the ANZSERCH/

APHA Joint National Conference, Perth, May

23, 1979.

Hospital and Health Services Commission

(Australia), “A Discussion Paper on Paying for

Health Care” (Canberra: AGPS, 1978).

McEwin, R., “Morbidity Monitoring in New

South Wales, Australia: Incidence of Discretionary Surgery, ” paper presented at the Slst

General Scientific Meeting of Royal Australasian College of Surgeons, Kuala Lumpur, May

1978.

Minister for Health (Australia), “Curbing RisWhat about the 3 percent of Australian children

who are born with a serious disability? While

few of them can be cured now, is there not clearly scope for the application of modern technology to their problems? As the result of an intensive and comprehensive genetic counseling program, Perth is said to have one of the lowest incidence of muscular dystrophy in the world.

It may be appropriate to end this discussion

with the following comment. Stimulus to the

social sciences and their technology may yield

greater benefits than the mindless multiplication

of diagnostic and therapeutic technologies in

hospitals. If Henry Sigerist was right in asserting

that the target of medicine is to keep people adjusted to their environment, or to help them readjust when they have dropped out because of

illness or injury, then we have a social goal.

8.

9 .

10.

11.

12.

13,

14.

ing Health Expenditure, ”

(Canberra, May 1979).

National Health Account:

AGPS, 1978),

news release 52/79

A Study (Canberra:

Report of the Committee of Officials on Medical Manpower Supply (Canberra: AGPS,

1979).

Report of the Pharmaceutical Manufacturing

Industry Znquiry (Canberra: AGPS, 1979).

“Report on Rationalisation of Hospital Facilities and Services and on Proposed New

Charges: A Discussion Paper” (Canberra:

AGPS, 1979).

Sax, S., “Impact of Federal Health Insurance

and Health Resources Allocation Policies in

Australia, 1975-79, ” paper presented at the Annual Meeting of the American Public Health

Association, New York, November 1979.

Medical Care in the Melting Pot (Sydney: A;gus and Robertson, 1972).

Scotton, R. B., Medical Care in Australia (Melbourne: Sun Books, 1974).
5 ●

Medical Technology in Japan

Joel H. Broida

National Center for Health Services Research

Hyattsville, Md.
Contents

Page

Japan: Country Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

The Health Care System. . . . . . . . . . . . . . . . . . . . . . ....?.... . . . . . . . . . . . . . .

General Organization of the System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Administration and Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Policies Toward Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Evaluation of Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Regulation of Drugs and Medical Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Reimbursement and Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Cost-Containment Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Specific Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Renal Dialysis.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Radiation Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Chapter 5 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

LIST OF TABLES

Table No.

1.

2.

3.

4.

5.

Japanese Health Insurance plans, Beneficiaries, and Enrollments . . . . . . . . . . . .

Number of Hemodialysis Units in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number and Percent of Chronic Renal Disease Patients Receiving Different

Types of Hemodialysis in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Percent of Chronic Renal Disease Patients Receiving Home Dialysis in

Selected Countries and Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Number and Distribution of Teletherapeutic Apparatus in Use in Japanese

Hospitals and Clinics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

79

80

80

81

82

82

83

83

84

84

85

85

86

86

86

88

89

90

81

87

87

87

88
Medical Technology in Japan

Joel H. Broida

National Center for Health Services Research

Hyattsville, Md.

JAPAN: COUNTRY DESCRIPTION

Civilization in the Japanese Archipelago began several thousand years ago in the neolithic

age (17). Japan is made up of 4 main islands and

more than 3,000 smaller islands, covering a land

mass of over 377,000km2. Over 111 million persons reside on less than 3 percent of the land.

Nearly 70 percent of the land is covered by

mountains and forests, and 27 percent is used

for farming and industry.

The Meiji Restoration in the mid-1800’s

marked the beginning of the modernization of

Japan. At that time, Japan opened its doors to

the rest of the world and took steps to modify

and update its industries, political institutions,

and the pattern of society. Today, the government is a parliamentary system with three

branches: legislative (the Diet), executive (Prime

Minister and Cabinet), and judicial. National

policies are administered at the local level by

governments in each of the country’s 47 Prefectures (States).

Buddhism, introduced to Japan from China

and Korea, and Shinto, a religion native to

Japan, are the primary religions. Japan has a

rich cultural history ranging from the theatrical

arts, including Noh and Kabuki, to significant

literature and poetry. Other forms of art and

music from the past still hold a prominent place

in today’s society.

Japan is essentially ethnically homogeneous

and has one language. In order to be able to

read the daily newspaper, one must have a

working knowledge of three different alphabets,

the principal alphabet (Kanji), which is made up

of several thousand characters; and two other

alphabets (Hiragana and Katakana), each of

which has 46 letters. The literacy level in Japan

is extremely high and education is an important

societal goal.

The economy of the past was labor intensive

and had many, many small industries. Japan, of

necessity, entered into international trade because of the lack of raw materials needed in

manufacturing processes. Much of Japan’s rapid

economic progress has occurred in the postWorld War II recovery period, after the country

and its productive capacity had become almost

totally inoperative. Accomplished primarily because of a focused effort, the country’s achievement has been rather remarkable.

In recent years, there has been a massive shift

to high technology. Industries in Japan, through

the guidance and support of government agencies, have concentrated on developing high levels of productivity for a limited number of manufactured products. Marketing methods for the

distribution and sale of these products, furthermore, have helped make these industries highly

competitive in world markets.

The tradition of lifetime employment security

has played no small part in the success of Japanese industry. In addition, Japan has a rather

elaborate social security system. This system,

which provides for medical, annuity, industrial

accident, and unemployment insurance, has undoubtedly had an impact on the lifestyle of the

Japanese people.

79
80 . Backround paper #4: The Management of Health Care Technology in Ten Countries

THE HEALTH CARE SYSTEM

The days of acknowledgment that “illness

was God’s punishment” went out to sea when

Western medicine was introduced to Japan in

the 1740’s by Dutch and German physicians

(20). Isei, the medical law, was adopted during

the Meiji Restoration in 1873 and established

medical schools for the education of physicians.

Japanese physicians were and are today primarily concerned with “. . . affairs to protect people’s health, to cure their illnesses, and to foster

medical science. ” Japan’s Constitution states

that “in order that all the people may lead a

healthy and decent life worthy of man, the right

to life and the pursuit of happiness shall be

respected” (20).

A series of questions come to mind when one

wishes to explore and understand the medical

care system within the milieu of a country like

Japan. What is the state of the art in Japan with

respect to health and medical care? What kind

of financing system is there? Who administers

and plans for the health sector? Finally, what

problems seem to be emerging and how are programs evaluated? Answering these questions in

brief will provide at least an overview of a

health and medical care system that is both

“alive and dynamic. ”

At the outset, it is important to realize that

Japan ranks as a modern postindustrial society and has an advanced medical care system.

Most observers in the United States turn to the

East—that is, to Western Europe—for information about their medical experience, but rarely

go West— to the Orient—to learn from centuries

of experience. When seeking to add to the body

of knowledge for future decisionmaking, observations in all directions might be more

appropriate.

Japan scores high in the health indicator

arena, with an infant mortality rate of 8.9 infant

deaths per 1,000 live births for 1977 (12). At the

other end of the lifecycle, Japan boasts about its

life expectancy achievements, namely, 77.95

years for females and 72.69 years for males (12).

With the newly developing health promotion

centers, the use of selective health screening programs, emphasis on physical fitness, and the use

of feet and bicycles for transportation, these

measures will probably continue to move in the

same positive direction.

General Organization of the System

Medical care in Japan has been, and continues

to be, dominated by solo general practitioners

in clinic (office) settings. There are 1.18 physicians per 1,000 population, but the distribution

of physicians varies markedly by Prefecture,

from a high of 1.8 to a low of 0.5 physicians per

1,000 persons (4). Operating parallel with, but

separate from, clinic practice is a “closed-staff”

hospital system. Clinic physicians rarely have

hospital privileges and hospital specialists

seldom conduct part-time private practices. A

situation in which hospital specialists are salaried at substantially lower incomes than clinic

physicians, who practice on a fee-for-service

basis, has caused some abandonment of hospital

specialty practice for lucrative solo general

practice.

Nearly 43 percent of the solo practitioner

clinics possess 1 to 20 short-term (72 hours or

less) holding beds. These units, although not officially classified or regulated as hospitals, account for 18.7 percent of the short-term beds in

Japan. In 1975, Japan had 8,294 hospitals with

1,164,098 beds, or 10.4 beds per 1,000 population (4). When the clinic and specialty beds are

added to this complement, the bed/population

ratio is estimated to be 12.8 beds per 1,000 population, or 70 percent higher than the ratio in

the United States (4).

Hospitals are owned and managed under

many auspiccs throughout Japan. Some are

owned by private physicians, whereas others

are owned and administered by insurance plans,

unions, industries, churches, and various levels

of government. The private sector owns between 70 and 75 percent of the general hospitals

(50 percent of the beds) and 95 percent of the

psychiatric hospitals (9,27). Private ownership

has had a definite impact on use patterns and expenditures for medical care, as evidenced by the
Ch. 5–Medical Technology in Japan ● 81

reported 33-day average length of stay in the

short-term general hospitals (9). This length of

stay has been explained in two ways. First, because of limited housing space and a paucity of

nursing homes, patients have nowhere other

than hospitals to convalesce. Second, the average cost per day in the hospital is rather low,

and a significant portion of this cost is covered

by sickness insurance.

Traditional public health and environmental

health programs (i.e., institutional inspections,

food and water supply inspections, etc. ) are administered by the 852 Prefectural and local

health centers (4). These health centers also provide preventive services to the population as a

whole. Preventive services, which are not included as covered benefits in the insurance program but are provided on a large scale through

these centers, include screening (early detection)

programs for selected conditions (e.g., hypertension, stomach cancer, diabetes), immunizations and physical exams for infants and school

age children, plus special categorical programs

for maternal health, hypertension, etc. It is

obvious from visiting the health centers that

persons from all socioeconomic strata frequent

them. These facilities truly function as public

centers.

Financing

Nearly the entire Japanese population possesses health insurance coverage which has

evolved over the 40-year period since passage of

the basic Health Insurance Act of 1922. The

original Act was a broad law covering the working population. By compelling employers to offer health insurance to their employees, this

statute set the stage for the development of various health insurance plans. Amendments added

subsequently required the plans to provide coverage to dependents of workers, the poor, and

the aged. Most recently, benefits were added to

provide special coverage for persons with highcost (catastrophic) illnesses.

Six health insurance plans have developed

since passage of the 1922 Act, and these plans

collectively cover the entire population: Seikan

Kempo, which is government-managed; Kyosai

Kumiai, which is administered by the Ministry

of Finance; Kokuho, which is administered by

Prefectural and local governments; and three

other plans which function independently. (See

table 1.) All six plans have been set up as nonprofit organizations.

The compulsory health insurance system in

Japan has been financed by two methods: 1) employer-employee contributions, and 2) subsidies

derived from general tax revenues. Employeremployee contributions are in actuality insurance premiums derived from a specified percent

(8.3 percent) of the employee’s basic salary. The

employer, by law, contributes at least 50 percent of the premium and the employee pays the

remainder.

Table I.—Japanese Health Insurance Plans, Beneficiaries, and Enrollments”

Plan and year Number of Percent of all

established Beneficiaries persons insured insured persons

Seikan Kempo, 1926 Employees off firms having 5 to 1,000 persons 27,721,000 25.1 %

Kumiai Kempo, 1926 Employees of firms having more than 1,000 persons 25,573,000 23.1

Hiyatoi Kempo, 1953 Day laborers 752,000 0.7

Senin Hoken, 1940 Seamen 753,000 0.7

Kyosai Kumiai, 1962 National and local government employees; public 11,969,000 10.8

corporations; private school teachers and staff

Kokuho, 1938 Employees of firms having fewer than 5 persons; persons 43,853,000 39.6

who are self-employed, retired, aged, and others not

covered by employees insurance

Total 110,631,000 1OO.OO

/O
82 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Over the past several years, the Government

of Japan has been called on to subsidize five of

the six health insurance plans to cover unexpected, and in some cases continuing, deficits.

Only one of the plans (Kumiai Kempo) has consistently shown a surplus, and surplus funds are

passed on to the enrollees in various forms (i.e.,

premium reduction, extra benefits, recreation

facilities, hospital facilities).

On the consumer side, in addition to the insurance premium paid to their respective insurance plan, insured persons (workers) pay a

small, fixed amount out of pocket for care,

whereas their dependents (family) pay 30 percent out of pocket up to a 39,000 yen ($108) I

maximum liability during a calendar month

(2).2 In late 1973, an amendment (Kogaku Ryoyohi) was added to the basic insurance law as a

means to meet high-cost illness (catastrophic)

expenses for dependents beyond the 39,000 yen

threshold. This program, administered by each

insurance plan, was designed to prevent economic catastrophes that heretofore had resulted

from high-cost illness. Patients in Japan have

the right to seek care from any provider, and the

provider in turn is able to bill any of the appropriate health insurance plans for the services

rendered.

Reimbursement

Physicians, dentists, other health providers,

and medical care institutions are reimbursed for

care by the insurance plans under a standardized set of fee schedules. Lists of fees for each

item of service (consultation, teaching, lab by

test, drug by generic class, specific surgical procedure, X-ray by type, etc. ) are published, and

all claims for reimbursement must be submitted

by medical care providers on standard forms.

Clinics and hospitals have a choice (annually) to

elect the use of “fee-for-( each) service” or an “allinclusive rate. ” In general, hospitals select the

“all-inclusive rate” scheme, and solo practitioners choose the “fee-for-service” method.

‘For conversion of Japanese yen to U.S. dollars, the exchange

rate used throughout this paper was Y360 = $1.00 (U.S.).

2

For the legally poor and the elderly (persons over 70 years old),

no copayment is required.

Fees for each service that is provided in a

medical care settings are negotiated on an annual basis. The Bureau of Insurance of the Ministry of Health and Welfare is charged with the

development of a fee reimbursement scheme

proposal for the providers and medical facilities

(14). Under a system adopted in 1943, each item

of medical service is assigned a certain number

of points, depending on such things as the item’s

relative complexity. The actual medical fee for a

particular item is then calculated by multiplying

the respective points by a certain unit cost,

which was set at 10 yen ($0.027) per point in

1977. Proposed changes in fees are presented,

debated, and negotiated within the Central

Social Insurance Medical Council, an advisory

body to the Ministry of Health and Welfare that

is made up of representatives from medicine,

dentistry, the insurance plans, and so forth. The

specific tariff schedule for drugs, for example, is

reviewed annually and in recent years has also

been revised annually. The strongest body in the

policymaking process of fee-schedule development is probably the Japanese Medical Association.

Administration and Planning

The Ministry of Health and Welfare has the

primary responsibility for the regulation, administration, and conduct of public health programs. This Ministry regulates the health insurance plans, but generally delegates the responsibility for day-to-day administration to each

plan. For insurance plans that are governmentsponsored, however, the Ministry retains this

administrative responsibility.

Health planning has traditionally been from

the bottom up (local to national) through committee consensus. In the past, national health

planning was categorical in nature. Early in the

1960’s, the concept of comprehensive planning

became more practical, particularly since there

had been rapid socioeconomic changes in the

country as a whole (4). Today, it has been

noted, the Ministry of Health, on an ad hoc basis, calls on and utilizes input from various institutes and university experts on substantive planning issues, and also solicits citizen participation

(the latter having become rather popular in re-
Ch. 5—Medical Technology in Japan ● 83

cent times). In this manner, it develops both

short- and long-range health plans and updates

these as changes are needed.

As part of the Ministry’s medical manpower

development plan, the policy of establishing

new medical schools (one per Prefecture) has

been implemented since 1970. This effort will be

terminated in a few years. The Ministry is planning to improve postgraduate medical education in primary care by training doctors for education technology or sending trainees to the

United States.

The Ministry of Health and Welfare recently

became actively involved in a newly formed

World Health Organization/Pan American

Health Organization (WHO/PAHO) health

planning consortium that will serve as a continuing forum for the exchange of methodologies and program experience in health planning.

Some WHO-collaborating health planning centers have been established. In addition, the Ministry has a plan to establish an International

Medical Care Cooperation Center to promote

medical care cooperation, particularly with developing countries.

POLICIES TOWARD MEDICAL TECHNOLOGY

The introduction and adoption of a significant volume of new forms of medical technology in Japan is similar to that in other well-developed industrialized countries. Over the past

two decades, vast amounts of sophisticated new

medical technologies have been developed and

used to augment the provision of medical care in

hospitals, as well as in private solo practitioners’

clinics. The function of these technologies is to

prevent, detect, or treat illnesses once thought

to be the cause of “unnecessary disease, disability and untimely death” (21).

The devices industry has grown rapidly in Japan. In 1974, receipts totaled 254.3 billion yen

($706 million), an increase of 26 percent over

the year before (14). Electronic equipment in

general has shown very rapid growth, rising

from 21.6 billion yen ($60 million) in 1971 to

35.7 billion yen ($99 million) in 1974 (14). Patient monitoring and diagnostic equipment sales

increased from 1.9 billion yen ($5.4 million) in

1971 to 5.5 billion yen ($15 million) in 1974

(14). Drugs account for annual sales for the

industry of 2,161 billion yen ($6 billion), a

figure that rose about 15 percent from 1975 to

1976 (14).

Because of the rapid development and dissemination of new medical technology in Japan,

the evaluation phase in many cases has been ignored or set aside for future action. Today, particularly with the ever increasing costs of the

delivery of health and medical care

there is not only a consciousness of

in Japan,

increased

costs, but a concerted effort to carefully allocate

scarce funds and resources. It may be that this

effort will provide some impetus to a more thorough evaluation of medical technology.

Research and Development

The Japanese Medical Association functions

prominently in the promotion, development,

and support of research, and in the introduction

of new technology (25). This has been particularly true in the past for historical reasons. Prior

to 1955, the vast majority of physicians continued their training 6 to 10 years beyond the

Doctor of Medicine degree to attain the higher

Doctor of Medical Science degree (IgakuHakase) (4,26). In 1955, postgraduate training

was reconstructed into a 4-year program in research, completion of which resulted in the

granting of the same higher degree. Some of the

physicians who completed their training in these

programs became and continue to be the nucleus

of the technological innovators in Japan. In

1968, a number of medical students challenged

the new process, reportedly because they believed that too much emphasis was being placed

on research and not enough on clinical medicine

(25). The immediate impact of the change that

resulted was a decrease in clinical research and

widespread inability of medical schools to attract new faculty interested in and/or with ex-
84 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

pertise in research. Currently, the impact of this

turn of events is being tempered by government

and private foundation sponsorship of research

fellowship programs abroad. The long-range effects of the change are not yet being felt.

The development and introduction of new

medical technologies in Japan—whether these

be in the form of instrumentation, procedures

for patient management, or drugs—follows a

common pathway. In general, a new technology

is developed by researchers and clinicians from

the leading medical schools, sometimes with the

aid of technical specialists from industry. The

quasi-governmental Science and Technology

Agency often provides grants-in-aid to support

the research, as do the Ministry of Health and

Welfare and the Ministry of International Trade

and Technology (MITI).

In recent years, the major focus for the development of medical technology in Japan has

been to find the means to change the tide of the

three leading causes of death: 1) cerebrovascular

disease (stroke), 2) cancer, particularly stomach

cancer, and 3) heart and other vascular diseases,

with special emphasis on chronic renal disease

(12). Basic scientific research on cerebrovascular

disease is currently being carried out at the

Japan Stroke Prevention Center, Institute of

Health Science in Shimane, in cooperation with

the U.S. National Institutes of Health. Animal

model studies, which it is hoped are transferable

to man, have been concentrated on the development of stroke-resistant strains of rats and on

the means of the treatment of persons who have

been found to be stroke-prone (5,28).

Also being carried out are clinical studies with

scanning devices to detect persons with vascular

changes. A limited number of experimental

stroke intensive care units, some with hyperbaric chambers, have been set up by private

hospitals in an effort to reduce mortality of persons who have had cerebral hemorrhages.

Other modalities for the prevention and treatment of stroke, including diet modification,

drugs for the treatment of hypertensive disease,

and neurosurgical procedures, are being explored. None of these modalities, however,

have been introduced on a broad scale; nor have

any of them been fully evaluated or received

sufficient endorsement from the medical community to warrant general use.

Much more technology has been developed

for the early detection of cancer, particularly

stomach cancer, than for detection of cerebrovascular disease. A great deal of research is currently underway in Japan to increase the speed

of diagnosis with the so-called automated cytology process using optical scanning technology. Research for this and a series of related

projects has been supported for several years by

funds from the Ministry of Health and Welfare

and MITI. Before there is any diffusion and dissemination of the new technology, however, researchers want to perfect it to the level at which

there will be no sacrifice of accuracy for speed.

Evaluation of Medical Technology

The use of a new medical technology in Japan

is dependent on its introduction by an eminent

professor or clinician and its subsequent endorsement by peers or professional groups. The

process of peer evaluation applies to all forms of

medical technologies—drugs, devices, and procedures—whether they are developed within

Japan or are imported.

Once the original investigator’s coworkers

and peers feel the technology has promise, the

investigator usually publishes the findings in

technical scientific or medical journals. If and

when the investigator’s peers recognize the potential and value of the technology, they replicate the work and often make improvements on

the basic idea. Subsequent publication of their

findings is recognized as a positive sign to the

original investigator, who then with his peers

formally introduces the technology for review

and approval by the Pharmaceutical Affairs

Bureau of the Ministry of Health and Welfare.

Regulation of Drugs and

Medical Devices

Drugs and medical devices are currently regulated in Japan under the Pharmaceutical Affairs Law (15), which passed the Japanese Diet
Ch. 5—Medical Technology in Japan ● 85

on August 10, 1960. Products intended for use

in humans are controlled by the Ministry of

Health and Welfare, through its Bureau of Pharmaceutical Affairs. The Bureau of Pharmaceutical Affairs is assisted in implementing the

Pharmaceutical Affairs Law by the Pharmaceutical Affairs Council, an advisory group with 13

committees and 55 subcommittees. The committees and subcommittees of the Pharmaceutical

Affairs Council deal with such matters as the

approval of manufacture and import of new

drugs (Committee on Drugs), the establishment

of quality standards for medical devices (Committee on Medical Devices), measures to assure

the safety of drugs (Committee on Safety of

Drugs), and review of drugs already on the market for effectiveness and safety (Committee on

Drug Efficacy Re-Evaluation).

Whenever a new drug is proposed for marketing, data concerning its safety and efficacy must

be submitted to the Bureau of Pharmaceutical

Affairs. The Committee on Drugs of the Pharmaceutical Affairs Council reviews the data and

makes a recommendation, but the final decision

on market approval is made by the Bureau of

Pharmaceutical Affairs. Of interest is the fact

that drugs already marketed in other countries

apparently are approved more readily than

totally new drugs.

Once the drug is approved, it is entered in the

Japanese Pharmacopoeia and may be marketed.

In addition, the Bureau of Pharmaceutical Affairs requires good manufacturing practices to

assure quality products. Because of their exposure to a series of manmade tragedies resulting

from environmental contaminants, the Japanese

are especially sensitive to the issue of safety. A

national drug monitoring system of 465 hospitals that report adverse drug reactions is administered by the Bureau of Pharmaceutical Affairs

(14). A surveillance system is also operated by

the Bureau of Insurance through its Division of

Medical Affairs.

Although medical devices are regulated under

the pharmaceutical affairs law, any medical device that is in conformance with standards promulgated under the industrial standard law,

may be manufactured or imported without a

product license. Regulation under the industrial

standard law focuses on safety, in particular,

the safety of electrical instruments and apparatus. Performance standards have been established for 140 devices, including electrocardiographs, gastroscopes, and blood pressure meters. The law also requires manufacturers to register their products.

Reimbursement and Medical

Technology

As was mentioned earlier, when a new service

is proposed for a fee in Japan, it must first be

debated by the Central Social Insurance Council, In its informal evaluation, the Council considers what is known about the benefits and

risks of the proposed technology at that time.

The fee established is intended to cover the price

of the service. Thus, for example, the fee for a

drug should be the actual purchase price. In

practice, however, these purchase prices vary

considerably in different institutions and different parts of the country, so the Minister of

Health and Welfare establishes one fee.

The fees for drugs have been consistently lowered in recent years, reflecting market prices.

The lowering of fees discouraged excessive drug

use in the early 1970’s, and the reduction of

market prices probably results from competition in the Japanese drug industry. In 1974, a

new free medical treatment system for the aged

“brought about a tendency to excessive dependence on drug therapy and eventually resulted in

great increase in drug consumption” (14).

Cost-Containment Efforts

A rather dramatic increase in medical care demands following the introduction of new technology has been documented by the ongoing

Medical Care Survey for Social Insurance (Shakai Iryo Chosa) (19) of the Ministry of Health

and Welfare’s Information and Statistics Department. In the period from 1964-74, for example, it was observed that new technology increased the frequency of visits 2.4 times and the

level of expenditures 6.9 times (19). These increases have been attributed, in part, to the increase in the variety of available laboratory

tests and the increased testing capacity of laboratories resulting from automation.
86 . Background Paper #4: The Management of Health Care Technology in Ten Countries

In general, it is thought that the new technology has contributed to better diagnostic ability

and therapy, and subsequently has had a positive influence by the improvement of the quality

of care (19). Some people, however, feel that at

least part of the observed increases in use of the

technology maybe due to provider incentives in

the fee-for-service payment system, which may

result in duplication and possible abuse or excess service (19). Although the increases themSPECIFIC TECHNOLOGIES

The use in Japan of medical technologies like

radioisotopes, radiotherapy, computed tomography (CT) scanners, renal dialysis, premature

incubators, and drug therapy has shown rapid

growth in recent years. Specific technologies are

discussed below.

CT Scanners

CT scanners were first introduced in Japan in

1975. At that time, the device used was the EMI

scan imported from England. Since then, similar

devices have been developed and manufactured

in Japan for domestic use. Initially, the CT scanner was used primarily as a diagnostic instrument, but over time it has come to serve also as

an adjunct and guide for radiation therapy for

cancer.

In 1978, a survey was conducted to determine

the number and type of CT scanners that were

in place in a number of industrialized countries.

In this inventory, Japan, with 180 head scanners

and 112 body scanners, ranked second out of 8

industrialized countries (10). There were 2.6

scanners per 1 million persons in the population

(10). As of April 1979, Japan had an estimated

516 (304 head, 212 body) scanners in operation,

or approximately 4.6 per 1 million persons

(23,24).

Japanese researchers and clinicians have continued to develop and evaluate scanners since

the introduction of this new technology. In particular, Japanese researchers have compared CT

scanners with other forms of diagnostic methodologies, e.g., radionuclide imaging and angiogselves have been documented through the Medical Care Survey, their causes remain to be demonstrated empirically before any attempts are

made to modify public policy. Because there is

now a great deal of concern about the rising

costs of medical care, the Ministry has been conducting a variety of studies to pinpoint the

underlying causes and is attempting to develop

methods to contain medical care costs.

raphy (11). Conclusions from some of their

studies (11) indicate that the medical profession

in Japan has not fully accepted the CT scanner

as a single, foolproof diagnostic tool. The use

by some practitioners of both CT scanning and

its diagnostic predecessors, however, may be

duplicative, resulting in an unnecessary added

expenditure in the delivery of medical care. Any

unnecessary expenditure is being absorbed by

society through the health insurance premiumreimbursement system.

Renal Dialysis

The introduction of hemodialysis in Japan, almost 25 years ago in 1955, marked the beginning of an era for the treatment of persons with

acute renal failure (8). Therapy for those with

chronic renal failure was made available about

10 years later.

For the first 10 to 15 years, the diffusion and

distribution of renal dialysis units in Japan were

rather limited. In 1972, however, this form of

therapy was introduced as a reimbursable benefit through all of the six major health insurance

plans that collectively cover the entire Japanese

population. From December of 1966 to mid1978, the number of hemodialysis units in Japan

reportedly increased from 48 to 11,671 (8).

Table 2 illustrates a nearly 50-percent increase

in the number of units from 1976 to 1978.

The number of patients receiving dialysis has

been increasing annually at a rather rapid rate.

There are now over 200 renal dialysis cases per 1

million population now receiving dialysis in
Ch. 5—Medical Technology in Japan . 87

Table 2.—Number of Hemodialysis Units

in Japan (1976-78)

Japan, which is probably the highest rate in the

world (8). This is not to say that the prevalence

of kidney disease in Japan is necessarily higher

than is reported in other countries, but that dialysis therapy is quite accessible and available.

Health insurance is probably a rather significant

“enabling factor” in this context.

As of July 1978, 99 percent of patients requiring renal dialysis in Japan received their treatment in the hospital or at specialized hospitalaffiliated centers; less than 1 percent of Japanese

patients who require dialysis had home dialysis,

which is used more commonly in other countries (1,3,6,7,8,17). (See tables 3 and 4.) There

are several reasons for the lack of use of home

dialysis in Japan. First of all, the vast majority

of the families live in one- or two-room apartments. The installation of a dialysis unit would

crowd the already limited quarters and might

require special plumbing facilities. Secondly,

the administration of dialysis is considered by

physicians to be a medical treatment which, because of its specialized nature, can be provided

Table 4.—Percent of Chronic Renal Disease

Patients Receiving Home Dialysis in

Selected Countries and Areas

Percent of patients

Country (or area) receiving home dialysis

Japan (1976). . . . . . . . . . . . . . . . . . . 0.6%

United States (1976) . . . . . . . . . . . . 23.7

Washington State. . . . . . . . . . . . 75.0

Indiana. . . . . . . . . . . . . . . . . . . . . 60.0

Northeast United States . . . . . . 15.0

United Kingdom (1977). . . . . . . . . . 66.0

SOURCES: E. Friedman, et al., “Pragmatic Realities In Uremia Therapy, ” N. .Errg

J. Med. 298(7):368, 1978 (3); and C Blagg, “Incidence and Prevalence

of Home Dialysis,” Journal Of Dialysls 1“475, 1977 (1)

only in a medical care setting by physicians.

Lastly, Japanese health insurance plans pay the

physicians higher fees for dialysis in the hospital

and clinical settings than in home settings. By

exerting a stronger influence on the physicians’

choice of treatment site, this last reason probably overshadows the others.

Along with the number of patients, the costs

for the provision of renal dialysis treatment

have been rapidly escalating. The equipment in

1976 dollars averages about $5,000 for the apparatus (coil type $5,120, plate type $4,200, and

hollow fiber type $6,420) and $70 per treatment

for the disposable parts (8). Each treatment

costs $200 in the outpatient setting, or $31,200

per year per patient (8). The cost across the nation for Japan for the year 1976-77 for 20,000

patients was estimated at $624 million (8).

A number of promising avenues (e.g., the development of reusabIe filters) to stem the cost

tide are being approached and explored by universities. In addition, concerted efforts are being

Table 3.—Number and Percent of Chronic Renal Disease Patients

Receiving Different Types of Hemodialysis in Japan (1976-78)
88 ● Backround Paper #4: The Management of Health Care Technology in Ten Countries

made by physicians to increase patients’ survival rates, and just as importantly, to improve

the quality of their survival. When appropriate,

for example, kidney transplantation is being

recommended to more candidates. Today, fewer than 200 kidney transplantations are performed in Japan per year (8). It has been reported that 8 to 10 percent of the kidneys are obtained from cadaver donors and that the remaining 90 percent are obtained from related

donors (8). There is also a drive to promote

night hospital dialysis and home dialysis. Finally, basic research projects supported by the government and foundations are well underway to

develop an effective low-cost artificial kidney.

Radiation Therapy

Radiation therapy or teletherapy for cancer in

Japan has taken, and continues to take, several

forms. Initially, the treatment of choice was

with X-radiation referred to as orthovoltage.

During the past two decades, other forms of

radiation therapy have been added to the cancer treatment armamentarium. A more potent

treatment source that followed X-radiation was

cesium (137CS), and this source was then superseded by the “super-voltage” modality cobalt

(

6

°CO). More recently, Japan has developed even

more advanced technology to augment cobalt

therapy, by the introduction of electronically

generated therapeutic impulses, with cyclotrons, betatrons, and linear accelerators. These

new radiation methods, along with cobalt therapy, are often combined with surgery, chemotherapy, immunotherapy, and hyperbaric

oxygen.

The predominant source of teletherapy used

in Japan today is cobalt therapy. The other

“super-voltage” sources are limited in number,

and in many cases still under development. Cobalt units that emit over the 1,000-curie range

have been shown to be most effective and are

more commonly found in hospital teletherapy

units. (See table 5.) A 1978 survey conducted by

the Science and Technology Agency’s Bureau of

Nuclear Safety indicated that there were 589

cobalt and 10 cesium units in use in Japan (22).

These units ranged in power from less than 100

to over 5,000 curies. Almost half (48.1 percent)

of the cobalt units and 70 percent of the cesium

units are in the over 2,000-curie class, which appears to be the treatment of choice (22,29).

Table 5.—Number and Distribution of Teletherapeutic Apparatus

in Use in Japanese Hospitals and Clinics (March 1978)
Ch. 5—Medical Technology in Japn ● 89

CONCLUDING REMARKS

No country, including Japan, has been able to

provide a problem-free health care program to

its people. Japan’s major problem now is dealing

with chronic disease. Once a country conquers

its basic communicable disease and sanitation

problems, it enters an era in which the challenges come from chronic illness, environmental

and industrial hazards, and other similar threats

to mankind. The leading causes of death shift

from infectious diseases like tuberculosis, typhus, and smallpox to cerebrovascular disease,

cancer, and other similar conditions. As inflation, recession, and unemployment affect the

general economy, they also affect the health

sector—and their impact makes the combating

of these chronic conditions of postindustrial

society especially difficult.

A second area of concern in Japan is the

rising costs of medical care. National medical

care expenditures (NMCE) have risen over 20

percent per year for the past several years

(e.g., from 1970 to 1975, NMCE increased by a

total of 154 percent, from 2,553 billion yen

($7,091,667) in 1970 to 6,478 billion yen

($17,994,444) in 1975) (4). At the present time,

approaches to modify the insurance program

are under serious discussion. In June of 1978,

the Ministry of Health and Welfare submitted to

the Diet a proposal to reform the health insurance program (i.e., to increase the premium,

increase the out-of-pocket payment for outpatient drugs, equalize insurer and dependent outof-pocket liability, etc.). This proposal, primarily a cost-containment measure, was introduced at the end of the legislative session of the

Diet and was tabled for further study. Since that

time, elements of the proposal have been debated by organized medicine, industry, unions,

and the general public. The debate and exchange

of ideas is a healthy sign, but unless action on

this measure is taken soon, the Ministry of

Finance will be unable to continue to cope with

the deficits of the health insurance plans.

A third problem that is being anticipated in

Japan is the potential impact of the country’s increased life expectancy achievement. It is estimated that by the year 2025, more than 18 percent of the population will be over the age of 65

(13). This important segment of the population

will require special health services, health facilities, housing, income maintenance, and other

specialized services. These services must be

planned for and financed by today’s working

population for a period of 40 years hence in

order to avert future problems. The emphasis,

therefore, has been on planning and program

development for the aged population to prevent

future problems. If this activity proceeds at its

projected pace, there will be few if any problems. Only time and experience will reveal the

success of this preventive action.

The fourth and final set of problems pertain

to medical manpower distribution and health

care technology. A visit to a physician’s clinic

will reveal a well-trained physician who probably has specialty training. Unfortunately, some

of the physician’s skills are underutilized because of the closed-staff hospital system. Relaxation of this barrier would alleviate at least

part of the problem. In the clinic setting, it is

clear that medical technology permeates the air.

One will probably find a rather large variety of

sophisticated diagnostic and therapeutic equipment. That is, technology can be observed as

the rule rather than the exception. Technology

assessment, on the other hand, has not kept

pace with the introduction of new modalities.

Because of the recent recognition of the need for

cost savings and cost-containment measures to

stem the tide of spending during these inflationary times, however, it is anticipated that more

assessment will be done in the future to determine the use, benefits, risks, and costs of technology to society.

68-095 - 80 - 7
90 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

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Science and Technology Agency (Japan), Nuclear Safety Bureau, “Statistics on the Use of Radiation in Japan” (Tokyo, 1979).

Suemasu, K., Vice Director, National Cancer

Center Hospital, Tokyo, personal communication, June 20, 1979,

Sugimura, T., Director, National Cancer Center

Research Institute, Tokyo, personal communication, June 8, 1979.

Tanaka, T,, “Medical Care in Japan, Yesterday,

Today, and Tomorrow, ” Social Sci. Med.

12(6A):49, 1978,

Ushiba, D., and Suzuki, J., “Medical Education

in Japan, ” Social Sci. Med. 12(6A):530, 1978.

Yamamoto, M., and Ohmura, J., “The Health

and Medical System in Japan, ” Inquiry 12

(suppl.):45, 1975.

Yamori, Y., et al., “Pathogenic Mechanisms and

Prevention of Stroke in Stroke-Prone Spontaneously Hypertensive Rats, ” in Hypertension and

Brain Mechanisms: Progress in Brain Research,

edited by U. De Jong, et al., vol. 37 (Amsterdam: Elsevier/North-Holland Biomedical Press,

1978).

Yasukochi, H., “Survey of Teletherapy in Japan,” Nippon Acta Radiol. 36(2):97, 1975.
Policy for Medical

6.

Technology

in France

Rebecca Fuhrer

Department of Health Services and Biostatistics

Harvard School of Public Health

Cambridge, Mass.

●

Policy for Medical Technology in France

Rebecca Fuhrer

Department of Health Services and Biostatistics

Harvard School of Public Health

Cambridge, Mass.

FRANCE: COUNTRY DESCRIPTION

Physically the largest country in Western

Europe, France has approximately 53 million inhabitants. Almost 75 percent of the population

lives in urban areas, and 16 percent lives in the

Paris metropolitan region. The average population density is 97 inhabitants per square kilometer, with a range from 44 inhabitants in the

Limousin Region to 821 in the Paris area.

The active working population includes approximately 21.7 million people, of whom 13.3

million are men and 8.4 million women. Life expectancy at birth is 69.1 years for men and 77.2

years for women (41). The birth rate, which in

recent years has been declining, is now 14 births

per 1,000 inhabitants; the mortality rate is

about 10.1 deaths per 1,000 inhabitants (41). As

in other Western countries, the proportion of

persons over the age of 65 has been increasing.

In 1977, they represented 13.8 percent of the

population. A summary of basic demographic

data for France is presented in table 1.

Table 1 .—Basic Demographic Statistics for Francea

Population . . . . . . . . . . . . . . . . .

Males . . . . . . . . . . . . . . . . . . .

Females . . . . . . . . . . . . . . . . .

Population density . . . . . . . . . .

Urban population. . . . . . . . . . . .

Birth rate . . . . . . . . . . . . . . . . . .

Death rate. . . . . . . . . . . . . . . . . .

Life expectancy at birth

Males . . . . . . . . . . . . . . . . . . .

Females . . . . . . . . . . . . . . . . .

Infant mortality rate . . . . . . . . .

Active working population . . . .

52,973,000

25,949,106

27,023,887

97 inhabitants per kmz

75 percent

14.0 per 1,000 inhabitants

10.1 per 1,000 inhabitants

69.1 yearsb

77.2 yearsb

12.3 per 1,000 Iive births

21,756,000

Like other countries in Western Europe,

France has a parliamentary democracy. The

present form of government was adopted in

1958 following a referendum which established

the Fifth Republic. Executive power is exercised

by the President, who is elected for 7 years and

appoints the Prime Minister. The Prime Minister leads the government and makes recommendations concerning presidential appointments to

other Cabinet positions.

The Prime Minister and the Cabinet are responsible to Parliament. Parliament, consisting

of the National Assembly and the Senate, has

legislative power. Deputies to the National

Assembly are elected directly by their constituencies for periods of 5 years. Senators, whose

term of office is 9 years, are elected indirectly by

Deputies to the National Assembly, Departmental General Councilors, and delegates from municipal councils.

Most legislation is initiated by the Prime Minister. 1 The Prime Minister not only proposes

new laws to Parliament, but, he/she has the exclusive right to initiate governmental expenditures. Parliament has censuring power over the

Prime Minister’s government, by its vote on the

budget and 4- or 5-year economic and social

development plans. Once laws have been approved by Parliament, the Prime Minister is

responsible for ensuring their execution.

Government administration, with Ministries

providing the infrastructure, is very centralized

in Paris. France is divided into 95 Departments,

each of which functions both as an administraI The Prime Minister initiates about 95 percent of proposed legislation. Parliament itself initiates only about 5 percent.

93
94 ● Backroundd paper #4: The Management of Health Care Technology in Ten Courtries

tive unit of the Central Government and as a

local unit administering its own concerns. In

each Department, a Departmental Prefect is appointed by and represents the Central Government and all the Ministries. The Departmental

Prefect is also responsible for executing policies

established by the Departmental General Council, a directly elected body in each Department.

Local units of governmental jurisdiction in

France are the communes. Each commune has

an elected municipal council and a mayor that

the council elects.

Regions in France were given explicit new

powers and functions by the Regional reform

law of 1972, which became effective in late

1973.2 The aim of Regional reform was decentralization, especially in the domain of economic and social development, so as to facilitate better response to Regional needs and more effective utilization of available resources. Economic

and social development plans have guided major national development concerns since 1947.

France is now in its seventh economic and social

development plan and is working on goals for

the eighth. In the past decade, plans have been

increasingly oriented towards a Regional

perspective.

‘Unlike the Department, the Region is neither an administrative

subdivision of the Central Government nor an independent administrative unit. It therefore has no authority other than that delegated by the Government.

THE HEALTH CARE SYSTEM

Brief History of the System

A dominating principle in the evolution and

growth of the French health care system has

been the continuing respect for the practice of

“medicine liberale” (liberal medicine). Four

basic principles, though somewhat modified in

practice, still dominate the functioning of the

French health care system: 1) the physician is

free to prescribe as he/she wishes, 2) medical

confidentiality is maintained, 3) the patient is

free to choose his or her physician, and 4) the

patient pays the physician directly.

Historically, French physicians cared for patients in their homes. Public hospitals were esThere are 22 Regions, consisting of two to

eight Departments each. Each Region is administered by a public corporation consisting of the

Regional Prefect (the Departmental Prefect of

the Department in which the Region’s capital is

located), the Regional Council, and an Economic and Social Commission. Advised by the Economic and Social Commission, the Regional

Council is the policymaking body. Its decisions

are executed by the Regional Prefect.

The French economy is a free enterprise system in which the State and public sector (i.e., industries and commercial establishments under

State control)3 play very important roles. Economic growth has been very rapid since World

War II. In recent years, the gross national product (GNP) has continued to increase, although

the inflation rate has been very high since 1974

(I5 percent in 1975), and unemployment, especially among the young, is a serious concern. Of

salaried workers in France, about 10 percent are

employed in the agricultural sector, 39 percent

in the industrial sector, and the remaining 51

percent in the commercial and services sector.

‘The public sector is comprised of: 1) government monopolies in

industries such as transportation and energy, and 2) nationalized

banks, insurance companies, automobile manufacturers, and oil

companies that compete in the private sector.

tablished by the church as centers for lodging

the poor. Hospital services were free, and resources—human and material—were gifts. After the French Revolution of 1789, the hospitals’

were accorded a civic rather than religious

status, but their function and resources were not

altered. In 1851, the civic responsibility was enforced explicitly, and each commune or municipality had to support its own hospital.4

The private hospital sector really developed

along two different tracks. First, small, private

“cliniques,” for-profit hospitals offering limited

4

In some cities, e.g., Marseilles and Paris, public hospitals today

are still called “public assistance hospitals. ”
Ch. 6–Policy for Medical Technology in France ● 95

services to privately paying patients, most often

were started by physicians. Second, private,

nonprofit hospitals for workers were started by

some large industries. Care at these institutions

was free and physicians were reimbursed by the

enterprise. Other private, nonprofit institutions

were established to address specific health problems (e.g., tuberculosis, cancer, mental health).

Medical care in France today continues to be

provided by both the private and public sectors.

(See table 2.) Most ambulatory care is furnished

Table 2.—Public and Private Health Care

Providers in France (1979)

Provider Public Private

Physicians . . . . . . . . . . . . . . 3 0 % 7 0 %

General practitioners. . . . (32) (68)

Specialists . . . . . . . . . . . . (28) (72)

Institutions. . . . . . . . . . . . . . 73C

Beds . . . . . . . . . . . . . . . . . (72) (28)d

by private practitioners. Some ambulatory care,

however, is furnished by outpatient departments associated with large public hospital centers, by mutual fund societies run by industries

or unions, and by neighborhood health centers.

Institutional care is provided by: 1) public institutions (including public hospitals) that are

sponsored by the Department or commune, but

are subject to administrative authority of the

Ministry of Health (Ministere de la Sante); 2)

private, nonprofit industry-related or special

purpose facilities; and 3) private, for-profit,

hospitals (called “cliniques”) which usually offer

surgical, medical, and/or obstetrical services.

Most psychiatric hospitals, although originally

private nonprofit or for-profit institutions, are

now public facilities.

National health care expenditures’ in France

account for 7.36 percent of the country’s GNP

(42). In 1976, public and private hospitals consumed 43.8 percent of national health expenditures (42).

Health Policy, Administration,

and Planning

Although government administration in

France is highly centralized, along with efforts

to decentralize economic and social development, there have been increasing efforts to decentralize the administration of health and social services. 6 Health policy is established nationally by the Ministry of Health. 7

In each Department, there is a Departmental

Directorate of Health and Social Services (Direction Departementale de l’Action Sanitaire et

Sociale, DDASS), which serves as an external

unit of the Ministry of Health (44). Heading the

DDASS is the Departmental director of health

and social services, who is directly responsible

to the Departmental Prefect. He/she is assisted

by various specialists (e.g., the Departmental

medical officer, who is responsible for ensuring

that institutions adhere to the decisions of the

Prefect).

DDASS enforces both the regulations of the

Ministry and the regulations of the local authorities. It has administrative authority over public

hospitals in the Department, must approve the

hospitals’ budget and help establish the prix de

‘National health expenditures includes only operating expenditures (not capital expenditures). Two categories of operating expenditures comprise national health expenditures: 1) medical care

expenditures (i.e., expenditures for hospital care, ambulatory and

home health care, routine and preventive medicine, affiliated medical activities such as industrial medicine, medical goods and devices); and 2) health expenditures (i. e., expenditures for medical

research, medical education, administration of the health care delivery system, and community health).

6The organizational and administrative structure of the French

health system is very complex. Full understanding of this structure

is not needed to examine issues related to medical technology.

Readers interested in other details, however, are referred to D.

Ceccaldi, Les Institutions Sanitaires et Sociales, 1979 (15).

‘The exact name of the Ministry concerned with health can

change when a new Minister assumes power, or when the existing

Minister feels that a socially relevant problem is of considerable

importance that it should be included in the ministerial title. Since

the establishment of the Fifth Republic in 1958, the name has

changed numerous times. For the purpose of simplicity, though,

the term Ministry of Health is used throughout this chapter.
96 ● Background Paper #4: The Management of Health Care Technology in Ten Countries
Ch. 6—Policy for Medical Technology in France ● 97

● “Hospitals” (“hopitaux”) or second category hospitals (hopitaux de deuxieme categorie). — “Hospitals” are usually affiliated

with hospital centers (see below) and collaborate in providing for the health care

needs of a health care district. These institutions are supposed to provide at least

one unit for each of the following: general

medicine, general surgical, maternity,

chronic care, pediatric, and infectious disease. They are also to have outpatient services, a clinical laboratory for basic analyses, and electroradiology. Medical personnel are salaried and are usually parttime employees.

. Hospital centers (centres hospitaliers). —

Hospital centers are one jurisdictional entity, but may consist of several institutions.

They are usually located in the capital city

of the Department and are supposed to be

able to provide for all the primary and secondary care needs of the health care district. Hospital centers offer a larger variety

of specialty services than “hospitals” do.

They also have more full-time medical personnel, especially in radiology, clinical laboratory, and anesthesiology. They sometimes participate in medical training and

are often the base for a nursing school. Specialized hospital centers (centres hospital iers specialises) provide specialized care

within a single medical area, e.g., psychiatry, tuberculosis.

● Regional hospital centers (centres hospital iers regionaux, CHR), called university hospital centers (centres hospitaliers universitaires, CHU), when they are in the same

city as a medical school. The CHR is usually in the Regior’s capital city. Not only

must the CHR have the facilities to meet the

basic needs of its health care district, but it

must have the highly specialized facilities to

provide the tertiary care for the entire Region. CHUS play a significant role in medical education and research.

Table 3 lists the number of different types of

public hospitals (classified prior to 1978 revisions) and beds for France. Table 4 summarizes

the distribution of types of beds for the public

and private sectors.

Physicians and Nurses

As shown in table 5, in 1977, there were some

91,000 physicians in France, or roughly 172 per

100,000 inhabitants. Of the total, one-third

were private practitioners. 12 The number of

nurses totaled 219,000, or 412 per 100,000 inhabitants.

Just as they do in the United States, physicians in France tend to cluster in urban areas,

especially around university hospital centers.

There is a 5:3 ratio of generalists to specialists,

and the distribution of physicians throughout

the country reflects and parallels this ratio.

In the period 1967-79, the number of physicians in France increased by approximately 80

percent (41,46). To stem this rapid growth, the

government has instituted more restrictive medical school selection procedures.

The rapid increase in the number of physicians is affecting the number of physicians seeking salaried positions in order to guarantee a

minimum level of income for themselves. In recent years, the number of salaried physicians in

France has been increasing. Furthermore, an

ever increasing number of salaried physicians

12 When hospitals and universities started to collaborate in medical education, a university-hospital career track was created. The

prestige associated with this career has made it competitive with

private practice.
98 ● Backround Paper #4: The Management of Health care Technology in Ten Countries

Table 4.–Number and Distribution of Facilities and Beds in Public and Private Institutions in France (1975)

Public institutions Private institutions Total

Beds per Beds per Beds per

Number of Number 1,000 Number of Number 1,000 Number of Number 1,000

Type of facility/bed facilities of beds population facilities of beds population facilities of beds population

Medicine/medical

specialties . . . . . . . . . . . 852

Surgery/surgical

specialties . . . . . . . . . . . 489

Obstetrics . . . . . . . . . . . . . 614

Convalescent/rest. . . . . . . 218

Functional rehabilitation . 53

Other: long stay. . . . . . . . . 24

Tuberculosis . . . . . . . . . . . 55

Psychiatry . . . . . . . . . . . . . 78d

114e

Total . . . . . . . . . . . . . . . . 1 ,044f

145,850a 2.8 680 29,262 0.6 1,532 175,112 3.4

70,569b 1. 3 1,265 66,249 1.2 1,754 136,818 2.5

16,374 0.3 716 14,695 0.3 1,330 31,069 0.6

7,099 0.1 452 21,217 0.4 670 28,316 0.5

3,426 0.1 134 12,007 0.2 187 15,433 0.3

2,314 0.1 – – – 24 2,314 0.1

9,163’ 0.2 195 15,038 0.3 250 24,201 0.5

16,913 0.3

105,519 2.0 222 15,103 0.3 414 137,535 2.6

377,227 7.2 2,534f

173,571 3.3 3,578f

550,798 10.5

Table 5.—Number of Physicians

and Nurses in France (1977)

Number per

100,000

Profession Number inhabitants

Physicians

Private practitioners~ . . . . . . . . 63,531 119.4

General practitioners . . . . . . . . 39,262 73,8

Specialists. . . . . . . . . . . . . . . . . 24,269 45,6

Salaried physicians. . . . . . . . . 27,911 52.5

General practitioners . . . . . . . . 18,453 34.7

Specialist. . . . . . . . . . . . . . . . . . 9,458 17.8

Subtotal—general

practitioners . . . . . . . . . . . 57,715 108.5

Subtotal—specialists. . . . . . 33,727 63.4

Total . . . . . . . . . . . . . . . . . . 91,442 171.9

Nurses

Registered nurses. . . . . . . . . . . 152,575 286.9

Nurses aides, nurses

auxiliaries, nurses

in sanatoriums. . . . . . . . . . . . 17,364 32.6

Psychiatric nurses . . . . . . . . . . 49,143 92.4

Total . . . . . . . . . . . . . . . . . . 219,082 411.9

Midwives . . . . . . . . . . . . . . . . . . 8,899 16.7

are working full time. The increase is especially

impressive in the public hospital sector. In 1965,

only 3.3 percent of all physicians were full-time

salaried employees in public hospitals, compared to 13.6 percent in 1977 (15,46).

The nursing population has not increased to

meet hospital staffing needs. Although the Government has made efforts to attract people to

nursing by increasing salaries and career opportunities, results have not yet been observed. It

may be that the low status of the nursing profession, combined with difficult working conditions, is retarding change.

Health Insurance

France has a comprehensive Social Security

system (Securite Sociale), with a highly elaborate sickness insurance mechanism13 that covers

virtually the entire population. Between 99 and

100 percent of the French population is now

13 The term health insurance would be a partial misnomer, because the orientation is definitely toward curative rather than preventive care. Only limited coverage for screening and periodic

checkups is mandated by national policy. A national system for

preventive services for mothers and children is established under

systems not discussed in this chapter.
Ch. 6—Policy for Medical Technology in France ● 99

covered by one form of sickness insurance or

another. The country’s Social Security system

had its formal origin in the law of April 5, 1928

(22), which was revised and became operational

in 1930. At first, insurance was mandatory for

certain groups of workers, but was administered

through private social insurance and mutual aid

funds. Reforms of 1945 and 1967 reorganized

the administration of the Social Security system

and also created a national health insurance

system (3,22,48).

Administration and Financing

Because there was resistance on the part of the

different worker groups to having one administrative system, different administrative “r%-

gimes” were established under the Ministry of

Health to cover different categories of workers.

Currently, there are four large regimes within

the Social Security system. These regimes and

the workers for whom they offer health insurance coverage are:

1.

2.

3.

4.

General Regime (Regime Generale).–All

salaried workers in industry, commerce,

etc., not covered by “special regimes” (see

below).

Special Regimes (Regimes Speciaux). —

Salaried workers in special industries such

as railroads, mines, electric and gas companies, and in the civil service.

Nonagricultural Independent Professions

(Professions Independents Nonagricoles).

—Autonomous, nonsalaried workers, including craftspeople, small business owners, private practitioners in medicine and

law.

Agricultural Regime (Regime Agricole). —

Salaried agricultural workers and independent farmers.

Social Security contributions are slightly different for each regime, but over the years have

tended to move in the direction of increasing

uniformity. Although contributions are the

shared responsibility of the employer and employee, the employer pays by far the larger

share (78 percent (48) or more) of the subscription rate. Social Security policy is set by the

Ministry of Health, but the sickness funds administer independently.

All four regimes have similar hierarchical

structures to facilitate service at levels close to

the insured. In the General Regime, which covers approximately two-thirds of the population

(and is expanding), the reimbursement system is

operated by 122 primary sickness insurance

funds (caisse primaire d’assurance maladie).

These 122 funds—there is usually one such fund

per Department—are fiscal intermediaries that

provide reimbursement to hospitals or patients,

as appropriate. A Regional sickness insurance

fund (caisse reionale d’assurance maladie)

operates in each Region, and is responsible for,

among other things, developing and coordinating prevention activities in the area of occupational health and accidents. At the national lvel

is the National Sickness Insurance Fund (Caisse

Nationale d’Assurance Maladie, CNAM), a

public institution under the trusteeship of the

Ministry of Health and the Ministry of Economics and Finance. The National Sickness Insurance Fund receives insurance fund contributions

from employers and employees and then disburses endowments to the primary and Regional

funds. It ensures on a national level the fiscal

solvency of the primary sickness insurance

funds with regard to the provision of coverage

for the two groups of risks: 1) sickness, maternity, disability, death; and 2) work-related accidents and occupational health (15).

Coverage

Although there are several health insurance

administrations or sickness funds covering different categories of workers, the coverage the

various funds provide is similar. Reimbursement coverage for the following is provided (3):

●

●

●

●

fees for general and special medical care;

fees for dental care;

cost of drugs, prosthetics, medical devices

or appliances, biological and radiological

exams;

cost of hospitalization in all public and

private nonprofit health institutions, and in

all private for-profit health institutions that

have made an agreement with the national

sickness funds and meet basic technical requirements (accreditation);
100 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

. cost of transportation by ambulance and

other means; and

● cost of surgical operations.

The patient’s copayment varies with the type

of care received. Although there are minor insurance fund differences for the rate of reimbursement, the following percentages are the

responsibility of patients covered by the General

●

●

●

●

●

The

Regime (3):

10 percent of expensive and essential drugs;

20 percent of medical and paramedical fees

and laboratory procedures in public or private nonprofit hospitals or hospital outpatient departments;

20 percent of hospital costs during the first

30 days;

25 percent of medical and paramedical fees

for care provided at the physician’s private

office or for a home visit; and

30 percent of other expenditures, such as

laboratory expenditures outside the hospital, drugs other than essential ones, outpatient dental care, eyeglasses, and small

medical devices-or appliances.

copayment often can be eliminated through

various exceptions recognized by the social insurance system. For certain procedures and tests

that are considered “high cost, ” for example,

computed tomography (CT) scans, the patient is

fully covered and the sickness insurance fund reimburses at 100 percent.

Many individuals belong to independent mutual aid funds or purchase private insurance to

cover copayment costs.14 If the patient is a

member of a mutual aid fund, care is provided

by the mutual aid society or reimbursement for

the copayment is provided through the mutual

aid fund.

Hospital Charges and Reimbursement

It is important to note the continued impact in

France of the principle of liberal medicine. Hospital charges in both the public and private sectors are calculated along two primary axes: 1) a

 14 In 1975, there were more than 8,000 mutual aid societies with a

membership of approximately 33 million. The number of societies

is constantly decreasing, but total membership is constantly increasing.

daily hospital charge for institutional service,

and 2) the quantity of different “medical actions” performed at the hospital by or under the

supervision of a physician. Compensation for

medical actions is provided in the form of honorariums for specific types of actions, either

directly to the individual physician or indirectly

through the institution.15 (Honorariums are discussed in more detail in the section on physician

reimbursement. )

The prix de journe (daily hospital charge) for

each public hospital and private nonprofit hospital in the public service is fixed in each Department by the Departmental Prefect, who is

advised on this matter by the Departmental director of health and social services. The prix de

journe is calculated for each hospital by dividing the sum of the institution’s real costs for the

previous year plus its deficit by the number of

bed days in that year, and then multiplying this

figure by the inflation-related index recommended by the Ministry of Health.

(Real costs of year N

Prix de journee = + Deficit of vear N) x Inflation=

for year N + 1

.

Number of bed days related

in year N index

The reimbursable daily hospital charge for

each private for-profit hospital is based on an

agreement or “convention” between the individual institution and the Regional sickness fund. If

a hospital is not conventioned, its reimbursable

daily charge is set by the Departmental Prefect,

and the charge is considerably lower than it

would be if the hospital were conventioned.

For the past few years, there has been an increasing interest in prospective reimbursement

as a method for cost containment. Several public service hospitals are now using prospective

reimbursement on an experimental basis.

15 In the case of salaried physicians working for public hospitals

(or in some nonprofit private hospitals), the principle of liberal

medicine that the patient pays the physician directly is not fully

respected. Honorariums for the physicians’ actions are paid to the

hospital, but the physicians themselves receive a set salary. Recent

legislation allows full-time salaried physicians to have a very

limited number of private beds, or perform certain medical acts on

a private patient basis. For these acts, they are directly reimbursed.
Ch. 6–Policy for Medical Technology in France ● 101

Physician Fees and Reimbursement

Fees for medical care provided by or under

the supervision of physicians are based on a system of valuation of medical actions. Assisted by

the Permanent Commission on the General Nomenclature of Professional Acts (Commission

Permanence de la Nomenclature Generale des

Acts Professionnels), the Ministry assigns a key

letter (i.e., C for consultation, K for medical

manipulation, B for laboratory, Z for radiology) and a coefficient or relative weight to every

medical action that must be done by or under

the supervision of a physician (16). Thus, for example, an appendectomy is worth 50K, whereas

an EKG is worth 12K (36). Monetary values are

assigned to the key letters, and these can and do

change over the years; the coefficients for specific medical actions, which presumably reflect the

action’s relative complexity, however, usually

remain constant.

Upper limits on physicians’ fees for office

visits and medical actions—the monetary values

assigned to the key letters—are determined either by conventions between physician groups

or individual physicians and the national sickness funds, or if no agreement is reached, by an

interministerial committee. As shown in table 6,

fees for physicians’ acts vary depending on

whether services are rendered through private

practice, private institutions, or public institutions. The key letters are assigned higher values

for physicians’ services provided in the public

sector than they are for services provided in the

public sector. The higher values in the private

sector reflect the inclusion in the physician’s

honorarium of certain material costs, which for

the public sector are included in the hospital’s

prix de journee.

Most private practitioners are conventioned

with the sickness funds.l6 Physicians who are

conventional are not supposed to charge more

than the conventional fees.17 In certain situations, specified below, the conventioned fees are

waived:

1. the physician holds certain categories of

university or hospital titles (e. g., the

Table 6.—Key Letters and Unit Values of Honorariums for Medical Actions

Performed by Physicians in the Public and Private Sectors in France (1977)
102 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

equivalent of assistant, associate, or full

professor, or clinical department head) or

has passed highly competitive specialty

exams;

2. the physician possesses medical authority

accrued through research, publications,

seniority, etc; or

3. a visit is excessively long or special treatment is provided.

For physicians who are in the first category, a

waiver is granted automatically if requested.

For those in the second category, a panel of

peers and representatives of the sickness funds

makes a judgment, which once attributed, is not

rescinded. Waivers for long visits or special

treatment are judged on a case by case basis. As

of January 1, 1979, 15 percent of conventioned

physicians had waivers for conventioned rates,

5 percent of general practitioners had waivers,

and 29 percent of specialists had waivers. The

fees of conventioned physicians who have waivers are not to be excessive and are to be set

“with good measure and tact” (25).

POLICIES TOWARD MEDICAL TECHNOLOGY

France is a country with a highly traditional

culture, and perhaps because of that, some ambivalence and skepticism underlie the attraction

of modern medical technology. For the most

part, however, technological innovation is

greatly appreciated and sought after. Furthermore, with the economic growth of recent decades, medical technology has diffused very rapidly. There is strong national interest in—and

financial support for—the development of

French-produced technology for domestic and

export use.

Numerous policies regulate the introduction,

diffusion, and utilization of medical technologies in France. Discussed below are government policies in the areas of R&D, regulation of

drugs and medical devices, health facilities and

equipment planning, and reimbursement.

Research and Development

An Undersecretary for Research, attached to

the Prime Minister’s office, is responsible for the

national publicly funded research budget. This

research budget, or research envelope (envelope

recherch~), includes the budgets of individual

public research institutions.18 Each public research institution is sponsored by the Ministry

most closely alined to the subject area of research, and each institution’s research funds

18The research envelop does not include all public research

funds. For example, it does not include military research and telecommunications research. The research envelope coordinated by

DGRST in 1977 represented 52 percent of all public research funds.

come primarily from the state’s budget to the

sponsoring Ministry. (See figure 1.)

Responsibility for coordinating, stimulating,

and monitoring all publicly funded scientific

and technical research rests with the General

Delegation for Scientific and Technical Research

(Delegation Generale a la Recherche Scientifique et Technique, DGRST), which operates under the authority of the Undersecretary for Research. Advised by the Advisory Committee for

Scientific and Technical Research (Comite Consultatif de la Recherche Scientifique et Technique), which is comprised of 16 prominent scientists from the public and private sectors,

DGRST defines and implements, either directly

or indirectly, any specific research policy in

France (2,14). Its basic purpose is to ensure that

short-term research goals are in accord with the

longer term objectives of the economic and social development plan and national priority

areas of interest.

DGRST attempts to coordinate collaboration

between public and industrial research groups.

In 1977, public funds accounted for 57 percent

of R&D expenditures in France, but 61 percent

of total R&D expenditures was utilized by private industry. The National Agency for the Promotion of Applied Research and Development

(Agence Nationale de Valorisation de la Recherche), a recently expanded agency under the

Ministry of Industry, stimulates innovation by

partially subsidizing prototypes and by assisting

in the subsequent development phase.
Ch. 6—Policy for Medical Technology in France ● 103

Figure I.–Simplified Organizational Chart for Public Research Efforts in France (1978)

CIRSTa

Prime Minister I

Interministerial

Committee on

Sponsoring Principal research

ministrvc

institutions

I

CEAe

Atomic Energy Commission

Industry IRIAf

Institute for Computer

Science Research

CNRS9

Universities National Center for

Scientific Research

Universities

1

Universities

INSERM h

Health National Institute

of Health and Medical

Research

Pasteur Institutei

II Technical and Scientific

Environment and Center for Buildings I

1

Central Laboratory of

Bridges and Roads I

Agriculture INRA’

National Institute

\ for Agronomic

Research I

Other ministries Various

institutions I

Undersecretary

I

DGRST m

I

I

General Delegation on I

Scientific and Technical

Research I
104 . Background Paper #4: The Management of Health Care Technology in Ten Countries

DGRST reviews and makes recommendations

concerning all public research institutions’

budgets to be presented to the Prime Minister

and the Interministerial Committee on Scientific

and Technical Research (Comite Interministerial

de la Recherche Scientifique et Technique,

CIRST) for annual budgetary approval. In addition to the budgets of individual public research

institutions, the research envelope includes

funds for DGRST to allocate to concerted actions (actions concertees) in areas of research

which DGRST has identified as having priority

(e.g., biomedical engineering, biology and myocardial function, computers and social sciences,

reproductive and developmental biology, nutritional and agricultural technology, immunology, organ transplants). Funds for concerted actions are given to university research groups, research units of the research institutes, and to industry (18).

The Coordinating Committee for Biomedical

Research (Comitee de Coordination a la Recherche Biomedicale, CCRBM) of DGRST supervises the activities of the various organizations that conduct or sponsor biomedical research. As shown in figure 1, the principal

public institutions are: 1) the National Institute

of Health and Medical Research (Institut National de la Sante et de la Recherche Medicale,

INSERM), 2) National Center for Scientific Research (Centre National de la Recherche Scientifique, CNRS), and 3) the universities. The

Pasteur Institute, a private, nonprofit foundation that also does biomedical research, is partially subsidized by the state.

INSERM and CNRS both allocate research

funds to their own in-house research laboratories and to research units at the universities;

both can also identify priority areas for research

and request research proposals that are called

programed thematic actions (actions thematique

programme, ATPs). ATPs are 3-year contracts

to support the operating expenses, equipment,

and temporary personnel for assistance with

items such as data collection or interviewing. 19

19 The salaries of reseachers at public institutions, who after a 4-

year probationary period are tenured employees, must be paid

with general research funds and cannot be met with funds for

ATPs.

The scientific merit of research proposals is

judged by different advisory commissions within INSERM and CNRS, depending on whether

the proposals are self-generated grant proposals

or are submitted in response to ATPs. INSERM

receives a certain amount of money to help subsidize ATPs from the National Sickness Insurance Fund. INSERM judges the proposals for

scientific merit, but if the ATP is based on a priority area of the National Sickness Fund, the

Fund makes the final decision about whether to

allocate funds.

Evaluation studies have been subsidized by

ATPs, concerted actions, and the sickness

funds. Most evaluation studies conducted are

either clinical trials or efficacy studies of one

form or another. A recent reorientation to include cost effectiveness is illustrated both by the

inclusion of cost-effectiveness studies as an

INSERM research priority and by the allocation

of ATP funds to evaluate radiologic examination methods and determine their cost-effectiveness ratios (20).20

The state and its central policy guidelines

have played an important role in scientific development since the creation of the Fifth Republic. A 10-year research policy (1980-90) has been

proposed and is now (January 1980) being refined and elaborated by scientists. Among the

various long-term priority areas that have been

identified are biomedical technologies (microbiology, genetics, biomedical engineering), medical care evaluation research (nutrition, medication), and health economics (19). For the past

few years, France’s total public and private investment in R&D has been 1.8 percent of the

gross domestic product. There is a plan to increase the public sector’s investment in R&D
Ch. 6—Policy for Medical Technology in France ● 105

during the 1980’s, so that the country’s total

public and private investment in R&D amount

to 2.2 percent of the gross domestic product—

the same percent as in West Germany and Japan

at present.

Evaluation and Regulation of Drugs

and Medical Devices

Medical technology in France is regulated

directly, indirectly, or not at all, depending on

the technology in question. New medical procedures are not regulated at all, because one of the

principles of liberal medicine which is still respected in France is that the physician is free to

prescribe or treat as he/she wishes. If a new procedure is not in the nomenclature of medical

acts reimbursed by the sickness funds, however,

reimbursement to the patient for the procedure

may not be provided. (In some cases, though, a

new procedure can be integrated into an existing

category of acts for which reimbursement is

provided. )

Medications are regulated both directly and

indirectly. Decisions regarding which drugs can

be sold in France are made with the assistance of

expert commissions by the Directorate of Pharmacy and Medications (Direction de la Pharmacie et du Medicament) at the Ministry of Health.

Drugs to be sold in France are required to meet

fairly stringent standards of experimentally

demonstrated efficacy, safety, etc. A recent legislative change by the European Economic

Council (EEC) may eventually provide an alternative for market approval: If a drug has been

approved for sale in any two EEC countries,

then the other EEC countries are expected to

grant permission fairly automatically (26,33,

34). This legislative change will not actually be

enforced for a few years.

Although there are no advertising or price

restrictions on drugs that have been approved

for sale (including most over-the-counter

drugs), such restrictions are imposed on drugs

that are included on the reimbursable list of the

Social Security System. In order to be placed on

this formulary, a new drug must be shown to be

more efficacious, have fewer side effects, or cost

less than another drug which is already on the

formulary. Once the drug has met these criteria

and been placed on the formulary, its price is set

by the Ministry, and advertising must conform

to certain restrictions. At the same time,

however, the market for the drug is greatly

expanded.

Medical devices are not regulated for efficacy

before being placed on the market. Sometimes,

however, the evaluation of a new medical device is stimulated by the National Sickness Insurance Fund. Since the Fund provides reimbursement for medical devices, it can decide to

provide reimbursement for a limited quantity of

a new device on the condition that INSERM or a

university group be permitted to evaluate the

new device’s efficacy. This evaluation provides

information that can be used in deciding whether or not the device should be placed on the list

of devices for which reimbursement will be provided (47). To obtain reimbursable status, a device must be shown to be efficacious. The evaluation of medical devices that is required by

Social Security can be considered an indirect

form of regulation.

Health Facilities and Equipment

Planning: The Carte Sanitaire21

The carte sanitaire, the system of health facilities and services charts that is used for health

planning, was created by the Hospital Reform

Act of 1970 (35). Since 1972, various decrees

and circulars have detailed how the system

should function (see, e.g., 4,5,6,7,8,10,26,27,

28,29,30,31,34,35). Creation of the carte sanitaire was aimed at stimulating reorganization

and equalization of the distribution of health

care facilities and services. By regulating their

expansion and redistribution, the carte sanitaire

regulates the availability of resources for geographic areas and population groups. Expansion

or creation of services must be approved regionally or nationally to ensure that growth relates

to need.

‘*Carte sanitaire, the French term for the system of health facilities and equipment charts that are used for health planning, is the

term used to refer to that system throughout the remainder of this

chapter.

68-095 13 - 80 - 8
106 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

A method for needs determination is established nationally. The Ministry of Health, advised by the National Commission on Medical

Equipment (Commission Nationale de l’Equipment Sanitaire), recommends norms for equipment/population ratios. 22 The charts that constitute the carte sanitaire are prepared on either

a population or specific equipment basis by the

Regional Prefect, and they list existing and authorized-for-purchase equipment and locations,

population projections, and where applicable,

the discrepancy between actual supply and projected supply and projected need.

The Ministry of Health reviews and approves

the charts prepared regionally; except in specified cases, however, he/she leaves actual needs

determination (and the local request and approval process) to the Regional and Departmental authorities. Health facilities planning for individual Regions and districts within the Region

is coordinated by the Regional Prefect, who is

assisted by the sectorial interhospital group, the

Regional interhospital group, and the Regional

Commission on Medical Equipment (Commission Regionale de l’Equipment Sanitaire).23 Interregional planning and decisionmaking for

certain facilities or equipment that are considered to be assessed best from a national perspective are the responsibility of the Ministry of

Health advised by the National Commission on

Medical Equipment. The carte sanitaire must be

reviewed by the Ministry each time a new economic and social development plan is being prepared, about every 5 years. At the initiative of

the Ministry or Regional Prefect, it can be reviewed at other times, as well.

The Ministry of Health has issued a list of

“heavy equipment” (equipements lourds), and

22 These have been established for surgical, medical, obstetrical,

and extended-care-facility beds, and also for certain medical technologies.

23 The members of the Regional Commission on Medical Equipment are recommended by the Ministry and include representatives from various organizations and institutions who are directly

or indirectly involved with hospital care. These include representatives from the Regional and Departmental government agencies,

from elected representatives, from private practitioners, from both

the public and private hospital sectors, from the medical university, from the sickness funds, etc. The membership of the National

Commission on Medical Equipment is analogous to that of the Regional Commission.

each of the specific medical technologies on this

list has its own chart, and usually an index of

need. Authorization for acquisition from the

Minister of Health, the Regional Prefect, or the

Departmental Prefect, depending on the technology and type of facility, is required for any

item on the list.24 In the case of a public institution, if authorization for purchase of an item is

granted, the state may—but is not obliged to—

subsidize part of the purchase cost. If authorization is not granted, purchase by a public or private institution would be illegal .25 The cost of

unauthorized equipment could not be included

in a public or private hospital’s capital or operating costs, nor could it be included in calculating a public hospital’s prix de journee,

At the present time, there are 11 technologies

on the “heavy equipment” list of the carte sanitaire that applies to both public and private institutions. 26 They are (modified May 1976) (31):

1.

2.

3.

4.

5.

6.

7.

8.

9.

100

11.

autoanalyzers,

heart-lung machines,

hyperbaric chambers,

linear accelerators with sources greater

than 10 MeV (million electron volts),

radiotherapy machines: cobalt bombs and

linear accelerators with sources less than

or equal to 10 MeV,

scintillation cameras,

radioisotope scanners,

artificial kidneys,

information-processing equipment whose

cost exceeds 150,000 francs (13,530)

27 for

purchase, or 5,000 francs ($1,175) per

month for rental and operation,

laser photocoagulators, and

CT scanners.

ent from that for institutions in the public hospital service. When a

private sector institution requests approval for equipment acquisition, replacement, or expansion, the appropriate approval body

must respond within 6 months of the demand. Otherwise, approval is granted by default. Public service hospitals are granted a 6-

year authorization, whereas for-profit hospitals are granted a 2-

year authorization.

25 Enforcement of the prefect’s decisions is the responsibility of

the Departmental or Regional medical officer.

26 Additional technologies are included on the heavy equipment

list that applies to the private sector.

27 For conversion of French francs to U.S. dollars, the exchange

rate used throughout this chapter was 4.25 francs = $1.00 (U.S.).
Ch. 6–Policy for Medical Technology in France ● 107

The Regional Prefect has jurisdiction for autoanalyzers, heart-lung machines, hyperbaric

chambers, artificial kidneys to be used only for

acute kidney failure, and information-processing equipment in private facilities. All equipment in public facilities, 28 excluding CHRS and

CHUS, are in the jurisdiction of the Departmental Prefect. The remaining items are the responsibility of the Minister. The Minister is advised

with respect to items in the private sector by the

National Commission on Medical Equipment.

Indexes of need are recommended by the National Commission on Medical Equipment. To

help determine an index, the Commission may

call on experts, including physicians and manufacturers, in the specific area of interest. Given

the diverse representation and expertise of the

National and Regional Commissions, indexes of

need are presumably unbiased or balanced and

based on the latest available information and

methodology for needs determination. If the indexes are perceived by the General Directorate

of Health or others at the Ministry of Health to

be inadequate or inappropriate, however, efforts to revise them are initiated.

The carte sanitaire can affect the capital expenditures of an institution and determine the

availability of specialty units and beds, and indirectly, personnel. By explicitly indicating that

certain districts are “underequipped” the carte

sanitaire can and has induced health costs. The

system also brings to light the fact that certain

districts are “overequipped. ” Until December

1979, the carte sanitaire regulations allowed the

appropriate authorities to close down “unneeded” beds and heavy equipment—for the private sector. In practice, however, little if anything, was done to redistribute equipment from

“overequipped” districts.29 The power to close

down unneeded facilities has now been extended

to public hospitals. Individuals responsible for

the carte sanitaire at the Ministry anticipate that

this change, combined with the present emphasis on health care cost containment, will provide

the impetus to enforce this regulation.

The Hospital Reform Act creating the carte

sanitaire was passed in 1970. In a circular on

July 13, 1976, however, the Minister indicated

that the carte sanitaire’s regulations were not being taken seriously and were therefore having

no apparent impact (12). At the time of the circular, the carte sanitaire system had been functioning for only 3 years, and its work had been

mostly descriptive and hardly at all normative.

Since then, the situation has been improved by

more concerted efforts. The latest available data

for the private sector 1977 (43) indicate that not

only are fewer beds being requested, but that a

lower proportion of the requests are being authorized. What is important to observe, however, is the lag between the declaration of policy, the presumed implementation of policy via

regulatory mechanisms, and the expected impact of the policy.

Reimbursement and Medical

Technology

Reimbursement for professional fees and

technology charges is provided for differently in

the public and private sectors. For public service

institutions, technology capital and operating

costs are included in the hospital’s prix de journee. For private facilities and practitioners, part

of these costs is included in the reimbursable

daily hospital charge and part is included in the

honorarium fee.

As has already been mentioned, the percentage of reimbursement to the patient depends on

the technology in question. More complex technological procedures engender a higher rate of

reimbursement, i.e., the patient pays less or

nothing at all. Prior to the use of certain highcost procedures, authorization should be obtained from the sickness funds. If authorization

is denied, the patient is liable for the cost. (The

mechanism of prior authorization is discussed

below in conjunction with cobalt therapy. )
108. Background Paper #4: The Management of Health Care Technology in Ten Countries

SPECIFIC TECHNOLOGIES

As described in the preceding section of this

chapter, France has numerous policies that regulate the introduction, diffusion, and utilization

of medical technologies. Some of these policies

are fairly recent, and it is too early to assess

their impact. The following examples of experience with specific medical technologies, however, provide insights into the existing relationship between the policies and the technologies.

CT Scanners

A highly expensive capital investment, the

CT scanner was subject to regulation by the

carte sanitaire even before it was specifically

added to the list of heavy equipment by the

decree of September 1975 (31). Because of the

computer component of the machine, the CT

scanner was regulated as technology in the category of information-processing equipment exceeding specified cost limitations. This category

was in the jurisdiction of the Prefect. As soon as

the Minister placed the CT scanner on the list of

heavy equipment, however, she indicated her

intention to obtain ministerial jurisdiction for

this technology. Ministerial jurisdiction for CT

scanners in the private sector was obtained

shortly thereafter (32).

The first CT scanner in France was purchased

with assistance from the Ministry of Health by

the Public Assistance Hospital of Marseilles.

That purchase was made in March of 1975, before a CT scanner facilities chart and government-recommended indexes of need had

been issued.

The current index of need, one CT scanner

per 1 million inhabitants, is a combined index

that includes both head and total body scanners.

This index was agreed on by an expert committee of renowned physicians, researchers, and

manufacturers called together by the National

Commission on Medical Equipment. The committee recommended that scanners be approved

only for institutions associated with research

units; it also recommended that brain scanners

be approved only for those facilities with neurosurgery departments and that body scanners be

approved only for facilities with clinical oncology departments.

The rate of diffusion of CT technology, as

controlled by the index of need, was affected by

an important factor—the desire to foster the

development of a French-fabricated scanner.

The scanner had been included in a priority area

for development identified by DGRST: computer science technology. In addition, government

subsidies for developing CT equipment had

been provided to the French manufacturer CGR.

The index of one scanner per million inhabitants

was chosen so that there would not be a rapid

saturation of the CT market and room would be

left for CGR to compete. The index was not

medically restrictive, because the relative diagnostic value of the scanner had not been fully

established. The first perfected CGR scanner

was installed in January 1977.

Using the current index of need, France

should have 54 CT scanners by 1983. As of January 1, 1979, 30 CT scanners (20 head, 10 body)

were installed in France, and 26 more (13 head,

13 body) have been authorized (43).30 Nine of

the twenty-two Regions do not have scanners,

although they have been authorized, and Corsica’s population size does not justify one. Other

Regions have attained their limit and would like

more.

The high level of interest in the diagnostic

value of the scanner has stimulated the awarding of grants and contracts through INSERM,

the National Sickness Fund, and DGRST for research on the value of this technology to medical decisionmaking. The impetus and efforts to

evaluate a medical technology in terms of the

impact of the information it provides are a

rather new phenomenon in France, but one

which has persisted. When the National Commission on Medical Equipment was requested to

reassess the index of need in light of the inment subsidies have been installed since 1975 (43), Most of these

scanners are in private (for-profit and nonprofit) establishments;

some are prototype machines for evaluation, All 15 were authorized.
Ch. 6—Policy for Medical Technology in France ● 109

production of body scanners, researchers working on the subject of diagnostic value of the

scanner were also invited to participate. Further

evidence of the persistence of the phenomenon

was the recommendation that total body scanners be installed where research could be conducted to evaluate the machine. Requests for

proposals (ATPs) from INSERM followed this

requirement. In addition, the National Sickness

Fund is currently supporting several scanner

evaluation projects.

Requests for scanner purchase authorizations

have been coming in more slowly than expected

by the Ministry and CGR. The supposition is

that the political problems involved in determining which radiology service in a Region or

hospital center gets a machine have slowed

down the process. In the United States, each

hospital within a medical or hospital center that

includes several hospitals usually has independent administrative authority; in France, though,

a hospital center is one jurisdictional entity.

Since each hospital can have its own radiology

department, or several smaller departments,

each of which is headed by a chief of radiology,

reaching agreement as to which radiology department within the hospital center will get the

machine can sometimes be difficult. This problem is thought to have affected the requesting

process.

The CT scanners that have been installed are

operating at capacity. Inpatients have an average delay of 3 to 4 days between the request for

a scan and the performance of the procedure.

For outpatients, the delay is closer to 4 weeks.

All scans are reimbursed by Social Security at

100 percent, because they are considered highcost procedures.

Whether the scanner is being utilized appropriately is not known. Most physicians perceive

a need for more installations, however, and this

perception, combined with CGR’S capacity to

supply the demands, fosters the expectation that

the present index will be revised with the next 3

or 4 years.

Renal Dialysis

Research on renal dialysis apparatus was going on in France in the late 1940’s, but the

clinical use of hemodialysis machines did not

begin until 1965. Since kidney disease fell into

the category of chronic diseases, Social Security

funds covered the entire cost related to the treatment. Considerations of the patient’s ability to

pay, therefore, were not a determinant of the

choice of patients for treatment. This choice was

left—and remains—entirely up to the clinician.

The very early indicators of need for dialysis

equipment, which affected the diffusion of this

technology, were based on the availability of

trained professionals and the purchase of equipment, as well as the increasing prevalence of

kidney failure. These early indicators came

from a group of experts representing INSERM,

specialists in nephrology, and the Ministry of

Health. The goal in the mid- to late 1960’s was

to have enough renal dialysis facilities to treat

10 new cases per 1 million inhabitants. The

treatment goal was revised in 1968, for the sixth

economic and social development plan (1971-

75), to 30 cases per million. The current goal, 50

new cases per 1 million inhabitants, has been

achieved in practice, and the present intention is

not to increase the number of facilities. The demand for facilities should start leveling off by

1985 because of advances in nephrology that are

expected to prevent chronic renal failure (39).

The carte sanitaire includes renal dialysis

machines as heavy equipment that must meet

interregional planning objectives (11). The

Ministry of Health has jurisdiction for the carte

sanitaire for dialysis machines used for chronic

renal failure in hemodialysis centers; and the

Regional or Departmental Prefect has jurisdiction for machines used in such centers to treat

acute renal failure. The current carte sanitaire

index prescribes 30 dialysis machines per 1 million inhabitants for chronic renal failure (24).

(This includes machines to train people for

home dialysis, and surveillance to ensure that

machines are being used for this purpose is

called for. ) That index is qualified by an additional index that guarantees at least five machines for each CHR. This means a possible in-
110 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

dex of 35 machines per 1 million inhabitants.

The directives specify the desired minimum

number of machines per center (eight), and they

assign the power to the Region to determine the

locale so that patient convenience is planned

for. Each machine is supposed to be used to treat

four patients.

Although the carte sanitaire does not include

home dialysis machines, present policy is to encourage the expansion of home dialysis and kidney transplants when medically and socially appropriate. The expectation is that stopping the

expansion of dialysis machines in centers will increase the use of home dialysis and transplants.

The goal is to treat approximately 50 percent of

new cases at centers and to treat the other 50

percent by other methods (e.g., home dialysis,

peritoneal dialysis, transplants, etc. ) (39). A

ministerial circular in January 1977 specified a

goal of 25 percent home-dialyzed patients

among chronic renal disease patients (13).

Statistics on the prevalence of dialysis use and

related information are maintained by the Division of Hemodialysis and Transplantation within the General Directorate of Health at the Ministry. This Division is advised about hemodialysis equipment by the Commission on Hemodialysis and Transplantation. There are 151 hemodialysis centers in France (9,13,43). As of 1977,

there were 7,096 individuals with chronic renal

failure on dialysis (9,13,43). Within this group,

83.4 percent (5,920 persons) were treated at the

151 dialysis centers, and 16.6 percent (1,176)

were on home dialysis. The percentage of patients on home dialysis tends to vary inversely

with the rate of transplant operations. Furthermore, this percentage varies in different parts of

the country: In the Paris Region, for example,

38 percent of dialyzed patients are on home

dialysis, whereas in the Rhones-Alpes Region,

only 9.8 percent are. Approximately 650 kidney

transplants were performed in 1978 (39). Data

on the number of machines to treat acute renal

failure were not available.

INSERM supports several research projects

on the subject of the treatment of chronic renal

failure. One collaborative venture, originally

supported by the Ministry of Health, the National and Paris Region Sickness Insurance
Ch. 6—Policy for Medical Technology in France ● 111

Since the charges for coronary bypass surgery

are the physician’s honorarium as reflected by

the total number of K’s, in fact, neither the

Ministry nor the sickness funds can even provide accurate data on the number of procedures

performed.

The general belief among physicians seems to

be that coronary bypass surgery is used cautiously, and the rate of coronary bypass surgery

seems to support that belief. The rate of coronary bypass surgery in France, about 19 procedures per million inhabitants, is far lower

than that in the United States, about 370 per

million inhabitants (21). One possible reason for

the lower rate in France is the channeled access

to the surgery there. Referrals for surgery are

made by cardiologists only after treatment

failure with medications. Generally, surgery is

prescribed only for those patients, usually fairly

young (35 to 45 age group), who have had certain types of myocardial infarctions or for

whom medications have not been effective in

treating cardiac pains. The rate of surgery has

been increasing (21), however, and one cannot

predict if the rate has reached a plateau or will

continue to increase.

Cobalt Therapy

The first cobalt treatment machine was installed in France in 1955. In the beginning, cobalt machines were mostly in the private sector.

Figure 2 illustrates the rate of diffusion of radiotherapy equipment (i.e., cobalt bombs and

small linear accelerators combined).

The carte sanitaire specifically lists linear accelerators and cobalt bombs as heavy equipment needing special approval (31). Both are

subject to approval of the Ministry of Health.

The first indexes of need were one linear accelerator and five cobalt treatment machines per 1

million population. In May of 1976, these were

revised to reflect utilization patterns. The present indexes are one large linear accelerator

(capable of more than 10 MeV) and five cobalt

bombs and/or small linear accelerators (capable

of 10 MeV or less) per 1 million inhabitants.

The carte sanitaire for radiation therapy

made explicit in three Regions the unmet need

for the large linear accelerators. With the reclassification of small linear accelerators into the cobalt bomb category, there is a small excess of

this category of equipment (278 authorized machines instead of 263) (43). This excess means

that the Ministry probably will not approve

more machines in this category unless a situation arises in which: 1) a population-based need

for additional equipment develops (which is

very unlikely), or 2) there is a need for replacement of existing equipment.

The replacement clause of the law pertaining

to the carte sanitaire does allow replacement of

a cobalt bomb with a small linear accelerator.

Though some regard the linear accelerator as

therapeutically preferable, in order to impede

rapid replacement of cobalt bombs, the Ministry has qualified the clause to allow replacement

with linear accelerators only in establishments

considered “heavy centers, ” i.e., centers that

have a wide range of high-energy equipment.

This action could foster more concentrated radiotherapy services, which would be more inconvenient for patients having to travel longer

distances for treatment.

For each piece of radiotherapy equipment it

possesses, every facility has an authorization for

ownership from the Ministry of Health. If an institution does not really use its machine, or uses

it infrequently, as may be the case for some private clinics that had cobalt machines early, it

sells its machine and associated authorization to

another institution within the health services region or Department. This procedure is not one

that the Ministry recommends, but it is not really illegal and is tacitly accepted.

In addition to the aforementioned measures

for regulating the acquisition and existence of

this technology through the carte sanitaire,

there does exist a Social Security System mechanism which presumably is intended to regulate

its use. When radiation treatment is prescribed,

a request for prior authorization of the treatment is submitted to the sickness fund. If a

response is not provided within 10 days, tacit

approval is implied. (Although prior authorization is supposed to be granted before treatment

is provided, in practice it is often granted after
112 . Background Paper #4: The Management of Health Care Technology in Ten Countries

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40

20

Figure 2.—Diffusion Curve for Installed Cobalt Machines and Linear Accelerators < 10 MeV in France

(1955-78)

of

hines

treatment. ) In the event that authorization is

denied, the patient who has received treatment

is liable for the cost and there is no reimbursement. It was not possible to obtain data on how

frequently reimbursement is denied. Few documents discuss the procedures for prior authorization, and the procedures are not often mentioned by physicians as being part of the treatment/reimbursement process. This suggests that

prior authorization is not widely perceived as a

powerful regulatory mechanism. Whether its

weakness results from inadequate staff at Social

Security to fully review authorization requests,

or from a small proportion of inappropriate requests, cannot be determined on the basis of

available data.

Several years ago a study commissioned by

the Ministry produced results that indicated to

the Ministry that the coefficients for radiotherapy (Z key-letter) were inflated (45). Despite

criticisms of this study, the coefficients were reduced. Radiotherapy is considered a high cost

therapeutic mode, and the sickness insurance

funds cover the cost completely.

At the present time, possible changes of the

carte sanitaire indexes for radiotherapy equipment are under discussion. The discussion has

arisen for two reasons. First, preparation of the

eighth economic and social development plan

requires review of the carte. Second, the experi- “

ence of using the linear accelerators, large and
Ch. 6—Policy for Medical Technology in France ● 113

small, for several years has changed the treatment protocols again and may have altered the

equipment needs.

Automated Clinical Laboratories

The first autoanalyzer installed in France was

a Technicon product installed in 1959-60. Since

1972, autoanalyzers have been included on the

heavy equipment list of the carte sanitaire. This

equipment is under the jurisdiction of the Regional or Departmental Prefect. For the carte

sanitaire, autoanalyzers are defined as bioassay

equipment capable of performing 250 analyses

or exams per hour, or more than 5 analyses or

exams simultaneously. The equipment can be

one apparatus or an assembled apparatus of

several components.

The index for determination of need is not

based on population, but based on the volume

of tests performed by the laboratory. A clinical

laboratory must perform a total number of tests

valued at a minimum of 2 million B (key-letter

category for laboratory honorariums) in order

to purchase automated equipment. This carte

sanitaire index is for public and private hosCONCLUDING REMARKS

The carte sanitaire system has been operational for close to a decade. Experience has improved judgment and clarified the problem

issues. With the present preparations for the

eighth economic and social development plan,

and the concomitant review of the carte sanitaire, two major issues are being raised at the

Ministry of Health.

One issue is revision of the authorization

process. The 1970 law establishing the carte

sanitaire and the many decrees and circulars

that describe, define, and redefine its procedures

have created a system that is bureaucratically

heavy, confusing, and at times counterproductive. Under the existing authorization process,

for example, a private institution and a public

institution (other than a CHR or CHU) that

want a heart-lung machine would submit their

requests to, respectively, the Regional Prefect

pital laboratories, as

laboratories.

Following the 1972

well as for freestanding

decrees identifying heavy

equipment, the Ministry of Health requested an

inventory of existing equipment. Data concerning the distribution of autoanalyzers in 1973

should therefore be fairly accurate. Any subsequent figures, however, underestimate the number of autoanalyzers. This is because the Prefect’s approval for purchase is required only if a

laboratory wants to purchase a large machine,

or wants to obtain several small ones simultaneously for integration into a unified apparatus. It

is not uncommon—and according to some, it is

quite frequent—for a laboratory to build up sophisticated apparatus by purchasing small independent components in a sequential and

planned fashion. In this manner, a laboratory is

able to obtain a more sophisticated and powerful machine, while avoiding government regulation and thereby not having its equipment appear in the Ministry’s statistics. Even when a

technology’s diffusion is closely regulated, it appears, ingenuity can sometimes circumvent the

regulatory process in a very legal fashion.

and Departmental Prefect. Each Prefect could

make a decision independent of the other’s,

thereby undermining the intended coordination

of the carte sanitaire. To improve overall coordination, some individuals at the Ministry

want to have one decisionmaker for a given type

of equipment in both private and public institutions.

The second major issue being raised at the

Ministry is revision of the carte sanitaire indexes. Health care providers consider many of

the indexes overly restrictive. Individuals with

responsibility for the carte sanitaire at the

Ministry of Health consider it advantageous not

to revise the population-based indexes for

equipment, 32 however, until there is better information about the use and the utility of the

equipment.

32 Other than the scintillation camera.
114 ● Background Paper #4: The Management of Health Care Technology In Ten Countries

The carte sanitaire system has the potential

for ensuring that the French population’s health

needs are being met and that health care facilities are not overabundant. Its early effects are

now being observed, but it is too soon to say

whether the system will be effective over a

longer period. As noted above, because of the

sanctioning process, the carte sanitaire system

does have loopholes. Further, it appears that

stricter enforcement of the carte sanitaire authority is necessary to the correct the system’s

functioning. Finally, it should be noted that although the carte sanitaire was introduced to

foster coherent health services planning and to

redistribute services so that the needs of local

populations are met, in some cases the carte

sanitaire can be counterproductive. The concentration of facilities at technology heavy centers

that have evolved in part because of some of the

criteria for authorization, for example, may

limit some patients’ access to these facilities by

necessitating their having to travel farther for

treatment. It is too early to say whether the

carte sanitaire system has had an impact on

CHAPTER 6 REFERENCES

1.

2.

3.

4.

5.

6.

7.

8.

9.

10.

11.

12.

13.

14.

Bachelot, F., Cancer et Radioth~rapie (Paris: Firmim-Didot, 1977).

Blanpain, J., National Health Insurance and

Health Resources: The European Experience

(Cambridge, Mass.: Harvard University Press,

1978).

Bridgman, R. F., “Medical Care Under Social

Security in France,” International journal of

Health Seruices 1(4):331, November 1971.

Bulletin Officiel du MinistZre de la Sant2 (Paris),

circular 85, Feb. 26, 1973,

, circular 159, May 2, 1973.

, circular 260, July 16, 1973.

circular 261, July 16, 1973.

j circular DGS/52/PR, Feb. 2, 1974.

f circular 204, June 12, 1974.

, circular 530, Nov. 3, 1975.

circular 495, PC2, June 15, 1976.

; circular 592, PC2, July 13, 1976.

circular 21, Jan. 19, 1977.

Burg, C., “The Organization and Support of

Biomedical Research in France,” in Medical Rehealth care costs. These costs have been rising at

the rate of 17 to 20 percent each year for the past

few years. Whether efforts to limit the supply of

available technology resources will stem the increases, however, is still not known.

The carte sanitaire is a good example of

French social laws. The policy is simple, clear,

and flexible: Regionalization of health services

planning, indexes of need based on the consensus judgments of experts, required review of the

indexes. The regulations, by contrast, are both

very detailed and subject to frequent modifications and additions, which often makes their

implementation complex bureaucratically. As

the carte sanitaire illustrates, the legislative

system’s flexibility in terms of permitting frequent changes can at times lead to a situation

that is confusing and somewhat less rational

than the rational policy which fostered the legislation. The result is a system that has many

positive attributes that are counterbalanced by

defects and other problems.

15.

16.

17.

18.

19.

20.

search Systems in Europe (Amsterdam: Ekevier,

1973).

Ceccaldi, D., Les Institutions Sanitaires et Sociales 7th cd., vols. 1 & 2 (Paris: Edition Foucher,

1979).

Centre d’Etude des Revenus et des Coats (Center

for the Study of Revenue and Costs), Le Coik de

l’1-lospitalisation, vol. 35-36, 1977; VO]. 45,

1978; vol. 46, 1978 (Paris: Documentation Fran-

~aise, 1977-78).

Comet, D. (cd.), Legislation des I%pitaux Publics (Paris: Editions Berger-Levrault, 1974).

D616gation G@n@rale 3 la Recherche Scientifique

et Technique, DGRST (General Delegation on

Scientific and Technical Research), L.e Progr&

Scientifique, No. 196 (Paris: Documentation

Fran~aise, September/October 1978).

Le Progr& Scientifique, No. 202 (Paris:

Documentation Fran~aise, September/October

1979).

, “France Recherche et Industrie” (Paris,

1975) (updated by personal communication).
Ch. 6—Policy for Medical Technology it France ● 115

21.

22.

23.

24.

25.

26.

27.

28.

29.

30.

31.

32.

33.

34.

35.

36.

37,

38.

39.

40.

Dubost, C., HGpital Broussais, Paris, personal

communication, May 1979.

Dupeyroux, J. J., Droit de la St?curitZ Sociale

(7th cd., Paris: Dalloz, 1977).

Institut Nationale de la Sant~ et de la Recherche

M@dicale, INSERM (National Institute of Health

and Medical Research), ATP: 70-78-102, Paris,

1978.

]ournal Officiel de la R2publique Fran~aise

(Paris), Arr~t~, Aug. 28,1973.

, Arrf!t6, Mar. 30, 1976.

, Decr6t 72-1062, Nov. 21, 1972.

, Decr@t 72-1068, Nov. 30, 1972.

Decr6t 73-54, Jan. 11, 1973.

~ Decr6t 73-1042, Nov. 15, 1973.

Decr6t 74-569, May 17, 1974.

~ Decr6t 75-883, Sept. 23, 1975.

Decr6t 76-844, Aug. 24, 1976.

; Decr6t 78-191, Feb. 9, 1978.

Decr6t 78-988, Sept. 28, 1978.

; Loi 70-1318, Dec. 31, 1970.

, “Nomenclature G6n6rale des Actes Professionals, ” 1979.

, Ordonnance 58-1198, Dec. 12, 1958.

, Ordonnance 58-1199, Dec. 12, 1958.

Legrain, M., H6pital de la Salpetri@re, Paris,

personal communisation, March 1979.

MinistZre de la SantE (Ministry of Health), Annuaire Statistique de la Sant@ et de /’Action Sociale (Paris, 1978).

41.

42.

43.

44.

45.

46.

47.

48.

Annuaire Statistique de la SantZ et de

l’Actio; Sociale (Paris, 1979).

et al., Les Comptes de la Santi7: M@tllodes e; Series 195o-I 977, Economique et Sant@

(vol. 8, Paris: Documentation Fran~aise, 1979).

, Direction Generale de la Sant@ (General

Directorate of Health), Sous-Direction de la Prospective et da la Carte Sanitaire (Subdivision on

Planning and the Carte Sanitaire), Paris. personal communication, 1979.

, Les Etablissernents Sanitaires et Sociaux: Le Rapport Ggni%al 1977-1978 (paris,

1978),

, Prix de Reuient de la Lettre Cle en Radioth-apie (Paris, Mar. 2, 1973).

, SantZet SZcurit~ Sociale, Tableaux 2972

(Paris: Documentation Fran~aise, 1973).

Prieur, C., former Director, Caisse Nationale de

l’Assurance Maladie, CNAM (National Sickness

Insurance Fund), Paris, personal communication, May 1979.

U.S. Department of Health, Education, and

Welfare, Social Security Administration, Office

of Research and Statistics, Social Security Programs Throughout the World: z!v5, research report No. 48, DHEW publication No. (SSA) 76-

11805 (Washington, D. C., 1976).
7.

Technology Assessment and

Diffusion in the

Health Care Sector

in West Germany

Graduate

Karin A. Dumbaugh

Program in Health Policy and Management

Harvard School of Public Health

Cambridge, Mass.
Contents

Page ‘

West Germany: Country Description. . . . . . . . . . . . . . . . . . . . . . .............119

population . . . . . . . . . . . . . . . ● . . . . . . . . . . . . . . . ....................119

Form of Government. . . . ..... .. .*.**.. . 119

Nature of the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........119

 The Health Care System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............120

Health Care Institutions and Providers . .............................120

Health Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............120

Federal Financing of Capital Investments in Hospitals . . . . . . .............123

State Planning for Hospital Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .124

Mechanisms for Managing Medical Technology. . .........................125

Research and Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......126

Support for Evaluation Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....128

Regulation for Safety and Efficacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .129

Health Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................129

Utilization Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............130

Fee and Rate setting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , ............130

Reimbursement of Hospitals . . . . . . ...............................130

Use of Evaluation Results in Managing Medical Technology . . . . . . . . ......130

Specific TechnoIogies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............130

CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............131

Renal Dialysis. . . . . . . . . . . . . . ● **.*** ● *..***, ● ****.,* ● ****.** ● * * * 132

Coronary Bypass Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......134

Cobalt Therapy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............135

Clinical Laboratory Testing and Automation . ........................135.

Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............136

Chapter 7 References . . . . . . . . .****** ● .*****. ● ******* ● *.****. ● *.***** 136

LIST OF TABLES

Table No. Page

1. Expenditures of Sickness Funds in West Germany as a Percentage of GNP .122

2. Annual Percentage Increases in Total Expenditures by Sickness Funds in

West Germany . . . . . . . . ● ...,  123

3. Grants and Contracts in the Areas of Biomedical and Health Services Research

in West Germany . . . . . . . . . . . . . . . . . . . . . .

Distribution of CT Scanners in West Germany

● ** ,*,*****.*.* . .......127 .

4. ● ☛☛☛☛☛☛☛ ,...4.. ● *.**** . 131
7.

Technology Assessment and Diffusion in

the Health Care Sector in West Germany

Karin A. Dumbaugh

Graduate program in Health Policy and Management

Harvard School of Public Health

Cambridge, Mass.

WEST GERMANY: COUNTRY DESCRIPTION

Population

In 1977, approximately 61.4 million people

lived in West Germany (including West Berlin).

Of these, roughly 48 percent were males. About

54 percent of all males and 29 percent of all

females were employed. The vast majority of

workers, roughly 97 percent of them, were not

self-employed, but working for an employer or

a relative (l).

The population pyramid reflects a very low

birth rate. As a result of this birth rate, the

population of West Germany has declined

slightly since 1974, and so has the number of

people in the labor force. The government estimates that in 1979 about 20 percent of the population was over 65 years of age and this percentage is expected to remain constant for the next 5

years. The male/female population ratio for

those over 55 years of age shows a substantial

surplus of females, resulting from two World

Wars, In terms of health care services requirements, increasing utilization of services by the

aging, predominantly female population is expected to continue in the future.

Form of Government

West Germany is a federal republic with 10

States (Lander) and West Berlin. These 10 States

and West Berlin have a fair amount of autonomy in terms of educational and health policies.

Health care policy is determined more by sickness funds (Krankenkassen), which are nongovernmental associations, however, than by the

Federal and State governments.

Social Democrats and Free Democrats, by

forming an alliance and thus creating a slight

majority in Parliament, have run the country

jointly since 1969. The Social Democrats usually draw more than 40 percent of the votes, and

the Free Democrats tend to garner slightly more

than 5 percent. The counterbalancing voting

block in this democracy are the Christian Democrats. Although they outpolled the Social

Democrats in the last election, the Christian

Democrats could not get the Free Democrats to

aline themselves with their party. The influence

of other political parties (except for a new

alliance of environmentalist splinter-groups and

parties popularly referred to as the “Green Party”) has slowly diminished, partially as a result

of the requirement that any party that wishes to

take part in the governmental process obtain a

minimum of 5 percent of the votes in the proportional election system.

Nature of the Economy

The two major political parties have similar

views about the Federal Government’s role in

the economy. Starting with Erhardt’s postwar

direction toward a “free market economy, ”

Ministers of Finance have attempted to create

favorable conditions for economic growth and

development, as well as a supportive social policy to shield the individual from the effects of
illness, disability, and unemployment. Serious

thought has been given over time to the displacement of labor that can be caused by structural economic changes, such as technology or

changes in trading policies. Such thought, for

example, was given to the social and labor legislation that accompanied the treaty that created

the European Economic Community (EEC).

To generalize, there is broad political support

for a Federal economic policy that aims to develop a solid economic and social infrastructure, and for Federal intervention in the market

to achieve these policy objectives. Thus, the

Federal Government subscribes to a policy of

support for technological growth, and even

some State and local governments have commissioned research to determine how they might

achieve a technological advantage for their

State or local economy.

THE HEALTH CARE SYSTEM

Health Care Institutions and Providers

There are 3,416 hospitals in West Germany,

which in 1977 discharged 10 million inpatients.

Of these hospitals, 36.8 percent are public, 33.4

percent are voluntary institutions, and 29.8 percent are proprietary hospitals (l). With about 12

hospital beds per 1,000 population, West Germany has more beds per capita than any other

country in the Western world, with the possible

exception of Sweden.

In 1977, the average length of stay in all

hospitals was 20.8 days; in an average acute

care hospital, it was 15.8 days. In a sample

survey by the German Hospital Association

(Deutsche Krankenhausgesellschaf t), the average length of stay in 1978 was 15.5 days, with a

range from 13 days in Hessen to 21 days in West

Berlin. This customary long length of stay is not

discouraged by an occupancy rate of 84.8 percent in 1978, down from 93.2 percent in 1960

and 88.5 percent in 1970 (1,7). Because there is a

separation between physicians who are permitted to treat patients inside of hospitals and

physicians who practice outside of hospitals,

hospitals generally do not have outpatient clinIn 1978, government R&D expenditures constituted over 3 percent of the gross national

product (GNP), and more than 6 percent of all

Federal, State, and municipal expenditures (3).

Paraphrasing the words of Volker Hauff, the

Federal Minister of Research and Technology,

these expenditures on research and technology

are considered necessary to the West German

economy and to its social fabric, because they

(9):

●

●

●

●

ics.

expand the understanding of basic science,

improve productivity and enhance the

ability of the West German economy to

compete on world markets,

conserve resources, and

improve living and working conditions.

(The exceptions

which sometimes have

are teaching hospitals,

clinics for teaching purposes. ) As a result, patients who in other countries might be treated as outpatients are often

hospitalized.

In 1977, West Germany had 125,274 doctors,

for a physician-per-population ratio of 1 per

490, one of the highest in the world. There were

32,121 dentists, 26,811 pharmacists, and

235,598 nurses, nurses aides, or midwives (l).

of the physicians, 56,334 were based in hospitals, 58,222 in private practice, and 10,718 in

administration and research. In 1977, 53.1 percent were general practitioners, and 46.9 percent specialists (l).

Health Insurance

West Germany has a system of social insurance which was established in 1883 and now

covers more than 99 percent of the population

with virtually full service benefits. In 1978,

1,360 semiautonomous sickness funds (Krankenkassen) administered the decentralized program, under the general supervision of the
Ch 7— Technology Assessment and Diffusion in the Health Care Sector in West Germany ● 121

Federal Ministry of Labor (Bundesministerium

fur Arbeit) (1).

The statutory health insurance program mandates a wide range of benefits, including service

benefits for medical and dental diagnosis and

treatment, for preventive examinations, and for

drugs. Sickness cash benefits are also provided

to cover periods of unemployment due to illness. Sickness funds may expand on the basic

benefits.

Employers and employees make equal contributions to the program in fixed amounts ranging from 10 to 13 percent of insurable earnings

up to 20,600 deutsche marks (DM) ($10,842)1

income per year, and averaging 11.3 percent in

1979 (2). Contributions on behalf of retired and

disabled pensioners are made by the Social Pensions Insurance Fund (Sozialversickerung), and

contributions for persons receiving unemployment benefits or assistance and maintenance allowances are made by the Ministry of Labor.

Administration

The 1,360 sickness funds are organized on

communal, regional, State, and Federal levels.

These funds are organizationally and financially

autonomous, i.e., independent of government

and responsible for balancing their own income

and expenditures. On the national level, they

organize themselves into associations of sickness funds (Krankenkassenverbande) to safeguard their common interests.

Many sickness funds are organized around

occupational groups (e.g., agriculture, large

enterprises, small firms, seamen, miners), and

membership, except for persons with high incomes, is obligatory. Those with high incomes

may belong to Ersatzkasse, a voluntary sickness

fund that frequently offers higher benefits at

lower rates because of low loss experience. For

1 For conversion of deutsche marks (DM ) to U.S. dollars the exchange rate used throughout this chapter was DM 1.90 = $1.00

(U.S.). The reader should bear in mind, however, that the actual

exchange rate has not remained constant over the years. According to the International Monetary Fund, between 1963 and 1968,

the rate was DM 4.00 = $1.00 (U.S.), in 1969, it dropped to DM

3.9433; in 1970, to DM 3.6600; in 1971, to DM 3.4908; in 1972, to

DM 3.1886; in 1973, to DM 2.6726; in 1974, to DM 2.5878; in

1975, to DM 2.4603; in 1976, to DM 2.5180; in 1977, to DM

2,3218; in 1978, to DM 2.0086; and in 1979, to DM 1.8329.

all those who do not fit into one of the specific

occupational groups, or who are not exempt by

virtue of their high incomes from having to join

a particular sickness fund, membership in the

largest sickness fund, the Allgemeine Ortskrankenkasse (AOK, or general local sickness fund)

is mandatory. In 1977, AOKS covered 44 percent of the working population and 57 percent

of the retired (1). The large proportion of elderly members with high utilization rates in AOKS

explains why these sickness funds charge generally higher premiums than do Ersatzkassen.

The Federal Government establishes broad

legislative guidelines with respect to the operation of the health insurance system. Agreements

on contract, payment, and benefit packages of

the various sickness funds may not violate these

guidelines. In all other matters, the government

may not interfere in the decisions negotiated between the sickness funds and the State Associations of Insurance Doctors (Arzteverbande).

Reimbursement

Of the DM 69.8 billion ($36.7 billion) spent

by sickness funds in 1977, 29.3 percent was paid

to hospitals for inpatient care, 17.9 percent to

physicians for ambulatory care, 6.6 percent to

dentists, 7.7 percent for dentures, 14.1 percent

for drugs, 4.8 percent for other products, 7.0

percent for sickness cash benefits, 1.4 percent

for prevention, 2.5 percent for prenatal care,

and 4.1 percent for other services (1).

Using a cost-finding formula set by the Federal Government, hospitals determine the per

diem rate to be charged for hospitalization. The

hospitals are then paid by the insured patient’s

sickness fund. Although in theory, per diem

payments are to cover the entire cost of the

hospitalization, in practice, they do not. Until

1972, the cost of hospital care was subsidized by

community tax revenues and charitable contributions, but the low level of reimbursement led

to inadequate reserves for maintenance, modernization, and replacement of buildings and

equipment. Concern about the rapidly deteriorating capital stock of hospitals led to the enactment by the Federal Parliament in 1972 of a law

on capital investments by hospitals, the hospital

financing law (Krankenhausfinanzierungsge68-095 0 - 80 - 9
setz) of 1972. (That law is discussed in a separate section below. )

Hospital physicians are generally salaried employees whose services are included in the hospital’s bill. Almost all physicians practicing outside of hospitals participate in the health insurance scheme. These physicians are reimbursed

by fee-for-service based on the number of patients they have seen. Each patient gives the

physician a sickness fund form (Krankenschein)

each quarter. For reimbursement, physicians

forward these forms to the State Association of

Insurance Doctors. Fee schedules are negotiated

by a Federal commission representing the doctors, sickness insurance funds, government, and

other interested parties. The schedules include

more than 5,000 separate procedures for which

a physician may charge.

Review of physicians’ services is done for purposes of economic control. Only recently have

physicians been considering quality controls.

Physicians who abuse the system are disciplined

by their Association of Insurance Doctors.

Expenditures

According to the Federal Center for Statistics

(Statistisches Bundesamt), West Germany spent

3.7 percent of its GNP on health care in 1970

and 5.8 percent in 1977 (18). 2 Expenditures of

2 There are other sources of data which estimate that the country

spends a far higher proportion of its GNP on health care than the

data on sickness funds would indicate. Thus, a 1979 Time survey

came to the conclusion that West Germany had overtaken the

West German sickness funds, GNP, and expenditures of sickness funds as a percentage of GNP

for the years 1970 through 1977 are shown in

table 1. These data cannot be compared directly

with the expenditures on health care in the

United States, however, because they do not include the same costs. The major difference is

that cash benefits for lost income during sickness were included in the expenditures of sickness funds until 1975 in West Germany.

What may be more telling than these data is

the rapid rise of expenditures by sickness funds.

As shown in table 2, between 1971 and 1977,

total expenditures by sickness funds increased

annually by the following percentages: 1971

(23.7 percent), 1972 (16.9 percent), 1973 (19.1

percent), 1974 (19.5 percent), 1975 (17.7 percent), and 1976 (9.1 percent), and 1977 (4.9 percent) (1). Only when cash payments were no

longer included, and when hospital capital expenditures were covered by the government

rather than by the sickness funds, did this yearly

increase drop to 9.1 percent in 1976, and to an

estimated 4.9 percent in 1977 (1). (As a yardstick, the consumer price index increased by between 5 and 7 percent per year between 1971

and 1975; between 1977 and 1978, it increased

by a mere 2.6 percent per year. )

United States in the proportion of GNP spent on health, spending

128 percent of GNP on health care in 1978. Data obtained from

the U.S. Social Security Administration in Washington indicate

similar proportions (8, 16, 17).
Table 2.—Annual Percentage Increases in

Total Expenditures by Sickness Funds

in West Germany (1971-77)

Percentage increase

Year over previous year

1971 . . . . . . . . . . . . . . . . . . . . . + 23.7 %

1972. . . . . . . . . . . . . . . . . + 16.9

1973. . . . . . . . . . . . . . . . . . . . . . . +19.1

1974. . . . . . . . . . . . . . . . . . . . . . . +19.5

1975. . . . . . . . . . . . . . . . . . . . . . . +17.7

1976?. . . . . . . . . . . . . . . . . . . . . . +9.1

1977?. . . . . . . . . . . . . . . . . . . . . +4.9

aPreliminary estimates

SOURCE Statistisches Bundesamt (Federal Center for StatisticsL 1979(18)

Hospital expenditures increased faster than

expenditures for ambulatory care. From 1970 to

1971, for example, hospital expenditures increased 27.3 percent, while ambulatory expenditures increased 24.4 percent (1). For subsequent

years, the annual percentage increases forhospital and ambulatory expenditures were as follows: 1972, hospitals (22.3 percent), ambulatory care (ll.4 percent); 1973, hospitals (25 percent), ambulatory care (13.4 percent); 1974,

hospitals (30.3 percent), ambulatory care (15,4

percent); 1975, hospitals (15.0 percent), ambulatory care (13.4 percent) (l).

Federal Financing of Capital

investments in Hospitals

By 1971, there was cause for concern that

sickness fund expenditures were increasing at

too rapid a rate to keep up with increased productivity and salaries in the labor market, so

sickness fund members werecharged higherpremiums. Despite the additional funds, the per

diem rates paid by sickness funds were too low

to permit hospitals to keep buildings and equipment up to date and to provide technically and

qualitatively superior care.

Deciding that hospital care was a public

good, that there should be no underserved

areas, and that the government had an obligation to make high-quality hospital care accessible to all citizens, Parliament enacted the

hospital financing law (Krankenhausfinanzierungsgesetz) of 1972. Studies by the Federal

Government had estimated the annual operating deficits of hospitals between 1966 and

1969 to be DMl billion ($526 million), and had

also found that aging hospital plant and equipmentled to high personnel costs and inadequate

medical care for patients(5). Many proposals to

ensure adequate hospital facilities had been

discussed, but two received the most attention.

One was that the Federal Government require

that the per diem fees paid by sickness funds

cover both operational and capital costs. The

other was to have the sickness funds cover hospitals’ operational costs and Federal and local

governments finance capital improvements.

The Federal Parliament opted for the latter,

i.e., having the sickness funds cover hospitals’

operational costs and the Federal Government

pay for capital improvements. The reasoning

was that an optimal distribution of services

could not be achieved with each sickness fund

deciding on a per diem fee, without central coordination (at least on a statewide basis) of capital

expenditures by hospitals. The legislators believed that the widely divergent financial capacity of the different funds would have resulted in

a system with services that were not geared to

the needs of the population in a geographical

area, but instead were dependent on the revenues of each area’s sickness funds.

The 1972 hospital financing law provided for

the financial requirements of hospitals as

follows.

Operating Expenditures.—Operating expenditures and supplies and equipment with a lifespan of up to 3 years are financed through the

per diem payments from sickness funds. The

hospitals complete uniform cost reports (Selbstkostenblatter) on a line-item basis. Eventually,

as reporting becomes more uniform, per diem

comparisons of cost centers will provide useful

information about comparative efficiency. The

major deterrent to using this comparative information at present, apart from nonuniform

reporting, is the inadequate detail which can be

obtained on patient mix. Although several associations of sickness funds produce side-by-side

comparisons of hospitals within a State, therefore, these data are not being used for planning

or reimbursement purposes. Thus, the purchase

of supplies and equipment with a lifespan of up

to 3 years is not controlled.
124 ● Backround Paper #4: The Managementt of Health Care Technology in Ten Countries

Short-Term Capital Investment .—Short-term

capital investment in capital goods with a lifespan of 3 to 15 years is financed with the socalled Zehnerpauschale (or par. 10, regarding

lump sum payments, of the hospital financing

law). The Federal Government contributes onethird of 8.33 percent of the basic replacement

value of each hospital bed. The replacement

value is lower for beds installed before January

1, 1951. It also varies by institutional category

as determined by numbers of hospital beds: 1,

up to 250 beds; II, 250 to 349 beds; III, 350 to

649 beds; IV, 650 or more beds. Thus, for example, the replacement value of a bed installed

prior to January 1, 1951, in a level I hospital is

DM 13,072 ($6,880); in a level II hospital, DM

15,351 ($8,079); III, DM 17,802 ($9,369); IV,

DM 22,704 ($11,949); whereas the replacement

value of a bed installed after this date in a level I

hospital is DM 15,200 ($8,000); II, DM 17,850

($9,394); III, DM 20,700 ($10,895); IV, DM

26,400 ($13,895).

The Federal Government has no direct control over how these funds are being spent. It is

within this category of funding that equipment

that has a long lifespan will be replaced, and just

as with the per diem funds, there is only an indirect incentive to spend these funds so that

comparable services are available in all the

regions. (That incentive is provided through the

State plans of need (Bedarfsplane), which are

discussed in the next section of this chapter. )

Medium-Term Capital Investment. —

Medium-term capital investment required to

finance replacement or additions to existing

capital stock with a 15- to 30-year lifespan is

completely financed by the Federal Government

(par. 9 of the hospital financing law). Applications for these funds must contain proof that the

funds will be used to equalize access to care and

that they will contribute to the cost effectiveness

of the system.

Long-Term Capital Investment.—Long-term

capital investment for buildings is completely financed by the Federal Government if the buildings are expected to have a lifespan exceeding 30

years. New hospital construction falls into this

category of funding. In no case, however, will

the Federal Government subsidize the purchase

of land.

The amount of Federal funds made available

under the hospital financing law for capital investment in 1972 was DM 465 million ($245 million). This amount increased to DM 915 million

($482 million) in 1977. Hospitals are not allowed to make capital investments outside of

this system, except with funds obtained from

philanthropic sources or public fundraising

campaigns. Operating expenditures continue to

be funded by the insurance system, which paid

about DM 20.5 million ($10.8 million) to hospitals in 1977.

State Planning for Hospital Services

Two major objectives of the 1972 hospital

nancing law, to ensure the financial viability

hospitals and to achieve acceptable levels

fiOf

of

sickness fund premiums, had been achieved by

1977. The third objective, to provide an equitable distribution of hospital services, has still not

been achieved, but all States have been working

on plans of need (Bedarfsplane).

The hospital financing law was based on the

idea that the physical plant of hospitals needed

to be improved, that costs in hospitals had to be

controlled, and that a system of incentives that

would stimulate hospitals to economize had to

be created. Past experience with reimbursement

to physicians had taught everyone concerned

that new funding without planning and evaluation would simply lead to higher expenditures—

not to more cost-effective services.

Under the 1972 law, all States were required

to produce plans for beds and services, and a

Federal/State task force was established to

discuss uniform terminologies and time frames

for the State plans. The legislation emphasized

the necessity of developing alternative modes of

care and of fostering cooperation between those

planning medical schools in the Federal Ministry

of Education and Science (Bundesministerium

fur Bildung und Wissenschaft), and even military establishments in the Ministry of Defense,

and those planning hospitals in the Ministry of

Labor and Social Affairs (Bundesministerium

fur Arbeit und Sozialordnung).
Ch. 7–Technology Assessment and Diffusion in the Health Care Sector in West Germany ● 125

States must comply with the planning requirements of the hospital financing law, and

hospitals have to be “needed,” according to the

State bed need plan, in order to qualify for Federal capital subsidies. The plans of individual

States vary greatly. The 1972 hospital financing

law requires only that each State have a regionalized hospital system, and that the levels of

care a hospital can provide correspond to criteria established by the State and be consistent

with the hospital financing law. The Federal law

suggested four levels of care, which would depend on the size of hospitals: The least complex

level of care, level I, would be provided by hospitals with up to 250 beds; level II, by hospitals

with between 250 and 350 beds; level III, by hospitals with between 350 and 650 beds; and level.

IV, by those with more than 650 beds. Only one

State used the suggested classification scheme

alone; the other States established additional

criteria for planning, such as the services provided and the departments providing care.

The need for beds is determined on the basis

of population growth, the rate of admissions,

average length of stay, and occupancy rates.

Planners have experienced the usual difficulties

in determining appropriate bed need indicators.

The population data are imprecise because of

the inadequate information on population

movement from one census period to another.

The use rate per 1,000 population differs greatly

by State, and although factors that contribute to

regional differences have been identified (e.g.,

the age and sex distribution of the population,

the incidence and prevalence of disease, traffic

patterns, occupational and socioeconomic characteristics, and the supply of hospital beds and

medical services), they are difficult to quantify.

Average length of stay and occupancy rates also

differ greatly from one State to another.3

Despite the difficulties, however, the States

are now at the point where they have some experience with bed need methodology, and some

States are now preparing their fifth-generation

State hospital bed need plan. Furthermore, the

sickness funds are starting to collect more adequate data that will allow them and the State

planners to become more sophisticated. Some of

the issues that are beginning to be discussed are

adjusting for patient mix, comparing line-item

expenditures by type of patient and by type of

hospital, and planning for new medical technology such as computed tomography (CT) scanners. If the plans become more sophisticated,

and their present emphasis on beds and facilities

is shifted to the types of patients a hospital

should admit or to the types of services it should

offer, State hospital plans will become the instruments through which the Federal and State

governments will be able to influence spending

on new technology.

‘Much research was carried out between 1972 and 1976 to analyze the variables that affect hospital admissions and stays. See,

e.g., H. Ehlers, Krankenhaushauf igkeit, 1976 (7).

MECHANISMS FOR MANAGING MEDICAL TECHNOLOGY

One effect of financing capital goods with

Federal support was that between 1972 and 1979

many hospitals were able to update their plant

and equipment. Since hospitals with fewer than

100 beds received no Federal support to acquire

capital goods, between 1970 and 1977, the average hospital size increased from 190 to 212

beds. 4 A number of hospitals closed or consolidated, and there was a trend toward centraliza-

‘Unexplained is the increase in private beds during that time.

Private beds constituted 8.9 percent of all beds in 1970, but had Increased their share to 12.2 percent in 1977 ( 10).

tion and regionalization of highly sophisticated

technology, such as open-heart operations, because only a level IV per diem rate would give a

hospital the necessary funds to staff and equip

such a service. Teaching hospitals, which are

financed concurrently with medical faculties of

universities by the Federal and State governments, were exempt from the planning requirements. The need for integrating teaching hospitals into the overall plan for hospital beck was

first expressed as a concern after the passage of

the law designed to decelerate cost increases

(Kostendampfungsgesetz) in June 1977.
The 1972 hospital financing law’s initial emphasis on financing increased the funds available to hospitals for renovation, new buildings,

and medical technology, but it also led to fears

that these investments would not lead to costeffective delivery of care. In addition to more

systematic efforts at planning, a uniform accounting system to permit evaluation of the cost

effectiveness of capital investments and of planning measures was proposed. Implementation

of a new uniform accounting system was required starting in the spring of 1978. This new

information system eventually is expected to

provide the basic data for government-sponsored research into the levels of care required,

personnel needs, optimal operations, duplicate

tests, and shared and purchased services.

Research and Development

Because the emphasis has been on upgrading

the capital stock and equipment of hospitals,

until recently, very little thought has been given

in West Germany to the effect of medical technology on the health of the population or the

health care system. The period immediately after enactment of the hospital financing law of

1972 in West Germany, therefore, is somewhat

comparable to the period following the HillBurton legislation in the United States.

The medium-term program of the Ministry of

Research and Technology (Bundesministerium

fur Forschung und Technologies) provides overall direction for technological development by

establishing priority areas for subsidies. In

1974, the Ministry of Research and Technology

commissioned a baseline study of medical technology in West Germany, which could be used

to develop a strategy for future support of

research activities and of new products (13).

The Ministry’s primary concern initially was to

promote R&D of medical technology as one

area where West German industry could compete effectively on world markets. A secondary

concern was to use this technology to improve

the health of the West German labor forces

‘Maintaining the productivity of West German workers in the

face of labor shortages has been said to have been Bismarck’s primary reason for advocating national health insurance in the

1890’s. Fiscal and social policy makers have since continued to

view social welfare legislation as an investment in the productive

capacity of the worker.

The rapid increases in expenditures on health

care services after 1975 affected the Ministry’s

policy. In 1978, the Ministry published its Program on Promoting Research and Development

in the Service of Health, which was to “increase

the capacity and economic efficiency of medical

care and also to facilitate making judicious decisions on health policy” (4). The emphasis shifted

from the development of new technology to improve the competitive edge of West German

manufacturers of medical supplies and equipment toward research to improve the health of

the population. In the Ministry’s 1978 report,

major sections are devoted to health prevention,

as well as to improving the cost effectiveness of

the health delivery system through research into

the structure of the system and possible

changes.

Thus, West Germany is now establishing

structures and procedures to develop a health

care services and research policy and to assess

all new medical technology and manage its dissemination. It has identified the following as

main areas for research (4):

● Prevention

—identification of risk factors (cancer,

heart disease, rheumatism, mental

health),

—behavior modification, and

—development of health status indicators

and measures of cost effectiveness of interventions.

● Diagnosis, therapy, and rehabilitation

—automatic laboratory testing of Pap

smears and other specimens,

—surgery with laser beams,

—improved optical instruments,

—reducing the exposure to X-rays,

—development of artificial kidneys,

—development of instruments that permit

the blind to read and paraplegics to function,

—development of artificial limbs, bones,

etc., and

—applications of automated data processing to diagnosis and therapy.

● Structure of the health care delivery system

—data base development on utilization,

costs, expenditures,
—effectiveness and efficiency of procedures,

—development of a planning process,

—evaluation of the health insurance

system,

—development of strategies for payment of

providers,

—examining the demand for diagnostic and

other preventive measures, and

—applications of data processing to the

delivery system.

Most medical research in the past was carried

out in universities and teaching hospitals. Since

the principle of academic freedom in West German universities guarantees the researcher virtual autonomy both in selecting a subject for investigation and in determining what type of research to conduct, research at these publicly

financed institutions was not subject to any

review. University research today continues to

be funded primarily by the State governments,

and no strings are attached to the moneys they

provide. Similarly, no strings are attached to

research funds that the Federal Ministry of

Education and Science makes available to the

States. In recent years, quasi-autonomous research institutes have gained in importance,

partly because they have been able to attract

funding from foundations, and partly because

they have received contracts for research from

manufacturers of equipment and supplies.

Since 1976, Federal funding of R&D has increased. The four Federal Ministries that support R&D are the Ministry of Research and

Technology, which has the largest budget, the

Ministry of Labor and Social Affairs, the

Ministry of Youth, Family Affairs, and Health

(Bundesministerium fur Jugend, Familie, und

Gesundheit), and the Ministry of Education and

Science. A Federal program for the years from

1978 to 1981 was outlined by the Ministries of

Labor and Social Affairs, of Research and Technology, and of Youth, Family Affairs, and

Health (4). Areas of emphasis and funding for

biomedical and health services research are

shown in table 3. Two major institutes were

Table 3.— Federal Grants and Contracts in the Areas of Biomedical

and Health Services Research in West Germany (1978-81)

Total expenditures Annual expenditures (in millions of DM/dollars)a 1978-81

1978 1979 1980 1981 —

In — In millions

Us. Us . Us. U.S. millions of U.S.

Ministry and area of promotion DM dollars DM dollars DM dollars DM dollars of DM dollars

Federal Ministry of Labor and Social Affairs

Promotion of research and its application to areas

of structural improvement in public health,

preventive and early-detection schemes in statutory health insurance, and medical rehabilitation

Promotion of research on hospitals pursuant to

article 26 of law on hospital financing . . . . . . .

Federal Ministry of Research and Technology

Promotion of R&D projects in public health,

medical research, and medical techniques . . . . . .

Data-processing applications in public health . . .

Federal Ministry of Youth, Family Affairs,

and Health

Public health, safety in the use of medicaments. .

Cancer research, cancer registers . . . . . . . . . . . . .

Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Statistical surveys on health questions. . . . . . . . .

4.2 $2.3 6.0 $3.1 5.5 $2.9 4.2 $2.2 19.9 $10.5

4.25 2.24 4.0 2.1 4.0 2.1 4.25 2.24 16.5 8.7

55.0 28.9 62.0 32.6 69.0 36.3 78.0 41.1 264.0 138.9

28.0 14.7 29.5 15.5 32.0 16.8 34.0 17.9 123.5 65.0

5.0 2.6 5.7 3.0 6.6 35 7.1 3.7 24.4 12.8

0.2 0.1 0.3 0.15 0.3 0.15 0.4 0.2 1.2 0.6

0.2 0.1 0.3 0.15 0.3 0.15 0.3 0.15 1.1 0.5

0.2 0.1 0.2 0.1 0.2 0.1 0.2 0.1 0.8
128 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

singled out to receive funding for medical

research, the Max Planck Society (Max Planck

Gesellschaft) and the German Research Association (Deutsche Forschungsgesellschaf t). These

two institutes are routinely funded by up to 50-

percent Federal moneys, and for special projects

may receive even larger Federal contributions.

Together, they carry out much of the important

medical/biological research in West Germany.

Federal financing is also provided to several

centers that conduct research of societal importance (Grossforschungsanlagen), for example, in the areas of cancer, radiation, and environmental issues. These centers receive up to

90 percent of their funding from the Federal

Government, and 10 percent from the States.

Other organizations that receive Federal funding for all or some of their activities are the

Federal Public Health Department (Bundesgesundheitsamt, BGA), the German Institute for

Medical Documentation and Information (Deutsches Institut fur Medizinische Dokumention

und Information, DIMDI), and the Paul Ehrlich

Institute (Paul Ehrlich Institut).

In recent years, the Federal Government has

increasingly let contracts to consulting firms, to

the research arm of the German Hospital Association (Deutsche Krankenhausgesellschaft),

and to similar organizations. Letting contracts,

however, is a rather new process, which is not

yet at all standardized. Thus, as many or more

unsolicited proposals submitted by research institutes and consulting firms to contracting

Federal agencies are funded as are proposals

solicited by Federal agencies through requests

for proposals. A comparison with the history of

grants in the United States in the 1950’s and

1960’s comes to mind.

The observer gets the impression that the

Ministry of Research and Technology is not

only the largest source of funds for R&D, but

that it is also taking the lead in letting contracts

for research and in developing coordinated research plans. As target areas for R&D of new

technology, this Ministry has identified new diagnostic tests, laboratory equipment, and radiotherapy. In September of 1976, it also concluded

a research agreement with the U.S. Department

of Health, Education, and Welfare in the area of

biomedical research.

The stated objective of the Ministry for Research and Technology is to develop technology

that will improve patient care, reduce side effects, and be more cost effective. As was suggested earlier, the West German Government

also is interested in developing R&D programs

that will help give West German manufacturers

a technological advantage over manufacturers

in other exporting nations.

Support for Evaluation Studies

Perhaps as a result of the lack of baseline information in many areas in the health care field

in West Germany, much of the research effort in

health services is descriptive and enumerative.

This characterization is somewhat applicable

even to medical research. Efficacy studies of

therapies, such as clinical trials, and cost-effectiveness studies of new technologies are still

rare.

The Ministry of Research and Technology has

been very supportive of conferences for physicians to discuss methodological approaches to

evaluating medical technology and practice.

One conference it supported resulted in a manual on methodology for evaluation; another

resulted in a summary of how to mount a study

of new therapies for cancer, heart disease, and

arthritis. Such conferences are only one way in

which the Ministry hopes to awaken interest in

the medical community in evaluating its work.

One major bottleneck the West German research community has to confront is a shortage

of analytically trained researchers, such as

statisticians, epidemiologists, and operations

researchers. The Ministry of Research and Technology is aware of the problem and has set aside

substantial resources to develop analytical capabilities in universities and to train young researchers.

A major critic of the system of developing

new therapies and new equipment without costeffectiveness analyses is Professor Manfred

Pflanz, a sociologist at the University of Hannever. His major themes are that there is too
C/I 7— Technology Assessment and Diffusion in the Health Care Sector in West Germany ● 129

much surgery in West Germany compared to

the United States and other countries and that

no one ever has discussed what types of medical

care contribute to patient health (12). Professor

Pflanz has influenced the opinion of the educated public on the subject of the need for evaluations, and it is to be expected that not only

professionals, but the general public as well,

will demand more evaluation studies in the

future.

Regulation for Safety and Efficacy

Drugs have been regulated in West Germany

for some years, but the regulations, which focused on assuring safety, have not been very

rigorous. A new law to strengthen drug regulation was passed in 1976, to become active on

January 1, 1978 (6). Reportedly modeled after

U.S. requirements, the new law requires Federal

Government approval of drugs to be sold in

West Germany. Prior to marketing a new drug,

the manufacturer is required to submit to the

Federal Government the results of clinical trials

testing the drug’s effectiveness, dosage, contraindications, and side effects. The 1976 law

states that the Federal Government may decline

to allow the drug to be sold if “, . . the therapeutic efficacy attributed to the drug by the admission applicant is lacking or is insufficiently

substantiated by the scientific knowledge currently recognized (or) there is reason to suspect

that, under correct use, the drug has harmful effects which exceed the bounds considered justifiable . . . .“ That law is now being implemented.

Since many West German firms do business

with the United States or other countries that

have laws regulating drugs and medical devices,

they already follow U.S. or similar regulations.

In addition, many of the drugs and devices used

in West Germany are produced in the United

States, and are therefore subject to U.S. regulations.

There is a growing awareness in West Germany that some governmental review of the

safety and efficacy of new equipment is in order,

that the training of technical personnel by manufacturers should be discussed, and that all

‘Appendectomies in particular.

equipment should be checked on a regular basis

once it is installed in a clinical setting. The

following types of equipment, failures of which

have been identified as life-threatening, have

become prime candidates for regulation: anesthesia equipment, dialyzers, infusion pumps,

and heart pacemakers.

The Technical Surveillance Service (Technischer Ubernachungsdienst, TUV), a voluntary, quasi-governmental organization now primarily checking the road-worthiness of passenger cars, has advocated in the Ministry of

Labor and Social Affairs that such equipment be

surveyed on a regular basis and that TUV be

given responsibility for this function. The Professional Association for Health and Social Welfare Services (Berufsgenossenschaft fur Gesundheitsdienst und Wohlfahrtspflege), a professional organization not unlike the American Public

Health Association, has suggested examinations

of all equipment and supplies that affect patients

through energy (e. g., electricity, heat, pressure,

ultrasound, radiation, and drugs).

Two basic approaches have been discussed.

One is to have an organization that develops

minimal criteria for new equipment. The other

is to have a second organization that checks to

see that these criteria are met, even when the

equipment is installed. No review processes

have been legislated yet, but government officials and equipment manufacturers believe

that some regulation is imminent.

Health Planning

The health planning approach as far as hospital beds and investment are concerned has already been discussed. Suffice it to reiterate here

that present planning legislation is still in its infancy, and that a methodology that would give

direction to new investment in the development

of new medical procedures or technology simply does not exist.

One of the problems faced by health planners

in West Germany is the absence of an ongoing

national data collection effort. There are national data on kidney dialysis because the manufacturers of the equipment have commissioned

a survey, but these data are not publicly avail-
able. No data are available through the government on the number of CT scanners, on the extent of coronary bypass surgery, on cobalt therapy, on clinical laboratory testing, or any other

new technology.

It is clear, however, that the Ministry of

Labor feels compelled to obtain better information, so that more rational decisions can be

made about allocating funds for equipment.

This Ministry seems to have singled out CT

scanning as one of the first technologies which

needs to be examined, whose use needs to be

surveyed, and whose benefits need to be documented. Likewise, the Ministry of Technology

and Research is outlining a program for research

and evaluation which may produce some baseline data within the next few years.

Utilization Review

The sickness funds have the capability of doing only rudimentary comparisons of utilization. They code only three digits of the International Classification of Disease (ICDA-8) code

and have little capability to check for the accuracy in the coding of discharge abstracts. The

major difficulty in carrying out utilization

review, apart from the lack of comparable data,

stems from the lack of trained personnel and the

independence of physicians. Both at the microand macro-levels, there exist shortages of personnel, such as record librarians, utilization

review coordinators, biostatisticians, epidemiologists, and computer experts.

Fee and Ratesetting

Little thought has been given to ways of

regulating the diffusion of medical technology

through the fee structure and ratesetting, even

though these mechanisms clearly do affect this

diffusion. Since hospitals have to forward plans

for special services and equipment with a 3- to

SPECIFIC TECHNOLOGIES

Some of the information that is available concerning West Germany’s experience with five

specific medical technologies—CT scanners, re15-year lifespan to the State, and the States forward their plans to the Federal Government,

perhaps eventually a national plan can be developed for technology, and reinforced through financial incentives.

Reimbursement of Hospitals

The reimbursement of hospitals has already

been described. Since there are virtually no

deductibles and coinsurance for medical care,

there are no disincentives for individual patients

to command the use of special services, advanced technology, or ultraspecialized medical

centers and personnel.

Use of Evaluation Results in

Managing Medical Technology

As discussed earlier, evaluation studies are

still in their infancy in West Germany. Many

such studies have been commissioned by policymakers in the Federal or State governments to

provide information for policy decisions. It

seems likely, therefore, that the results of research will be used in developing policy in R&D

of medical technology, in the delivery of services, and in the incentives and disincentives

provided by reimbursement, planning, and

regulation.

Another important recent development is the

so-called “Konzertierte Aktion im Gesundheitswesen” or “coordinated action in the health

care system” (8). Since its inception early in

1979, the Minister of Labor and Social Welfare

has attempted to develop medical and economic

baseline data in cooperation with representatives of all umbrella organizations, such as the

German Hospital Association, associations of

sickness funds, and physicians. The objective of

this effort that the Minister of Labor is coordinating is to increase the effectiveness and efficiency of the health care delivery system,

nal dialysis, coronary bypass surgery, cobalt

therapy, and clinical automation—is presented

below.
Of these five, only coronary bypass surgery is

directly affected by bed-planning parameters,

Teaching hospitals and level IV hospitals are the

only hospitals that get high enough capital subsidies and per diems to be able to provide openheart surgery. Since few hospitals can afford to

become highly specialized centers, it is fairly

noncontroversial when a State planning agency

designates only those few as ultraspecialized

centers that receive funding to carry out specialized work.

CT Scanners7

CT scanners are the most contested new

equipment in the West German health care system. As medium-term purchases with a 15- to

30-year lifespan, CT scanners are regulated

under paragraph 9 of the 1972 hospital financing law and are completely financed by the Federal Government. Hospitals seeking to acquire a

CT scanner must submit an application to their

State ministry, and the State ministry then requests funding from the Federal Ministry of

Labor and Social Welfare.

In theory, therefore, CT scanners in hospitals

should be very closely regulated, and up-todate information on their distribution and use

should exist. In practice, however, there is still

some room for “slippage,” because some hospitals are able to obtain CT scanners by having a

fundraising campaign or by having a private

physician purchase the equipment. There are no

restrictions on the purchase of a CT scanner for

a physician’s office, Private financing is obtainable on the basis of the reimbursement rate paid

by the sickness funds. This rate is DM 480 to

DM 500 ($252 to $263) for a body scan and DM

300 ($158) for a head scan, with an added DM

115 ($61) for additional work.

There has been some discussion by sickness

funds and by physicians’ associations about

restricting reimbursement for CT scanning services to physicians who are specialists in

radiology and have special technical training.

‘The information for this case was gathered in meetings with the

Federal Ministry for Labor and Social Welfare, with State ministries, with sickness funds, and from proceedings of a symposium

on CT scanners on Jan. 11 -12, 1979, at the West German Clinic for

Diagnostics at Wiesbaden.

According to confidential information from one

executive of the association of physicians who

accept sickness fund patients (Kassenarztlichen

Bundesvereinigung), guidelines will be developed for reimbursement of head and body scanning services. These will include criteria establishing the need for equipment, a limited list of

symptoms for which CT scanning will be considered appropriate, proof of competence by the

physician, a limit on who can refer a patient for

a scan, and a fee schedule for appropriate and

equitable reimbursement.

At the end of 1978, according to one source,

160 CT scanners were reportedly in operation or

on order in West Germany. Physicians’ offices

had 48, or 30 percent of these, 82, or 51 percent,

were in acute care hospitals, and 30, or 19 percent were in long-term care and rehabilitation

hospitals (14). (See table 4.) A survey in April

1979 carried out by the Federal Public Health

Department (Bundesgesundheitsamt) counted

120 scanners in operation at the end of 1978

(19). One issue that has been raised is the possible maldistribution of CT scanners and the concentration of this equipment in urban areas of

the country. The Ministry of Labor and Social

Welfare is examining the problem, but still has

to gather data to see where scanners are located.

A CT scanner “needs assessment” conducted

by one radiology facility, the Diagnostic Radiology with Computer Tomography Institute (Diagnostisches Rontgeninstitut Mit ComputerTable 4.—Distribution of CT Scanners

in West Germany (1978)

Total Number of Percentage

number of CT of all CT

Type of facility facilities scanners a

scanners

Acute care hospitals

Up to 300 beds. . . . . . 1,900 2 1.070

300 to 600 beds . . . . . 410 20 12.5

600 to 800. . . . . . . . . . 65 10 6.5

Over 800 beds . . . . . . 75 50 31.0

Long-term hospitals . 1,250 30 19.0

Offices of physicians

in private practiceb . 2,400 48 30.0

Total . . . . . . . . . . . . 6,100 160 1OO.OO

/O
132 ● Background Paper #4: The Mangementt of Health Care Technology in Ten Countries

Tomographic) at Dietzenbach derives a “need”

for West Germany of between 120 and 300 scanners, depending on the proportion of the population who will need a scan per year and on the

number of scans that can be done on one CT

scanner (14). Almost accepted is a standard of

0.5 percent of the population needing a head

scan per year and another 0.5 percent needing a

body scan. If an average 200 working days per

year and 15 scans per day per machine are

assumed, then a total of 200 CT scanners would

be required. If the working day can be extended

to more than 8 hours, or the number of working

days per year or the number of scans per day

can be increased, then the 160 CT scanners West

Germany already has are enough for the country as a whole.

In applying any standards when awarding

grants to States for the purchase of CT scanners

in hospitals, the Ministry of Labor and Social

Welfare has to take into account the need for

CTS based in physicians’ offices (with lower

utilization), because of the separation between

private practice and hospital privileges, and the

geographic distribution of the equipment. Eventually, therefore, the Ministry will not only

have to plan for the distribution of scanners in

hospitals, but it will have to look at the availability of all CT equipment.

When CT scanners were initially introduced

in West Germany 3 to 4 years ago, they were

produced only by EMI, the British firm that first

developed the equipment. At present, many

other firms are in the market, such as Siemens (a

West German firm), General Electric, and CHF

Muller. The peak in sales seems to have been

reached, unless better and less expensive equipment can be developed and new applications

can be found. Because of the training requirements, technical manpower may contribute to a

temporary bottleneck in terms of further expansion of CT scanning.

CT scanning is a new medical technology

which has been singularly well studied in West

Germany within 3 years of its first being used.

Such study is quite unusual and may signal a

complete change in how West Germany will examine new medical technologies. The Ministry

of Labor and Social Welfare believes that CT

scanners constitute more than 1 percent of all

capital expenditures in hospitals, however, and

it is possible that CT is an atypical new

technology.

Renal Dialysis8

Renal dialysis was introduced on a large scale

in West Germany relatively late, in comparison

to the United States, and when one considers

that Dr. Willem Kolff built the first kidney

dialysis machine in Holland in the early 1940’s.

The year 1960 was a landmark year in the history of dialysis because it was then that the

“Scribner shunt” made long-term dialysis possible. Although that year also seemed to mark a

turning point in the accessibility of this new

therapy, however, dialysis was still relatively

scarce in West Germany until the late 1960’s.

Manufacturers of dialysis equipment through

the European Dialysis and Transplant Association jointly purchase a yearly survey being conducted in all of Europe by a London firm, which

provides up-to-date information on patients,

centers, and types of equipment used. According to information from one of the largest manufacturers of dialysis equipment in West Germany, end-stage renal disease (ESRD) dialysis

treatment was not introduced on a large scale

until 1968. Up to 1970, waiting lists in West

Germany were long. By 1973, however, patients

could enter treatment without having to wait for

a treatment place.

At the end of 1975, West Germany treated

5,421 patients in ESRD dialysis programs. (The

estimated population in ESRD dialysis programs in 1976 was 6,200 patients, and in 1978

was 7,000 patients; estimates for 1985 are between 12,500 and 13,500 patients. ) In 1975,

compared to other European countries, West

Germany was in the middle in terms of number

of patients on ESRD treatment per million population, with 87.7 patients per 1 million popula-

“The data and information for this case were gathered with the

help and from the files of one of the largest manufacturers of dialysis equipment in West Germany. The data were collected in

surveys sponsored by a manufacturer. Additional information for

the case was provided by a consulting firm and a consortium providing dialysis services.
a hospital. Dialysis in limited-care centers lies

between home and hospital dialysis in terms of

reimbursement rates. These centers are expected

to become very successful in the more populated

areas of the country.

In 1975, ESRD patients in West Germany

were far less likely to receive a kidney transplant (4.8 percent of all patients with ESRD)

than patients in the United States (31.7 percent),

Australia (64.5 percent), Switzerland (47.7 percent), or Sweden (40.6 percent). At a one-time

cost of DM 30,000 ($15,789), and providing that

rejection rates are low, transplants are considered both by the government and by potential

kidney transplant patients as an attractive alternative to dialysis. One problem in West Germany, however, is a serious shortage of donor

kidneys. Of 19,000 fatal accidents, only 100 permit the donation of kidneys. Thus, in 1976, only

273 transplants in 24 centers were performed (an

increase from 228 transplants in 1975). Eight

hundred persons were on waiting lists for transplants. Only 10 percent of the 2,000 patients

who could benefit from a kidney transplant get

a donor kidney each year. West Germany belongs to the Eurotransplant Center in Leiden

and also has been debating a law since 1977

which would facilitate donating kidneys.

States license dialysis centers. There is at present no contiguous planning by the Federal Government to coordinate the planning decisions of

the States in this area. Furthermore, no certificate of need is required in order to establish a

dialysis center. The distribution of dialysis stations depends on the demand by physicians of

dialysis for their patients. Since each patient is

covered for this service, private physicians,

nonprofit kidney centers, public and religious

organizations, as well as hospitals, all have

established services. As in the United States, the

startup capital may be provided by a voluntary

organization, or may be borrowed from a bank.

An implicit belief in West Germany is that the

dialysis market will regulate itself and that an

optimal distribution of centers will result.

There is no State regulation of dialysis equipment. New dialysis processes are quickly available, since equipment is either imported or produced within the country by a West German
firm under license. Although major changes in

the dialysis process are infrequently developed

within the country, West German manufacturers and physicians are very aware of research in

other countries and will try a new process almost as soon as it becomes available. New

models are introduced by manufacturers, tested

in a few centers, and then demonstrated at fairs

and by salesmen. Equipment manufacturers

often use the evaluations of “expert” users to sell

equipment to other centers. In addition, they

often develop new equipment jointly with physicians in a dialysis center or teaching hospital.

Since there is no real financial restriction on the

purchase of new equipment, nonprofit organizations have a strong incentive to get the latest

equipment for their centers. The Federal or State

government does not approve the production

process and evaluate the safety and efficacy of

equipment, as the U.S. Food and Drug Administration does under the 1976 medical devices legislation and the good manufacturing practices

requirements. There is discussion, however, of

having periodic testing of equipment, analogous

to the rigorous annual testing of automobiles.

Dialyzers, monitors, pumps, and supplies

produced in West Germany and other countries

are used. Three types of dialyzers are being

used: coil dialyzers, plate parallel flow, and

hollow fiber parallel flow. The coil dialyzer is

being phased out; the hollow fiber one is the

newest. Much of the dialysis equipment, especially the dialyzers, is imported from the United

States. Plate dialyzers are also imported from

Sweden (Gambro), Japan (Cobe), and France

(Rhone-Poulenc). Cuprophan, the most common membrane for dialyzers worldwide, is

made by a West German firm (Bemberg, a subsidiary of Enka) in Wuppertal.

As noted in the previous section of this chapter, the Federal Government supports several institutions that carry out research that benefits

society but may be too expensive to be undertaken by any one institution. In its 1978-81 program to support R&D, the Federal Government

named as one objective the further development

of transplant and dialysis technology. This is

the first instance in which a concerted effort is

being mounted to develop new technology in

this area under government sponsorship.

In summary, the diffusion of new ESRD technology in West Germany is left to market mechanisms. Funding for each dialysis session leaves

room for independent organizations or entrepreneurs to enter the market and to determine

whether they can attract enough patients to

break even. If in the future the sickness funds

should determine that controls are necessary,

the controls can be exercised through the reimbursement contracts the sickness funds develop

with dialysis centers. The only other way in

which the government may affect this market in

the near future may be through a requirement to

have periodic inspections of all equipment.

Coronary Bypass Surgery

Open-heart surgery has been performed on a

large scale in West Germany for the past 5 to 6

years. Coronary bypass surgery is performed

mostly at seven centers which are affiliated with

medical schools. Since there are virtually no

restrictions on what operations can be performed by surgeons, the only restrictions on

coronary surgery are those on the equipment a

hospital can acquire. The equipment for coronary bypass surgery has a short lifespan, so it

has to be financed via the per diem rate paid to

hospitals by the sickness funds. Only the large

hospitals with tertiary services are paid a high

enough rate to finance this equipment.

The sickness funds are comparing the costs of

open-heart surgery in various settings. In the

State Nordrhein/Westfalen, a coronary bypass

operation costs DM 50,000 ($26,316) in Dusseldorf, but far less elsewhere. The sickness funds

hope to negotiate the reimbursement for such

operations with hospitals in that State, If no

agreement can be reached, and if the State’s

Minister of Finance cannot act as mediator, it is

anticipated that the funds may take court action. Similar developments can be expected in

other States.

There have been no evaluations of rates of

complications from this surgery or cost-benefit

analyses, such as have been seen in the United

States, but the results of analyses carried out

elsewhere are being publicized and used by physicians at their discretion. The 1,000 to 1,500 pa-
tients who are waiting for this operation constitute an enormous political pressure group.

Cobalt Therapy

Cobalt therapy has become increasingly

available in the past 10 to 15 years. Operating

and capital funds have come from the per diem

reimbursement provided to hospitals by the

sickness funds, or from the sponsors of individual hospitals (community, private, etc.).

At university teaching hospitals, which are well

funded by the Federal Ministry of Education,

the funds have come out of the general budget.

Little information about the distribution and

utilization of radiation therapy equipment is

available. The Government of Bavaria, for example, knows where such equipment is located

only if the equipment is in a newly constructed

facility that has been federally financed. One of

the largest cancer treatment services in the country is at the City Hospital for Women in Nuremberg, which uses approximately 45 percent of its

capacity (or 115 beds) for cancer patients. Since

its establishment 12 years ago, it has treated

5,OOO women, and this year is accepting approximately 400 new patients.

As long-term capital investment, cobalt and

other radiation therapy equipment is paid for

completely by the Federal Government. The

sickness funds and the Federal Government

have been encouraging hospitals to form consortia that share radiation equipment. Since the

equipment is becoming more expensive and

complex, further efforts to encourage this are

likely to be made.

“Needs” for the equipment have not been projected. In one case, a State Ministry decided not

to approve an application for a cobalt therapy

unit, so the community and the hospital decided

to carry out a fundraising campaign, and

through this they were able to finance the purchase. The local sickness funds felt that they had

no choice politically but to pay the higher per

diem that resulted.

Cobalt therapy equipment is being checked

for safety only by the Board of Trade Regulation (Gewerbeaufsicht), a branch of the Department of Commerce, which also checks equipment used in the operation of businesses and

other public institutions.

Clinical Laboratory Testing

and Automation

In 1975, approximately 1.3 billion laboratory

tests were carried out in West Germany. Of

these, 500 million tests were done in acute general hospitals, 105 million were done in specialty hospitals, and 530 million were done in physician practices (4). Physicians own roughly 90

percent of the country’s 45,OOO laboratories.

Only a very small proportion of these laboratories are central, large-scale commercial labs or

diagnostic centers (13).

For the past 20 years, the volume of laboratory tests has increased by about 20 percent per

year. Similar trends are predicted for the future.

Since all diagnostic tests are fully covered by the

sickness funds, there is no disincentive to use on

the part of the patient. In addition, the Federal

Government has actively promoted “preventive

screening programs” for cancer of the breast,

uterus, cervix, prostrate, and colon. These programs, based in physician offices, have also

contributed to the high volume of tests.

One might expect that the large volume of

laboratory tests and a continued lack of qualified personnel in West Germany would precipitate automation of laboratory testing. Since

physicians provide the lion’s share of ambulatory services, however, most laboratory tests

are still carried out in nonautomated, smallscale laboratories in physicians’ offices.

In discussions with economists at consulting

firms, with the Ministers of Labor and Technology, and with manufacturers of equipment, no

clearcut process of the diffusion of automated

equipment emerged. Further complicating research into this topic was the almost complete

lack of data on specific equipment, and the

fiercely competitive market in this area in West

Germany. The information that emerged from

the discussions was that multichannel analyzers

were introduced on a large scale around 1973-74

and that analyzers produced by U.S. firms and

by Coulter (U. K.) dominate the market. The

total number of automated analyzers in 1974,
136 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

according to one source, was 1,200. With 300

analyzers that year, Technicon seemed to dominate the clinical chemistry market for automated enzyme analyzers and other similar automated equipment. Lack of centralization of laboratories was given as the major reason for the

comparatively slow diffusion of automated

equipment.

Laboratory equipment in hospitals is financed

via the per diem allowance which hospitals get

from the sickness funds. In physicians’ offices,

laboratory tests are billed for separately from

physicians’ services. From a purely financial

point of view, therefore, there has been little incentive to consolidate laboratory services.

Many obstacles would have to be overcome in

order for hospital-based physicians and physicians in private practice to agree in principle to

share laboratory services. Not surprisingly, one

central laboratory has been hailed as exemplary

(15). This, the so-called Lemgo model, is a cooperative laboratory that a general acute hospital

with 634 beds founded in 1972 to be able to utiCONCLUDING REMARKS

Medical technology is easily obtained by

West German physicians’ offices and by teaching hospitals, because there are virtually no

financial constraints or planning guidelines to

limit the acquisition of new equipment. As

much as 90 percent of all medical technology

originates at West German medical schools, but

the diffusion from university hospitals to community hospitals and private offices is rapid.

Physicians who move from a university hospital

to a community hospital often want the same

CHAPTER 7 REFERENCES

1.

2.

Bundesministerium fur Arbeit (Ministry of Labor), Strukturdaten des Gesundheitswesens,

(Bonn, Mar. 6, 1979).

Tabellen zu den Orientierungsdaten f;r

Empfehlungen der Konzertierten Aktion im Gesundheitswesen im ]ahre 1979 (Bonn, Mar. 6,

1979).

lize multichannel analyzers in a cost-effective

way.

Although there is much discussion of automated laboratory testing in West Germany,

very little quantitative information seems to be

available.11 This is one reason why cost-effectiveness studies in this area are not very common. 12 In sum although the planning, utilization, and financing of automated laboratory

equipment is an area that generates much discussion in West Germanyf it is relatively unexplored and unregulated.

equipment they had in the teaching hospital,

and some physicians acquire new technology

which they see at meetings or read about in the

medical literature. Even where there are some

constraints on the diffusion of new medical technology, for example, in community hospitals,

political considerations still seem to outweigh

the planning criteria that have been discussed

and are being established at the State and Federal levels.

3.

4.

Bundesministerium fur Forschung und Technologies (Ministry of Research an~ Technology),

Faktenbericht zum Bundesbericht Forschung

(Bonn, 1977).

The Federal Government’s Program on

Promo;ing Research and Development in the
5.

6.

7.

8.

9.

10,

11.

Serz?ice of Healtlz, 1978-1981 (Bonn, English version undated, German version 1978).

Bundesministerium fur Jugend, Familie, und Gesundheit, (Ministry of Youth, Family Affairs,

and Heal th ), Bcric/~t der Bz/tILfL~srt~~ie~-z{}~~ Uber

c~ie t! Llsulirh-li)lge!l dm Kratlh-etlll~z~[sfitlarlz icruHgsgcsetzes (Bonn: Bundestag, Dec. 12, 1975).

“Law on the Reform of Drug Legislation

of the Federal Republic of Germany of 24 August 1976, ” unofficial translation from the Federal LauI Gtizettc 1. (Bonn, n .d. ).

Ehlers, H., K~-a/Ike}~lzfi~ /slza~/figkeit (Dusseldorf:

Ministerium fur Arbeit, Gesundheit, und Soziales des Landes Nordrhein Westfalen, 1976).

Gcsetz zl~r Dii))lpfl~)~~ ~ler Al~sgabet]c)]t~llich-lll i]g

LirILl z lir Stttih-tli\ ’zl~~t’bcssc~\’[~ /lg irl der Gcsetzlicl~e}~ K)-a~~ke~~z~~~rsi~-l~ er-~/}~~ (Law Designed To

Decelerate Cost Increases) (Krankenversicherungs-Kostendampf ungsgesetz —KVKG ) ver6f -

fentlicht in Bundesgesetzblatt, Nr. 39, vom .

26.6.77, S.1069 ff.

Hargrave, A., “German Technology Today, ” -

Sriet!tific Attlericajl 241 :53, August 1979.

Dus Kra}Ike}I/IuzM, Heft 3, 1979.

Michael, H. A., et al., “Kosten und Investitionsplanning im Medizinischen Labor, ” Biotecl~-

~liscllc U~}IsrlIoIl 2:3, S.76, 1978.

12.

13.

14.

15.

16.

17.

18.

19.

Pflanz, M., “Daten zur Epidemeologie der Appendicitis, ” ML/tlclletIct’ Medizi~lisclle WoclIe?Iscljrift 119 (20-30):933, July 16, 1976.

PROGNOS AG., Europaisches Zentrum fur

angewandte Wirtschaftforschung, Mcdizi~~tecl~-

trik, unpublished report (Base], July 1975).

Rau, G., remarks at the CT Symposium at the

Deutsche Klinik tur Diagnostic (German Clinic

for Diagnosis), Weisbaden, Jan. 11-12, 1979.

Rausch-Stroman, I. , and Loring, G., “Das

Model] Lemgo, Zusammenarbeit von NiedergeIassenen Arzten und Krankenh;usern auf dem

Laborsektor, ” Deutsclles Arzteblatt 75(5):252,

Feb. 2, 1978.

Simanis, J. G., Office of Research and Statistics,

U.S. Social Security Administration, Washington, D. C., personal communication, May 1979.

, and Coleman, J. R., “Health Care Expenditures in Nine Industrialized Countries,

1960-1976, ” %c. Sec. 131/11. 43(1 ):3, January

1980.

Statistisches Bundesamt (Federal Center for Statistics), 1979.

Stieve, F. E., Bundesgesundheitsamt (Federal

Public Health Department), West Berlin, personal communication, April 1980.

68-095 I? - 83 - 1 C
8.

Medical Technology in the

Health Care System of

the Netherlands

L. M. J. Groot

Faculty of Medicine, University of Limburg

Maastricht, Netherlands
Contents

Page

The Netherlands: Country Description. . . . . . . . . . . . . . . . . . . . . . ............141

Form of Government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............141

Nature of the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........141

The Health Care System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............142

Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........143

Health Care Providers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........143

Levels of Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................143

Administration of the System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........144

Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....................144

Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..145

Cost Containment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............146

Policies Toward Medical Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147

Research and Development Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...147

Evaluation of Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .148

Regulation of Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148

Planning of Medical Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....148

Reimbursement and Medical Technology . ...........................14 9

Utilization Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...150

Specific Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150

CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150

Renal Dialysis and Kidney Transplants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151

Cardiac Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................151

Megavolt Radiation Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...151

Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............152

Chapter 8 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................152

LIST OF TABLES

Table No. Page

1. Intramural Health Care Institutions in the Netherlands . ..................143

2. Number of Personnel Employed by Intramural Health Care Institutions

in the Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......144

3. Number of Physicians and Other Health Care Personnel in the Netherlands. ...l44

4. Increase in Hospital Staffing in the Netherlands . ........................144

5. Overview of Health Care Costs in the Netherlands. . .....................146
Medical Technology in the Health Care

System of the Netherlands

L. M. J. Groot

Faculty of Medicine, University of Limburg

Maastricht, Netherlands

THE NETHERLANDS: COUNTRY DESCRIPTION

The Netherlands is a small country divided

into II Provinces, a district called the IJsselmeerpolders, and 850 municipalities. With

about (400 inhabitants per square kilometer

(1978), the Netherlands is one of the most densely populated areas of the world. In 1976, there

were 13.9 million inhabitants. The percentage of

the age group 65 and older was 11 percent, an

increase of 5 percent since 1889 (2).

Form of Government

The Netherlands is a kingdom with a parliamentary democracy. The head of state is Queen

Juliana of the House of Orange-Nassau. The

Parliament (Staten Generaal) consists of two

chambers. The Second Chamber (De Tweede

Kamer), which is the more important one, has

150 members. As there are no electoral districts

in the Netherlands, members of this chamber

are chosen directly by the population under a

system of proportional representation. This

method of election leads to the presence in Parliament of a number of political parties. Since

no one party has a majority, a coalition of several parties is necessary to form a government.

In 1979, the government consisted of Ministers

of the Christian Democratic and Liberal Parties.

The major role of the Second Chamber of Parliament is to amend and approve drafts of laws

put forward by the government. Only rarely

does this chamber exercise its authority to develop laws on its own. The First Chamber (De

Eerste Kamer), which is elected from and by

Provincial councils, can only approve or reject

laws that the Second Chamber has passed. Ordinarily, the First Chamber does approve these

laws.

Provincial councils are elected in each of the

11 Provinces and manage the policies of individual Provinces. Each Province is headed by a

Royal Commissioner (Commissaries der Koningin), who is appointed by the Queen after she is

advised by the Cabinet. The main task of the

Provinces is the supervision of the municipalities. Each municipality has an elected council

and a mayor appointed by the Queen advised

by the Cabinet (for larger cities) or by the

Minister of Internal Affairs (for smaller towns).

Nature of the Economy

The Netherlands’ location at the mouth of the

great rivers Rijn and Maas has made the country

a leader in international trade. Rotterdam has

the largest harbor in the world. The Dutch economy is based on free enterprise, but the government’s influence is growing in response to the

weak economic situation and the imminent failure of a number of private enterprises.

Overall, the working population is divided

into the following sectors (2):

Agriculture and mining . . . . . . . . . . . . . . . . . . 1.9%

Industry. . . . . . . . . . . . . . . . . . . . . . ........38.0

Services (for-profit) . . . . . . . . . . . . . . . . . . . . .31.8

Government and nonprofit . ..............28.3

Wage costs have risen tremendously in recent

years, creating problems in selling the country’s

products internationally. Labor-intensive industries, in particular, have had a very difficult

time. Because of the importance of the problem

141
of unemployment, the Government has sought

to encourage the development of industries that

make use of sophisticated techniques and knowhow.

The production of medical technology is discussed in this context as a partial solution to the

nation’s economic problems. About 60 enterprises in the Netherlands are active in the manufacture and trading of medical instruments internationally. These include large companies,

such as Philips, which have a broad range of

articles, and many small companies, which are

more specialized. The Dutch industry in medical

technology takes care of 18 percent of the world

market (I). Ninety percent of medical techTHE HEALTH CARE SYSTEM

Fully describing the health care system of the

Netherlands is a difficult task. Because the

system has emerged with no systematic plan

from the Netherlands’ tradition of pluralism, in

fact, some people call it a “nonsystem. ”

Immediately after World War II, the Government of the Netherlands sought to restore the

country’s social and economic life through various formal policies. As wartime regulations

were abolished and freedom restored, specific

laws regulating the health care system were

passed. The two most important were the hospital tariffs law (Wet Ziekenhuistarieven) of 1965,

which regulates price setting for all intramural

institutions, and the Hospital Provisions Act

(Wet Ziekenhuisvoorziening) of 1971, which

regulates the building and renovation of intramural institutions. Notwithstanding this postwar government intervention, however, the

health care system of the Netherlands remains

largely private. Proposals to strengthen the

government’s regulatory powers have recently

been sent to Parliament.

The government’s role in health care is administered through the Ministry of Health and

nology produced in the Netherlands is exported,

which accounts for the importance of the medical technology industry to the national

economy.

Overall, the Netherlands is a pluralistic country. With people of different backgrounds and

different religions, tolerance is essential. Government is viewed not in a negative light, but as

a solution to societal problems. Ordinarily, the

public and the private sectors work hand-inhand; but if the private sector is unable to deal

with a problem, the Government will generally

step in. The traditions of the Netherlands encourage the incorporation of the new, including

the adoption of new models of social action.

Environmental Protection (Minis

Volksgezondheid en Milieuhygiene)

responsibility for the entire Ministry

erie van

Ultimate

rests with

the Minister, but health care, specifically, is

under the direction of a State Secretary. Both

these officials are politicians.

A number of important advisory councils and

boards at the national level seek to ensure the

full cooperation of doctors, hospitals, sick

funds, private insurance organizations, and

others affected by national health care policies.

These advisory boards include: 1) the Health

Council (Gezondheidsraad), which advises the

government about the state of the art in applied

medical sciences and plays a central role in the

application of new technologies; 2) the Central

Council for Public Health (Centrale Raad voor

de Volksgezondheid), which fosters cooperation

between the government and private organizations and institutions working in the health care

system and advises the government on all issues

in curative and preventive health (16); 3) the

Central Board for Hospital Tariffs (Centraal Orgaan Ziekenhuistarieven), which plays an important role in the pricing of services of intramural institutions on the basis of the 1965

hospital tariffs law; and 4) the Central Board for

Hospital Provisions (College voor Ziekenhuisenvoorzieningen), which advises the government on the building of intramural institutions
in accordance with the 1971 Hopital Provisions

Act .

The government’s most important role in the

health care system is in the area of preventive

medicine. Preventive services, which amounted

to 3 percent of total costs of health care in 1977,

are financed out of general revenues. Some preventive services are provided by the organizations for home care (Kruisorganisaties), private

organizations that receive government subsidies. In addition, municipal health services provide preventive care and ambulance services.

Industry provides some preventive services as

required by law.

In general, the government’s role in curative

health care is very modest, involving only a few

government institutions. Basically, it is to guide

the curative system to help ensure the availability y and accessibility of high-quality care at reasonable costs. The government has a special responsibility for the quality of care, which is entrusted to National Inspectorates (Staatstoezicht

op de Volksgezondheid ) and their Provincial offices ( 16).

Hospitals

A number of hospitals in the Netherlands

were founded and administered by Catholic or

Protestant religious orders, but most of these

institutions have now been turned over to private foundations administered by lay people.

Though most of the hospitals in the Netherlands

are private, there are also public institutions.

Some large cities, for example, have their own

municipal hospitals. Originally, these facilities

were established to treat poor patients, as required by the national poor laws. In addition to

municipal hospitals, some psychiatric hospitals

are public. With the exception of the Province of

North Holland, however, most Provinces meet

their legal obligation to provide psychiatric

services by making arrangements with private

hospitals.

There are seven university teaching hospitals

in the Netherlands, which are under the control

of the Ministry of Education and Sciences (Ministerie van Onderwijs en Wetenschappen).

These hospitals, which have traditionally had

an important role in conducting medical research, are gradually being transferred to the

health care system and are increasingly emphasizing patient care.

A breakdown of hospitals in the Netherlands

by type is presented in table 1.

Table 1 .—Intramural Health Care Institutions

in the Netherlands (1976)’

Total. ., . . . . . . . . . . 763

Number

of beds

61,038

7,012

6,776

25,940

26.947

1,795

42,034

171.542

0.5

1.9

2.0

0.1

3.0

12.4

Health Care Providers

Medical specialists and pharmacists in the

Netherlands work mostly on a fee-for-service

basis. They work either in private practice in the

community or under an arrangement with hospitals to provide services. Generally, physicians

work independently. Only in psychiatric hospitals, university teaching hospitais, and large

municipal hospitals are doctors on salary.

Data on the numbers and types of personnel

in the Dutch system are presented in tables 2

and 3. Table 4 shows the increases in specific

types of hospital staff that occurred between

1973 and 1978.

Levels of Care

The health care system of the Netherlands is

generally considered to have three levels of care.

The first level, public health, includes the provision of preventive services. Some preventive

services are offered to the entire population, and
144 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Table 3.—Number of Physicians and Other

Health Care Personnel in the Netherlands (1976)

--

Number per

100,000

Types of personnel Number inhabitants

.—.

Physicians - - - - “‘- --

General practitioners. . . . . . 4,937a 36

7,223 53

1 . . . 1,158 8.4

8,574 62

. . . . ‘21,892 ‘- - 159.4 -

–

. . . 4,462 32

. . . . 1,197 9

Table 4.—increase in Hospital Staffing

in the Netherlands (1973-78)

others are offered to specific groups (e. g., children, diabetics, employees, and elderly people).

The second level of care, so-called “first-line

care, ” is immediately accessible to the patient.

This includes home care provided by nurses, as

well as care provided by general practitioners

working in solo practice, in group practice with

other general practitioners, or in health centers

with other professionals such as nurses, physiotherapists, and social workers. Both the government and sick funds want to encourage the development of health centers.

“Second-line care, ” the third level in the system, is generally, except for emergencies, provided on referral by the first-line practitioners.

Second-line care includes outpatient care by specialists (provided mostly through outpatient departments of general hospitals) and inpatient

care in acute care hospitals. It also includes care

in nursing homes and homes for the mentally

retarded.

Administration of the System

The Netherlands’ health system depends very

heavily on private institutions and independent

practitioners. Individual patients are free to

choose their own physician, whether generalist

or specialist. Professionals are free to select

treatment for their patients. Physicians are also

free to settle and practice where they like, although in order to practice in a particular hospital, they are required to obtain a license from

the hospital board.

With the government taking the steps to be

described below, the openness of the health system in the Netherlands is generally decreasing.

The possibility of restraining cost rises by restricting the number of health care personnel is

now much discussed.

Financing

As mentioned previously, preventive care is

financed by the government out of general revenue. Curative health care is financed by insurance and out-of-pocket payments; only a small

part of it is subsidized by the government.

The following sections describe how the insurance system is divided.
Ch. 8—Medical Technology in the Health Care System of the Netherlat?ds ● 145

National Sick Fund Insurance

A compulsory insurance scheme dating to

1941 was legalized in the Sick Fund Act (De

Ziekenfondswet ), social security legislation

passed in 1966. Sick fund insurance (Zeikenfondsverzekeving) covers about 70 percent of

the population, Members of the scheme include

employees whose income falls below a certain

level (36,200 florins in 1978—$19,053), 2 selfemployed persons whose income falls below this

same level, and those over the age of 65 with incomes below a certain level (20,600 florins in

1978-$10,842). Each group is subsidized by the

government in a slightly different way.

National sick fund insurance finances all

acute health care, including that provided by

general practitioners, specialists, and hospitals.

Generally, all costs, including drug costs, are

covered, and the patient pays only for incidentals such as appliances and transportation.

The national sick fund insurance scheme is executed by 65 independent sick funds. All of

these funds are members of the Society of Dutch

Sick Funds (Vereniging Nederlandse Ziekenfondsen, VNZ), which plays an important role

in shaping health care policy in the Netherlands.

The sick funds are supervised by the Sick Fund

Council (Ziekenfondsraad), representing government, employers, employees, sick funds, institutions, and professionals working in the

health system. The Sick Fund Council approves

arrangements between sick funds and providers

of medical care. It also advises the Ministers of

Social Affairs and Health Care concerning the

premiums of the insurance schemes, which the

Ministers have to fix.

Private Insurance

Approximately 30 percent of the population

is not insured under the national sick fund insurance scheme described above. Individuals in

this group finance their own health care, usually

by buying private insurance. Private insurance

premiums and health care expenses are tax deductible by the patient.

Although private insurance policies vary,

generally the costs of more expensive items,

such as hospital and specialist care, are completely covered. The costs of general practitioner care and drugs, however, are usually not

covered. Deductibles and coinsurance are

common.

In Government councils that play an important role in the system, private insurance companies are represented by their own society, the

National Society of Private Insurers for Health

Care Cost s (Kontaktcommissie Landelijke

Organisaties van Ziektekostenverzekeraars,

KLOZ).

National Catastrophic Illness Insurance

In 1968, Parliament passed a general law on

costs of catastrophic illness (Algemene Wet Bijzondere Ziektekosten), establishing a new catastrophic insurance scheme under social security.

This scheme is known as “insurance for the population” (Volksverzekering), because all citizens

are required to be members. The scheme is financed out of premiums, which are levied by

fiscal authorities. There is no income limit for

membership, but the premium (2.86 percent) is

levied on those whose incomes exceed a specified maximum (41,750 florins in 1978–$21,974;

43,950 florins in 1979–$23,131).

This insurance finances the most expensive

forms of care, including long-term care in general hospitals, nursing homes, homes for the

mentally retarded, and ambulatory care for

mental health. Beginning in 1980, the catastrophic scheme will also finance home care,

previously financed through general revenues

and patient contributions. This change is intended to reinforce first-line health care.

Reimbursement

Payment to Hospitals and Other Institutions

Tariffs for hospitals and other institutions are

set by the Central Board for Hospital Tariffs,

the national advisory board mentioned earlier.

This body is made up of representatives of hospitals, sick funds, private insurance systems,

and independent members. The Central Board

for Hospital Tariffs evaluates costs prospective-
146 ● Buckground Paper #4: The Management of Health Care Technology in Ten Countries

ly and sets rates following guidelines that it has

developed and that the Sick Fund Council and

the Minister concerned have approved. The

guidelines are very clearly defined and applied

with individual circumstances taken into consideration.

Payment to Physicians

General practitioners are paid on a cavitation

basis for sick fund patients and on a fee-forservice basis by private patients. Specialists are

paid exclusively on a fee-for-service basis for all

patients. Fees from the sick funds are set in negotiations between the organization of physicians, the Royal Netherlands Medical Association (De Koninklijke Maatschappij ter Bevordering der Geneeskunst), and the sick funds.

General practitioners’ fees for private patients

are comparable to their fees for sick fund patients. Specialists’ fees for private patients, however, are much higher. On the average, a specialist can earn 50 percent of his/her income

from private patients, who make up only 30

percent of the population. Technical specialties

such as radiology are the best paid.

Fees for all physicians can be changed only

with the approval of the Minister of Economic

Affairs, who is attempting to implement a general incomes policy for social and political reasons. Recently, the government has set up a

Commission on the Structure of Medical Specialists’ Fees (Commissie Structuur Honorering

Medische) to revise fees. The government is also

developing an incomes policy to bring the incomes of specialists and other professionals into

line with incomes of comparable government

officials.

Cost Containment

Because the curative health care system is

largely private and financed by insurance, the

government’s influence on the system can only

be indirect. Many items of the health care system are open ended. More services generate

more money for the providers. Furthermore,

since the health care costs are not part of the

government budget, health care expenditures do

not compete with other social needs such as

education.

Figures demonstrating the rise in the costs of

care during the period from 1973 to 1977 are

shown in table 5. As can be seen from these figures, overall cost rises have been in the range of

between 11.2 and 18 percent each year for the

past several years. There does, however, seem

to be a decreasing trend in the rise of costs. The

percentage of gross national product consumed
Ch. 8—Medical Technology in the Health Care System of the Netherlands ● 147

by health care expenditures was 7,2 percent in

1973 and 8.2 percent in 1977 (6).

Since 1976, the government has tried to bring

down collective spending, that is, spending on

items financed by taxation and social security

premiums. Since these items are financed out of

wages, increased expenditures contribute to unemployment. The government expects that implementation of its cost-containment policy will

save 2 billion florins ($1.052 billion) in 1981

(15). It has already submitted two important

proposals to Parliament. One is the law on tariffs in health care (Wet Tarieven Gezondheidszorg), which would give the government full authority to regulate all tariffs and fees. The second proposal is the law on health care provisions (Wet Gezondheidszorgvoorzieningen),

which would allow regulation of the development of all health care facilities, including doctors’ practices. These proposals would broaden

and replace existing laws.

Although these proposed laws could be enacted within 2 years, past experience with the

Hospital Provisions Act of 1971 suggests that

the types of policies which they embody are difficult to implement. Under the Hospital Provisions Act of 1971 (which the pending legislation

would strengthen), the government’s policy is to

decrease the number of general hospital beds to

four beds per 1,080 inhabitants. Implementation

of this policy has been difficult, because the

general population, patients, and hospital employees resist the closing of their hospitals. Furthermore, because of its policy of full employment, the government approved an increase in

guidelines for nursing personnel in intramural

institutions this year, despite the predicted negative impact on costs.

POLICIES TOWARD MEDICAL TECHNOLOGY

The general impression in the Netherlands is

that medical technology is a significant contributor to rising health care costs, but little

specific information is available. Econometric

analyses by the author give indirect indications

that technological innovation is an important

contributor to costs (10,12). In an analysis of

price rises in institutional health care, Van

Montfort reported that costs for medical and

nursing materials rose from 323 million florins

($170 million) in 1972 to 497 million florins

($262 million) in 1975, an increase of 53.9 percent (17). Of the 53.9-percent increase, 16.9 percent was due to price increases and 37 percent to

real changes in services. Technical innovation

also increases costs by increasing staff size in

hospitals (5). Further, technology requires

space. About 20 percent of total space in hospitals is taken up by selected departments with

technology, such as X-ray equipment, laboratories, and operating rooms (9).

From the standpoint of outputs, technical innovation appears to be a stronger influence in

the diagnostic area than in the therapeutic. Between 1960 and 1974, the number of diagnostic

procedures performed rose from 9.84 per 1,000

insured patients to 45.75 per 1,000 (13). The

number of therapeutic procedures performed

rose during the same period from 50.5 per 1,000

in 1960 to 94.09 per 1,000 in 1974 (13). Increases

within the area of diagnosis can also be documented. For example, laboratory production

per 100 admissions increased about 11 percent

per year from 1973 to 1975 (13). The incidence

of X-ray use also rose slightly, from 401.8 per

1,000 admissions in 1973 to 413.7 in 1975, an increase of 3 percent (13). Therapies increased 31

percent over the same interval (13).

Research and Development Efforts

Research related to medical technology is

conducted by industry, by research organizations, and by universities. University research is

generally funded by government.

The two important government organizations

that fund research are: 1) the Dutch Organization for Fundamental Scientific Research

(Nederlandse Organisatie Zuiver Wetenschappelik Ondezock, ZWO), and 2) the Dutch Organization of Applied Scientific Research (Nederlandse Organisatie voor Toegepaste Natuur-
148 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

wetenschappelijk Onderzoek, TNO). The research of ZWO is basic research that has little to

do directly with medical technology. TNO,

however, has a special department for health

care, the Health Organization TNO (Gezondheidsorganisatie TNO), which spends about 50

million florins ($26.3 miIlion) a year on research

related to patient care. Some of this research is

conducted in a few prominent general hospitals,

but most of it is conducted in university

teaching hospitals.

R&D in the health area is primarily the task of

the university teaching hospitals, which are

reimbursed by the social security system and patients on the basis of a uniform tariff. This tariff

is based on the output of the average university

teaching hospital, with the guidelines applied to

the bigger general hospitals taken into consideration. Reimbursement is not sufficient to cover university teaching hospitals’ costs, however,

and the government covers their deficits. The

deficits amount to about 30 percent of the hospitals’ budgets, and some of the deficits are attributable to research and teaching. According to

the Ministry of Education and Sciences, the total

deficit in 1977 was 496 million florins ($261

million).

At this time, there is a special commission on

the tariffs for these university teaching hospitals

which is to solve the problem of reimbursement.

As a method of furnishing the resources needed

for new developments in patient care, the policy

will be to fund new techniques at the marginal

cost of the technique. The guidelines for reimbursement, however, do not contain space for

research. Research is to be directly funded by

special funds.

Evaluation of Medical Technology

Few evaluation studies of medical technology

have been conducted in the Netherlands. New

technologies in heaIth care, including new diagnostic and therapeutic devices, however, are

evaluated by the Health Council, before they

are accepted into medical care. The advice of

this group guides the decisions of other bodies,

such as the Sick Fund Council and the Central

Board for Hospital Provisions, which are

responsible for planning heaIth services.

The Health Council’s evaluations are mostly

of a technical nature. Only recently has the

council considered costs and benefits in making

its recommendations. Before it made its recent

recommendation about the number of kidney

transplants, for example, it considered the economic benefits of transplantation versus dialysis

(4), Similarly, it considered some cost issues

prior to advising on renal dialysis.

A working party on the evaluation of medical

instruments with regard to safety and efficacy

has been founded in cooperation with the

Health Organization TNO and the National

Hospital Institute (Nationaal Ziekenhuisinstituut), a research institute founded by the National Hospital Council (Nationale Ziekenhuisraad). So far, the working party has published

eight papers on items including heart monitoring systems, EKG apparatus, defibrilators, electrical thermometers, electrical beds, external

pacemakers, and blood pressure monitors. Reports in preparation concern EEG instruments,

fetal monitoring instruments, and heart monitoring instruments.

Regulation of Medical Technology

The only medical technology that is directly

regulated in the Netherlands, based on legislation of 1958, is drugs. Drugs can be prepared

only by pharmacists, general practitioners with

their own pharmacy, or assistants working under the supervision of pharmacists or general

practitioners with their own pharmacy.

Industrial production and distribution of

drugs by drug companies must be approved by

the government. The Commission on Drugs

(Geneesmiddelencommissie) advises the Minister of Health on drugs, and only those drugs

which have been registered can be distributed to

the public. Prior to registration, a special board

evaluates the drug’s composition, efficacy, and

side effects. This board critically examines the

producer’s claim regarding the drug’s efficacy.

Planning of Medical Technology

The Hospital Provisions Act of 1971, which

regulates the building and renovation of institutions such as hospitals, is the only law that can
Ch. 8–Medical Technology in the Health Care System of the Netherlands ● 149

contain the expansion of technology in the

Netherlands. Under this law, a hospital that

wants to make a capital investment for renovation exceeding a certain amount of money must

apply for a license with the Central Board for

Hospital Provisions. The Board can also limit

the size of, for example, the hospital’s X-ray department. Recently introduced legislation

would give the government the authority to

close down hospitals or part of them.

Article 18 of the Hospital Provisions Act of

1971 gives the government the authority to regulate very “advanced” technologies on the basis

of a national plan. This national plan contains

an inventory of existing facilities and gives indications as to where these facilities should be

changed. The planning process has not been

fully applied to all facilities, because there is

some fear that a national plan may favor the expansion of existing facilities and thereby increase costs.

So far, regulations have been issued for both

renal dialysis for chronic kidney failure and

megavolt therapy. Preparations are currently

under way to issue regulations to cover cytogenetic laboratories, nuclear medicine (both diagnostic and therapeutic), and diagnostic facilities

for angiocardiography and heart catheterization. Guidelines for open-heart surgery and

computed tomograpy (CT) scanners are in

operation, also.

Many technologies, however, do not need

building arrangements and can be expanded

without government regulation. In some instances, the government has asked hospitals not

to invest in new instruments without the approval of the Ministry of Health. It has done

this, for example, in the case of diagnostic

devices that use radioactive isotopes, such a s

gamma cameras. (The automation of laboratory

equipment is a special case described in the next

major section of this chapter. )

The Central Board for Hospital Tariffs is considering the development of special guidelines

with respect to investments in medical instruments and the number of paramedical personnel. General hospitals following the guidelines

would be able to expand these investments and

personnel by a limited amount each year. It is

hoped that a policy of restricting this infrastructure will make doctors more critical with respect

to their utilization of facilities.

There are technological innovations that the

government has not dealt with and over which it

has no authority. The government is considering a system of restraining expansions by a new

law to limit tariffs in the health care sector. This

law, the law on tariffs in health care, may avoid

a proliferation of bureaucracy and allow for a

flexible policy. Recently, the government has

stressed the importance of negotiations between

hospitals and reimbursers of care. These regional contacts could provide an important forum

for discussion, out of which a sensible policy

toward the deployment of medical technology

may evolve.

Reimbursement and Medical

Technology

The reimbursement system, as described previously, favors the expansion of medical technology, The structure of tariffs varies between

hospitals, and such services as drugs and laboratory tests can be included or not in the charge

per day. Pharmacists and clinical chemists, who

are responsible for the chemical analyses done

in the hospital, are on the hospital’s payroll, and

their salaries are included in the hospital tariff.

A few physicians also perform these tests, however, and they can be paid on a fee-for-service

basis. Most specialists work on the basis of fee

for service, which encourages giving service.

The surgeon and the anesthetist bill the patient

for their services, for example. The radiologist

bills for a fee.

The hospital bills separately for its services

and is reimbursed at cost. Costs for the use of an

operating room (including the cost of personnel,

instruments, and appliances), for example, are

not included in the hospital tariff. X-rays are not

included either. These services are billed for separately and are reimbursed at cost. The tariffs

for medical ancillary services such as laboratory

and X-ray are set uniformly for the whole country by the Central Board for Hospital Tariffs.

These tariffs, which are based on costs for per-
150 ● Background Paper #4: The Management of Health Care Technoloy in Ten Countries

sonnel, materials, and costs of other investments and include a small addition for overhead

costs, are revised every 3 years.

Under this hospital reimbursement system,

the more services that are performed, the more

money that is generated. In technical departments, the costs are more or less constant, so an

increase of services above the budgeted level

generates surpluses of revenue above costs.

These surpluses allow expansion. They also lead

to lower rates for patient days when the Central

Board for Hospital Tariffs has to revise the hospital budget. Hospital budget revisions are

made whenever the hospital applies for a tariff

increase, otherwise at the end of 4 years.

The direct relation of services and income for

physicians is criticized by government, the sick

funds, and patients. Because of these criticisms,

radiologists recently made a new agreement

with the sick funds, under which radiologists’

fees for tests in excess of 15,000 are lowered by a

percentage. The government is also urging

hospitals to include more items in the day rate

to mitigate expansion in certain services.

Several health economists are studying the

possibilities of stricter budgeting in hospitals, or

perhaps replacing hospital rates by a system of

budget financing under which there would be a

more direct relationship between output and

costs (lo, 12).

Utilization Review

There has not been much utilization review in

the Netherlands. In Utrecht, however, the FounSPECIFIC TECHNOLOGIES

As noted previously, article 18 of the hospital

provisions law allows the government to issue

guidelines and regulate advanced medical technologies on the basis of a national plan. Only

some medical technologies have been brought

under this article to date.

CT Scanners

At the present time, there are 32 CT scanners

installed in the Netherlands. There is no defindation of Medical Registration (Stichting Medische Registratie) assembles data about patients

admitted to hospitals, diagnoses, average length

of stay, operations performed, and so forth.

This foundation covers almost 90 percent of

hospital beds in the Netherlands and is financed

by member hospitals, i.e., voluntary members,

The data the foundation generates are very important, because they are used by medical staff

to evaluate their work and are also used for hospital planning.

A separate data bank has been established by

the sick fund organizations to collect data on

their patients admitted to hospitals. The data

collected concern such things as the referral

policies of general practitioners and acts performed by specialists, they also include data on

hospitalizations (e.g., average length of hospital

stay). Some individual private insurance companies have also begun to collect important data

about their patients admitted to hospitals.

Recently, a new foundation called the National Organization for Quality Assurance in

Hospitals (Centraal BegeIeidingsorgaan voor Intercollegiate Toetsing in Ziekenhuizen) was

established. This new organization is financed

by hospitals, which are licensed by the Central

Board for Hospital Tariffs to include their contribution as part of their reimbursement costs.

The new organization is expected to foster medical audit and utilization review in hospitals,

particularly in cooperation with the medical

societies.

itive regulation of CT scanners by article 18, but

the Secretary of State and the hospitals have

agreed not to install additional facilities without

allowances from the government.

In existing CT scanner guidelines, a distinction is made between brain scanners and total

body scanners. For brain scanners, the guideline

is one scanner per 500,000 inhabitants. Brain

scanners are to be installed in hospitals that

have teaching facilities in neurology and a
department of neurosurgery, and hospitals with

scanners are to work in regional cooperation

with other hospitals, On the basis of the existing

guideline and population, about 30 brain scanners can be installed. These scanners will be

placed in the near future.

Total body scanners are to be placed in those

university teaching hospitals which have a center for cancer patients, teaching facilities for Xray diagnostic and therapeutic procedures, expertise in radiation physics, a radiation therapy

simulator and treatment planning system, and

the capacity for evaluating the results of CT

body scanning with those of other radiological

diagnostic methods, nuclear medicine, echography, and clinical neurophysiology. Since a preponderant motivation is research, spreading CT

body scanners throughout the country is not

deemed necessary. About eight total body scanners are to be installed.

Renal Dialysis and Kidney Transplants

There has been a “gliding standard” of an absolute limit of a minimum of 71 and a maximum

of 111 dialysis units per 1 million inhabitants.

This gliding standard was made dependent on

the number of kidney transplants performed.

The guideline for kidney transplants has been 32

transplants per 1 million inhabitants, and the

Health Council urged the government to aim at

400 kidney transplants per year. This goal has

not been reached, however, because there have

not been enough kidneys available.

The existing renal dialysis guideline applies

for patients older than 15 years. As dialysis is

being used for people over 60 years old, and

more people are applying for treatment, however, the need for dialysis equipment is growing. The government has recently increased the

guideline to 100 dialysis units per 1 million inhabitants. This would bring the number of dialysis units, not including home dialysis units, to

1,407 in 1980.

Cardiac Surgery

Cardiac surgery is a very hot political issue in

the Netherlands. The supply of existing facilities

is not sufficient to meet the ever growing demand for coronary bypass surgery. Notably,

the Society of Heart Patients (Nederlandse Hartpatientenvereniging) deployed lobbying activities in government and Parliament to increase

the facilities and get permission for patients to

have operations in other countries such as the

United States, Switzerland, and England (8). As

a result, patients may now be reimbursed by

sick funds and other private insurance for bypass operations performed in foreign countries.

According to the Sick Fund Council, in 1978

there were 1,079 operations for open cardiac

surgery performed abroad as follows (18):

Houston, Tex., United States. . . . . . . . . . . . . . . 268

Genolier Swiss, Switzerland. . . . . . . . . . . . . . . . 501

London-St. Anthony’s Hospital, England. . . . . . 218

London Middlesex Princess Grace

Hospital, England . . . . . . . . . . . . . . . . . . . . . 92

Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ,079

In 1977, the total number of operations performed abroad was 965.

Planning for cardiac surgery is based on the

following guidelines: 300 operations for open

coronary surgery per 1 million inhabitants (i.e.,

4,200 operations per year), 50 operations for

closed cardiac surgery (i. e., 720 operations per

year). The total capacity in 1976 was 2,095

open- and 388 closed-heart surgery operations.

The target at the moment is set at 6,000 operations a year. The specified guidelines are to be

realized after 1980.

The government has designated six teaching

university hospitals and three general hospitals

as cardiac centers where these cardiac surgery

operations can be performed. Each center is to

aim towards a production of 400 operations a

year. Currently, the Antonius Hospital at

Utrecht is performing 700 operations a year. In

addition, very recently, the government designated a sanatorium for tuberculosis to function,

in cooperation with a nearby general hospital,

as a center for 1,000 operations per year.

Megavolt Radiation Therapy

For planning these facilities on the basis of article 18, the concept of a “radiation unit” is

used. A radiation unit is a megavolt apparatus,

with supplementary provisions, which has suffi-
152 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

cient capacity to treat 250 new patients a year.

The capacity of telecobalt apparatus with a

range of 2,OOO to 3,OOO curies is one radiation

unit. The capacity of telecobalt apparatus with

6,000 to 9,000 curies is two radiation units. A

linear accelerator can be counted as two radiation units.

Currently, there are 49 radiation units in 20

general, university teaching, and categorical

(special purpose) hospitals in the Netherlands.

The number of cancer patients in the Netherlands is estimated at 3,250 patients per 1 million

inhabitants, about 1,450 of whom need radiCONCLUDING REMARKS

The proliferation of medical technology is of

great concern to the government of the Netherlands, which is confronted with ever increasing

costs of medical care. In an effort to restrain

costs, the government is seeking to control specific elements of the health care system, especially hospital beds. There are many conflicting

interests to be considered. Patients and doctors

want the most modern technology. The medical

technology industry, with its importance in

R&D and the general economy, is another important force. Although a full employment policy favors the expansion of health care personnel, the rising costs of the health care system

may jeopardize the general economic system.

CHAPTER 8 REFERENCES

1.

2.

3.

4.

5.

Algemene Bank Nederland, E/ektrisch-Medische

Apparatuur (Amsterdam, April 1978).

Centraal Bureau voor de Statistiek (Central Bureau of Statistics), Statistisch Zakboek 197 8

(The Hague, 1978).

Vademecum Gezondheidsstatistiek

Nederland 1977 (The Hague, 1977).

Gezondheidsraad (Health Council), Advies inzake Faciliteiten en Kosten Niertransplantaties

LJitgebracht door een Commissie uit de Gezondheidsraad (The Hague, May 5, 1977).

Groot, L. M. J., “Economische Problematiek

rend Technische Innovatie in de Gezondheidsation therapy. Given its population of 13.9 million inhabitants, the country needs radiation

capacity for 20,155 new patients, i.e., 80 units.

The existing 49 units, therefore, may have to be

enlarged in the near future. Since 20 of the 1,450

patients are treated by orthovolt units, however, the need for megavolt apparatus may be

less. For this reason, the government intends to

follow a prudent policy in enlarging the existing

facilities. Very recently, there have been indications that the need for radiation therapy may increase. The government will ask the Health

Council to advise on this matter. The guidelines

may have to revised.

In light of these conflicting interests, the

evaluation of medical technology could play an

important role in the effort to find solutions to

the difficult and delicate problems which surround the diffusion of medical technology. In

the area of technology assessment, the Netherlands has as yet made very few contributions.

The need for technology assessment, however,

is likely to be increasingly felt in the future. The

problems are international, so perhaps technology assessments could be performed on a European basis. I would hope that the European

community will be able to make a contribution

in this area.

6,

7.

8.

zorg, ” in Verslag Symposium, KHSV Nijmegen,

Oct. 13,1977.

Ministerie van Volksgezondheid en Milieuhy -

giene (Ministry of Health and Environmental

Protection), Financieel Overzicht van de Gezondheidszorg, Waarin Opgenomen een Raining

van de Kosten tot 1984 (The Hague, September

1979).

, Financieel Overzicht van de Gezondheidszorg, Waarin Opgenomen een Raining van

de Kosten tot 1984 (The Hague, September

1979).

Naaborg, R., “Beleidsvorming in de Gezond-
9.

10.

11.

12.

13.

heidszorg, Zoeklicht op de Hartchirurgie, ” dissertation, Rotterdam, 1979.

Nationaal Ziekenhuisinstituut (National Hospital institute), Bo~lz~]~?o/t/t~ ~e-B~/dgette~’i~~g Alg=e-

~~~e~~e Zieke~z)~~/izen, 76.96 (Utrecht, 1976).

, Erc>/zc~/}~ett-iscl~e A}~alyses itz )Jet Kader

~~atl )let Basis o}lderzoek- Kos te~zs tructuzi r Zieke?z -

l~zfizc~~, 76.90A, 76.90B, 76.90C (Utrecht, 1976).

, Fitzarlcie[e Statistiek 1976 itl de Imtellillgc}l zla~z lfltra)~ll[rflle Gezorzdlzeidszorg

(LJtrecht, 1977).

Ftl)zctieclassificatie zlatl Alge}~le/le Ziekenhliiz;}l i~l /let Kader ~~at~ het Basisonderzoek

Kostpilstrlict[l[lr Ziekerl/lt~izetl, Dcel 3, 75.7 6

(LJtrecht, 1976).

Otltu~ikkelitlgc)l iil de Vraa,g ~zaar Speciulistis’c~ze Elzllp, V. IOT (Utrecht, 1977).

14.

15.

16.

17.

18.

, Statistiek Perso/zee/ssterkte 1978 itl de

l~~stc!litzgetl L’~tI liltran~urule Gezotld/leidszorg,

79.165 (Utrecht, 1979).

Nota van de Stattssecretaris van Volksgezondheid en Milieuhygiene aan de Voorzitter van de

Tweede Kamer der Staten Generaal Betreffende,

Het Beleid terzake va}l de Gezo~ld}leidszorg i?let

/let oog op de Koste~~orltu~ikke/i/~g, Gedrukt

stuk 15-540, nrs. 1-2 (The Hague, 1979).

Roscam Abbing, E. W. (cd.), Boz~uI e~z Werki~~g

l~atl de Gezo)ld)leidszorg ill Nederla~zd (Utrecht:

Bohn, Scheltema & Holkema, 1979).

Van Montfort, A. P. W. P., “Analyse van de

Kostenstijging in de lntrarnurale Gezondheidszorg, ” Het Zieke/llzl/is 7: ]5, AugLIst 1977.

Ziekenfondsraad (Sick Fund Council), Jaarz~erslag 1978 (Amsterdam, 1978).
9 ■

Medical Technology in

the Health System of Iceland

David Gunnarsson

National Hospital

Reykjafik, Iceland

and

David vB. Neuhauser

School of Medicine

Case Western Reserve University

Cleveland, Ohio
Contents

Page

Iceland: Country Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157

Health Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........160

Medical Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....161

Specific Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............162

CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .162

Renal Dialysis.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................163

Coronary Bypass Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......163

Cobalt Therapy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...164

Automated Laboratory Testing Equipment . . . . . . . . . . . . . . . . . . . . . . . . . ..164

Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................164

Chapter preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....164

LIST OF TABLES

Table No. Page

1. Distribution and Growth of Iceland’s Population. . . . . . . . . . . . . . . . . . . . . . . .159

2. Distribution and Growth of Iceland’s Population Over Age 67..............160

LIST OF FIGURES

Figure No. Page

1. Demographic Trends in Iceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........158

2. Proportion of Iceland’s Total Population of Males and Females in

5-Year Age Groups. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159
Medical Technology in

the Health System of Iceland

David Gunnarsson

National Hospital

Reykjavik, Iceland

and

David vB. Neuhauser

School of Medicine

Case Western Reserve University

Cleveland, Ohio

ICELAND: COUNTRY DESCRIPTION

Iceland is a Scandinavian republic of 224,000

population (1978) located in the North Atlantic

near the Arctic Circle. It is a country of almost

no trees and has a rugged volcanic landscape.

Iceland has one of the world’s lowest population growth rates, lowest infant mortality rates

(11.3 per 1,000 live births, 1978; 9.5 per 1,000

live births, 1977), and longest life expectancy

(male 73.0 years, female 79.0 years, 1975-76).

Demographic trends between 1850 and 1975 are

shown in figure 1. The proportion of the total

population of males and females in 5-year age

groups is shown in figure 2.

The population is spread along the coast,

with 100,000 people living in the capital city of

Reykjavik and surroundings. (See table 1.)

Reykjavik has the same growth of population as

other Scandinavian capitals do. The proportion

of persons over the age of 67 is growing faster in

Reykjavik than in other parts of the country.

(See table 2.)

Iceland has a high per capita gross national

product (GNP) and a per capita income of

$9,470 (1978). There are no very rich and no

very poor. Inflation, which in past years has

averaged 30 percent, was up to 69 percent in

November 1979. Because of this high inflation,

people tend not to save money but to invest immediately in houses and automobiles. Therefore, although population growth is not great,

Reykjavik is a city in which there is a great deal

of construction.

Iceland’s economy is mixed—public and private. Except for an aluminum refinery (Icelandic

Alloys, Ltd.), cement plant, fertilizer plant, and

diatomite industry, there is little heavy industry. Fishing occupies 11 percent of the labor

force, and more than 75 percent of Iceland’s exports are fishing products. The country’s fishing

industry is technologically very advanced.

Only 9.5 percent of Iceland’s hydroelectric

energy potential is in use. If calculated with current technology, 12 percent of the profitable potential is being realized. Geothermal energy is

used to heat all of Reykjavik and many other

places.

Iceland is a republic. It has the oldest parliament in continuous existence and no fewer than

224 elected municipal councils. Parliament

(Al thing) is divided into an Upper Chamber and

a Lower Chamber. The chief of state is an

elected President without political power. The

political parties are the Independence Party, the

Progressive Party, the Peoples Alliance, and the

Social Democratic Party. In foreign policy, the

major issue on which these parties disagree is

that regarding the continued presence of an

157
158 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Figure 1 .–Demographic Trends in Iceland (1850.1975)

Life

expectancy

80

Infant

mortali

300

70

60

5O

o

0

)

I

250

200

50

00

)

KR

80,00(

45,00

30,00(

15,000

01

Female --- _ Mal e

a

400 Icelandic kronur = $1.00 (U. S.)

American air base an hour’s drive from Reykja- Family ties in Iceland are still very strong, and vik. Iceland has no army. as a rule, primary social assistance is rendered National funds come from a 22-percent sales by the family. Iceland’s few inhabitants, the tax, export/import duties, and from income tax. country’s distance from other countries, and the The highest income tax rate is 50 percent. homogeneity of its population result in close Municipal funds come from a 10- to 12-percent personal contacts across occupations and work income tax and real estate taxes. places.
Ch. 9–Medical Technology in the Health System of Iceland . 159

Figure 2. —Proportion of Iceland’s Total Population

of Males and Females in 5-Year Age Groups (1977)

Years Male Female

85 years and older

80-84 years

75-79

70-74 I

85-69

80-84 1

55-59

50-54

45.49

40-44

35-3$

30-34

25-29

20-24

15.19

I

Proportion 12 1 0 86420 2 4 6 8 10 12 “/o

Table l.— Distribution and Growth of Iceland’s Population (1970-78)

— — —. — — —

Reykjavi k Reykjavik area “ “ ‘ - -

Icelan d Numbe of - ‘ -

- Percent of - Number of Percent o f

Yea r Total populatio n inhabitant s total populatio n inhabitant s total populatio n

1978. ... , 224,38 4 83;092 -

- 37.2% 119,05 4 53.00/0

1977 . . . . . . 222,47 0 83,38 7 37. 7 118,42 2 53. 2

1976. , , . . . . . . 220,91 8 84.49 3 38. 3 118.24 1 5 3 5

1975. . . . . 219,03 3 84,85 6 38. 7 117,73 6 53. 8

1974. , 216,62 8 84,77 2 39.1 116.41 0 53. 7

1973. , : : 213.49 9 84,33 3 39. 5 114,45 3 53. 7

1972, .. . 210,77 5 83,97 7 39. 8 113,27 6 53. 7

1971 . . . . . . . . . . . . 207,17 4 82,89 2 40. 0 108.77 0 53. 5

1970. . . . . . . . 204.344 81,561 39.9 — —
160 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Table 2.—Distribution and Growth of Iceland’s

Population Over Age 67(1970.78)

Percent of population over age ———— — 67

Year Iceland Reykjavik

1978 . . . . . . . . . . . . . . 8.5% 10.7%

1977 . . . . . . . . . . . . . . 8.3 10.3

1976 . . . . . . . . . . . . . . 8.0 10.0

1975 . . . . . . . . . . . . . . 7.9 9.5

1974 . . . . . . . . . . . . . . 7.9 9.3

1973 . . . . . . . . . . . . . . 7.9 9.1

1972 . . . . . . . . . . . . . . 7.8 8.8

1971 . . . . . . . . . . . . . . — 8.5

1970 . . . . . . . . . . . . . . 7.6 8.3

HEALTH SERVICES

In 1978, Iceland spent about 7 percent of its

GNP on health—a little less than the percent of

GNP spent by Sweden or the United States

(8,9). Iceland’s health service is almost entirely

funded within the government sector. In 1974, a

new health law was issued in Iceland. The law’s

main emphasis is on advancing outpatient and

community services.

The Minister of Health is a member of the

government and is usually a Member of Parliament. The Secretary General is the senior civil

servant for health. The Chief Medical Officer is

the next most senior post. The country is divided into eight local health government areas,

and local health governments are appointed by

the municipal councils and boards of institutions in each area.

Key decisions in the Ministry of Health are:

1) hospitals’ per diem rate, 2) physicians’ cavitation and fee rates, and 3) patient payments.

Patient payments for outpatient visits do not

change often and are not a major issue. The per

diem funding rate for municipal hospitals is

decided by a joint committee composed of both

national and municipal authorities.

Since the patient day charge is based on the

costs of salaries, positions, and supplies for the

previous 3-month period, a snowball effect

tends to increase costs. 1 All hospital workers,

‘inflation, however, tends to keep spending down.

including physicians, are unionized. The

unions, which are organized by occupation,

negotiate with the Ministry of Finance for pay

scales. z The National Government pays the

municipality for hospital care on the basis of

(0.92) times (patient days) times (agreed upon

patient day charge). When a patient from one

municipality is hospitalized in another, there is

a transfer payment to the second municipality.

If the patient is hospitalized at the National

Hospital (discussed below), however, no transfer payment is made.

The municipal council, among other things,

appoints the administrator of the local hospital

and approves the hospital’s budget. If major

capital expenditures are being considered, National Government approval is sought to ensure

that 85 percent of the investment funding is obtained this way. If the National Government refuses to approve a project and provide funding,

however, the municipality can, if it chooses, finance the project itself.

Perhaps because of rising health care costs,

the municipalities’ central organization has

asked for municipalities to be relieved from paying for their hospitals. There is now a political

debate over whether the National Government
Ch. 9–Medical Technology in the Health System of Iceland ● 161

should take over the funding and management

of all the hospitals.

Iceland has 21 general hospitals. The largest

three are in Reykjavik. The National or University Hospital (Rikisspitalar) has a total of 1,082

beds and is the largest hospital in the country.

The Rikisspitalar organization includes, for administrative purposes, a 238-bed psychiatric

hospital (including beds for alcoholism), a 184-

bed hospital for the mentally handicapped, a 76-

bed hospital for chest disease, and a 76-bed

nursing home (in the north of Iceland). The

main hospital, Landspltal inn, has 508 acute care

beds, including beds in maternity, gynecology,

psychiatry, neurology, and pediatric departments. The National Hospital is the primary

teaching hospital of the University Medical

School. Unlike other hospitals, the National

Hospital has a fixed budget and receives almost

100 percent of its funding from the National

Government.

The second largest hospital in Iceland is the

Reykjavik City Hospital. This institution, like

all other local hospitals in Iceland, receives 9 2

percent of its operational funds from the National Government and 8 percent from the local

government. The third largest hospital, Landakotsspitali, was founded by a Catholic Order

of Sisters from East Germany. In 1976, the National Government bought the hospital and

handed it over to an independent board of

trustees. Both these hospitals are funded by a

per diem rate.

A number of health clinics are being built

with 85-percent national funding and 15-percent

MEDICAL TECHNOLOGY

Being a small country, Iceland has no medical

technology industry of its own. The country’s

close contacts with other Scandinavian countries, the United States, and England, however,

guarantee that medical technology know-how

gets to Iceland fast. At any one time, about onethird of Icelandic physicians are abroad, some

of whom are obtaining medical specialization in

specialties unavailable in Iceland.

local funding. These clinics are operated with

both national and local funds.

Ambulatory care is largely provided outside

of hospitals by private practitioners. Private

practitioners receive most of their income from

the National Government, partly by cavitation

and partly per visit. The patient pays 2,000

Icelandic kronur ($4.30)’ per visit. Pharmacy

services are paid for by the National Government, and the patient pays about 2,000 Icelandic kronur ($4.30) per prescription. There are

some small fees paid by ambulatory patients going to hospitals for X-rays or other procedures

unavailable in physicians’ offices, but there is no

charge to patients for inpatient care.

Iceland is probably educating more doctors

per capita than any other country in the world.

For the years 1975 to 1979, Iceland graduated an

average of 21.6 doctors per 100,000 inhabitants

each year (6), As of January 1, 1979, Iceland

had 651 licensed medical doctors, or 290 doctors

per 100,000 inhabitants (1,6).

Physicians who work 75 percent or less of

their time in a hospital may pursue private practice as much as they wish. Physicians who spend

more time in the hospital are limited to 6 hours

of work per week outside the hospital. Nearly

all Icelandic physicians do some private practice, so a sharp separation between hospital and

nonhospital doctors does not really exist.

Because of Iceland’s excellent population

records, which go back 150 years, medical research often relies more on those and clinical

population studies than on elaborate laboratories with expensive technology. Research outside the University is funded by the Cancer and

Heart Societies, which obtain some money for

research from the National Government and

some from yearly lotteries and donations. The
162 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

University Medical School does not provide

research funds, but faculty may use spare time

in the National Hospital for clinical research.

Most of the teaching facilities and equipment for

medical research are provided by the National

Hospital. The major source of funds for construction of the University Medical School is the

University lottery.

Studies in health economics are becoming increasingly common and are gaining interest

among Iceland’s decisionmakers. A number of

senior doctors in Iceland are interested in costeffectiveness studies of health care programs.

Excellent evaluations of some programs have

already been conducted. A program to reduce

smoking by high school youths, for example, received a careful evaluation (7). An evaluation of

the cost of automobile accidents and their

prevention has also been done (3). Decisions

about programs and new technology that are

based on analysis of costs and effectiveness are

well received. As in other countries, however,

decisions in these areas are generally influenced

by political forces.

Consistent with the informality of a small

country, there are no detailed regulations pertaining to the safety and efficacy of medical

technology, quality of medical care, etc. There

are strict regulations for electrical equipment in

general, however, and medical equipment must

adhere to these. At the National Hospital there

is a physical technical department, which most

of the other hospitals consult when choosing or

approving apparatus. There is a national drug

formulary, but a hospital may obtain other

drugs and special drugs for research. The list of

SPECIFIC TECHNOLOGIES

Given Iceland’s small population, the country’s medical care technology is modern and extensive. Most specific technologies have been established as soon as technological knowledge

has become available in the country.

CT Scanners

As of September 1979, Iceland does not have

a computed tomography (CT) scanner. Doctors

approved drugs in Iceland is maintained by a

committee of the Ministry of Health.

Health planning at the national level is the

responsibility of the Ministry of Health. For major decisions, however, local involvement results in formal negotiation. Such decisions include capital expenditures and the addition of

hospital beds. If a technology requires special

expenditures, the matter will be debated and

decided upon through the budgetary process—

first with approval at the hospital level, then at

the level of the Ministry of Health, and then by

review of the Ministry of Finance and approval

by Parliament. It would not be unusual for a

local hospital administrator or doctor to discuss

the subject with the local parliamentary member, who might be a neighbor, former schoolmate, second cousin, or all three.

During the years, it seems, the National Government has had difficulties” in controlling both

capital and operational expenditures. The building of health centers in the south of Iceland is an

example. Initially, there were plans to build

only four centers. When the politicians in Parliament had had their say, however, there were

seven, three of which had no permanent

doctors.

There is no utilization review. Hospitals employ chiefs of service who are responsible to the

Chief Medical Officer. These individuals are responsible for assuring efficient utilization and

quality of care in their service as are chiefs of

service in Sweden or England.

mechanism is better developed

hospitals.

This control

in the larger

at both the National Hospital and at the Reykjavik City Hospital, however, believe there is an

urgent need for one.

The two matters at issue are the location and

type of scanner. Doctors at each of these institutions have been developing their justification for

having a scanner at their own hospital. Part of

the problem is that neurology is at the City
Hospital and neurosurger-y is at the National

Hospital.

Reykjavik City Hospital doctors argue that

they need a scanner there because they run the

major emergency service for the city, and some

trauma cases need a head scan as soon as possible. Doctors at the National Hospital argue that

they need a body scanner there because they

have neurology, oncology, and radiation therapy departments, and doctors in these departments do 200 tests per year (such as pneumoencephalography) which a body scanner would

replace. Further, they suggest, an additional ZOO

to 400 tests that are not done now because doctor-s prefer to avoid the risky, unpleasant procedures available probably would be done if a CT

scanner were available.

The National Hospital doctors worked

through an analysis of the value of the body

scanner. They argue that there are certain

cancers which are detectable by body scanner

only, retroperitoneal cancer being the primary

example. They also argue that the body scanner, by more accurately locating a tumor, will

increase the chances of radiating all the cancer

and lower the chances of radiating noncancerous tissue.

The doctors at the National Hospital feel

somewhat discouraged in pursuing their analysis, however, because they believe that political

lobbying will determine which hospital gets a

scanner. If the Reykjavik City Hospital gets a

scanner, the city must pay 15 percent of the purchase cost; if the National Hospital gets it, all

the costs will be paid through the National

Government.

The final decision concerning the purchase of

a CT scanner will be made by the Parliament

during the budgeting process. Because of the

high cost of buying a scanner, Parliament is interested in buying only one, and it is relying on

the doctors and administrators in the two hospitals to cooperate.

In the meantime, the Icelandic Government

does pay for some CT scanner examinations

abroad. Some Icelanders go abroad and pay for

this test themselves.

Renal Dialysis

At any given time, there are three or four patients needing dialysis. This number has reached

a high of eight patients. There are four dialysis

machines at the National Hospital in Reykjavik,

and these have been available for several years.

Coronary Bypass Surgery

As of September 1979, coronary bypass surgery is not being performed in Iceland. Patients

needing this procedure, about 35 a year, are sent

abroad at the expense of the National Government. They generally go to Hammersmith or

Bromton Hospital in London, institutions chosen because of personal contacts between Icelandic surgeons and the surgeons at these

hospitals.

Whether bypass surgery should be performed

in Iceland has been debated at some length over

several years. A committee of doctors was appointed by the Ministry of Health to make a decision about it. It is recognized that the volume

of patients would not be very large—perhaps

double the current number. This volume might

not be enough to maintain a high-quality service. One senior government official in the Ministry of Health, however, said the Ministry

would be willing to accept a slightly higher

operative mortality rate in order to achieve

“medical independence. ” Having bypass surgery

in Iceland, it was argued, would eliminate the

need for having Icelandic patients go for the

procedure to a foreign country, where they

would not feel as comfortable as they would at

home. It was also argued that existence of capacity for this surgery would improve other aspects of the country’s surgical and medical care.

The committee of doctors appointed by the

Ministry produced a report with some analysis

and decided that coronary bypass surgery

should be started at the National Hospital. An

Icelandic physician in Sweden is becoming proficient in this procedure and will return to

Iceland to start it. An existing operating room is

to be set aside for specific periods in the year for

coronary bypass surgery. Experienced nurses

and a surgeon are to come from abroad during

these periods, at least during a transition period

until proficiency is achieved locally.
164 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

The committee’s analysis reflects careful

thought given to fixed costs, capital expenditures, proficiency of the surgical team, and

other effects of the committee’s decision. Some

Icelandic physicians, though, are still unsatisfied with the decision. They maintain that they

themselves would prefer to go abroad for this

procedure, If coronary bypass surgery is performed in Iceland, the National Government

will no longer pay for this procedure abroad.

In February 1980, the Minister of Health

decided that coronary bypass surgery will be

started at the National Hospital in the beginning

of 1981.

CONCLUDING REMARKS

Perhaps the most striking feature of Icelandic

health policy decisionmaking, the result of the

small size of the country, is the frequency of

contact between politicians, administrators, and

CHAPTER 9 REFERENCES

1.

2.

3.

4.

5.

Bjarnason, O., Sk61ayfirlaeknir (Chief Medical

Officer of the School Health and Community

Medicine), internal document (Reykjav~k, February 1980).

Framkvaemdastofnun Rik~sins (Economic Development Institute), Ma~~}zfjoldi, mutltzafli og

telq’ur (Reykjav{k, 1979).

Gunnarsson, D. A., R~issp;talar (National Hospital), lecture at the Icelandic Automobile

Association, Reykjav;k, 1978.

Hagfrae~ideild Reykjavlkur (Eco~omic Department of the City of Reykjav;k), Arbok Reykjaz?~kurborgar 1979 (Reykjav7k, 1979).

Hagstofa~slands (Statistical Bureau of Iceland),

Ha,gti5it~di 71-79 (Reykjafik, 1979).

Cobalt Therapy

This procedure has been available since 1969

at the National Hospital. It was provided as a

gift from the International Order of Odd Fellows, a men’s benevolent organization, the Cancer Society, and several individual gifts.

Automated Laboratory Testing

Equipment

High-volume testing machinery such as the

SMA12 or SMA16 is not currently in use. The

volume of tests seems sufficiently small at any

one location, however, that there appears to be

no pressing need for it.

doctors. A second notable feature is the implicit

balancing, as in the case of coronary bypass

surgery, of medical quality and medical

independence.

6.

7.

8.

9.

10.

H5sk61i ~slands (University of Iceland), internal

document (Reykjav~k, n,d. ).

Magnusson, G., Professor, University of Iceland, lecture at the Cancer Society, Reykjav;k,

1977.

Olafsson, O., Landlaeknir (Dire;tor General of

Public Health, Iceland), internal document

(Reykjafik, February 1980).

Pj6?$hagsstofnun (Economic Institute of Iceland), internal document (Reykjafik, n.d. ).

Selllabanki Islands (Central Bank of Iceland),

Hagttilur tttZna3aritw 74-79 (Reykjav~k, 1979).
10.

Controlling Medical Technology

in Sweden

Erik H. L. Gaensler

Lewin and Associates, Inc.

Washington, D.C.

Egon Jonsson

Swedish Planning and Rationalization Institute

Stockholm, Sweden

Duncan vB. Neuhauser

Case Western Reserve University

Cleveland, Ohio
Contents

Page

Sweden: Country Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167

Historical Origins and Development of the Medical System . .................169

The Swedish Bureaucracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........169

The Parish System of Decentralized Administration . ...................170

State Secular Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........170

Counties and County Councils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......171

National Health Insurance, Employment of Doctors by the State, and

Medical Regions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .171

Mechanisms for Controlling Medical Technology . ........................172

Swedish Patients and Constraints on Consumer Demand . ...............172

The Regionalized Hierarchy of Hospitals. . . . . . .......................174

State Education and Employment of Medical Personnel. . ................176

Governmental Evaluation and Control of Medical Technology . ...........176

Summary of Mechanisms for Controlling Medical Technology . ...........177

Specific Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...178

CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........178

Coronary Bypass Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........181

Renal Dialysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......184

Cobalt Therapy. . . . . . . . . . . . . . . . . . . . . . . . ........................184

Automated Clinical Laboratories . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....185

Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............185

Chapter l0 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........185

LIST OF TABLES

Table No. Page

1. Demographic Characteristics of the United States and Sweden . ............167

2. Data on Health in the United States and Sweden. . . . . . . . . . . . . . . . . ........168

3. Data on Medical Care Providers and Facilities in the United States and Sweden .168

4. Estimated Number of Coronary Artery Bypass Operations Performed

in Sweden. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . 183

5. Number of Renal Dialysis and Renal Transplant Patients in SwedenbyRegion .185

LIST OF FIGURES

Figure No. Page

1. Relative Proportions of Different Cost Items in the Total Costs

of Pneumoencephalographic, Cerebral Angiographic, and CT Examinations. . .179

2. Projected Annual Cost Increase or Decrease Resulting From the

Introduction of a CT Scanner. . . . . . . . . . . . . . . . . . . . . . .................180
10 ●

Controlling Medical Technology

in Sweden

Erik H. L. Gaensler Egon Jonsson

Lewin and Associates Inc. Swedish Planning and Rationalization Institute

Washington, D.C. Stockholm, Sweden

Duncan vB. Neuhauser

Case Western Reserve University

Cleveland, Ohio

SWEDEN: COUNTRY DESCRIPTION

Sweden is a Scandinavian country of 8 million people. It is 1,500 miles in length and its

northern part is above the Arctic Circle. Largely

urban and highly industrialized, Sweden has

one of the world’s highest per capita incomes.

The country’s economy is mixed capitalist and

socialist. Basic demographic data for Sweden

and the United States are presented in table 1.

Sweden’s internal development has occurred

in an atmosphere of tranquility unknown to

most Western nations. Except for an ultimately

unsuccessful expansionary period during the

17th and 18th centuries, Sweden’s history has

largely been one of relative isolation, distinguished by neutrality since the Napoleonic

Wars. The stability of this country is reflected in

the continuity of Swedish politics. During this

century, one party, the Social Democrats, ruled

for 44 years with only a 3-month hiatus prior to

their defeat in 1976 (65).

Like England, Sweden is a constitutional

monarchy in which all Federal political power

rests in an elected Parliament. Local units of

government are the lans (counties), of which

there are 25. Although Sweden has not fought in

a war since 1812, it maintains a modern army

with compulsory military service.

Sweden provides extensive health and welfare

benefits for its citizens. Demographic data and

information on health and medical care in Sweden and the United States are presented in tables

2 and 3, respectively. All 8,236,179 Swedes1 are

covered by compulsory health insurance. This

pays for all physician care and hospital services,

except for a modest copayment fee of about

$4.50. Care for the chronically ill is provided in

nursing homes or at the patient’s residence at no

extra charge. Drugs are free except for a modest

‘By census as of Dec. 31, 1976 (56).

167
 - —

168 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Table 2.—Data on Health in the United States and Sweden

Table 3.—Dataon Medical Care Providers and Facilities

in the United States and Sweden

United States Sweden

Health expenditures

Percent of GNP spent on health services(1969) . . . . . . . . . . . . .

Annual health expenditures per person (U.S. dollars)(1969) . . .

Physicians and nurses

Dentists per l0,000 population (1970). . . . . . . . . . . . . . . . . . . . . .

Doctors per l0,000 population (1970) . . . . . . . . . . . . . . . . . . . . . .

Nurses per 10,000 population(1969) . . . . . . . . . . . . . . . . . . . . . . .

Percent of general medical practitioners in

group practice(1971). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

Hospitals

All hospital beds per 1,000 population (1969). . . . . . . . . . . . . . . .

Average number of beds in general hospitals(1969) . . . . . . . . . .

Average number of beds in psychiatric hospitals(1969) . . . . . . .

Psychiatric beds per 1,000 population (1969) . . . . . . . . . . . . . . . .

Admissions to general hospitals per l,000 population(1969) . .

Average length of stay(days) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .

6.7%.

$298

5.0

15.8

33.5

12.O%

81.0

155.0

1,174.0

30.3

144.6

9.3

6.4%

$234

8.4

13.6

38.2

20.0%

164.0

540.0

146.0

62.8

147.0

12.6

basic charge, and prescriptions for such longterm conditions as diabetes or epilepsy require

no copayment. Also provided in Sweden are

maternity benefits, compensation for 90 percent

of lost income during illness, and various types

of pensions. All of these benefits, which maintain the citizen’s health indirectly by providing

for economic well-being, are part of the Swedish

matrix that blends health and social welfare

functions.2

Largely because of the cost of Sweden’scomprehensive health and social welfare benefits,

which absorb almost three times as much of the

budget as defense, Swedes pay among the highest taxes in the world (44). The magnitude of

these taxes is a commentary on the Swedes’ high

priority for good health. In fact, in a 1975

survey, a representative sample of the population ages 18 to 70 years listed medical and dental

care first among 29 potential uses of an increase

in the nation’s total revenues (11).

As a country that not only is actively trying

to control the use of medical technology but has
C/I. 10—Controlling Medical Technology in Sweden ● 169

had some success in doing so, Sweden is a fascinating case. The efforts of Swedish planners are

aided by the Swedish bureaucracy’s favorable

relationship with the citizenry. They are greatly

facilitated, as well, by the regionalized hierarchical structure of Sweden’s health care system.

To understand the regionalized structure of

Sweden’s present health care system, it is necessary to gain some appreciation of the major

forces in Swedish history that have affected its

development. These are discussed in the next

section of this chapter. In the following section,

the general mechanisms that Swedish planners

use to control the diffusion of medical technologies—the rationing of medical care, the education and employment of doctors by the state,

and the evaluation of specific technologies and

issuing of voluntary guidelines by the Swedish

Planning and Rationalization Institute of the

Health Services (SPRI)—are described. The section after that contains case studies of specific

technologies to illustrate how Sweden’s system

operates in practice.

HISTORICAL ORIGINS AND DEVELOPMENT OF

THE MEDICAL SYSTEM

Two aspects of the Swedish health care system, regionalization and socialization, are critical in understanding the manner in which Sweden controls medical technology. The origins of

these features of this country’s medical care

structure are rooted in Sweden’s political, economic, and cultural history.

The fiscal “socialization” of Swedish medicine

did not occur until national health insurance

was implemented in 1955, the regional system of

medical services was not established until 1958,

and the employment of doctors by the Swedish

Government did not come about until the establishment of a national health service in 1969. As

described below, however, events as early as the

16th century predisposed Sweden to develop the

regionally organized and tractable medical system that facilitates controlling the diffusion of

modern medical technologies.

The Swedish Bureaucracy

The effectiveness of the Swedish bureaucracy

is partially rooted in the bureaucracy’s historically favorable relations with the citizenry. The

origins of the Swedish civil service date to medieval times. Unlike many other countries, Sweden failed to develop a feudal system, so rather

than becoming feudal lords, Swedish nobles

entered into the service of the king. The consequences of the nobles’ playing the role of civil

servants rather than feudal lords were twofold.

First, friction between nobles and serfs in Sweden was inarguably less than it was on the continent, and Sweden’s aristocratic civil servants

did not have to bear the burden of citizen antagonism. Second, comprising an elite, selected

from the well educated and capable, the Swedish civil service usually acquitted itself in a style

worthy of the respect accorded it.

The result has been described by British historian Roland Huntford (24):

The identification of aristocracy and civil

service has conferred on the Swedish bureaucrat

a unique supremacy and esteem. For centuries,

he has been honored with deference and respect.

He has never had to bear the scorn, dislike, and

suspicion poured on the state functionary in so

many other countries. He is considered greater

than the politician, the lawyer, and the industrialist, The senior official remains, true to the

figure of a mandarin, at the top of Swedish society . . . . The chief civil servant has more prestige than his minister.

State office was monopolized by the Swedish

nobility until the late 19th century; at that time,

highly competitive examinations were introduced to determine entrance to the “executive”

guild, so the Swedish bureaucracy has remained

a recognized elite (20).

Good bureaucrat-citizen relations are

guarded in Sweden by special officials called

“ombudsmen, ” who have been active since
170 ● Background Paper #4: The Management of Health Cure Technology in Ten Countries

1809. It is their duty to investigate complaints

against the government and its agencies on behalf of the electorate. The diffusion of the Swedish word “ombudsman” into other languages is

testimony to the longstanding responsiveness of

the Swedish civil service, a responsiveness that

is only beginning to be duplicated elsewhere.3

The effectiveness of the Swedish bureaucracy

also stems from the bureaucracy’s insulation

from political tides. Even when governments

turn over, as happened in 1976, the medical administration remains intact. This is because the

chief health officer, the Director-General of the

National Board of Health and Welfare (Socialstyrelsen), is not a Cabinet Minister, but a civil

servant who works on a theoretically apolitical

plane above the elective government. The continuity of the Swedish medical civil service

has enormously facilitated health planning, because in some cases, as many as 20 years have

elapsed between the issuing of a report and its

implementation.

The Parish System of Decentralized

Administration

The subjugation of the nobles to the state was

not the only important source of qualified

administrators for Swedish development. The

Reformation, embraced by King Gustav Vasa in

the 1530’s, resulted in the establishment of a

Lutheran State Church which exists to this

day (45). Following the union of state and

church, the clergy continued its task of keeping

parish records of births, deaths, and population

movements, but now this activity amounted to

census taking on behalf of the state. This source

of demographic information has proved to be

invaluable to medical planners on many

occasions.

3Today, a special medical ombudsman plays a crucial role in arbitrating consumer complaints against the health care system. This

ombudsman and the Medical Responsibility Board of the National

Board of Health and Welfare usually settle what would be malpractice claims in the United States with far less litigation and

lower awards (70). A frequent complaint in the United States is

that the defensive medicine produced by malpractice claims leads

to overuse of diagnostic procedures. It is interesting to note, therefore, that the volume of laboratory and X-ray tests ordered in

Swedish hospitals is only one-half of that performed in American

hospitals on similar patients (12,30).

The parish system also provided a geographic blueprint for administrative regions. This

framework was exploited by the government as

a basis for decentralized medical care responsibility when it ordered the church to provide rudimentary care for its parishioners in the 17th

century.

State Secular Hospitals

Before the Reformation, the Catholic Church

had established helgeandshuser (lit: holy ghost

houses) for the care of the sick and the poor.

When King Gustav Vasa de facto nationalized

the church in 1527, he took pains to see that

these salutary functions were continued. In a

series of letters4 to priests and taxmasters, King

Gustav ordered that parish services to the indigent and ill be maintained, and authorized taxmasters to finance them (64). This royal initiative marks the beginning of the government

takeover, or socialization, of medicine i n

Sweden.

The development of state hospitals was further spurred by the needs of the 17th century.

Swedish troops, particularly during the Napoleonic Wars, were devasted by syphillis (50). For

treating the soldiers, venereal disease hospitals

called kurhus (lit: cure-house) were established,

and government district doctors were appointed

to staff them (22). These secular hospitals established a second channel for medical services,

alongside the parish system, that eventually

came to dominate.

When the last soldiers returned from the Napoleonic Wars to henceforth neutral Sweden, a

third course of medical development, a civil

one, was already being pursued. Military spending was being reduced, so to preserve the kurhus

system, a head tax was levied. A number of hospitals independent of the original “holy ghost

houses” had already been established in the major cities. These were more reassuringly named

lasaretts, s after the biblical figure Lazarus who

was raised from the dead. In the century preceding 1864, the landmark year when the lans
Ch. 10—Controlling Medical Technology in Sweden ● 171

(counties) and landstinget (county councils)

took over the hospitals, nearly 50 lasaretts were

built, and the number of beds went from 200 to

nearly 3,000 (67).

Counties and County Councils

Sweden was not politically organized in a

highly centralized fashion until quite recently.

In the 19th century Sweden’s economy was

based on loosely connected and geographically

disparate clusters of industry, mining, and

agriculture called bruks (46). The parishes and

bruks were too small to deal directly with the

Swedish Government, so for their dealings with

the state, they had formed small clusters called

lans, or counties. These lans eventually came to

be used as the new administrative base for medical care delivery.

In the reforms of 1862, 25 counties (mostly

rural areas with a central market town) and four

self-standing cities were officially designated

lans (40). A mere 2 years later, in 1864, the

responsibility for health of citizens in each of

these lans was invested in the landstinget (lit:

county council) which had been formed to administer the Ian (58). At first exclusively devoted to providing for the hospitals, the county

councils subsequently took on other responsibilities. Nevertheless, they continued to devote

over two-thirds of their budget to medical care

(33).

The state retained both fiscal and administrative control of the medical schools, and in 1878,

it created a body to supervise them as well as the

county councils. This organization was known

as Medicinalstyrelsen (lit: Medical Steering)

(59), and was a descendant of the Collegium

Medicum, a principally academic and professional organization that had been founded in

1663.

The remaining events in the history of Swedish health care involved resolving the problems

of financing and providing personnel for the

costly and complex enterprise of state-operated

hospitals. With the exception of the development of medical regions in 1958, few major

structural changes have been made in Sweden’s

health system since the transfer of the administration of health care to the county councils in

1864.

National Health Insurance,

Employment of Doctors by the State,

and Medical Regions

The Social Democrats came to power in 1932,

and it was during their 44-year tenure (1932-76)

that Sweden’s health care system evolved most

of the features that facilitate its control of technology: 1) national health insurance, 2) the employment of doctors by the state, and 3) a regionalized, hierarchical system for the provision

of medical services.

During the period 1862-1955, numerous voluntary insurance plans had evolved to replace

patients’ income, but the financing of outpatient

care remained largely in private hands. Inpatient care was financed through a system of

employer-financed sickness funds (sjukkassor)

(35). In 1910, only 10.7 percent of Swedes were

active members of the over 2,OOO sickness

funds; by 1930, this figure had grown only to

16.6 percent (57).

National health insurance covering outpatient

care was not seriously debated until the 1920’s

(60). The National Health Insurance Act (Allman Sjukforsakring), covering physicians, outpatient services, and drugs, was finally passed

by Parliament in 1947. Laws in Sweden, however, are implemented at the government’s discretion, so a grace period is left during which

the administrative framework can be ironed out

to ensure their smooth implementation. In the

case of the health insurance law, the major issue

complicating implementation was whether physicians would remain independent under the

new insurance scheme or instead would become

civil servants (32).

In a 1948 report, Dr. Alex Hojer, a prominent

socialist who served as Director-General of the

National Board of Health from 1935 to 1952,

recommended a reform of primary health care,

based on salaried positions for all physicians

(51). Hojer also suggested that Sweden should

aim to improve its health system by coupling

the development of decentralized ambulatory

and preventive care services with that of more
172 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

centralized specialized services (51). The county

appeared to be too small a unit to benefit from

full efficiencies of scale in providing specialized

services that required major investments of capital and training of personnel, Hojer said, so intercounty cooperation would be essential (51).

To facilitate such cooperation, he suggested,

large regional hospitals should be developed.

Primary care services, however, should be decentralized to bring them as close to the people

as possible. Small health centers, Hojer believed, were the ideal unit for blending both

social welfare and medical services into “totalvard, ” or total care on an ambulatory basis (51).

In 1955, 8 years after the National Insurance

Act was passed, national health insurance was

implemented. The history of the Swedish health

system since then, with some minor exceptions,

can be described as the development and systematic implementation of Director-General

Hojer’s principles by his successors Arthur Engel

and Bror Rexed. Their systematic implementation of Hojer’s ideas during the three decades

following the publication of his 1948 report is

compelling evidence of the importance of the

continuity and power of the civil service as a

factor in the development of Sweden’s medical

structure.

With the publication of the Engel report of

1958, the basis of Sweden’s hierarchical hospital

plan was laid (52). Under this plan, Swedish

counties were organized into seven medical regions, creating the intercounty cooperative

clusters that Hojer had envisioned as necessary

for efficient delivery of specialized services. In

1961, a comprehensive plan was introduced to

increase medical manpower by expanding medical education (53). Vast numbers of new hospital positions were created for medical school

graduates, and by 1970, the center of gravity of

the medical profession had shifted sufficiently

toward salaried service that a reform making

virtually all doctors employees of the state, unthinkable in 1948, was effected with fairly little

ado (69).

The unification of medical and

services became a reality when

social welfare

the two were

combined into the Nation-al Board of Health and

Welfare (Socialstyrelsen) in 1968. The decentralization of ambulatory health services, intended to foster small facilities for “total care, ”

was prompted when the government transferred

responsibility for the district doctors and mental

hospitals to the counties in 1961 and 1963,

respectively.

MECHANISMS FOR CONTROLLING MEDICAL TECHNOLOGY

Swedish planners, have at their disposal three From the patient’s viewpoint, there is hardly

organizational levers for controlling medical any reason to stop the individual demand at a

technologies—patients, hospitals, and medical point at which further costs for treatment will

personnel. These levers and how Swedish health not be outweighed by benefits. Probably the paplanners manipulate them in order to control tients will demand treatments up to a point

the influx of medical technologies are described where further treatment will be rather a nuisance

below. and completely disregard the costs involved

Swedish Patients and Constraints on

Consumer Demand

Sweden has a government-owned and operated medical care system. Except for a nominal

charge for ambulatory care, the patient pays

nothing for medical services. Price, therefore, is

not a mechanism used to limit demand. As

Swedish health economist Ingemar Stahl has

pointed out (49):

. . . . With zero user charges, rationing of health

care becomes a necessity. Clinical freedom in its

usual sense can no longer be accepted and different types of cost control and economic surveillance have to be introduced . . . . One and the

same illness can often be treated in different

ways and there will be no incentives for patients

to select or prefer the most cost-effective treatment . . . . It is not at all clear that the basic incentives of the medical profession will act as a

countervailing power.
Ch. 10—Controlling Medical Technology in Sweden ● 173

Restraining consumer demand, therefore, is

one method that—deliberately or otherwise—

Swedish planners have used to limit the use of

medical services and restrain the influx of

medical technologies. What makes these restraints on supply of services successful i n

Sweden is not the brilliance of its planners but

the compliance of Swedish consumers. This

compliance appears to be rooted in the collectivist orientation of Swedish society.

The Swedish medical care system depends to

an extent on consumers who not only place a

high enough value on medical services to willingly pay the price, but who also have a “collectivism” rather than “individualistic” attitude

toward the use of resources. Without Swedes’

collectivism orientation, which in large measure

accounts for their acceptance of the rationing of

medical care, the efforts of Swedish planners

could not succeed.

Before investigating collectivism further, certain constraints on consumer demand in Sweden

must be described to show why they might be

objectionable to those with individualistic values. An intentional mechanism for limiting demand for medical services in Sweden are modest

copayments for consultations and prescriptions.

These copayments, set at 7 Swedish crowns in

1970, rose to 20 crowns ($4.50 U. S.) by 1977.

The copayments are loosely indexed to inflation, by being kept roughly equal to “the cost of

a first run movie at a commercial theatre” (68).

The parallel is deliberate. Not a significant

source of revenue, these copayments are meant

to discourage frivolous waste without inhibiting

reasonable use of medical services.

A second, though unintended, constraint on

the demand for medical services in Sweden is

that patients are often forced to wait for services

simply because the supply of services is insufficient. Since there are no appointments for preliminary consultations, patients have to form

physical queues in reception areas. Patients also

have to be put on waiting lists for specialist

services after referrals have been made. The

Swedish Medical Association has acknowledged

that patients have average waits of over 60 days

to see an internist, 82 days for a gynecologist,

146 days for an ophthalmologist, and 16 days

for a routine X-ray (43). Although they are not

pleased by the long waits, Swedish patients are

surprisingly phlegmatic about them.

The difference between the values of Americans and Swedes was noted by American political scientist Steven Kelman in his comparison of

worker safety regulation (31):

In Sweden, deferent values were dominant,

which encourage people to accept the wishes of

the state. In America, dominant self-assertive

values encouraged people to have it their way.

The deferent values that Swedes hold are reflected in their confidence in the civil service and

respect for government policies. For example,

Sweden has been able to pass and successfully

enforce legislation mandating the use of vehicle

seatbelts, a law that has proved unacceptable or

unworkable in other countries. While it is difficult to argue against the benefits of seatbelt

use, Swedish citizens have also complied with

rules requiring daytime use of special headlights, which are at times expensive to install, a

slight nuisance, and are only of debatable value.

Other examples of how Kelman’s so-called “deferent values” have facilitated social policy decisions abound. Extraordinarily high taxes on

cigarettes and alcohol have not spawned widespread contempt of government monopolies and

rampant smuggling as in other countries. In the

medical sphere, studies requiring mass screening

of mass populations—even entire counties—for

asymptomatic disease have been successful

largely because of citizen compliance. Planners’

efforts to control the dissemination of medical

technology are greatly assisted by this tendency

of Swedish citizens to cooperate with their

government.

Why Swedish citizens are so accommodating

is difficult to determine. In addition to the supply of medical services, the Swedish Government controls the supply of housing, capital on

both the reserve and retail levels, education,

and many other citizens’ services. In a country

where one must wait in line for an apartment, a

loan, or a position in a university, waiting in

line for health services is not so strange an

experience. Swedish internist Lars Werko remarked on the phlegmatic nature of the Swedish
174 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

patient shortly after the “Seven Crowns reform”

(69):

The relative indifference demonstrated by

most people toward the recent changes in medical practice, as judged from what is written in

the newspapers or discussed on television, has

always astonished me. The explanation I have

arrived at is that the people rely upon the government and are confident that all is going to

function as well tomorrow as it did yesterday.

Copayments and queues apparently do reduce the demand for services. In 1963, the average number of physician visits per person per

year in Sweden was 2.5 (7). By 1974, 4 years

after the “Seven Crowns Reform” significantly

reduced costs to the patient, annual visits had

risen only to 2.7 per capita (33). More visits per

capita would have led to increased referrals and

to greater demand for specialists and their

technologies.

The Regionalized Hierarchy

of Hospitals

In terms of expenditures, 87 percent of medical care in Sweden is delivered at hospitals, 88

percent of which are operated by the 26 county

councils in the decentralized fashion set out by

the reforms of 1864 (33). Thus, it is the counties

who are the actual purchasers of medical equipment, and in a sense, it is the counties who

decide whether a new technology is adopted.

The policymaking of the counties, however,

is constrained by the” state, as is discussed below. The counties’ freedom of choice is also limited by cooperative agreements with other counties to provide specialized services on a regional

basis. The objective of the regional system of

medical services introduced by Director-General Arthur Engel in 1958 (52) was to ensure that

specific types of services were delivered at the

level—local, county, or regional—on which

they could be provided most efficiently.

This regionalized system of Swedish medical

services is mirrored by Sweden’s hospital system. There are four levels or categories in the

hospital hierarchy: 1) health centers, 2) district

hospitals, 3) central general hospitals, and 4) regional hospitals.

Outpatient services within each county are

organized by primary care districts containing

10,000 to 20,000 inhabitants, and each of these

districts usually has one or more health centers.

Health centers in primary care districts, which

form the lowest tier of the hierarchy, are usually

staffed by general practitioners in charge of ambulatory and preventive practice. District

nurses are active in home care and sometimes

specialize as midwives or child care nurses.

At the second tier of the hospital hierarchy,

above the health center, are district hospitals.

These hospitals, which usually serve several

primary care districts with a total population of

60,000 to 90,000, ordinarily provide four specialized services—medicine, surgery, radiology,

and anesthesiology.

At the third tier of the hospital hierarchy are

the central general hospitals. There is usually at

least one such hospital per county, and each

hospital serves a population of 250,000 to

300,000, Each central general hospital offers 15

to 20 specialized services.

At the fourth and top tier of the Swedish

hospital hierarchy are the regional hospitals.

There are seven regional hospitals throughout

the country, each of which has an average population base of slightly over a million. All but one

of these institutions are affiliated with medical

schools and serve as centers for research and

teaching. Among the specialized services that

these institutions provide are neurology, radiation therapy, thoracic surgery, neurosurgery,

pediatric surgery, and certain types of cardiac

care. b

Sweden’s four hospital tiers provide a clear

“pecking order” for who receives sophisticated

new technologies. The regional hospitals are the

first in line, and the central general hospitals,

district hospitals, and health centers follow. At

each tier, a service is provided only if there is a

sufficient population base for it to be as cost effective at that level as at a higher one.7

‘Some of these services are actually provided on an interregional

basis. Thoracic surgery departments, for example, are located only

at the four largest regional hospitals.

‘As an aside, it might be said that such a system is not only more

economical but also tends to provide better care. The very rarely

needed procedures are concentrated, and more experience with

such procedures by medical practitioners brings better results.
Ch. 10—Controlling Medical Technoloxy in Sweden ● 175

County council members need not feel responsible for bringing a sophisticated new

technology to their own county’s central general

hospital, because county residents may be referred from that hospital to the regional hospital

that they subsidize. If a new technology is cost

effective on the central hospital level, however,

the county’s council and taxpayers both have a

role in deciding whether or not to acquire it. As

Egon Jonsson, the SPRI planner responsible for

the CT rationalization report, put it, “There is a

clear link between the politician a Swedish

citizen elects, the size of his taxes, and the

medical services he has access to” (28). Because

of the policy that, except under special circumstances, Swedish patients cannot use hospitals

outside the county or region in which they reside, citizens as well as planners have a direct interest in seeing that necessary—but not excessive—equipment outlays are made in the central

hospitals.

It should not be inferred, however, that costeffective choices are always made. County pride

occasionally dominates over pragmatism. Several central hospitals, for example, have begun

to insert pacemakers, even though ideally this

procedure should be performed at the regional

level (68). Similarly, when technology-intensive

advances in obstetrics and a decline in the birth

 rate recently mandated closing the lying-in ward

of the Enkoping central hospital in favor of the

regional department in Uppsala, local citizens

filed a petition to block the closing. A senior

planning official of the National Board of

Health and Welfare, attributed the uproar solely

to local fear that the city was becoming a backwater (68). 8

This regionalized hierarchy of hospitals provides Swedish health planners with two separate

strategies for optimizing the use of medical

technologies. Highly sophisticated equipment

and technology-intensive specialties can be concentrated at the regional hospitals and simpler

‘Citizens’ opposition to the closing of the central hospital ward

was certainly not based on medical grounds because the quality of

care to be received by the mothers at the regional hospital was to

improve significantly. Less than 10 percent of the Enkoping petitioners were women of childbearing age. When polled separately,

the women who were potential mothers and likely to be the most

affected by the change, were in favor of the move.

inventions can be dispersed to the health centers. Often, the most cost-effective level for the

provision of a service is that of the health

center, because care at health centers is less expensive per patient than care at outpatient clinics at major hospitals (14). As Director-General

Arthur Engel explained (14):

For financial and manpower reasons, we have

formulated the guiding principle that care

should be provided on the lowest acceptable level of the organizational system.

Swedish planners foresee the health center as

being the new basic unit for the decentralized

provision of total care (totalvard), the combination of sick care (sjukvard) and preventive care

(halsovard), and also the counseling and financial services of the social welfare system (34).

Referrals to specialists at the central and regional hospitals will be made from the health

centers, so that economies of scale for complex

and unusual care will be preserved.

The American political scientist Arnold Heidenheimer concluded that the hierarchical structure of Swedish hospitals is deliberately being

polarized (21):

Centripetal forces here respond mainly to the

location of highly specialized equipment and

skills, while centrifugal forces are strengthened

by political demands for care which is proximate

both in terms of physical distance and in terms

of its concerns with primary care.

This process of polarization leaves the district

hospitals caught in the middle between the poles

of specialization and decentralization. Swedish

planners doubt that district hospitals are large

enough to benefit fully from efficiencies of scale

for many services, and aim to convert them to

chronic care and old-age homes (15). The four

specialties that these hospitals now house will

then move up to the level of the central general

hospitals. Currently, too much geriatric care is

being delivered on an inappropriate technologyintensive level at the central and regional hospitals. The conversion of the district hospitals to

long-term care facilities, therefore, should

reduce the influx of technology not only at the

district level, but at the county and regional

levels as well.
176 . Background Paper #4: The Management of Health Care Technology in Ten Countries

State Education and Employment of

Medical Personnel

The external organization of Swedish hospitals provides only a partial picture of the mechanisms at the disposal of Swedish planners to restrain the influx of technologies. In addition, the

internal mix of medical personnel and facilities

must be analyzed. For the sake of brevity, the

discussion of medical manpower here is limited

to physicians and nurses.

As of 1977, Sweden had roughly 15,000 doctors, or a ratio of 1 physician per 515 population, quite similar to the ratio of 1 per 571 population in the United States (25,61). Most Swedish physicians are employed by the state. In

1977, only 6 percent of Swedish physicians were

in private practice, and the average age of these

physicians was considerably over the mean for

their profession. The gradual disappearance of

the private sector in Sweden has facilitated planning. In other countries, noninstitutional settings have been used to circumvent constraints

on technology purchases (47).

The state not only employs but also educates

virtually all medical personnel in Sweden. Thus,

it is able to match training programs to anticipated and present needs. As Director-General

Rexed succinctly put it, “Training policy (is) the

most important contribution to future planning” (44). By 1985, the numbers of Swedish

doctors specializing in long-term care and psychiatry are projected to increase by 130 percent

and 60 percent, respectively. The ranks of physicians who use technology-intensive techniques, however, will be increased by only 28

percent (44). (Swedish policy toward the training of the latter is discussed in conjunction with

specific technologies in the next major section of

this chapter. )

Once doctors are educated in a predetermined

fashion, the National Board of Health and Welfare also can decide to a large extent where these

physicians will work, through its allocation of

medical posts. This power facilitates planned

assignment of doctors at various levels within

the hospital hierarchy (from the regional hospital to the health center) and is also the basis for

ensuring their proper geographical distribution.
Board of Health and Welfare, and the county

councils.

The relationship of the state to the counties is

like that of a rider to a horse—the rider can apply persuasive tactics, but in the final analysis,

it is up to the animal to decide on its movements

(48). The steering role of the rider is played by

the National Board of Health and Welfare,

which sets standards for quality, conducts inspections, and allocates physicians (44). In addition, the Swedish Government uses its fiscal leverage by subsidizing hospital construction.

Since 1884, however, counties have had constitutional power to tax their citizens and to decide

whether or not to build hospitals, so they control the amount of care available. In summary,

the state tries to compel the counties to follow

the desired path through regulation and

subsidy.

The question persists, however, of how the

state decides which course to adopt when a new

technology becomes available. To answer this,

it is useful to examine the information on which

the “rider” depends. The National Board has

three principal sources of information for evaluating new methods and instrumentation: 1) the

National Bureau of Statistics (Statistiska Centralbyran), 2) physicians who serve as consultants to the National Board of Health and Welfare, and 3) the Swedish Planning and Rationalization Institution (SPRI).

The National Bureau of Statistics assembles

data concerning all Swedish patients using their

“social security” numbers. Since social security

numbers are used for medical record identification, all medical services rendered to a given individual can be accounted for and used in tabulating national health statistics.

Once health needs and budgetary constraints

are known, the strictly medical likelihood of a

new technology’s satisfying unmet needs must

be evaluated. This general evaluation of biomedical innovations in Sweden is performed by

selected physicians, prominent in their specialties, who serve as consultants to the National

Board. Their task is to assess whether the technology “is consistent with proven scientific
178 . Background Paper #4: The Management of Health Care Technology in Ten Countries

funded research chairs in important areas.

There are no special procedures for planning

this R&D investment. Not only is it considered

counterproductive to supervise basic science in

Sweden, but it also would be impossible to extend control abroad, where innovations such as

CT scanners and coronary artery bypass operations originated.

A second strategy Swedish planners could

employ, adjusting manpower policy so as to reduce the number of technology-intensive specialists, is used. Favored by Sweden’s manpower policy at present are doctors and nurses

trained for chronic, geriatric, and primary care.

The third mechanism that could play a role in

Sweden’s socialized system is funding incentives. Financial pressure might be used to indirectly punish counties that acquired technologies that were uncalled for in the eyes of SPRI

and the National Board. Swedish planning director Dr. Gunnar Wennstrom, however, although fully cognizant of this channel for technology control, insists that it is rarely used (68).

The fourth strategy, regulating technologies

as rigidly as pharmaceuticals, is not appropriate

for use in Sweden, because it goes against the

“rider and horse” mentality of the Swedish medSPECIFIC TECHNOLOGIES

CT Scanners

The first CT scanners became available in

England in 1972 and were introduced in Sweden

and the United States in 1973. As of May 1978,

the United States had 4.8 scanners per million

inhabitants (8). Sweden, however, had only 1.6

scanners per million population (54).

How did Sweden manage to stem CT’s influx?

In the case of CT scanners, manpower strategies

did not play a role for two reasons. First, in the

short period between the introduction of CT

scanners in 1972 and 1978, no significant adjustment in the numbers of radiologists could have

been made. Second, although the concentration

of physicians per capita is about the same in

Sweden as in the United States, 5.23 percent of

ical structure. As previously noted, the counties

in this context are free to make their own decisions concerning the purchase of medical technologies.

In light of Sweden’s medical structure, issuing

voluntary guidelines through a national information agency, the fifth strategy, is clearly preferred. It is therefore not surprising that SPRI

has undertaken to fill this advisory role. The

success of this purely advisory institute in planning technology in Sweden goes hand in hand

with the regional organization of Sweden’s hospital system, because planning the rational diffusion of a technology requires a clear hierarchy

in order to prevent duplication.

In theory, therefore, Sweden is predisposed

towards the second and fifth of the aforementioned containment strategies, i.e., the manpower and informational approaches. Only empirical evidence about the influx of specific

technologies, however, can demonstrate whether these methods work. Presented in the next

section of this chapter, therefore, is an analysis

of the Swedish experience with CT scanners,

coronary artery bypass operations, and other

innovations.

Swedish doctors (compared to 2.81 percent of

American physicians) are specialists in radiology (23).13 Thus, Sweden has sufficient radiologists to equal if not exceed the U.S. level of CT

use per capita.

It appears that what was responsible for

restraining the influx of scanners in Sweden

were timely coordinated planning and the regional hierarchy of services. SPRI began with

the groundwork for plans to rationalize CT

scanners in 1973, when the first head scanner
Ch. 1O– Controlling Medical Technology in Sweden ● 179

Figure 1 .—Relative Proportions of

Different Cost Items in the Total Costs of

Pneumoencephalographic, Cerebral Angiographic,

and CT Examinations

Cost per

examination

I

❑

❑

Cost per ward

including personnel cost

Capital cost including

service and maintenance

Material cost

Personnel cost

of the radiology department

Cerebral CT

angiography

Pneumoencephalography

As is evident from this figure, cerebral angiographic and

pneumoencephalographic examinations are much more

personnel demanding than CT examinations.

CT? The answer lies partly in the timeliness of

SPRI’S report. As the experience with the Enkoping hospital obstetrics unit showed, it is

easier not to add a service than to eliminate it

later on. Swedish health economist Edgar

Borgenhammer stated (11):

My experience is that it means a lot for the

possibilities of cost containment that the admin-
Figure 2.—Projected Annual Cost Increase or Decrease Resulting From the Introduction of a CT Scanner

Number of

cerebral

angiographic

examinations

eliminate d

5

10

15

20

25

30

35

40

45

50

60

70

80

90

100

110

120

130

140

150

175

200

225

250

(in thousands of Swedish kroners)

Number of

pneumoencephalographic

examinations

eliminate d

5 10 15 20 25 30 35 40 45 50 60 70 costs

(4.5 SW, Kr. = $lU.S.)

487 471 453 437 420 403 386 368 362 335 301 267 .

476

465

465

444

433

423

411

401

390

369

346

325

304

282

261

240

469

443

439

427

417

406

385

373

352

331

308

286

266

244

224

442 426 403 392 374 357 341 323 289 256

432 415 398 381 364 347 330 313 279 246

421 405 367 371 354 336 320 302 269 235

410 393 376 360 342 326 306 29 1 257 223

417 383 366 349 332 314 298 281 247 213

369 373 335 339 321 304 288 270 236 203

376 361 344 327 310 283 278 282 225 191

387 351 333 317 300 262 266 246 215 181

366 339 322 306 288 271 254 237 203 169

335 319 301 285 267 250 234 216 182 149

313 267 279 263 246 226 212 194 161 127

201 275 287 241 224 206 190 173 139 105

270 263 237 220 203 186 169 152 118 84

249 232 215 183 181 184 147 130 96 62

227 211 I93 177 168 142 126 106 74 41

— 206 190 172 156 138 121 105 87 54 20

218 202 181 168 151 134 1171~7 99 63 66 32

196 180 163 146 129 11 2 112

175 158 141 124 107 *1

122 105

95 76 61 44 10

73 66

+

14

istrator can catch problems before they grow

big. . . , Once resources have been allocated to

an area it is very difficult to diminish or remove

them,

The Swedish experience with CT is a case

where planning was done before the situation

grew too big. Most Swedish hospitals waited for

the report and seemed to follow its recommendations. Only two scanners had been installed

in Sweden at the time the SPRI report was released. By that date, 320 scanners were already

in operation in the United States (8).

Although it is far from perfect in practice,

Sweden’s hierarchical hospital system did serve

to arrest the diffusion of scanners. As of February 1979, Sweden had eight head scanners, all

but one at regional hospitals, and six total body

scanners, two of which were located at the largest central hospital (54). As of late 1979, Sweden

had 17 scanners (27). They were installed on the

following dates: October 1973 (1), November

1975 (1), November 1976 (l), January 1977 (l),

February 1977 (l), March 1977 (I), July 1977

(1), September 1977 (l), November 1977 (1),
Ch. 10-Controlling Medical Technology in Sweden ● 1 8 1

December 1977 (l), January 1978 (l), February

1978 (l), May 1978 (l), February 1979 (l), June

1979 (2), August 1979 (1).

How successful was the SPRI model in predicting the effect of the introduction of CT? The

assumption that the usage of alternate modalities would drop off proved correct. A subsequent turn that has altered the results of CT implementation, however, is that scanners are

used more frequently than was projected on the

basis of the assumption that scans would replace

angiographs and pneumoencephalographs (4).

As a consequence, the introduction of CT may

have lowered costs for given numbers of cerebral examinations, but raised total costs. The

structure of the Swedish hospital, however,

keeps these marginal costs at a minimum, an advantage Swedish planners Jonsson and Marke

pointed out (28):

It is conceivable that in the United States, 50

angiographs per year could be replaced by 800

CAT exams. This would result in a major net increase in third party expenses. The Swedish

counties have less of a problem in this area.

Once they decide on equipment purchase and

staffing changes, that decision defines most of

the difference in total costs. A much higher than

expected volume of CAT scans will not create a

financial crisis, perhaps until another budget

year when a second CAT scanner is asked for.

In September 1979, SPRI organized an international conference to alert other countries to

the need for evaluations similar to its evaluation

of CT. The following features of SPRI’S approach are especially deserving of note:

● SPRI developed good working relationships with a number of senior physicians

who provided medical expertise.

● The report SRRI issued was timely, Produced when the decisions were being made,

the report synthesized existing knowledge

and original information SPRI collected in

areas such as costs and staffing. It was not

the definitive study that might have consisted of a randomized trial with long-term

followup. Such a study, however useful,

would not have provided information until

many years after the critical decisions had

already been made.

The report addressed the concerns of the

decisionmakers. The lay county council

members needed to understand the central

issues. They needed this kind of information to respond to the perhaps overenthusiastic requests for scanners from their

medical staff.

The report did not give a simple yes or no

answer with regard to CT scanners, but defined a set of tradeoffs related to the

avoidance of other more risky procedures,

volume of tests, and costs. It allowed play

for local preferences in coming to a

decision.

SPRI performed a new analysis for body

scanners when the matter of their possible

purchase arose.

SPRI organized a national conference on

this topic drawing together physicians and

administrators and lay county council

members to present its analysis and allow

for discussion. Swedish authorities presented their views on CT, and an American

expert, Barbara McNeil, came to explain

that the benefits of CT scanners were not

yet at all well defined.

SPRI staff continued contacts with medical

decisionmakers to offer advice.

To improve future medical technology assessments, SPRI is now conducting a followup interview study to see how, if at all,

Swedish decisionmakers were influenced

by the SPRI analysis.

The approach that SPRI used in its evaluation of

CT scanners might well be used as a model for

other countries.

Coronary Bypass Surgery

Although there were precedents for the treatment of coronary artery disease by surgery in

Sweden, no procedure had been very successful

or was in wide use when coronary bypass surgery was introduced. Beginning with Lindgren’s

stellate ganglion resection experiments in the

late 1940’s, Sweden had been on the forefront of

experimental surgical techniques to relieve

angina pectoris (36). Various techniques were

developed and tested, but although in some

cases the techniques did yield some relief from
— --

182 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

pain, they did not appreciably change mortality

statistics. As a result, there developed in

Sweden skepticism toward each new “miracle”

operation that emerged in that country or

elsewhere.

A cording to Uppsala thoracic surgeon Torkel berg, skepticism toward innovations in A

heart surgery influenced Swedish decisionmaking on the bypass operation (1). Lending credence to berg’s argument is Sweden’s decision i

not to use heart transplantation. Subsequent to

its introduction in South Africa in 1967, heart

transplantation was attempted in almost every

developed nation except Sweden. The consensus

in Sweden, despite some heated dissent, was

that heart transplantation was too experimental

in nature to justify its use (9,10). In the case of

coronary bypass surgery, Sweden exercised

considerable restraint, but did not decide to

avoid the procedure altogether. The experts on

the medical evaluation board agreed that, unlike heart transplantation, the bypass procedure

was consistent with proven scientific knowledge

and good practice. Since the bypass surgery was

felt to be potentially valuable, in 1973-74, it was

instituted in Sweden on a small and experimental scale (68).

The Swedish experience with coronary bypass surgery differed from that with CT scanners because of the doubts concerning not only

the economics of the surgery, but also its strictly

medical worth. Once the decision to implement

bypass surgery was made, however, its diffusion process paralleled that of CT. Once again

the central question for Swedish planners was:

How can this technology be implemented in the

most cost-effective fashion? In other words,

which tier of the hospital hierarchy is appropriate for coronary bypass surgery? In the case

of CT, there was some dispute, since a scanner

can be placed virtually anywhere, even in a doctor’s office. Bypass surgery is fundamentally different from CT, however, in that it requires

enormous ancillary support.

In order to perform this surgery, all the prerequisites for major cardiac surgery—intensive

care units, heart-lung machines, blood gas monitoring—are necessary. Given these prerequisites, the sites at which coronary bypass surgery

could be performed in Sweden were predetermined—by the location of departments of thoracic surgery, which had already assembled all

these resources and equipment for other types of

heart operations. These departments, as a result

of a consolidation that took place in 1963, were

located only at Sweden’s four largest regional

hospitals.

In designing the framework for the Swedish

regional hospital network, Director-General Arthur Engel saw thoracic surgery departments as

a special case, noting in his 1958 report that

these departments required a “block” of supporting departments: pulmonary medicine, specially equipped cardiology and radiology clinics, and a physiology laboratory for respiratory

and circulatory testing (52). At the time of that

report, eight hospitals and two sanitoria were

equipped for thoracic surgery. Referrals to these

institutions from smaller hospitals were erratic.

Furthermore, two of the departments had far

greater operating loads than the others, some of

which had only 10 beds. Engel felt that these inefficient units were best closed, as the minimum

effective size for a thoracic surgery department

was 25 beds, and the ideal unit was 50 beds (52).

This judgment implied that a fifth, interregional

tier of the hospital hierarchy would be necessary

for thoracic surgery; otherwise if all seven

regions were to outfit effective size units, there

would be overcapacity. No immediate modifications were made to the newly created regional

system, however, so as to ease the passage of

the 1958 report.

As explained by Engel, the interregional system for advanced cardiac surgery departments

was developed in 1963 (14):

One amendment to the original plan was

made in 1963. It was found inadvisable to carry

out advanced cardiac surgery needing extracorporeal circulation and respiration by means of a

heart-lung machine at all regional hospitals.

This activity is therefore now located in the four

largest regions only.

As a result of the 1963 consolidation of thoracic

surgery departments, Swedish planners had

only four possible sites to choose from for cor-
Ch. 10—Controlling Medical Technology in Sweden 183

onary bypass surgery. 15 Thus, in the case of coronary artery surgery, an earlier consolidation of

services played a dividend in restraining the diffusion of a then unforeseen innovation—the

maxim being “past planning begets the success

of future planning. ”

The decision that coronary bypass surgery

was worthwhile and would be done only at select hospitals did not answer the question of

how many operations should be performed. For

the year 1977, only about 220 coronary bypass

operations, or about 27 per million Swedes,

were performed. (See table 4.) What limited

Table 4.—Estimated Number of Coronary Artery

Bypass Operations Performed in Sweden (1977-79)

Number of Number of operations

Year operations per million population

1977 . . . . . . . . . . . . . . 220 27

1978 . . . . . . . . . . . . . . 300 37

1979 . . . . . . . . . . . . . . 400 50

SOURCE. T. Aberg, Professor of Thoraclc Surgery, The Academ!c Hospital,

Uppsala, Sweden, personal communication, December 1979 (2)

Sweden to the relatively low figure of 27 operations per million citizens? Surgical candidates

were plentiful. According to the World Health

Organization (WHO), the theoretical need for

bypass surgery is estimated to be 150 patients

per million population (71). Medical manpower

was not a limiting factor in Sweden, either.

Swedish thoracic surgeons were doing far fewer

coronary bypass procedures than the 50 procedures that WHO stated “are required per year

per surgeon for adequate professional skill to be

maintained” (71).

The immediate limiting factor was the number of intensive care beds available to the thoracic surgery clinics. A certain number of beddays are allotted to each clinic, which can use

them as it sees fit. This allowance was expanded

to accommodate what planners saw as suitable

numbers of bypass operations. Additional operations would have had to cut into resources for

other types of thoracic surgery (l). Swedish thoracic surgeons’ response to the Veterans Administration (VA) trial (38), given the limited

resources they had, was to try to treat only the

most promising candidates with coronary bypass surgery and handle the remainder of angina

patients with drugs (26). Surgeons at Uppsala

Academic Hospital, who handled roughly onethird of the bypass referrals in 1977, allotted

resources for 72 operations. In deciding who

received the operation, surgeons considered patients’ medical conditions and ages (1).

The level of 27 coronary bypass operations

per million population per year, achieved by

1977, was found to be insufficient to treat all the

patients that had been selected for surgery.

Plans were proposed to incrementally raise the

number of bypass operations in Sweden closer

to the optimal level of 150 per million per year

suggested by WHO, if not beyond (3). At the

same time, there was a call in the United States

to reduce the amount of bypass surgery.

Viewing the discrepancy in coronary bypass

surgery levels in the United States and Europe,

Swedish internist Ed Varnauskas arrived at the

following conclusion (66):

With the given indications, the number of

operations now performed is probably too high

in the USA and too low in Europe. The truth lies

somewhere in between.

There are two separate routes for reaching the

“golden mean” between underutilization and

overutilization of technology. The pattern in the

United States seems to be overexpansion followed by contraction. The disadvantage of this

path is that resources are wasted. Furthermore,

reducing the share of resources allocated to an

entrenched medical technology is more difficult

than increasing the share allocated to an underutilized one.

Rather than following the pattern in United

States, Sweden tends to adopt a “wait and see”

approach. l6 In the case of coronary bypass surgery, Sweden’s “wait and see” approach was

“The phrase used to describe this policy is “avvaktande hallning” (54), which translates idiomatically as “wait and see. ”
184 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

cost effective but had one major drawback.

During the “trial” period, triage was instituted,

so many deserving candidates for coronary bypass surgery were not given treatment or put on

waiting lists. The success of Sweden’s limited

approach to coronary bypass surgery, therefore, was very dependent on Swedish citizens’

acceptance of rationalization. The “collectivism”

orientation that underlies Swedes’ willingness to

wait their turn has already been noted previously in this chapter. The experience with coronary

bypass surgery does not shed additional light on

the roots of Swedes’ “collectivism” orientation,

but does demonstrate how it facilitates the efforts of Swedish planners. Had patients felt they

were being denied a lifesaving service and

rebelled, the “wait and see” approach might

have failed.

Swedish citizens did not feel that a vital service was being denied to them for two reasons.

First, the Swedish medical system previously

had avoided implementing an innovation—

namely, heart transplantation 17—without disastrous results, perhaps establishing a precedent

of good judgment in controlling the diffusion of

new operations. Second, definitively lifesaving

technologies have not been withheld from

Swedish patients—only questionable ones have.

A good example of a clearly vital innovation

that was not restrained by Swedish planners is

that of kidney dialysis.

Renal Dialysis

For examining the diffusion of an innovation,

renal dialysis is not as good a specific case study

as CT scanners and coronary bypass surgery.

CT of the head and the coronary bypass surgery

arrived as state-of-the-art technologies at definite times, and few fundamental theoretical improvements on these technologies have been

made since. Renal dialysis evolved more slowly,

and its gradual diffusion since the late 1940’s has

been controlled as much by advances in equipment as by specific policies and their effects

(19).

17 It must be added that the decision against beginning with heart

transplantation hinged on Sweden’s definition of brain death

(which is uniquely stringent), not on a socioeconomic opinion that

the operation would be unrewarding.

Dialysis machines function as kidney substitutes in cases of chronic renal failure. This

disorder, when untreated, quite predictably

leads to death from uremic poisoning. Demand

for dialysis is therefore linked more closely to

urgent need and less to subjective medical referrals than are CT and coronary bypass surgery.

As a lifesaving technology for which demand

originates largely from objectively rather than

subjectively determined need, renal dialysis is a

valuable reference point.

Swedish planners made this technology readily available to individuals that needed it (5).

The planners’ policy of meeting the demand for

this clearly lifesaving technology contributes to

the confidence citizens have in their judgment.

This faith in turn allows rationalization of more

questionable technologies without major objections by Swedish patients.

Table 5 shows the number of Swedish patients receiving renal dialysis and kidney transplants by region in 1978. Reliable statistics on

renal dialysis for identical years in the United

States and Sweden are difficult to obtain, but

during the year 1977, both countries had roughly 100 persons per 1 million population on dialysis (39,55). The fact that the rates for dialysis

in the countries are comparable suggests that

when Sweden does not make attempts to restrain technologies, dialysis being a case in

point, they proliferate to a similar extent as in

the United States. Using the dialysis baseline, it

is justifiable to attribute at least some crossnational discrepancy in the levels of CT and coronary bypass surgery in Sweden and the United

States to Swedish planners’ success in actively

seeking to restrain the influx of these two

technologies.

Cobalt Therapy

Cobalt therapy units are rationalized in Sweden through the hospitaI regionalization planning mechanism. The decision to have such a

unit requires national approval of the physician

staffing at the hospital and local approval for

construction and operating costs. This mechanism for rationalizing cobalt therapy fits well

into the regionalized structure of hospital care in

Sweden. There are 28 cobalt machines in Sweden, about 3 per 1 million population.
Ch. 10—Controlling Medical Technology in Sweden ● 185

communicatlon, January 1979 (6)

Automated Clinical Laboratories

Decisions regarding automated laboratory

testing in Sweden have been left up to local

CONCLUDING REMARKS

Unique features of Swedish culture, history,

and the organization of medical care have set

the stage for careful and systematic evaluation

of new medical technology. The regionalization

of hospital services, the respect for government

planners, the county and national control of

medical care costs, the homogeneity of Swedish

culture, and the existence of SPRI, a central advisory group, make possible in Sweden the

timely review of new medical technology.

Decisions concerning automated laboratory

testing have been made at the local (county)

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 11.

 Summary and Analysis
Contents

Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . .

Research and Development . . . . . . . . . . . . . . .

Evaluation of Medical Technology. . . . . . . . . .

Regulation of Drugs and Devices for Safety and

Controls on Investment and Use. . . . . . . . . .

Controls on Five Specific Technologies. . . . .

CT Scanners . . . . . . . . . . . . . . . . . . . . .

Renal Dialysis . . . . . . . . . . . . . . . . . . . .

Coronary Bypass Surgery . . . . . . . . . . .

Cobalt Therapy. . . . . . . . . . . . . . . . . . .

Automated Clinical Laboratory Testing

Summary and Conclusions. . . . . . . . . . . . . .

Chapter 1

Table No.

1.

2.

3.

4.

5.

6.

References . . . . . . . . . . . . . . . . .

. .

. .

. .

. .

. .

. .

. .

. .

. .

Page

. . . . . . . . . . . . . . . . . . . . . . . . . . . 191

. . . . . . . . . . . . . . . . . . . . . . . . . . . 192

. . . . . . . . . . . . . . . . . . . . . . . . . . . 194

Efficacy . . . . . . . . . . . . . . . . . . . . 196

. . . . . . . . . . . . . . . . . . . . . . . . . . . 199

. . . . . . . . . . . . . . . . . . . . . . . . . . . 204

. . . . . . . . . . . . . . . . . . . . . . . . . . . 204

. . . . . . . . . . . . . . . . . . . . . . . . . . . 208

. . . . . . . . . . . . . . . . . . . . . . . . . . . 211

. . . . . . . . . . . . . . . . . . . . . . . . . . . 213

. . . . . . . . . . . . . . . . . . . . . . . . . . . 214

. . . . . . . . . . . . . . . . . . . . . . . . . . . 215

. . . . . . . . . . . . . . . . . . . . . . . . . . . 217

LIST OF TABLES

Page

Technology Development and Use in the United States: Formal

Programs of the U.S. Department of Health and Human Services. . ..........191

Distribution of Randomized Clinical Trials of Gastrointestinal Therapies by

Country. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............195

Distribution of Installed CT Scanners by Country . . . . . . . . . . . . . . . . . .. ....207

Treatment of Patients With End-Stage Renal Disease by Country and Year .. ..209

Percent of Dialysis Patients Receiving Treatment at Home by Country

Coronary Artery Surgery per Million Population by Country and Year

LIST OF FIGURES

. . . . . . . 210

. . . . . . . 212

Figure No. Page

1. Diffusion of CT Scanners in the United States, Japan, Sweden, and

the United Kingdom. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...206

2. Patients Treated for Chronic Renal Failure in Great Britain and Europe . ......211
 11.

Summary and Analysis

INTRODUCTION

The preceding

described the po

manage medical

alized countries:

Australia, Japan

chapters of this volume have describes the policies and mechanisms used in

licies and mechanisms used to the United States and then compares these with

technology in nine industri- those of the other countries. (An overview of

the United Kingdom, Canada, medical technology development and use in the

France, West Germany, the United States appears in table 1.) The purpose

Netherlands, celand, and Sweden. This chapter of the analysis- is twofold: first, to draw- out

Table 1 .—Medical Technology Development and Use in the United States:

Formal Programs of the U.S. Department of Health and Human Servicesa

Technology’s stage

of development Policy area and Government activityb Responsible agency or program

Research and Support, conduct, and pIan basic research

development

Support, conduct, and plan applied research

Demonstrate ion of Support or conduct clinical trials

safety, efficacy, . test safety

and cost ● test efficacy

effectiveness ● protect human subjects

Ensure efficacy and safety of drugs and devices

● control of testing procedures

. postmarketing surveillance

Provide economic analyses

● cost-benefit analysis

● cost-effectiveness analysis

Evaluate social, ethical, political impacts

. technology assessment

Regulate market approval of drugs and devices

Encourage distribution by information dissemination

Control distribution through certificate of need, review of

purchase

Ensure appropriate use

Monitor practice

Reimbursement for health services

● define benefits package

● set reimbursement levels

Diffusion

Widespread use

National Institutes of Health,

others c

National Institutes of Health, other

agencies and programs

National Institutes of Health,

others c

Food and Drug Administration

National Center for Health Care

Technology

National Institutes of Healthd

National Center for Health Services

Research

Food and Drug Administration

National Institutes of Healthd

Health Resources Administration

Professional Standards Review

Organization certification programs

Professional Standards Review

Organizations

Medicare f

Medicaidg

191
192 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

common patterns in the various countries’ appreaches to managing medical technology

where such patterns exist; and second, to delineate differences in approach where there are interesting and important exceptions to the

patterns.

The discussion is organized in five sections.

The first four sections discuss, in turn, government policies toward 1) R&D, 2) evaluation, 3)

safety and efficacy regulation, and 4) investment in and use of medical technologies. The

RESEARCH AND DEVELOPMENT

In 1979, the world’s total public and private

R&D budget was estimated to be about $150 billion (31). About one-third of that amount was

invested by the United States, and another third

by Western Europe and Japan combined. Overall, from 7 to 10 percent of the total was spent

on R&D related to health (2,31).

Since World War II, governments over the entire industrialized world have become deeply involved in supporting R&D of all kinds. In 1979,

the U.S. Government spent almost $30 billion

on R&D, making up about two-thirds of the

country’s total investment. Governments of

other industrialized countries spend proportionately comparable amounts. In Britain and

France, for example, more than half of the R&D

effort is supported by public funds (31). Although government funds in Japan amount to

less than 25 percent of the country’s total investment in R&D (31), the special relationship between government and industry there gives government planners more power over R&D than

that figure suggests. The actual amounts invested by different countries in R&D vary. In

1970, for example, the percentage of gross national product (GNP) invested in R&D ranged

from 0.5 percent in Canada to 1.6 percent in the

United States (36). The per capita expenditure

on health R&D in 1969 ranged from more than

$6 in the United States to less than $1 in the

United Kingdom (36).

According to the Organization for Economic

Cooperation and Development (OECD), despite

substantial government support, R&D generally

fifth section examines the U.S. and other countries’ policies toward five specific medical technologies: computed tomography (CT) scanners,

renal dialysis, coronary bypass surgery, cobalt

therapy, and automated clinical laboratory testing. Data concerning these technologies have

been drawn from the chapters in this volume

and from other sources. 1

IThe chapters on individual countries in this volume are not referenced in this chapter. Unless otherwise noted, material is taken

from these chapters.

has been going through a difficult period (36).

During the 1950’s and 1960’s, a preoccupation

with economic growth led to an attitude on the

part of the general public that almost all R&D

should be encouraged. By the end of the 1960’s,

however, with heightening interest in the proper

utilization of human and environmental resources, there emerged a desire on the part of

the public for science to attack problems more

directly related to the achievement of these

goals. Since that time, governments of industrialized countries have attempted to exercise

greater selectivity in making R&D investments

and to bring about relative or absolute reductions in the amounts that they devote to R&D

(30).

The increasing emphasis on social goals for

R&D has helped to foster increasing support for

health R&D (36). Numerous countries have declared health R&D to be one of their top priorities in coming years. In 1975, OECD found that

among 12 OECD countries, including the

United States and Japan,2 health ranked number

seven overall among priorities for R&D investment (36). Furthermore, among the new social

objectives that became prominent during the

1970’s— including public welfare, community

services, and pollution abatement—health

ranked number one. With health services taking

a growing share of GNP, some countries are interested in the contribution that health R&D can

‘The 12 OECD countries are Belgium, Canada, France, West

Germany, Italy, Japan, the Netherlands, Norway, Spain, Sweden,

the United Kingdom, and the United States.
Ch. 11—Summary and Analysis . 193

make to strengthening the general economy.

This is particularly true in the Netherlands,

which exports 90 percent of its medical

technology.

In the United States, health R&D represents

about 11 percent of the total Federal R&D expenditure, a higher percentage than in most industrialized countries.3 A number of U.S. Federal agencies fund R&D related to health, with a

total budget of about $3.8 billion in 1978 (27).

Of these, the National Institutes of Health (NIH)

is predominant. With a 1978 budget of $2.6 billion, NIH supports about two-thirds of the entire Federal effort. Private industry in the United

States also supports R&D related to health. In

1978, U.S. industry invested an estimated $1.8

billion in health-related R&D. Of this amount,

$1.3 billion came from pharmaceutical companies, and the remainder from instrument and

supply companies. Industry is also important

internationally.

The allocation of moneys in Government research programs in the United States is essentially a political process, with Congress playing

an active role in setting overall priorities.

Biomedical research policies in the United States

have been well described by Strickland (47), and

more recently, by Rettig (40) and Springarn

(46). During the second half of the 1970’s, NIH

came under pressure from many sources to fund

nontraditional research more related to societal

goals, such as epidemiological research, social

science research, and nutritional research

(49,50). Research to evaluate medical technology, described in the next section of this

chapter, also falls into this category.

In countries other than the United States, central government agencies that support and carry

out biomedical research do exist, but probably

none of these agencies is as dominant and autonomous as NIH. Among the 12 OECD countries cited earlier, only half have a central government budgetary mechanism for biomedical

research (36). Australia, Japan, France, and the

Netherlands invest their public funds through a

‘Some industrialized countries spend considerably less. In 1972,

for example, Japan spent only 1.8 percent of its public R&D funds

on health; the comparable figure in the United Kingdom was 1.9

percent (36).

central mechanism, usually through the Ministry of Health or its equivalent. Most publicly

funded biomedical research is done either in intramural institutions (i. e., government agencies

or institutes) or in the higher education sector.

In the United Kingdom, Canada, and Sweden, independent medical research councils play

an important role in funding biomedical research and insulate such research from direct

government controls. West Germany has a particularly decentralized system, in which the

State governments play an important role. Most

federally funded research is carried out in quasiautonomous research institutes. In all countries,

much research is carried out by academicians in

university hospitals who are funded by service

moneys through health insurance. As in the

Netherlands, university hospitals have higher

tariffs than others, and this money subsidizes

research.

How priorities are set in the government biomedical research programs of various countries

has not been well described (40). Given the decentralized nature of the R&D system, the large

private involvement, and the autonomy of academic teaching hospitals, the possibilities for

control are limited. Furthermore, the scientists

themselves play a large role in setting priorities

through research councils or, as in France, by

giving advice to the government. According to

Klein, biomedical research priorities in Britain

have tended to be shaped by the interests of the

research community rather than by an appraisal

of what type of research would yield the greatest

dividend to the community at large (20).

In some countries, however, there are indications that the interests of the public are increasingly being considered in determining biomedical research priorities. France has perhaps gone

the furthest in setting explicit priorities. In addition, the “war on cancer” in the United States

resulted from public demands that research be

addressed to specific needs (39). In Belgium, the

government has been concerned with the effect

of drugs (36). The stated objective of the Ministry of Research and Technology in West Germany is to develop medical technology that will

improve patient care, reduce side effects, and be

more cost effective. Finally, the development of

68-095 0I - 80 - 14
194 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

the CT scanner was funded by the Department tional impact of the CT scanner developed in

of Health and Social Security in the United Britain and of renal dialysis developed in the

Kingdom because of its promise for improving Netherlands clearly shows this. In many cases,

quality of care through better diagnosis. therefore, the critical decision for policymakers

will be how to react to a new medical technolBiomedical R&D, wherever it is carried out, ogy developed elsewhere—not whether and

has implications for all countries. The interna- when to develop it.

EVALUATION OF MEDICAL TECHNOLOGY

One type of health-related research that has

been gaining visibility is the evaluation of the

benefits, risks, and costs of medical technologies. In the United States, no Government agency has had a clear mandate to perform such

evaluation until recently. Examining the situation in 1977, OTA found that there had been little research done on the efficacy and safety of

medical technologies (33). In many cases, available evaluation methods had not been applied.

By far the largest of the U.S. Federal Government agencies that were performing some evaluative work, OTA found, was NIH, which supports such work as part of its general research

mandate. In 1975, NIH supported about 755

clinical trials at a cost that year of about $100

million (33). In 1976, it spent $147 million on

926 clinical trials (29). The priorities of these

NIH-sponsored studies, in terms of the types of

technologies being evaluated, were heavily

skewed toward cancer therapies, especially

drugs. Few surgical procedures, diagnostic technologies, or preventive interventions were being

evaluated. Noting the lack of knowledge about

the efficacy and safety of many medical technologies, OTA suggested a mandated program to

evaluate medical technology.

In October 1978, Congress passed legislation

establishing the National Center for Health Care

Technology (NCHCT). Besides carrying out

and supporting evaluation studies, NCHCT has

responsibility for coordinating research on medical technologies to ensure that important

studies are funded. In particular, it is supposed

to see that the information needs of programs

such as the health planning program are met.

NCHCT also has a statutory mandate to provide advice on the coverage of benefits to the

medicare and medicaid programs, the major

public health insurance programs that pay for

medical care for the elderly and the poor. Since

its inception, NCHCT has devoted a great deal

of effort to performing this function, although

its effect on the development, diffusion, and use

of medical technology is unknown.

The issue of the need for more evaluation of

medical technology is also becoming more visible in a number of countries other than the

United States, but investments in this’ type of

research appear to be small. The highest priority

for evaluation in other countries also seems to

be drugs (33). A number of voluntary institutes

evaluate medical devices in other countries, but

the evaluations tend to be technical (i.e., they

deal with such matters as safe design to prevent

electrical shock, but not the question of health

benefit from use of the device).

OTA was unable to identify data on the

amounts various countries spend on evaluation

studies in health care. Furthermore, such studies

are not specifically budgeted and must compete

with other types of health R&D. With respect to

the performance of randomized clinical trials

(RCTS) in various countries, Cochrane has commented (8):

If some such index as the number of RCTS per

1,000 doctors per year for all countries were

worked out and a map of the world shaded according to the level of the index (black being the

highest), one would see the U.K. in black, and

scattered black patches in Scandinavia, the

U. S. A., and a few other countries; the rest

would be nearly white.

As shown in table 2, Cochrane’s observations

concerning the unequal distribution of RCTS
Ch. n-Summary and Analysis 195

Table 2.—Distribution of Randomized Clinical Trials of Gastrointestinal Therapies

by Country (1964-74)

Country rank

Number of by number

trials per of trials

Number Percentage million per million

Country a

of trials of total population population

United Kingdom. . . . . . . . . . . . . 83 27.1 % 1.48 2

United States. . . . . . . . . . . . . . . 75 24.5 0.34 6

Italy. . . . . . . . . . . . . . . . . . . . . . . 16 5.2 0.28

West Germany. . . . . . . . . . . . . . 15 4.9 0.24 8

Japan . . . . . . . . . . . . . . . . . . . . . 13 4.2 0.11 10

Denmark. . . . . . . . . . . . . . . . . . . 11 3.6 0.46 4

South Africa. . . . . . . . . . . . . . . . 10 3.3 0.38 5

Australia. . . . . . . . . . . . . . . . . . . 9 2.9 0.64

France . . . . . . . . . . . . . . . . . . . . 7 2.3 0.13 9

Norway . . . . . . . . . . . . . . . . . . . . 7 2.3 1.75 1

Other countries . . . . . . . . . . . . . 52 16.9 — —

International trials. . . . . . . . . . . 8 2.6 — —

Total . . . . . . . . . . . . . . . . . . . . 306 100.O% — —

(19)

among nations have been generally confirmed

with independent data on trials of gastrointestinal therapies. Although one should not overemphasize their generalizability,4 the findings

presented in this table are in accord with the

reputation of different countries. In particular,

the high ranking of the United Kingdom, both in

numbers of trials and in trials by population, is

consistent with Cochrane’s statement. The low

ranking of France and Japan, and the intermediate ranking of West Germany and the

United States, are similarly in accord with anecdotal evidence.

Because their results are often used in countries other than the country of origin, controlled

clinical trials obviously have international implications. It might be noted that, in terms of

conducting clinical trials of gastrointestinal

therapies, the United Kingdom is carrying a burden disproportionate to its size. The number of

trials conducted in the United States is relatively

large, although the number of U.S. trials per

million population is small. The lack of Canadian trials of gastrointestinal therapies in table 2

may be attributable to Canada’s dependence on

4

Since the literature review that yielded the data in table 2 was

done from the U.S. Medlars System, it may not have represented

journals from all countries equally, but instead emphasized English-language journals.

data from trials conducted in the United States.

Although the international importance of U.S.

clinical trials may be an argument for expanding

their funding, it also points to the need for other

countries to begin sharing more of the burden of

evaluating medical technologies. Smaller countries that might have problems producing a

large enough sample for a study could make financial contributions to help ensure that important technologies are studied.

The small number of international trials in

table 2 is also of interest. Currently, there is

considerable discussion of expanding international studies (48). An international European

study of coronary bypass surgery was carried

out in the mid-1970’s. In 1979, there were discussions about initiating a trial of electronic

fetal monitoring coordinated by the European

Common Market Commission.

On the basis of the information presented in

the other chapters of this volume, it appears

that few evaluative studies other than randomized controlled clinical trials are done in

either the United States or other countries.

Deserving of note, however, is that the French

and Australian Governments have begun to

fund cost-effectiveness studies for the purpose of

influencing policymaking. A number of coun-
196 Background Paper #4: The Management of Health Care Technology in Ten Countries

tries have analyzed the role of CT scanning. An

independent cost analysis by the Swedish Planning and Rationalization Institute apparently

led county governments to approach the purchase of CT scanners with considerable caution.

Some scanners in France have been approved

only for institutions that have the capability to

do evaluative studies.

Another important activity related to the

evaluation of medical technology is synthesizing

and drawing conclusions from existing knowledge. In the United States, where organizations

such as insurance companies are increasingly involved in the delivery of health care, clear-cut

conclusions about the benefits and risks of technologies are essential. Traditionally, syntheses

of existing knowledge in the United States have

been done in a very informal manner. Many different Federal Government programs do such

syntheses. In an effort to make the synthesizing

processes more formal and more open to public

view, NIH has been experimenting for several

years with a process that it calls “consensus exercises. ” NIH brings together various experts

and gives them the best scientific information

that can be found; these experts then arrive at

consensus recommendations concerning such

matters as the appropriate use of specific

technologies (e.g., electronic fetal monitoring

and mammography). These consensus exercises,

however, are still in an experimental stage.

In all the countries discussed in this volume,

activities to synthesize existing knowledge

about medical technologies, unlike formal experimental evaluations, are common. In England, physician consensus often substitutes for

either scientific evaluation or public involvement in decisionmaking (20). In Canada, guidelines for new and expanded facilities in hospitals

are frequently developed by special task forces

comprised of Federal and Provincial officials

and outside medical consultants. More or less

the same situation has been noted in West Germany, France, Australia, and Sweden.

Although the countries in this volume have

done little to assure the timely evaluation of

medical technologies, the issue of the need for

such evaluation has become visible in all of

them. Furthermore, a number of countries, including France, West Germany, and the Netherlands, are considering expanding their evaluation activities. In Australia, a new system has

been proposed that would include a national expert committee to give advice on medical technology and a central repository of information

on medical technology. It seems certain that activities to evaluate medical technologies will

continue to expand.

REGULATION OF DRUGS AND DEVICES

FOR SAFETY AND EFFICACY

Virtually every country discussed in this volume has mechanisms to regulate the safety and

efficacy of drugs. These regulatory mechanisms

have evolved because the production and sale of

drugs in capitalist countries is primarily the

responsibility of private enterprise (41), and

although the private enterprise system has led to

many advances in modern medicine and has

made high-quality drugs accessible to the general population, it has also resulted in harm. A

law to regulate safety of drugs sold in the United

States, the U.S. Food, Drug, and Cosmetic Act

of 1938, was enacted in response to a 1937 disaster in which 358 people died from ingesting a

drug (“elixir of sulfanilimide”) that was sold in a

solvent of diethylene glycol, which caused kidney damage. The law initiating the regulation of

drugs for efficacy in the United States, the U.S.

Food and Drug Amendments of 1962, also followed a disaster, this time involving serious

birth defects caused by the drug thalidomide.

The historic pattern of first regulating drugs for

safety, and later for efficacy, has also apparently been followed by other countries.

The U.S. Government agency with responsibility for the regulation of drugs for safety and

efficacy, along with the regulation of their man-
Ch. 11—Slimlnary and Analysis ● 197

ufacture, is the Food and Drug Administration

(FDA). When a drug company has a drug that it

wishes to test in humans, it must submit data

from preclinical testing in animals to FDA. If

FDA agrees that the drug looks promising, it approves the sponsoring company’s “investigational new drug” application to permit the drug

to be tested in humans. When sufficient data

have been accumulated from controlled clinical

trials and other tests in humans to show that the

drug is efficacious and safe, or that the benefit/

risk ratio is favorable, the company submits a

“new drug application” to FDA. If FDA finds

the data convincing, it allows a drug to be

marketed.

Once a drug is on the U.S. market, FDA has

little control over its use or evaluation. Processes for collecting information on the safety

(rare adverse reactions, long-term effects) and

on the indications for use of drugs on the market

are very limited and for the most part voluntary. It also should be noted that although drugs

are usually tested for specific clinical indications, and their use is often approved only for

those indications, such products are frequently

used for other indications. Anesthetics used in

childbirth, for example, have not been tested for

that indication and are not explicitly approved

by FDA for that use.

In countries other than the United States, controls of the marketing of drugs based on efficacy

and safety are similar to controls in the United

States, but are generally not as rigorous. Indirect controls are often more restrictive than

direct ones. In France, for example, a decision

must be made to place a specific drug on the reimbursable formulary of the Social Security

System. To be placed on this list, a new drug

must either be more efficacious, have fewer side

effects, and/or cost less than another drug on

the formulary. In Japan, fees to cover the prescribing of drugs are set yearly. In recent years,

the fees have been reduced each year, perhaps in

part in an attempt to lower the incentive for

drug prescribing. In Australia, the pharmaceutical benefits scheme does not cover all drugs on

the market.

Some countries do have postmarketing regulation of drugs. A system for collecting information on adverse reactions to drugs on the market

has been set up in Japan, where there is great

concern about safety. Canada also relies primarily on a postmarketing surveillance system

to regulate drugs. Postmarketing surveillance,

either in combination with premarketing controls or as a specific approach, has a number of

advantages, One is that it allows the collection

of data from the real-world setting where drugs

are used. Another is that it enhances flexibility.

In recent years, there has been increasing discussion in the United States about relying more

on postmarketing controls on drugs and relaxing the premarketing controls a bit. The drug

approval process used in the United States since

passage of the 1962 Food and Drug Amendments has demonstrably lengthened the time required for approval of a new drug. DeHaen

studied the time required for a drug to move

through the “pharmacology, clinical study, government review to marketing” pipeline in four

European countries and the United States

(11,12). Looking at 42 drugs, he found that the

12 drugs that became available before 1962 were

marketed about as rapidly in the United States

as they were in Britain, France, Italy, and West

Germany. For the 30 drugs introduced since

1962, however, the story was quite different.

The number of years required between introduction and marketing of these products was lowest

in Britain, next lowest in France, third lowest in

West Germany, higher in Italy, and highest in

the United States. A1l post-1962 applications in

Britain, France, and West Germany were approved within 2 years, but in the United States,

only 17 of 23 drugs were approved in that span,

and 4 of the 23 drugs took 4 years or longer to

gain approval.

The basic findings that the United States tends

to lag behind other countries in licensing of

drugs and that the U.S. drug lag is in part attributable to FDA’s regulatory program has

been confirmed by a considerable body of literature (16,37,45,52,53), which has been summarized by Schifrin and Tayan (44). The following

conclusions can be drawn. First, drug lag exists

to some extent in every country. Second, drug

innovation, as measured by the number of new

chemical entities marketed per year, has de-
198 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

clined since 1960 in all countries. Third, the

United States tends to lag somewhat behind

other countries in its marketing of drugs, but it

also has drugs that are marketed very early.

Fourth, the United States has had the most productive private drug R&D effort in the world.

Peltzman used a broad framework to analyze

the effects of the lag in drug marketing in the

United States, and concluded that the negative

effects of forgone health benefits and higher

prices resulting from reduced competition

caused by the lag outweighed the positive effect

of reduced waste from purchases of ineffective

drugs by $3OO million to $4OO million in 1970

alone (37). It is important to note, however, that

Peltzman made no adjustment for the value of

additional information gained about adverse

reactions during the extended premarketing

period. As Schifrin and Tayan observed (44):

With some estimates of the annual hospital

costs of drug reactions ranging into the billions

of dollars, it is plausible to suppose that even

fairly small percentage net reductions in new

drug adverse reactions and interactions may

have brought a benefit of large dollar magnitude, which . . . might change Peltzman’s conclusion of a large net negative result to a smaller

one, or even to a net positive balance.

Unfortunately, the literature on drug regulation that is available does not answer some of

the most important questions. One is whether

there is any relationship between the development of drug regulatory programs and the decline in drug innovation. It is not clear that there

is. A second question concerns the overall impact of drug regulatory programs on the health

of the public. That impact cannot be assessed.

Deaths and disability that result from unsafe

drugs are highly visible. Thus, the thalidomide

disaster in Europe, which led to enactment of

the 1962 U.S. Food and Drug Amendments, is

often cited as evidence of the need for drug regulation to protect the public. On the basis of data

from uncontrolled clinical trials, thalidomide

was allowed to be marketed in West Germany

in 1956 as a safe, effective, sleep-producing

sedative drug. By the time the link between thalidomide and deformities in babies whose

mothers had taken the drug while pregnant was

established in 1961, an estimated 6,000 to 8,000

cases of deformity had occurred in West Germany (22).5 Less visible, though no less important than deaths and disability that result from

unsafe drugs, however, are deaths and disability

that result from delaying the marketing of new

and better drugs. Striking a reasonable balance

between the two is a difficult task for

policymakers.

Given the lack of data to answer the important questions concerning the impact of drug

regulation, social policy must be based on wise

judgment. At the moment, the international

trend seems to be toward more rigorous regulation of drugs. In 1965, the Council of the European Economic Community (the European

Common Market) issued a directive aimed at

developing common procedures for drug regulation among its member countries (9). Although

at that time, West Germany had a rather weak

law, in 1976 it set up a structure similar to

FDA’s and began to require evidence of efficacy

of drugs from well-controlled studies. (West

Germany’s new law was implemented beginning

in 1978. ) In the United States, FDA has attempted to cut down on the long periods of time

required for approval of drugs and has participated in developing amendments to the Food,

Drug, and Cosmetic Act that would expedite the

approval processes. FDA is also seeking authority to expand its use of postmarketing drug

evaluation mechanisms.

The regulation of medical devices in the

United States, like the regulation of drugs, is

primarily accomplished through premarketing

controls. FDA is authorized to regulate medical

devices under the Medical Devices Amendments

of 1976. Since medical devices do not always

come in contact with the human body, FDA’s

system for regulating devices is somewhat different from its system for regulating drugs. Devices are classified into three types, classes I, II,

and 111. Class I devices are those that are not used to support or sustain human health (e.g.,

tongue depressors), and these are subject only to

5Although thalidomide was not approved by FDA for marketing

in the United States, the drug was readily sold in the United

Kingdom and Japan, and it was 1962 before it was withdrawn

from the Japanese market (22).
Ch. 11–Summary and Analysis ● 199

general controls. Class II devices are those for

which general controls are deemed insufficient

to provide assurance of efficacy and safety (e.g.,

X-ray devices) and about which enough is

known to establish performance standards.

Class 111 devices are those that are used to support or sustain human health (e.g., cardiac

pacemakers), and like drugs are required to be

tested in clinical trials and to have premarket

approval. (The 1976 medical devices law is still

being implemented. )

Other countries do not ordinarily regulate

medical devices directly. One exception is Japan, which has established performance standards for a number of medical devices through its

industrial laws. Another is Canada, which has a

program for postmarketing surveillance of devices that includes the power to require modification or withdrawal of a product. Even without direct regulation, however, evaluation of

medical devices in other countries is common.

In England, for example, the Medical Research

Council often funds such evaluations. There

also appears to be discussion in some countries

about changing the situation with regard to the

regulation of medical devices. In West Germany, for example, there is considerable interest in the U.S. devices law and in the possibility

of legislating a similar program for West

Germany.

CONTROLS ON INVESTMENT AND USE

When a new technology moves out of the laboratory and begins to enter everyday medical

practice, the diffusion phase has begun in earnest, and institutions and practitioners must

decide whether to invest in the technology and

how extensively to use it. Most or all of the

population in each of the countries discussed in

this volume has extensive medical coverage provided through some sort of public program,

through private insurance, or a combination of

the two. As a result, decisions regarding the

adoption and use of technology in the medical

sector are not constrained—as they often are in

other sectors—by the preferences and incomes

of individuals. Collective constraints, however,

have been introduced as a matter of public policy in every country—most often in response to

the rising costs of medical care. In many cases,

the policies are quite recent and have not yet

had time to be fully worked out. Their efficacy

and side effects, like those of some of the technologies they regulate, are not always known.

Collective constraints on the adoption and

use of medical technologies can be generally

characterized as either direct or indirect. Direct

constraints come in the form of prohibitions

against the adoption or use of a technology or

detailed specification of the circumstances under

which the technology may be adopted (e. g., a

requirement that only hospitals with open-heart

surgery units may have cardiac catheterization

laboratories). Indirect constraints are most

often financial. These come in the form of decisions by authorities external to the institution or

practitioner, for example, a State government

or an insurance fund, about the budget or fees to

be permitted, Decisions about fees include

whether to reimburse for the use of the technology at all, and, if so, how much. Fees can be

coupled with conditions (e. g., that the use of the

technology will be reimbursed only for patients

with specified symptoms, or reimbursed only if

the work is done by certain specialists) that

make them little different from direct constraints. Another form of indirect constraint is

offered by manpower policies. Through controls over the numbers of health professions

students, the kind of training they receive, and

the kinds of posts available for them when they

graduate, governments can influence the climate

for a new technology.

The United States has so far emphasized direct controls. Some of the controls grew out of

the requirement that States draw up statewide

plans for hospital construction in order to receive construction subsidies under the Hill-Burton program created by the Hospital Construction and Survey Act of 1946. In 1966, Federal
200 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

legislation created a network of comprehensive

health planning agencies, voluntary agencies

that were to draw up plans for the development

of health resources in their areas. Initially, these

agencies were given no power to carry out their

plans. Over time, however, individual States

legislated certificate-of-need laws requiring

State approval of major capital investment by

hospitals, and the planning agencies were often

asked to give advice on applications from their

areas. Three States passed such laws in the

1960’s, and quite a few more did so in the early

1970’s. Federal legislation passed in 197 2

stipulated that medicare and medicaid would

not reimburse the depreciation charges for any

investment that had not been approved by the

appropriate planning agency; this law strengthened the certificate-of-need process in those

States that had one and was used to set up a

review process in a number of other States as

well.

These strands were brought together in the

National Health Planning and Resources Development Act of 1974. That Act designates State

health planning agencies and approximately 200

health systems agencies (HSAS) to replace the

voluntary agencies created in 1966. Each of the

new HSAS has responsibility for a relatively

self-sufficient catchment areab and is required to

develop a plan for health resources in that area.

These plans form the basis for a statewide plan.

The major power to implement these plans resides with the State: The 1974 Act requires that

every State enact a certificate-of-need law. To

guide the process, the U.S. Department of

Health and Human Services (DHHS)7 has set

out the features that a State’s certificate-of-need

law must have and is responsible for publishing

guidelines for the appropriate supply and distribution of health resources.

Although the U.S. health planning law was

passed in 1974, its provisions are still being

worked out. Some States have still not agreed

on a certificate-of-need law, and Federal guidelines were first published March 1978 (28). The

bThe average HSA has jurisdiction over a population of about 1

million, but the range extends from less than 100, OOO to more than

7 million.

“Formerly the Department of Health, Education, and Welfare.

1978 guidelines set the standard for non-Federal

short-term hospital beds at a maximum of four

per 1,000 persons, with an occupancy rate of at

least 80 percent. They also set standards for the

occupancy rates, or minimum caseloads, for a

number of specialized facilities, such as neonatal

intensive care units, radiation therapy, and

renal dialysis. Planning laws often take a long

time to put into practice, and the United States’

experience with planning is similar in this

respect to the experience of other countries.

Another form of direct control in the United

States, aimed in this case at the use of technologies rather than at investment decisions, is the

network of Professional Standards Review Organizations (PSROS). Created by the Social Security Amendments of 1972, PSRO’S are organizations —usually groups of physicians—designated by DHHS to review the care given medicare and medicaid patients for necessity and

quality. Their first assignment has been hospital

care. If a PSRO decides that a patient does not

need to be in the hospital, medicare or medicaid

refuses to pay. PSRO reviews could be directed

at the use of particular technologies in the hospital, but so far they have not been.

Reviews of incoming bills are carried out by

private insurers, of course, and also by medicare and medicaid. These reviews are usually

for the purpose of trying to hold down costs by

catching fraudulent claims and suspicious patterns of services by individual physicians or

hospitals. In some cases, however, third-party

payers have adopted reimbursement policies

that have a bearing on the use of medical technologies, Perhaps the best example is the Blue

Cross/Blue Shield “medical necessity” program,

in which Blue Cross/Blue Shield determined

that certain services would no longer be reimbursed because they are believed to be ineffective and that others would be reimbursed only

in certain specific situations.

Interest in financial controls in the United

States has been growing, but such controls have

not been extensively used. DHHS has been cautious in using its power, legislated in 1972, to set

hospital reimbursement rates for the medicare

program, and has so far only regulated routine,

or “hotel,” costs. A few States have created
Ch. 11 –Summary and Analysis ● 201

ratesetting commissions to review hospital

budgets and establish reimbursement rates. But

the major effort in this line, the Carter administration’s hospital cost-containment bill,

was rejected by Congress. That legislation

would have specified a maximum rate of increase each year for the revenues of individual

hospitals.

The only example of a manpower policy

aimed at the diffusion of technologies in the

United States is now a footnote in history. The

regional medical program, passed in 1965, was

supposed to promote the adoption and use of

technologies for the treatment of heart disease,

cancer, and stroke; renal dialysis was added to

the list in 1970. The principal means available to

the program was training; the regional agencies

financed many short courses to train physicians

and nurses in the use of specific technologies.

(Intensive care received particular emphasis. )

But as costs became a greater concern, the active

promotion of technological diffusion began to

seem out of place, and Congress terminated the

program in 1975.

Policies in other countries follow a variety of

patterns and have been in place for quite different lengths of time, but there are many points

of overlap in both the types of controls used and

the timing of their introduction. Direct controls

on investment (usually referred to as regulation

or planning) and budget constraints are the

dominant policies. Direct controls are usually

aimed at large items of expenditure (e. g., at investments involving more than $150,000 in the

United States (less in some States), more than

5,000 ($11,000 to $12,000) in the United Kingdom, or with an expected life of more than 3

years in West Germany). Smaller items may be

outside the system of controls altogether or may

be subject to general constraints through limits

on operating budgets.

Budget constraints may allow the planning

process to be more informal, with fewer specific

directions and sanctions from the top, because

they limit the consequences for costs of whatever decisions are made. Strictly enforced

budget limits force planners to trade off the

costs of one proposal against another, These

statements appear to apply, for example, to the

United Kingdom. A national budget for the National Health Service (NHS) is allocated to the

health service regions, and the regions are responsible for decisions about how the money is

to be used. There seem to be few, if any, direct

prohibitions from the Department of Health and

Social Security (DHSS). As Stocking relates,

DHSS does intervene—sometimes extensively—

with information, advice, and occasionally,

subsidies to encourage particular policies; this

intervention has been unusually frequent and

extensive in the case of dialysis. But the advice,

and even the offered subsidies, can be and are

ignored by the regions. There has apparently

been some dissatisfaction with the informal

process, however, and a more formal process of

planning within each region was introduced

along with the reorganization of NHS in 1974.

That planning process, according to Stocking, is

still not in place and is having “teething

troubles. ” More recently, the creation of a committee to set policies on equipment and supplies

has been recommended.

The Canadian system also places first reliance

on budgetary constraints. Because of Canada’s

Federal-State system, there is no nationally set

budget, but the Provinces are encouraged to

limit spending by the fact that the Federal share

of costs, once 50 percent of whatever was spent,

has since 1977 been allowed to grow only as fast

as the GNP. The Provinces set operating budgets for hospitals, and provide capital funds

separately; capital subsidies are available from

the Federal Government, but not according to

the same generous matching provisions as operating funds. The planning process that goes on

within these budget constraints can be detailed—equipment specialists at the Provincial

health department may determine which machine is finally bought—but Needleman describes it as informal. It is sometimes ignored. In

Ontario, for example, Provincial approval of a

project often does not bring extra money with

it—the hospital is expected to finance the purchase out of its existing budget—and hospitals

sometimes choose to go ahead with a project

without getting approval.

Australia and West Germany appear to have

elements of planning and budget controls, but in
202 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

these countries the policies are much more recent, and as a result, much less clear in their operation. Australia has the potential for control

over the adoption of hospital technologies

through its largely public hospital system. The

system receives most of its funds from the States

and the Commonwealth. The Commonwealth’s

share of these costs has been changed often and

by large amounts during the 1970’s; it was greatly increased under the national health program

introduced in 1975, and has been greatly decreased since the reversal of that program a year

or two later. The States provide capital funds

and must approve proposals for capital expenditures. When operating funds were easily available through the Commonwealth subsidies, the

capital planning process did not impose many

limits on investment in new technologies. In the

new, less affluent climate, that may be

changing.

Planning was introduced in West Germany

by a 1972 law under which the West German

Government supplies the funds for long-lived

capital equipment. The States are required to

engage in planning, and hospitals’ applications

for funds are submitted to the States. Currently,

the focus of the planning process is on hospital

beds, but applications. also involve technologies, and planning can potentially include them.

Dumbaugh states that a major stumbling block

has been lack of information about even so

much as the current distribution of particular

technologies. The State governments have some

financial control through their power to set hospital per diem rates to be reimbursed by the insurance funds. Until very recently, however,

when costs began to rise very rapidly, the ratesetting process was not used to try to restrain

costs. In 1977, financial controls were expanded

by a law giving the government the power to set

guidelines for the amounts that can be paid doctors and other health practitioners (15).

In the Netherlands, the national government

has some control over investments in technologies through the Hospital Provisions Act of

1971. A good deal of investment falls outside

the jurisdiction of this law, however, and the

Netherlands Government has recently proposed

legislation to extend its powers in this area and

to give it greater power to set rates as well.

In France, the Hospital Reform Act of 1970

created a quite detailed system of planning and

regulation of technologies. Under the law, the

Ministry of Health prescribes the maximum ratio of equipment to population for specific items

such as dialysis machines, linear accelerators,

and CT scanners. This system of direct controls

appears to be the major form of governmental

intervention in the diffusion process, and like

many planning systems, it is taking time to put

in place. In the last few years, the French Government has become increasingly interested in

financial controls as well, and it is experimenting in particular with global budgets.

Every country discussed in this volume uses

some concept of regionalization— the idea that

facilities should be planned for an entire region,

or State, or Province in order to avoid needless

duplication of highly specialized facilities. In

Sweden, however, regionalization is the major

component of policy toward medical technology. Institutions are designated as belonging to

one of four ascending levels in a hierarchy—

health centers, district hospitals, central hospitals, and regional hospitals—and the designation carries a certain weight when decisions are

made about where to place new technologies.

The counties finance the hospitals and have primary responsibility for making such decisions.

The Swedish Government’s influence over the

process is exercised through its encouragement

of regionalization, its emphasis on providing information relevant to the decisions in good

time, and through its power to allocate staff

positions in hospitals. The counties have not yet

apparently felt any need to introduce the kinds

of budget limits that are the rule in the United

Kingdom and Canada and that have been proposed in other countries.

Mechanisms other than budget constraints

and direct controls on investment play a much

smaller part in most countries’ policies toward

medical technology. Except in Sweden, for example, relatively little use is made of manpower

policies to influence technological diffusion.
Ch. 11 —Summary and Analysis ● 203

Manpower policies are rather slow and uncertain and often too general an instrument to influence the course of a single technology.

Changes in numbers of students and in curricula

take a long time to reach the medical care system, by which time the technology is well established. Gaensler, Jonsson, and Neuhauser note

that manpower policies could not be of much

help in Sweden in controlling the diffusion of

the CT scanner, because at the time the scanner

appeared, Sweden already had an unusually

high proportion of doctors in radiology—and

such stocks of trained manpower are slow to

change. To control CT’s diffusion, Sweden

relied instead on the regional hospital system

and on the rapid dissemination of information

about scanners and of rules of thumb for

deciding about them. The potential of manpower policy as a more general cost-control

device is reflected in the debate in the Netherlands over whether to restrict the numbers of

people trained and in the decision in the United

States to stop increasing them.

The setting of fees and conditions of reimbursement also seem to be used only occasionally as a way of influencing technological diffusion. In countries like the United Kingdom or

Sweden, where few doctors or hospitals are paid

fees, fees are not available to serve as an instrument of policy. This may also be true where private insurers are important and have the right to

set reimbursement rates independently. But it

may also reflect difficulties in choosing the level

at which to set fees, and the fact that controlling

the quantity of services, hence the total cost, by

means of the fee is a more uncertain process

than controlling the total cost directly through a

budget. Fee policies can, however, be a useful

addition to policy in specific cases: For example,

West German insurers decided to reimburse

home dialysis at cost in order to avoid creating

financial incentives to choose center dialysis.

Formal utilization review is apparently part

of national policy only in the United States,

making the PSROS a unique institution. Insurers

in other countries check bills in much the same

way as U.S. insurers do, but again primarily for

the purpose of spotting fraudulent claims. Utilization review programs are now being

considered in several countries—the Netherlands, Australia, West Germany, and France, in

particular.

Notwithstanding variations in the different

countries’ precise mix of policies, certain common themes run through the descriptions. One

is the need for information about technologies.

Planners and regulators set guidelines, and to do

this, they need a great deal of information about

the uses of the technology, the resources it requires, and the associated costs. Hospitals and

doctors need information to make the decisions

that are left to them, and to present their case

when the decision is made by an outside authority. The information needs are enormous.

A second theme is that controls are never airtight. Probably they cannot be—and, in democratic countries, should not be. Some countries

permit, or even encourage, local discretion.

Even if they did not, public and professional

pressures would produce deviations from any

national plan. Regulated parties often try to

evade the regulations. Hospitals in Canada, for

example, as a way around their own limited

budgets, have tried to spin off some of their activities in the form of freestanding centers, while

physicians in the United States have bought CT

scanners when their hospitals were denied approval for one. Private philanthropy has often

allowed a community to go ahead with plans

that were vetoed by a public authority.

Finally, the situation in nearly every country

is changing. In most, the changes are quite obvious, as one new law is followed quickly by

another to strengthen or reverse it. Countries

are trying to figure out not only what works,

but what balance of services and costs they want

to achieve. This balance would not be easy to

achieve in any event, but certainly not when

new technologies must continually be factored

into the problem.
204 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

CONTROLS ON FIVE SPECIFIC TECHNOLOGIES

To explore the way various controls have

been applied in different countries, the author of

each chapter on a specific country was asked to

examine five specific technologies: 1) CT scanners, 2) renal dialysis, 3) coronary bypass surgery, 4) cobalt therapy, and 5) automated clinical laboratory equipment. These five were

chosen because they are known to be of policy

concern in the United States and in other

countries.

In some instances, a positive decision has

been made about the diffusion of a particular

technology (e.g., about renal dialysis in France).

In others, general constraints, such as certificate

of need, have been applied to specific cases as

they have arisen (e.g., certificate of need has

been used to restrain the spread of open-heart

surgery units in some States of the United

States). In either situation, the fact of control requires that some standard of provision be set

and that the government begin to formulate

some idea of the optimal provision of resources

considering both the costs and benefits of their

use. The specific cases discussed below point to

some of the stresses and strains that arise in trying to develop and apply these objectives.

CT Scanners

Determining the value of diagnostic technologies such as CT scanners is particularly difficult.

In discussing the benefits of diagnostic technologies, Fineberg, et al., posited five levels at

which these benefits could be examined (14):

1.

2.

3.

4.

5.

Technical capability. —Does the device

perform reliably and deliver accurate

information?

Diagnostic accuracy, —Does use of the device permit accurate diagnoses?

Diagnostic impact. —Does use of the device replace other diagnostic procedures,

including surgical exploration and biopsy?

Therapeutic impact.—Do results obtained

from the device affect planning and delivery of therapy?

Patient outcome. —Does use of the device

contribute to improved health of the

patient?

If it is assumed that the function of a diagnostic

technology, such as a CT scanner, is to make

accurate diagnoses of individuals’ illnesses, the

evaluation of benefit concentrates on the second

level. If the technology is expected to affect

therapy or eventual patient outcome, then the

fourth and fifth levels would be examined. Studies at the fourth and fifth levels are often difficult to conduct because long-term followup is

required. In addition, health improvements may

depend on better therapeutic tools.

As a result of the difficulties in defining the

goals of diagnostic testing and the emphasis on

diagnostic accuracy, evaluations of CT scanners

in terms of therapeutic planning and patient

outcome are infrequently performed. The scientific literature evaluating the efficacy of scanners in the United States is rather sparse. Although there are many articles on the use of CT

scanners, almost all of them are uncontrolled

case reports (34). Very few examine effects on

patient therapy or health outcome. The same

dearth of scientific literature generally obtains

in other countries. Because of this dilemma, it is

not possible to say what an appropriate number

of CT scanners for a country or an area is. Policies toward placement of scanners and payment

for scanner services have reflected that

uncertain y.

In the United States, an early evaluation of

CT scanners based on a synthesis of available

knowledge was published by OTA (34). A first

draft of OTA’s evaluation was available and

widely circulated in late 1976, but the diffusion

of scanners during 1977 and 1978 was nevertheless very rapid. Another study, to determine indications for use of CT body scanners, was undertaken in 1976 and 1977 by a quasi-governmental agency, the Institute of Medicine of the

National Academy of Sciences, at the request of

the National Blue Cross Association (25). This

study did have some impact, because a number

of Blue Cross plans did not pay for CT body

scans until after the report was published.

Similarly, some evaluation studies of CT

scanners in other countries have affected policy.

In Sweden, for example, an early evaluation by
Ch. 11 –Summary and Analysis ● 205

the Swedish Planning and Rationalization Institute convinced the county councils to limit the

number of CT scanners and to place them in regional hospitals. Sweden’s model of waiting to

make a decision until the results of an evaluation are completed is an interesting one. In the

United Kingdom, early evaluations that were

carried out on units that DHSS purchased partly

for the purpose of assuring such evaluations

were the basis for the government’s decision to

recommend that each region purchase a brain

scanner. Evaluations in France, Australia, and

West Germany have also had some effect on

decisionmaking.

In the United States, all medical devices are

regulated for efficacy and safety under the 1976

Medical Devices Amendments described earlier.

In addition, the Bureau of Radiological Health

of FDA, has the statutory responsibility of protecting the public from medical X-ray. When CT

scanners were introduced to the United States in

1973, the Bureau of Radiological Health had

general technical standards for radiological

equipment that applied to them. These technical

standards were modified to be applicable only

to CT scanners, and the modifications were

published in 1980. FDA’s approach to evaluating scanners emphasizes the evaluation of technical capability, i.e., the first level of evaluation

posited by Fineburg, et al. (14).

In other countries, devices are not consistently regulated. In Japan, the Ministry of Health

and Welfare can set standards to assure efficacy

and safety of medical devices such as CT scanners. Whether it set such standards in the case of

CT scanners is not known. In other countries, as

noted earlier, medical devices are not regulated,

although technical evaluations are often done

on a voluntary basis. In France, some evaluation is required before devices will be made

reimbursable, so there is in effect an indirect

regulatory program. In West Germany, there is

considerable discussion of device regulation,

and it is possible that medical devices will be

regulated in the future.

The major program aimed at affecting the

numbers and distribution of medical technologies in the United States is the health planning

program and its provisions for certificate of

need described earlier. CT scanners generally

cost more than $5s0,000 and are therefore subject to certificate-of-need provisions. In fact,

because of the development of head scanners

costing less than $l50,000, in April 1979,

regulations were published to cover CT scanners regardless of cost under a provision concerning significant new services. Generally,

however, health planning agencies do not have

jurisdiction over services in out-of-hospital settings or in Federal hospitals. In the case of CT

scanners, the exclusion of physicians’ offices in

the health planning law is significant. Eighteen

percent of the 1,254 scanners in the United

States in February 1979 were in out-of-hospital

settings, and the loophole in the law has been

used to circumvent disapproval of hospitals’ requests for scanners. Amendments to the law

passed in 1979 included jurisdiction over such

scanners used on a regular basis for hospital inpatients.

Under the National Health Planning and Resources Development Act of 1974, DHHS is required to produce health planning guidelines to

assist planning agencies. Guidelines were

published in March 1978 with provisions pertaining to CT scanners (28):

1.

2.

3.

ACT scanner (head and body) should operate at a minimum of 2,500 medically

necessary patient procedures per year, for

the second year of its operation and thereafter.

There shouId be no additional scanners

approved unless each existing scanner in

the health service area is performing at a

rate greater than 2,500 medically necessary patient procedures per year.

There should be no additional scanners

approved unless the operators of the proposed equipment will set in place data

collection and utilization review systems.

These guidelines were controversial even before

they were published. U.S. manufacturers contend that the guidelines have prevented the purchase of scanners, thereby hurting the market

and impeding the process of innovation. Actually, however, the situation is much more complex. The U.S. market for CT scanners is near

saturation. More than 80 percent of hospitals
206 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

with more than 500 beds already have scanners during 1979, after the U.S. health planning

(35). guidelines had been issued, although Japan appeared to be catching up. A major factor inThe diffusion of scanners in the United States fluencing the diffusion of CT scanners in the

and other countries is illustrated in figure 1. As United States is probably the medicare and

shown in table 3, by early 1978, the United medicaid programs. These programs, with their

States had significantly more CT scanners than use of cost reimbursement to hospitals and feeany of the other nine industrialized countries ex- for-service payment of physicians, have in effect

amined in this volume. That situation continued assumed an open-ended obligation to pay for

Figure l.— Diffusion of CT Scanners in the United States, Japan, Sweden, and the United Kingdom (1971=79)

Scanners

per million

population

7

[

F

.

4

3

2

1

1971 ‘ ‘ 1973 1974 1975 1976 1977 1978 1979

SOURCES: U.S. data: Office of Technology Assessment, U.S. Congress, Policy Implications of the Computed Tomography (CT) Scanner (Washington, D. C.: US.

Government Printing Office, August 1978) (34).

Office of Technology Assessment, U.S. Congress, PoIicy /rep//cations of the Computed Tomography (CT) Scanner: An Update, draft, Washington, D. C., 1980 (35).

Other data: Country papers in this volume
Ch. 11–Sumnlary and Analysis ● 207

Table 3.–Distribution of Installed CT Scanners by Country (1978 and 1979)

March 1978 1979

Scanners Scanners

Number of scanners per million Number of scanners per million

Country’ Head Body Total population Head Body Total population

United States. . . . . . . 337 668 1,005 4.6 400 854 1,254 5.7 (Feb.)

Japan . . . . . . . . . . . . . 180 112 292 2.6 304 212 516 4,6 (Apr.)

West Germany. . . . . . 51 42 93 1.5 u u 160 2,6 (July)

Australia. . . . . . . . . . . u u u u 7 21 28 1.9 (Jan.)

Canada. . . . . . . . . . . . u u u u 9 29 38 1.7 (May)

Sweden. . . . . . . . . . . . 8 5 13 1.6 8 6 14 1.7 (Feb.)

Netherlands. . . . . . . u u u u u u 20 1.4 (Jan.)

United Kingdom . . . . 36 16 52 0.9 39 18 57 1.0 (Jan.)

FranceC. . . . . . . . . . . . 10 2 12 0.2 20 10 30 0.6 (Jan.)

Iceland . . . . . . . . . . . . 0 0 0 0.0 0 0 0 0.0 (Jan.)

Other 1979 data: Country chapters In this volume.

medical care for their client groups. In the case

of CT scanning, the Federal Government made

an unprecedented decision to withhold reimbursement payments pending evidence of the

new procedure’s efficacy. CT scans of the head

were paid for beginning in September 1976, but

scans of the body were not paid for until August

1978. This policy does represent an instance of

using the reimbursement system to affect use of

technology, but probably had little effect on

overall diffusion.

A number of countries other than the United

States have used planning guidelines to indicate

the number of scanners that would be acceptable. In France, for example, the standard is one

CT scanner per 1 million population. Ontario,

Canada, and the Netherlands set a guideline of

one scanner per 500,000 population. In the

Netherlands, scanners have not been regulated,

but hospitals have agreed not to install them

without government approval. Some countries,

notably Iceland and Japan, do not regulate the

distribution of CT scanners directly but do use

direct or indirect budgetary controls. In Iceland,

purchase of a CT scanner would have to be

budgeted, so without the explicit approval of

the national government, a scanner could not be

purchased—and, in fact, has not been. Budget

constraints have been specifically used to control the spread of CT scanners in Canada, the

United Kingdom, Australia, and West Germany. In addition, France uses budget constraints to enforce its centrally developed

guidelines for -planning. The global budgeting

system in Canada is a direct attempt to limit the

purchase and use of technology which deserves

more scrutiny.

Although, superficially, it appears that the

controls used in other countries have constrained the number of CT scanners, one should

be cautious in reaching such a conclusion. First,

it should be noted that Iceland, with no direct

controls, has no scanners. Second, it should be

noted that physicians and patients in Europe appear to be more conservative in adopting and

using new medical technologies than those in

the United States. This conservatism was apparent in the case of coronary bypass surgery,

which is described in a separate section below

(38). Furthermore, political pressures are certainly put on other countries’ government programs to control medical technologies. In

France, a restrictive policy was developed for

CT, not only because of rational planning and

cost-benefit considerations, but for the broader

economy. The French company CGR did not

have a scanner when the British firm EMI began

to sell scanners in Europe, so it needed the pro-
208 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

tection of French law to have a chance to develop its own scanner. The restrictive law, however, apparently failed to prevent purchases and

installations without subsidies from the central

government: Five head and ten body scanners

were installed without such subsidies. Likewise,

in Ontario and the United Kingdom, restrictive

policies led to the purchase of unauthorized

scanners with private funds.

Table 3 indicates that most countries have

focused on head scanners and continue to be

cautious about body scanners. Most experts

would feel that head scanners are much more established as an important part of the diagnostic

armamentarium. Another interesting comparison that might be noted is the number of scanners in out-of-hospital settings. In most countries, the tradition is against the location of such

technology in the physician’s office. In West

Germany, it apparently is not. Furthermore,

just as there are no restrictions in the United

States, there are none in West Germany on purchase of scanners by private out-of-hospital settings. Insurance readily pays for scans on these

machines. The result is that 30 percent of CT

scanners in West Germany are in physicians’

offices.

The data on CT scanners are generally quite

good. In the United States, OTA has a well-validated list of operational scanners that is updated

about once a year. In other countries, because of

the expense and visibility of the scanner, data

on the numbers of scanners and their distribution are generally not hard to find and should be

fairly reliable.

The irony of the situation with CT scanners is

that after more than 3 years of controversy in

the United States, little is known about the

ultimate place of CT scanning in medicine.

Guidelines for number of scanners per population are essentially based on minimum utilization standards and are often arbitrary. And

without clear definition of the goals sought from

diagnostic testing, it is unlikely that the situation will improve for other diagnostic technologies in the future.

Renal Dialysis

Renal dialysis is unlike many technologies in

that its efficacy is not at issue. It clearly extends

the lives of people who would otherwise die

from the accumulation of metabolic wastes,

which their own kidneys are no longer able to

remove from their blood. Because of its known

efficacy and high cost, questions about dialysis

have focused with particular clarity on the issue

of how extensively to provide it—that is, on

when the gains in extra months or years of life

and the quality of that life are great enough to

justify the diversion of resources from other

uses. In all of the countries described in this

volume, there have been irresistible pressures to

expand the provision of dialysis to all who can

benefit from it.

In the 1960’s, when the technology was new,

the estimates of people who would need dialysis

were based on rather conservative assumptions.

Those assumptions rested in part on the fact

that not enough machines, staff, or money were

yet available to offer dialysis to everyone. In the

United States, a National Committee on Chronic Kidney Disease convened in 1967 to draw up

recommendations for the provision of dialysis.

The committee recommended that treatment

should go primarily to people between the ages

of 15 and 45 who had no serious disease other

than kidney disease; those criteria implied about

35 new patients per 1 million population each

year. Similar criteria guided the major surveys

carried out in the United Kingdom during the

1960’s; those produced estimates that there

would be 40 new patients between the ages of 5

and 60 per 1 million total population each year

(32).

In most countries, treatment gradually became available to most or all of the people within these guidelines. In West Germany, for example, waiting lists had virtually disappeared by

1973. Beyond this, every country has felt

pressure to broaden the criteria for treatment

and to admit older people and people with other

serious disease. In the late 1970’s, in the United

States, estimates of new patients had been revised upward to 60 per million population on

the basis of the new criteria. A British source

estimates that the number could rise as high as
Ch. 1 l—Summary and Anlalysis ● 209

150 new patients per million population (32).

The incidence of chronic kidney failure appears

to be similar in different countries, so all countries face similar problems of provision and

cost .

Table 4 presents some data on the numbers of

people on dialysis (or with a functioning transplant) in each of the countries discussed in this

volume. It also gives data on the number of new

patients admitted to treatment each year. These

data suggest that many countries are now taking

about 30 new patients per million population

per year, with the exception of the United Kingdom. Stocking notes that although the United

Kingdom was a leader in establishing dialysis

and transplant services in the 1960’s, dialysis

has not grown as rapidly there as in other countries because of budget constraints. She

describes the recurring debate in Britain that has

accompanied this policy and the unusual degree

of intervention by the British Government in an

attempt to provide more resources specifically

for dialysis. Most countries have reached levels

of patients receiving treatment that are close to,

or exceed, 100 per million population. The

United States and Japan are far beyond this

point, with the United States having something

closer to 200 dialysis patients per million population and Japan exceeding 200.

There are some problems with the data, however, that suggest that the comparisons between

countries are rough at best, and possibly misleading. The range of estimates given for the

number of people on dialysis in the United

States presents the clearest case. The low estimates are derived directly from surveys of dialysis facilities (3). The higher ones are based on

enrollment records kept by the medicare program, which pays for most dialysis treatment in

the United States (42). Since many people become eligible for medicare (because of age or

disability) before they require dialysis, a special

survey was taken in 1973, when dialysis was

first included in medicare, in an attempt to identify the records of dialysis patients. This survey

is known to have included by mistake some patients receiving short-term dialysis for acute

kidney disease, but how many is not known.

The upshot is that no one knows which set of

Table 4.—Treatment of Patients With End-Stage Renal Disease by Country and Year’

New patients (on dialysis or Total patients (on dialysis or

with a functioning transplant) with a functioning transplant) Transplant rates

Countryb 1975 1976 1975 1976 1978 1976

Japan . . . . . . . . . . . . . u u u 140 222 u

United States. ., . . . . u u u 123-149* 164-206” 15.9

France . . . . . . . . . . . . 30.3 29.1 102.2 125.0 133* (1977) 6.8

Canada. . . . . . . . . . . . 30.3 31.4 u 121.1 u 15.1

West Germany. . . . . . 29.6 30.8 87.7 1.05e 114e u

Netherlands. . . . . . . . 18.9 21.4 90.2 108.5 u 11.7

Sweden. . . . . . . . . . . . 28.7 28.7 85.4 99.3 73’ 20.0

United Kingdom . . . . 14.5 15.1 62.0 71.2 9 2 10.8

Australia. . . . . . . . . . . u u u u 77* u

Iceland . . . . . . . . . . . . u u 41.5 50.0 u u
210 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

numbers is correct or what accounts for the differences between them.

The data for Europe come from the records of

the European Dialysis and Transplant Association (EDTA) (32). No description of the method

of collecting the records, or their probable completeness, was published with the data. There

are some inconsistencies, however, that suggest

problems with these data as well. In particular,

the growth in number of patients on dialysis per

million population from one year to the next

should equal the number of new patients minus

the number of patients who died during the year

(approximately 10 percent of the total (32)). The

numbers for the United Kingdom are consistent

with this requirement, but those for France between 1976 and 1977, for example, are not. It is

thus not clear how good the data are or how

confidently one can draw international

comparisons.

Most countries have tried to provide facilities

and financing to make dialysis quite widely

available. As noted, the United States extended

medicare coverage to dialysis and transplant patients in 1973. The health planning guidelines require end-stage renal disease “network areas, ”

each serving a minimum population of 3.5 million, and define standards for the development

and approval of facilities for treatment.8 In

West Germany and Japan, dialysis has been

covered by the ordinary health insurance funds.

The United Kingdom provides dialysis through

NHS, but the technology has received an unusual amount of attention from the British Government from first to last, Although the usual

policy is to allow the regions and districts to

decide about resource allocation, the dialysis

and transplant network resulted from national

guidelines and special funds, the results of a national conference on dialysis policy.

The major response to the high and growing

costs of dialysis (Medicare estimates, for example, that a year of dialysis in an outpatient

center cost $22,000 in the mid-1970’s (24)) has

been that virtually all countries advocate treatment by transplant whenever possible, and the

provision of dialysis at home, again whenever

“20 CFR, part 405, subpart U.

possible. If successful, a transplant eliminates

the need for continuing expensive treatment.

But the use of transplants is severely limited by

the availability of kidney donors, so the extent

to which governments can promote transplantation as a matter of policy is also limited.

The encouragement of home dialysis is a

more amenable policy instrument than the encouragement of transplantation. Medicare estimated that after the first year, when the patient

must be trained in the technique at a center,

dialysis at home cost $12,000 per year in the

mid-1970’s (24). The experience of different

countries in this respect varies over an extremely wide range, The percentage of dialysis patients receiving dialysis at home in different

countries is shown in table 5. In the United

Table 5.—Percent of Dialysis Patients Receiving

Treatment at Home by Country (1976)

Country Percent

United Kingdom. . . . . . . . . . . . . . . . . . . . . 66.570

Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33.4

West Germany . . . . . . . . . . . . . . . . . . . . . . 27.5

Sweden. . . . . . . . . . . . . . . . . . . . . . . . . . . . 25.6

United States. . . . . . . . . . . . . . . . . . . . . . . 23.7

France. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13.8

Netherlands . . . . . . . . . . . . . . . . . . . . . . . . 10.2

Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.6

Iceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.0

Kingdom, two-thirds of all patients dialyze at

home. In West Germany, the proportion is 28

percent, and in the Netherlands it is about 10

percent. In Japan, less than 1 percent of patients

dialyze at home.

The different countries have various policies

to try to encourage more home dialysis. In the

United Kingdom, the government pays for special housing or plumbing requirements, over

and above the more strictly medical components of the service (6). The United States recently revised its reimbursement policy, which

had paid a larger proportion of the costs for

center dialysis than home dialysis, in an attempt

to remove financial reasons for favoring center
dialysis. West Germany’s sickness funds decided

in the early 1970’s to pay the full costs of home

dialysis for the same reason. France has guidelines for the maximum number of dialysis units

that should be available in a Region; home units

are specifically excluded from this limit to encourage their use (43).

Dialysis will continue to be a major cost problem as long as it is the primary form of treatment for chronic kidney failure. In every country, the number of dialysis patients is growing

as new patients are brought in for treatment and

a much smaller number die each year—and the

number of patients will continue to grow for

many years. Figure 2 shows the rapid growth

between 1971 and 1976 in the total number of

patients on dialysis for Britain and for the other

European countries belonging EDTA.

The equilibrium population of patients eventually reached by each country will depend on

the criteria for selecting new patients and the

death rate among existing patients. The more

generous the former, and the lower the latter,

the larger that population will be. EDTA estimates equilibrium levels for its member countries, assuming an upper limit of 40 new patients

per year is eventually achieved. For the United

Kingdom, for example, EDTA estimates that the

dialysis population will reach 340 patients per

million sometime after the year 2000, about five

times its level in 1976 (32). With growth like this

expected, each country will repeatedly face the

question of an appropriate policy toward dialysis. It is undoubtedly with this in mind that the

West German Government has taken the unusual step of establishing the treatment of kidney

disease as a particular area of concentration for

future medical research.

Coronary Bypass Surgery

The controversy concerning coronary bypass

surgery encompasses its efficacy, safety, and

costs. In the United States, the operation was introduced in the early 1970’s and rapidly diffused. Approximately 25,000 operations were

performed in 1973, at least 70,000 in 1977, and

an estimated 100,000 in 1978 (21). The population rates corresponding to these figures are

shown in table 6.

Figure 2.—Patients Treated for Chronic Renal

Failure in Great Britain and Europe (1971-76)

(rates per million population)

I 1 I I ! I

1971 1972 1973 1974 1975 1976
212 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Table 6.—Corona~ Artery Surgery per

Million Population by Country and Year

Country 1975 1977 1978

United States. . . . . . . 280

Netherlands. . . . . . . . 50

Sweden. . . . . . . . . . . . 24

United Kingdom . . . . 25

West Germany. . . . . . 14

France . . . . . . . . . . . . u

Australia. . . . . . . . . . . u

Iceland . . . . . . . . . . . . u

369

u

20

55b

20C

u

136

u

u

78’

u

u

u

19

u

233d

‘Coronary artery bypass graft,

In the United States, coronary bypass surgery

is generally not subject to policies concerning

medical technology. A number of trials were

funded by U.S. Government agencies, including

VA and NIH. No program regulates the surgery, and insurance programs (including medicare and medicaid) pay for it when a physician

considers it to be medically necessary. With a

cost per procedure of at least $15,000, coronary

bypass surgery probably costs the country more

than $1.5 billion in a given year.

As indicated by table 6, the coronary bypass

surgery rates in other industrialized countries

are considerably lower than those in the United

States. Preston has speculated that European

patients are less aggressive than Americans in

seeking out the new treatment (38). He feels that

the disparities in rates of coronary bypass

surgery can be explained only by political and

economic factors. A high degree of skepticism

among physicians about the efficacy and cost effectiveness of the bypass procedure is mentioned

as a factor in the chapters on the United Kingdom, Sweden, and France in this volume. Skepticism in Sweden, for example, initially led to

the provision of the procedure on an experimental basis only. Furthermore, only four hospitals

in Sweden’s regionalized hospital system were

equipped with the facilities necessary to perform

the procedure—an open-heart machine and a

team trained to use it, intensive care units, advanced anesthesia, blood gas monitoring, and

so forth.

Facilities were also limited in the United Kingdom, the Netherlands, France, West Germany,

and Iceland. In the Netherlands, capacity was so

limited and the demand for the procedure so

great that insurance companies sent patients to

the United States to have surgery. In 1977, it

was reported that one university surgical center

had a contract with an American medical center

to provide coronary bypass operations at

$11,000 an operation (21). Patients in the Netherlands have lobbied for access to bypass operations. In Iceland, patients deemed to need the

operation are also sent out of the country,

usually to England.

In 1978, the World Health Organization convened a special meeting on coronary bypass
Ch. 11 —Summary and Analysis ● 213

surgery, which concluded that the theoretical

need for bypass surgery was about 150 patients

per million in developed countries (55). That

standard, though supposedly based on population rates and proven and expected efficacy of

the procedure, was actually agreed upon without sufficient information. Furthermore, it has

helped lead to attempts to increase capacity for

coronary bypass surgery in various countries.

It should be noted that the figures given in

table 6 are approximate. One source of data in

the United States is the Hospital Discharge Survey, a random sample survey of hospitals carried out yearly by the National Center for

Health Statistics (NCHS). The most recent data

available from this NCHS source are from 1977.

Another source of data is the Commission on

Professional and Hospital Activities (CPHA),

which estimates rates of certain procedures on

the basis of a sample of data from its subscribing

hospitals. The most recent data from this source

are also from 1977. NCHS estimated 81,529

procedures in 1977 (27), while CPHA estimated

79,000 (10). The yearly totals from each source

are given below:

NCHS CPHA

1972 . . . . . . . . . . . . . 31,380 17,000

1973 . . . . . . . . . . . . . 49,940 26,000

1974 . . . . . . . . . . . . . 52,168 42,000

1975 . . . . . . . . . . . . . 56,962 53,000

1976 . . . . . . . . . . . . . 73,700 63,000

1977 . . . . . . . . . . . . . 81,529 79,000

Although the orders of magnitude are similar,

the figures obviously lack precision. The reliability and validity of the figures from other

countries are not fully known. It is known that

the figures from West Germany and France are

only educated guesses. Except for the obviously

top ranking of the United States, the relative

ranking of countries shown in table 6 could be

in reality quite different.

The important point to stress in the case of

coronary bypass surgery is that the appropriate

rate of use is not known. There does seem to be

general agreement that the rates in most European countries are too low, and that the U.S.

rates are probably too high, at least on the basis

of what is now known. How does one reach the

optimal level of use? Gaensler stated:

The pattern in the United States seems to be

overexpansion followed by contraction. The disadvantage of this path is that resources are

wasted. Furthermore, reducing the share of resources aIlocated to an entrenched medical technology is more difficult than increasing the share

allocated to an underutilized one . . . In the case

of coronary bypass surgery, Sweden’s “wait and

see” approach was cost effective but had one

major drawback. During the “trial” period,

triage was instituted, and many deserving candidates for coronary bypass surgery were not

given treatment or put on waiting lists.

This quote seems to sum up the difference in

approach of the European countries and the

United States to this technology.

Cobalt Therapy

Cobalt is the oldest of the five technologies

specifically considered in this volume. It has

also been stable in form for the longest time;

there have been no major changes in the technology since it was first introduced in the early

1950’s. As a result, this technology does not

need or get as much attention as the other four

from individuals concerned with policy. This

observation is reflected in the very brief remarks

about cobalt in most of the chapters.

Cobalt treatment units are major pieces of

equipment, and where there are laws governing

the acquisition of such equipment—as in the

United States, France, and West Germany—cobalt is covered by the law. But applications for

cobalt are not submitted very frequently. In the

United States, for example, the adoption of

cobalt by hospitals reached a plateau in the mid1960’s (43). The issues that do appear involve

policies for replacing units and policies for the

overall distribution of radiotherapy equipment

in general, of which cobalt is only one kind.

With respect to distribution, policies usually

favor the regionalization of radiotherapy—

through explicit planning or indirectly through

a more general policy of regionalization such as

Sweden’ s—not only because of the expense but

because of the expertise and backup facilities required for good treatment.

The question of replacing units brings up an

issue that is not yet important for new technol-
214 Background Paper #4: The Management of Health Care Technology in Ten Countries

ogies like the scanner or bypass surgery—the

issue of whether and how to regulate the replacement of one technology by a newer one

that is marginally better. The replacement of

cobalt by the newer linear accelerators brings up

issues that are mentioned in the chapters on the

United Kingdom and France. In Britain, there is

no policy favoring one over the other, and each

radiotherapy center is free, within its budget

constraint, to choose its own mix of equipment.

The French system has not operated under

budget constraints, and the planning guidelines

are thus designed to try to slow the replacement

of cobalt by the more expensive accelerators, by

permitting such replacement only in centers that

already have a wide range of high-energy radiotherapy equipment. The French can potentially

control the use of cobalt radiation as well

through the mechanism of prior authorization

for treatment, which is necessary if the patient is

to be reimbursed; but there is little evidence concerning the effectiveness of this mechanism. The

fee schedule for reimbursement is another potential influence on use, and here the French

recently reduced the fees paid for radiotherapy

relative to other fees.

Automated Clinical Laboratory Testing

Describing the efficacy of clinical laboratory

tests is difficult, just as it is in the case of other

diagnostic technologies. Presumably, the ultimate goal of medical care is to improve the patient’s health and functioning. The diagnostic

test, however, cannot itself accomplish this

goal. Its efficacy depends on the efficacy of a

subsequent therapeutic intervention. For this

reason, diagnostic technologies are generally

evaluated for their precision in establishing a

diagnosis. Occasionally, their contribution to

therapeutic decisionmaking is also analyzed.

The importance of evaluating the efficacy of

clinical laboratory tests is heightened by their

enormous volume. The average laboratory now

offers perhaps 600 specific tests (s). Some machines can automatically perform up to 20 distinct tests on one sample of blood.

To analyze efficacy completely requires

knowing the contribution of each test to the

diagnosis, therapy, and ultimate outcome of the

patient. Because of the difficulties in determining this contribution, policies toward clinical

laboratory tests in the United States have

understandably focused on the technicalities of

clinical laboratory testing. The machines themselves are regulated for efficacy and safety by

FDA, as described earlier in this chapter. FDA

also regulates the reagents and diagnostic products used in testing.

Responsibility for developing policy for the

educational preparation, utilization, and credentialing of certain types of manpower employed in clinical laboratories in the United

States rests with the Health Resources Administration of DHHS. In addition, the health

planning system described earlier has authority

over laboratory construction and renovation in

hospitals for capital investments exceeding a

“trigger” amount. It does not have such authority over independent commercial clinical laboratories, but under the 1979 amendments to the

Health Planning Act, States are given the option

to include independent laboratories under capital expenditure controls. And finally, the

Center for Disease Control of DHHS administers a comprehensive laboratory improvement

program through the provision of reference diagnostic services, research, consultation, proficiency testing, and licensing of laboratories

engaged in interstate commerce.

Perhaps the most important policy toward

clinical laboratories in the United States is that

concerning payment. Since hospitals are generally reimbursed on the basis of costs, there is no

economic check on laboratory testing. The

PSRO program has done no direct reviews of

clinical laboratory services, primarily because

of the volume of tests involved. It has undertaken some educational activities. Programs of

prospective reimbursement and other methods

of limiting hospital expenditures might slow the

growth in these services and their associated

expense.

The situation in other countries described in

this volume is rather similar to that in the

United States. In most countries except Iceland,

which does not yet have automated equipment,

automation began during the 1960’s. The number of tests and the expense of testing have since
Ch. 11 —Summary and Analysls ● 215

risen to a level that is causing concern in most

countries, but about which generally little is being done. The only policy that has been followed with any consistency is the policy of centralizing labs. Laboratory centralization is occurring in Sweden, Canada, the United Kingdom, and France. Another mechanism for controlling the number of automated machines is

through budget constraint, as the United Kingdom and Canada.

SUMMARY AND CONCLUSIONS

This study was undertaken because of the

lack of literature about policies toward medical

technologies in various countries and how such

policies affect the distribution and use of specific

technologies. The chapters in this volume show

that it is seldom possible to make definitive

statements about how technologies are evaluated and controlled in other countries. None of

the chapters point the way to clearly desirable

alternatives that might be adopted by the United

States. In most of the countries described, policies to evaluate and control medical technologies are quite new, but even in those countries

where the policies are of longer standing,

changes are under consideration. Further, as the

discussion of specific technologies in each country shows, the application of any given policy is

altered by the circumstances surrounding a particular technology.

The chapters do show that a range of alternative policy mechanisms has been and is being

used in the various countries to affect medical

technology distribution and use: biomedical research policy, manpower policy, reimbursement methods and levels, direct regulation of investment and use, and information gathering

and evaluation activities. Since each of these

mechanisms can be directed at different policy

objectives, the precise content of a specific policy will depend on which objective is chosen.

The rapid changes in the laws and policies of the

countries described in this volume thus reflect

not just attempts to find effective policy mechanisms, but the difficulties of choosing a realistic

policy objective.

It should be noted that few data are available

on the volume or cost of laboratory services. In

the United States, the data, based on surveys of

hospitals, are of questionable quality. Numbers

and types of laboratory tests done in physicians’

offices are little more than estimates.

The range of possible policy objectives is a

wide one and might best be described in terms of

a four-level hierarchy (43). At the first level, a

national government may actively promote a

new technology’s development and adoption.

To promote a technology’s development, it

might finance research; or to speed the diffusion

process, it might pay for the equipment or train

people to use the technology. When promoting

a technology is the goal, costs are usually secondary. The rising costs of health care programs, though, have become a matter of concern to the governments in most of the countries

described in this volume (1); thus, many of these

governments have been led to the next level of

the hierarchy.

At the second level, a government may concern itself with whether a new technology is being used efficiently. Without making judgments

about the volume of use, it may ask whether

that volume is being produced at the lowest possible cost, whether existing facilities are used to

capacity, and whether there is “unnecessary”

duplication. Once the government makes these

determinations, it may intervene to encourage

greater efficiency in the production or use of a

technology.

At the first two levels of the hierarchy, a government generally takes as given that the technology is a good thing, that it is beneficial for

patients and therefore worth having. Actual

judgments about benefits are left implicitly to

medical professionals (individually and collectively) and to patients. But in fact, the
216 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

value of many medical technologies has not

been proven.

At the third level in the hierarchy, a government may begin to question and test the benefits

of medical technologies. The simplest approach

to determining the benefits of a technology is to

ask the medical profession whether it thinks the

technology is beneficial and for whom. This approach does make the previously implicit judgments of the medical profession explicit, but is

based on the assumption that the steps the profession has taken to learn about the benefits of

specific technologies support its judgments.

Questioning or discarding that assumption, a

government may instead adopt the approach of

asking whether the technology has been proven

beneficial by persuasive scientific evidence, particularly in the form of randomized controlled

clinical trials. If the government establishes

either by expert opinion or by controlled trials

that a technology is not beneficial, it may use

the information in the planning or reimbursement process in an effort to restrain the technology’s use, or it may simply disseminate the information and let practitioners decide for

themselves.

At the fourth level in the hierarchy, a government accepts the further possibility that it may

not be realistic to provide every kind of care

that is beneficial. Some benefits are too small or

too costly. At this level, the question shifts from

whether the technology is beneficial to how

great its benefits are for different groups and

how the benefits compare with the costs. The

corresponding objective becomes to limit the

diffusion of technologies to a level that strikes a

balance between the benefits to be gained and

the costs of achieving them,

It appears from the chapters in this volume

that so far most of the countries discussed have

concentrated on the goal of technical efficiency,

that is, they have not moved beyond the second

level of the hierarchy. Even in those countries

that have a more rigorous planning process than

the United States, the focus still seems to be on

efficiency. The discussions do show, however,

an increasing interest in the evaluation of medical technologies in many countries in addition

to the United States. One or two countries have

even adopted systems of budgetary constraints

that clearly bring them to level 4 of the hierarchy. The United Kingdom, for example, has a

limited national budget for medical care, which

forces hospitals and physicians to limit the provision of some beneficial technologies, and is a

clear exception to the generalization stated

above. Canada is moving in a similar direction.

It is striking that in all 10 countries described

in this volume there is so much new activity

related to the evaluation of medical technology

and so much discussion of the necessity for

doing more evaluations and using them in decisionmaking. This activity and discussion seem

to constitute a general movement to the third

level of the hierarchy, and may presage further

movement to level 4. Actually, it is possible,

and perhaps even desirable, for policy to function at multiple levels. The objectives of the four

levels are not mutually exclusive, and it is even

fair to say that level 4 encompasses activities at

all of the previous levels. Thus, for example,

careful evaluation of technology (level 4) can indicate which technologies should be promoted

(level 1). The promotion of technologies that

bring benefits to patients at reasonable cost is as

much a part of the objective of level 4 as is the

limitation of other technologies.

Finally, and perhaps more importantly, the

chapters in this volume show that the concern

for medical technology and its use is a common

one across country boundaries. The problems

that surround the diffusion of medical technologies have some of the same dimensions in different countries. This suggests the potential value

of doing further research in the international

area. Now may be an excellent time to develop

international efforts to evaluate the benefits,

risks, and costs of medical technologies.
Ch. 11 —Summary and Analysis ● 217

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Appendix
Appendix —Description of

Other Volumes of the Assessment

The overall OTA assessment, The Implications of

Cost-Effectiveness Analysis of Medical Technology,

consists of a main, policy-oriented report plus five

background papers. The present volume, The Management of Health Care Technology in Ten Countries, is one of the background papers. The main report and the other background efforts are briefly

described below.

The main report, The Implications of Cost- Effectiveness Analysis of Medical Technology, examines

three major issues: 1) the general usefulness of

CEA/CBA in decisionmaking regarding medical

technology, 2) the methodological strengths and

shortcomings of the technique, and 3) the potential

for initiating or expanding the use of CEA/CBA in

six health care programs (reimbursement coverage,

health planning, market approval for drugs and

medical devices, Professional Standards Review Organizations, R&D activities, and health maintenance

organizations), and most importantly, the implications of any expanded use.

The prime focus of the report is on the application

of CEA/CBA to medical technology (i. e., the drugs,

devices, and medical and surgical procedures used in

medical care, and the organizational and support systems within which such care is provided). With the

exception of a background paper on psychotherapy,

the report does not address psychosocial medicine.

Other aspects of health, such as the environment, are

not directly covered either. The findings of the assessment, though, might very well apply to health

care resource decisionmaking in general, and with

modification, to other policy areas such as education, the environment, and occupational safety and

health.

The main report contains chapters on methodology, general decisionmaking, each of the six health

programs mentioned above, and the general usefulness of CEA/CBA. It contains appendixes covering a

survey of current and past uses of CEA/CBA by

agencies (primarily Federal), a survey of the resource

costs involved in conducting CEA/CBAs, a discussion of ethical issues and CEA/CBA, and a brief discussion of legal issues.

In order to help examine the applicability of techniques to assess the costs and benefits of medical

technology, 19 case studies were prepared. All 19 are

available individually. In addition, 17 of the cases are

available collectively in a volume entitled Background Paper #2: Case Studies of Medical Technologies. Some of the cases represent formal CEAS (e.g.,

the case on bone marrow transplants), and some represent net cost or “least cost” analysis (e. g., the case

on certain respiratory therapies). Other cases illustrate various issues such as the difficulty of conducting CEA in the absence of adequate efficacy and safety information (e. g., the case on breast cancer surgery), or the role and impact of formal analysis on

policymaking (e.g., the case on end-stage renal disease interventions). The 17 case studies in Background Paper #2 and their authors are:

Artificial Heart

Deborah P. Lubeck

John P. Bunker

Automated Multichannel Chemistry Analyzers

Milton C. Weinstein

Laurie A. Pearlman

Bone Marrow Transplants

Stuart O. Schweitzer

C. C. Scalzi

Breast Cancer Surgery

Karen Schachter

Duncan Neuhauser

Cardiac Radionuclide Imaging

William B. Stason

Eric Fortess

Cervical Cancer Screening

Bryan R. Luce

Cimetidine and Peptic Ulcer Disease

Harvey V. Fineberg

Laurie A. Pearlman

Colon Cancer Screening

David M. Eddy

CT Scanning

Judith L. Wagner

Elective Hysterectomy

Carol Korenbrot

Ann B. Flood

Michael Higgins

Noralou Roos

John P. Bunker

End-Stage Renal Disease Interventions

Richard A. Rettig

Gastrointestinal Endoscopy

Jonathan A. Showstack

Steven A. Schroeder

Neonatal Intensive Care

Peter Budetti

Peggy McManus

Nancy Barrand

Lu Ann Heinen

Nurse Practitioners

Lauren LeRoy

221
222 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Orthopedic Joint Prosthetic Implants

Judith D. Bentkover

Philip G. Drew

Periodontal Disease Interventions

Richard M. Scheffler

Sheldon Rovin

Respiratory Therapy

Richard M. Scheffler

Morgan Delaney

The 18th case study is published separately as

Background Paper #3: The Efficacy and Cost-Effectiveness of Psychotherapy. That study assesses methodological and substantive issues relating to the

scope of psychotherapy, the evaluation of psychotherapeutic efficacy, and the applicability of CEA/

CBA in assessing psychotherapy. It was prepared by

Leonard Saxe on the basis of a report prepared for

OTA by Brian Yates and Frederick Newman. The

19th case study was prepared by Judith Wagner and

is published separately as Background Paper #5: Assessment of Four Common X-Ray Procedures.

A related report prepared by OTA and reviewed

by the Advisory Panel to the overall assessment is A

Review of Selected Federal Vaccine and Immunization Policies. That study, published in September of

1979, examined vaccine research, development, and

production; vaccine efficacy, safety, and cost-effectiveness; liability issues; and factors affecting the use

of vaccines. Pneumococcal vaccine was used as a

case study, and a CEA/CBA was performed.

o