Organisational matters Market-based control mechanisms for patient safety See Editorial, p 83 and Commentaries, p 86–91 1 Centre for Health Informatics, Institute of Health Innovation, University of New South Wales, Australia; 2 Centre for Clinical Governance Research, Institute of Health Innovation, University of New South Wales, Australia Correspondence to: Professor E Coiera, Centre for Health Informatics, University of New South Wales, 2052, NSW, Australia; e.coiera@unsw.edu.au Accepted 25 August 2008 This paper is freely available online under the BMJ Journals unlocked scheme, see http:// qshc.bmj.com/info/unlocked.dtl Qual Saf Health Care 2009;18:99–103. doi:10.1136/qshc.2007.025833 E Coiera,1 J Braithwaite2 ABSTRACT A new model is proposed for enhancing patient safety using market-based control (MBC), inspired by successful approaches to environmental governance. Emissions trading, enshrined in the Kyoto protocol, set a carbon price and created a carbon market—is it possible to set a patient safety price and let the marketplace find ways of reducing clinically adverse events? To ‘‘cap and trade,’’ a regulator would need to establish system-wide and organisation-specific targets, based on the cost of adverse events, create a safety market for trading safety credits and then police the market. Organisations are given a clear policy signal to reduce adverse event rates, are told by how much, but are free to find mechanisms best suited to their local needs. The market would inevitably generate novel ways of creating safety credits, and accountability becomes hard to evade when adverse events are explicitly measured and accounted for in an organisation’s bottom line. In 1999, the US Institute of Medicine published the landmark report ‘‘To Err is Human,’’ which out- lined a strategy to reduce preventable medical error by 50% in 5 years.1 More years have passed, and we have yet to meet that target.2 One major unan- swered question is how pressure and encourage- ment are to be applied to improve patient safety. Key contenders are litigation,3 safety training,4 systems change,5 legislation,6 information technol- ogy7 and accreditation.8 Pay-for performance (P4P), the linking of reimbursement with adherence to safety and quality measures, has received much recent attention and can produce modest to good improvements in quality,9 10 but there remain difficulties: c P4P targets a few behaviours or outcomes for reward, and can distract from non-targeted outcomes, focus on what is easily reportable or measurable11 and create uncertainty when one set of targets is replaced by another.12 c Clinical practice is highly localised, shaped by differing needs, practices, resources and cultural norms, and the variability of individual patients. Selecting meaningful, broadly applic- able process or outcome targets is thus difficult. Further, targeting specific behaviours is a top- down strategy that does not adapt to local needs. c There is no avenue for third parties to take a stake in quality improvement, hindering inno- vation and the harnessing of additional resources and skills unavailable in the clinical setting. A PROPOSAL FOR SAFETY UNDERPINNED BY MARKET-BASED CONTROL Given our slow progress in improving the quality and safety of care, and the limitations of P4P, we propose a potentially radical new model for governing the safety of health services, inspired by successful environmental approaches. The US Federal Clean Air Acts of 1970 and 1990 set pollution-reduction targets but did not mandate how they were met. A central innovation was emissions trading, which allowed states to meet targets in highly flexible ways. Emissions trading is also central to the Kyoto protocol, which has set a carbon price and created a market where carbon credits are traded between those who have reduced emissions below targets, and those who have not. While Kyoto has had little time to demonstrate its effectiveness, the US Clean Air Acts succeeded in dealing with acid rain, and the challenge of chlorofluorocarbons. There thus seems to be merit in using market-based mechan- isms for other public good goals. There are clearly similarities and differences between environmental and health regulation. Notably, both healthcare and the environment are public goods and involve the private and public sectors as participants. In contrast, a system like Kyoto is designed to engage nation states in a global regulation task, whereas health services could conceivably be regulated at a national, state or regional basis. Indeed, many of the most pressing challenges of the Kyoto protocol seem to have arisen for geopolitical reasons, including the inability of Kyoto nations to compel other nations to join the system, and the trade-offs that have to be accepted to get nations to sign, for example the divisions between how developed and developing nations are treated in the Protocol. Emissions trading is however not a one-off governance model but rather is an example of market-based control (MBC).13 MBC systems were inspired by economic marketplaces but are now understood to be a general approach to optimising system responses to varying circumstances. MBC is thus a specific mechanism for system governance, not to be confused with ideological stances like ‘‘the free market.’’ MBC has been used widely and with much success, for example for the allocation of resources in communication networks. More generally, markets are used in many unexpected ways, such as the prediction of avian flu outbreaks and vaccine effectiveness. Defining attributes of MBC include decentralisation (there is no need for anyone to understand all the parameters being optimised) and distributed allocation of resources (individual agents make local decisions about allocation). Few measures are needed globally beyond the main controlling signal, be that price or quantity. Consequently, while we can draw inspiration from individual implementations of MBC, such as the Kyoto mechanism, it is probably more instructive to look at the more general 99