Both the Five Year Forward View and Dalton review highlight the concept of hospital ‘chains’ (or ‘groups’) as an innovative model of healthcare delivery and a new organisational form for the NHS to consider. This concept has developed in other countries over a number of years – especially in Germany – giving NHS leaders a substantial body of evidence to explore in search of solutions to the sustainability and quality challenges.
The development of chains of hospitals in Germany started more than ten years ago. It came in response to a number of concurrent factors requiring providers to adapt service delivery to changing population and market needs to remain sustainable and competitive. More specifically, key drivers were:
- The introduction of case-flat-rate remuneration, based on diagnosis-related-groups (G-DRGs) in 2004, and the increasing financial pressures felt by hospitals, given the decline in public funding available to support capital investment. This has meant that hospitals have increasingly had to draw on income allocated for operating costs to fund investments.
- New regulatory efforts to improve quality and safety, through the introduction of a nation-wide benchmarking quality assurance programme with more than 400 quality indicators used.
- The increasing pressure to compete in a market characterised by an oversupply of hospital capacity, where patients are free to choose where they are treated, based on quality of care provided, among other factors.
This context has led to several hospital mergers and acquisitions over the last decade. It has also seen the development of new forms of collaboration between hospitals through the establishment of chains, providing a way to improve competitiveness while maintaining or improving quality. This process has continued to develop over time, with over half of all hospitals in Germany today part of a group or chain.
The hospital chains concept is not defined in German regulation or policy, and as a result, these collaborations have evolved in different legal and practical forms. Despite these differences, a common feature is that, compared to a large single-merged organisation, a chain is characterised by a separate group headquarters that sets governance, standards, protocols and procedures – often with centralised procurement and back office functions. Each site is then managed on behalf of the group by a local management team that has delegated decision-making within the parameters set by the HQ board.
Another common aspect is that providers within a chain tend to be spread across the country, rather than concentrated in a specific geography. So if we take a particularly large chain, such as Helios Kliniken, its providers – 110 hospitals, 15 senior residences, 49 medical provision centres, five rehabilitation centres and seven prevention centres – are distributed across Germany, with the majority of the population having access to a Helios hospital within a one-hour drive.
Operating as a chain allows hospitals to reduce functioning costs and achieve efficiencies by, typically, centralising a number of support services – such as quality management; accounting and finances; controlling; procurement; human resources; information technology; and internal audit services, among others – operated from the group’s headquarters on behalf of all providers in the group. This bundling of support services brings synergy and efficiency by optimising the use of material, human and financial resources.
A chain is also characterised by a ‘cooperative spirit’, with an overall set of values and a single strategic framework which permeate at the level of each local provider. This centralised, strategic approach is coupled with local autonomy, with local partner organisations retaining leadership on core operations such as medical services, nursing and care services in their facilities.
Building on this autonomy, the chain benefits from sharing local knowledge and expertise through establishing groups of experts in specific areas of work. For example, the heads of medical departments from across partner organisations will meet regularly to discuss clinical standards or innovations, with the aim of improving clinical practice and quality of care across the group.
These coordinating groups play an important role, enabling the exchange of good practice between sites, allowing benchmarking activity between peers, ensuring coherence of clinical practice between providers, and supporting the quick diffusion of successful innovation across the group.
While some chains bring together only acute providers, the majority have developed into some form of vertical integration, gathering different types of providers, including acute hospitals, rehabilitation services, long-term and nursing home care, psychiatry and hospice care, alongside day care centres, home care services, or medical care centres.
In addition to the efficiency and quality benefits, this form of vertical integration brings additional value in terms of patient experience and improved continuity of care.
While the German health system has significant organisational differences to the UK system, there is evidence that consolidation into health groups has helped German hospitals to:
- achieve economies of scale and reduce costs in a number of operational areas
- strengthen negotiating power with suppliers and obtain better contract deals
- reduce quality variation and improve patient care through improved clinical standards
- speed-up the uptake of successful innovation through benchmarking and peer review activity
- improve continuity of care for discharged patients.
At a time when the NHS is considering new operational models that can help improve efficiency and reduce quality variation, these results confirm that there is clear value in looking more closely at the experience of our German colleagues.
Elisabetta Zanon is director of the NHS European Office, a part of the NHS Confederation. Follow the organisation on Twitter @NHSConfed_EU.
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