The influence of economic evaluations on the management control of general practices

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The influence of

economic evaluations on

the management control

of general practices

Frank de Kwaadsteniet

University of Groningen, The Netherlands

August 24, 2014

Student number: s1700081

MSc BA Organizational & Management Control Faculty of Economics & Business

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Abstract

The goal of this research is to link the results of an economic evaluation with the decision-making process within general practices, especially the influence on the exercise of management control within general practices. In healthcare, economic evaluations are systems to identify and quantify costs and consequences of healthcare interventions. It compares two or more interventions in terms of both their costs and their consequences. The results of an economic evaluation can play an important role in different types of healthcare decision-making, like formulary decision, reimbursement decisions and prescribing. Also healthcare decision-makers recognize the potential important role of economic evaluations. Despite of this potential role of economic evaluations on the decision-making process in healthcare organizations, the use of economic evaluations at the local decision-making level remains limited. Therefore, this study tries to investigate how the results of an economic evaluation can influence the decision-making process in healthcare organizations. A case study is performed at a general practice from the Netherlands. This general practice has a treatment method, in which more time is spend with the patients. They believe that this method (the extra consultation time) results is higher benefits for the patient. The results of the economic evaluation showed that there are indeed some potential benefits, but some of these benefits are not fully proved yet. The results furthermore showed that the labor costs of the general practice are much higher compared to other health centers with general practitioners. The influence of these results on the management of the general practice was not very high. They believed that those high labor costs were necessary to come with the appropriate treatment for the patients. On the other hand, they were interested in the results about the benefits, and they wanted to investigate those benefits more to prove that they were right. However, overall, the influence of the results of the economic evaluation on the exercise of management control was in this case quite low.

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Preface

Dear reader,

After seven months of hard work, with this thesis, I finished my master Business Administration: Organizational & Management Control at the University of Groningen. Writing this thesis was an ultimate challenge, but was a valuable and learning experience. Some parts of the research process I really enjoyed, for example conducting the interviews and learning more about the complex processes and challenges within healthcare organizations. There were also some phases were I experienced some setbacks, for example scheduling and transcribing the interviews. However, overall, writing this thesis was a learning experience, where I learned how to put through after some setbacks, how to do research independently, how to conduct interviews and how to perform a case study.

I would like to thank the general practice Therapeuticum Lemminkäinen for giving me the opportunity to perform a case study for this organization. In specific, I would like to thank Rigobert van Zijl, one of the general practitioners of this practice, for his time and valuable insights.

Moreover, I am really grateful to my first supervisor, dr. Ben Crom for providing valuable feedback and advice during the research process, for his valuable insights on this topic, and for challenging and motivating me to get the most out of this thesis.

I hope you will enjoy reading this thesis. Yours sincerely,

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1. Introduction

In the last three decades, governments have introduced fundamental changes in the healthcare sector. Also in the Netherlands, a fundamental reform of the healthcare system came into effect in 2006. Before the change, the Netherlands did have a dual system of public and private insurance for curative care. Since 2006, a single compulsory health insurance scheme was introduced, in which managed competition for providers and insurers became a major driver in the healthcare system. Therefore, the roles of insurers, providers, patients and the government have changed fundamentally. In the new situation, insurers negotiate with providers about the price and quality of the care. The patients choose the provider they prefer and join a health insurance policy which best fits their situation. The role of the government has changed from directly controlling the healthcare system to safeguarding the effective functioning of the health markets. With the privatization of former sickness funds and the introduction of market mechanisms in the healthcare sector, the healthcare system in the Netherlands now presents an innovative and unique variant of a social health insurance system (Schäfer et al., 2010).

The reform aimed to further strengthen and develop primary care to reduce the traditional fragmentation in the primary health care field. The general practitioner (GP) plays a pivotal role in primary care, because they function as gatekeepers. The gatekeeping role of the GPs means that hospital care and specialist care, except the emergency care, are only accessible with a referral from the GP. The ‘gatekeeping’ GPs are a relatively unusual element in social health insurance systems. The strong position of primary care is considered to prevent unnecessary use of more expensive secondary care, and promote consistency and coordination of individual care (Schäfer et al., 2010). Through the reform, a new financing system was needed. In 2006, GPs, insurers, and the ministry of Health, Welfare and Sport (ministerie van Volksgezondheid, Welzijn en Sport; VWS) have agreed on a new financing system for GPs. This new financing system has four main objectives. First, it has to stimulate collaborations of GPs and other primary care providers. Second, it has to improve the further development of the programmatic approach to chronic disorders. Third, it has to provide substitution of care from secondary to primary care. Fourth, it has to control the administrative costs (NZa, 2007). Regarding the funding of GPs, the new system consists of two components; GPs receive a registration fee per attached and a fee-for-service. They can also request a premium for different modules; Practice Support (POH), Backlog Fund, and Modernization & Innovation (M&I). These M&I procedures were made negotiable for GPs and insurers in 2006 (Schäfer et al., 2010).

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6 or it can be that the statutory maximum is only just enough to cover the costs for a GP. In any case, the NZa concludes that there is the need to perform a study of the costs within a general practice. Furthermore, in the same research, the NZa concludes that insurers have often the feeling that GPs request too high fees for their M&I processes. M&I processes are processes which contribute to the modernization and innovation of the GP care. In addition to the registration and consultation fees, GPs can apply for additional funding for these processes. Then they have to negotiate with the insurer about the details of the funding. However, insurers often have the feeling that the GPs requests incorrect reimbursements. This is caused by the fact that insurers have often insufficient insight in the actual costs of the M&I processes. Also the bargaining power of the GP appears to be greater than the bargaining power of the insurer. Furthermore, insurers believe that some M&I processes should be regarded as regular primary care and that these processes should be charged at the normal consultation fee.

However, GPs sometimes have the feeling that their application for an M&I procedure is wrongfully rejected. This is also the case with the general practice which will be central in this research, namely Therapeuticum Lemminkäinen. They are a general practice where regular primary care is complemented by the principles and applications of anthroposophic medicine. Therefore, the GPs spend more time with their patients to come to the correct complementary approach. First, they spend more time on the contact with the patient, namely fifteen minutes per consultation instead of ten minutes. Second, they spend additional consultation time with the therapists within the general practice to take care that the problem and the demand for care is understood correctly. For the past years, according to figures from the insurer Menzis, Therapeuticum Lemminkäinen was able to work relatively inexpensive through lower prescription of medication, lower referral to secondary care, and through a comprehensive supervision of patients, especially for the young population, infants, toddlers, preschoolers and their parents. Therefore, Menzis recommended the GP to apply for the module M&I, based on the working process of the GP (especially extra consultation time) and the savings it entails. In response to the application of the M&I module, Menzis came with new figures of the Therapeuticum. From these figures, it appears that the positive figures for pharmaceuticals and referral to secondary care are nullified by the negative figures for mental healthcare (in Dutch; Geestelijke GezondheidsZorg; GGZ). Instead of being ‘cheap’, the general practice seems to be ‘expensive’ now. However, the general practice assumes that the benefits of their treatment method are high and that they are worth the extra costs

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7 viewed as decision analyses, economic evaluations are intended to help decision makers use the available evidence to reach a decision that they cannot avoid. Decision makers, in this case the GPs, will not readily accept results from economic evaluations unless they can understand them intuitively and explain them to others in relatively simple terms (Weinstein, 2006). There are different ways to perform an economic evaluation, but the general approach in all forms is to compare the consequences of health interventions with their costs. Cost analysis gives an indication about the amount of funds likely to be required to continue health interventions, and it can furthermore help the organization to assess the use of personnel in delivering primary health care and the efficiency of putting supplies, transport resources and other inputs to work (Creese & Parker, 1994). These results can be used to make a comparison with other units that deliver services and can be used to make health interventions more efficient. Furthermore, during the analysis of costs, there will probably also derive additional information of practical use. When cost data can be related to information on performance, useful assessments of efficiency in an input/output sense can be made. Besides the analysis of the costs, the analysis of the consequences or benefits of health interventions is also an important aspect of an economic evaluation. It is possible that an alternative health intervention has higher costs, but the benefits of this intervention are worth the extra costs. Therefore, it is also very important to identify the corresponding outcomes of health interventions (Haddix et al., 2003).

The goal of this research is to link the results of an economic evaluation with the decision-making process within a general practice. Torrance (2006) described in his article a brief historical background on the development of economic evaluations in healthcare. He outlined a number of research ideas in this field which are worthwhile to investigate. Torrance mentioned that “an important area of research would be to work with specific decision makers on specific decision problems, to help them formulate the problem, provide useful analyses, and to publish these as case study to give the field a better understanding of the problems and the needs of decision makers”. Researchers consistently say that their analyses are aimed at informing decision making, but they seldom close the loop to determine to what extent they have actually helped and how they could do better (Torrance, 2006). The results of an economic evaluation can be either positive or negative for a general practice. In both situations, it will be interesting to examine how a general practice will deal with this information from a management control perspective. Therefore, this research tries to link the results of an economic evaluation with the actual decision-making process within a general practice from a management control perspective, so how the information about the costs and benefits can influence the management of the general practice, how it can influence the behavior of the employees, and how it can improve the business processes of the general practice. Hence, the research question in this paper is: How does a system of identifying costs and consequences of provided healthcare interventions support the management of general practices in their exercise of management control?

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 Which system of identifying costs and consequences of provided healthcare interventions should be chosen?

 How can the costs of a general practice be identified and quantified?

 How can the consequences of a general practice be identified and quantified?

 How does the information, provided by the system of identifying costs and consequences, influence the management of Therapeuticum Lemminkäinen? So, first it is necessary to describe several systems to identify costs and consequences of healthcare interventions, and to choose the appropriate approach. Second, information about the identification and quantification of costs and consequences will be discussed. Third, the link between the results of the economic evaluation and the decision-making process will be analyzed. With the information gathered from these sub-questions, the main research question will be answered.

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2. Theoretical Framework

This section gives an overview of literature on the relevant subjects of this research. First, the perspective of the research will be described. Second, literature on economic evaluation within the healthcare sector will be analyzed, and the most appropriate approach for this research will be chosen. Third, there will be an analysis on the identification, measurement, and valuation of costs and consequences. Fourth, the impact of economic evaluations on the decision-making process in healthcare will be discussed. Finally, the relationship between the main concepts of the research will be presented.

2.1 Perspective

Before the start of the analysis of costs and consequences, it is important to determine the appropriate perspective of the research. According to Haddix et al. (2003) perspective can be defined as “the viewpoint from which the analysis is conducted and refers to which costs and benefits are included”. They distinguish five different perspectives. First, the societal perspective, in which all benefits of a program (no matter who receives them) and all costs of a program (no matter who pays them) will be analyzed. This perspective is appropriate when the research is to analyze the allocation of societal resources among competing activities. Second, the federal, state, and local governments perspective, in which the impact on the budgets of specific agencies will be analyzed. Third, the healthcare providers perspective, in which the costs and benefits of various types of hospitals, GPs, or other providers will be analyzed. Fourth and fifth, the analysis can be performed from the business or individual perspective.

In this research, the healthcare providers perspective is the most appropriate perspective, because the purpose of the research is to identify and quantify the costs and consequences of a general practice, and connect those results to the decision-making process within that general practice.

2.2 Economic evaluation

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10 In general, these activities consist of interventions that take inputs (labor, capital, etc.) and transform them into outputs. To aggregate these inputs, one usually values the labor and capital using market prices to create a measurement of all the resources included in the healthcare intervention. This aggregate input measurement is called ‘costs’ and is expressed in monetary units (Brent, 2003). The identification of various types of costs and their following measurement in euros is mostly similar across economic evaluations. However, the identification of the outputs stemming from the activities or alternatives being examined may differ significantly. The outputs of the evaluation can come in different forms and these are the ‘consequences’ of the healthcare intervention. The most obvious output to consider is what the healthcare industry immediately works with, such as a successfully completed operation or a diagnostic test outcome. These outputs are called ‘effects’ and are expressed in natural units, such as a completion ratio or a percentage detection. A broader measurement of effects relies on utilities, which means the estimation of the satisfaction of the effects. This output unit is called a quality-adjusted life-year (QALY) and is measuring the satisfaction of the time that a person has left living. The output can also be expressed in the same monetary units as the costs, in which the outputs are now called ‘benefits’ (Brent, 2003).

Corresponding to the costs and consequences just identified, there are four approaches for an economic evaluation that contain some or all of the components described above. These four approaches are: cost-benefit analysis (CBA), cost-effectiveness analysis (CEA), cost-utility analysis (CUA), and cost-minimization analysis (CMA). There will first be a description of these four different approaches. At the end, the most appropriate approach for this research will be selected.

2.2.1 Cost-benefit analysis (CBA)

The distinguishing characteristic of a CBA is that the consequences are expressed in monetary value. Therefore, CBA is often considered the gold standard for economic evaluations, because results from CBAs can be compared with results from studies of a wide range of public programs, since it is the one method in which costs and benefits are expressed in a common metric value (Haddix et al., 2003). Forming benefits means that the consequences are measured in the same units as costs. A healthcare intervention, for a simple example taking an aspirin, will lead to some advantages and disadvantages. When the advantages and disadvantages are measured in monetary terms, they will be called benefits and costs. The aspirin would be worth buying if the amount of the benefits exceeded that of the costs.

The CBA deals with the final result of a health care intervention. In the process of arriving at this final result, there is an intermediate phase, which involves transforming the treatment from an input into an output, which is the effect of the intervention. In the example of the aspirin, the effect might be pain relief. The estimation of the benefit occurred in two steps. First, there is an effect of the intervention, and a monetary value will be assigned to it. The second step is pricing the effect. So the benefit of the aspirin is the effect of it multiplied by the pricing. In this way, the benefits are measured in the same units as costs (Brent, 2003).

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11 main reason why cost-effectiveness and cost-utility analysis have been relied on more often in the healthcare sector. None the less, there have been a number of approaches which sought to place monetary values on the benefits that arise from healthcare interventions. Early methods of valuation benefits were based on the human capital approach in which benefits are valued in terms of productivity gains. Hereby, rates of pay are used as a measure of productivity. Another approach have adopted the more theoretically sound practice of basing valuations on patients’ observed or stated preferences. This approach is usually based on willingness to pay, so the value patients attach to healthcare outcomes is established by asking them how much they would pay to receive the benefits or avoid the costs of illness (Robinson, 1993a). A third approach within CBA is the balance-sheet (or opportunity cost) approach. This form of CBA can be used to identify who bears the costs and who reaps the benefits from any intervention, which can be measured in physical units. The next stage in CBA is to value all costs and benefits in monetary terms, but this is often not feasible or practical. However, the balance-sheet approach says that available monetary values can be augmented by other measures of costs and benefits, namely measures of quantity (e.g. numbers of referrals) and measures of time (e.g. time spent waiting for consultation). Whilst the balance-sheet approach can be seen as a type of CBA in its own right, it can also be seen as the first stage of CBA, i.e. as a means of outlining the benefits before monetary valuation (McIntosh et al., 1999).

The CBA approach has some imperfections in practice, but it is also recognizes as an important framework for decision-making. McIntosh et al. (1999) state that “a good CBA will: identify relevant options for consideration; enumerate all costs and benefits to various relevant social groups; quantify as many as can be sensibly quantified; not assume the unquantified is unimportant; use discounting where relevant to derive present values; use sensitivity analysis to test the response of net benefits to changes in assumptions; and look at the distributive impact of the options”.

Because CBA seeks to place monetary values on both the inputs and the outcomes, it makes it possible to say whether a particular procedure or intervention offers an overall net gain to society in the sense that its total benefits exceed its total costs. Furthermore, it enables people to express the benefits of healthcare in terms of their valuations of the quantity of life, its quality, and any other dimension that they feel is important. And like described above, all of these diverse benefits are expressed in the same monetary units as the costs, which makes it a more powerful approach than the other approaches (Robinson, 1993a). However, in practice it can be difficult to express every benefit in monetary terms. In that case, the balance-sheet approach can be a good starting point for a CBA.

2.2.2 Cost-effectiveness analysis (CEA)

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12 intervention 1, and C2 and E2 are the costs of healthcare intervention 2, the ICER of intervention 1 versus 2 will be computed as: ICER = (C1-C2) / (E1-E2). When the ICER is below the maximum acceptable cost-effectiveness ratio (or willingness-to-pay threshold per unit of effect), intervention 1 is considered cost-effective (Mohseninejad, 2013). However, the use of ICER has been criticized for not taking opportunity costs into account and because it can lead to increasing costs in a healthcare system (Brazier et al., 2009).

CEA is an approach used to evaluate the relationship between net investment and health improvement in healthcare strategies competing for similar resources. Because the approach itself is limited to the comparison of strategies designed to improve health, no attempt is made to assign a monetary value to the averted disease. Rather, results are presented in the form of the net cost per health outcome, for instance cost per life saved or cost per case prevented. The decision maker is left to make right judgments about the value of the outcomes (Haddix et al., 2003).

CEA is most useful when the purpose is to rank healthcare interventions by their relative cost-effectiveness. It is a useful approach for economic analysis of randomized controlled trials (RCTs), which generally feature a control group and one or more interventions that seek to achieve a common outcome. It is furthermore also a very useful approach for ranking healthcare interventions that address a number of health problems for the purpose of priority setting or resource allocation (Haddix et al., 2003).

CEA has been very popular to date and is a very useful approach where there is a single unambiguous objective for an intervention. However, many healthcare interventions have multiple objectives or outcomes and the issue of assigning preferences or values to these outcomes becomes central to the evaluation (Drummond et al., 1997). In the case of multiple objectives or outcomes, CBA or CUA (described below) are more appropriate approaches to use.

2.2.3 Cost-utility analysis (CUA)

A third approach to perform an economic evaluation is the CUA. The term utility refers to the preferences individuals or society may have for any particular set of health outcomes (Drummond et al., 1997). CUA uses money as the cost measure, just like the approaches described above. Health outcomes in CUA are valued via health-state utilities that reflect preferences for living in various states of health for the duration of the health state and with the quality of life experienced in the health state (Wright et al., 2009). The measurement of these utilities or preference values is necessary for calculation of the most commonly used outcome measure in this approach of economic evaluation: quality-adjusted life-years (QALYs). The core concept of the QALY is grounded in decision science and expected utility theory and is a widely used measure of health improvements that is used to guide healthcare resource allocation decisions. The basic construct is that individuals move through health states over time and that each health state has a value attached to it. Health is defined as the value-weighted time (i.e. life-years weighted by their quality) accumulated over the relevant time horizon to yield QALYs. Health states must be valued on a scale of 0 to 1, where 0 is the value of being dead and where 1 is the value of being in perfect health (Weinstein, 2009).

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13 universally accepted (Haddix et al., 2003). Nevertheless, the CUA approach has also some distinct advantages over CBA and CEA. CBA suffers from the difficulty of translating all costs and consequences into monetary terms, especially translating patient-reported outcomes into dollars (Patrick & Erickson, 1993). In addition, CBA has the potential for discrimination because it favors treatment for people who are working or those who are wealthier. CEA is limited by the inability to compare interventions with different outcomes or to simultaneously incorporate multiple outcomes from the same intervention (Coons & Kaplan, 1996). Furthermore, in CEA, although the outcome measurement is in natural units (e.g. life-years saved), no attempt is made to value the outcome in terms of quality or desirability, while CUA incorporates the quality of the health outcome achieved (Drummond et al., 1997). CUA is the most common approach to combining quantity and quality-of-life outcomes in economic evaluations, by using QALYs as the outcome measure.

Drummond et al. (1997) enumerated several circumstances in which CUA may be the most appropriate approach for economic evaluation:

1. When health-related quality of life is the important outcome, for example in comparing alternative health interventions that are not expected to have an impact on mortality, but which have a potential impact on patient function and well-being.

2. When health-related quality of life is an important outcome, for example in evaluating neonatal intensive care for low-birth-weight infants. In this evaluation is not only survival an important outcome, but also the quality of that survival is critical.

3. When the health intervention affects both mortality and morbidity and a combined unit of outcome is desired.

4. When the health interventions being compared have a wide range of different kinds of outcomes and the researcher wishes to have a common unit of output for comparison.

5. When the researcher wishes to compare a health intervention to others that have already been evaluated using CUA.

2.2.4 Cost-minimization analysis (CMA)

This analysis is an appropriate evaluation method to use when the case for an intervention has been established and the procedures under consideration are expected to have the same, or similar, outcomes. In these circumstances, attention may focus on the cost side of the equation to identify the least costly option (Robinson, 1993b). Because the consequences are not important in the evaluation, only the costs of alternative interventions are compared.

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14 has demonstrated equivalence in consequences. In any case, CMA should only be used when the outcomes of alternative interventions are the same or similar (Robinson, 1993b).

2.2.5 Economic evaluations in practice

In practice, the economic evaluations are used in different situations. An example is given for every economic evaluation approach. First, the CBA is often used when alternative healthcare interventions are compared, with single or multiple possible effects. An example of a CBA study is the study of Scott & Freeman (1992). Their goal was to compare the clinical efficiency, patient satisfaction, and the costs of three specialist treatments for depressive illness with routine care by general practitioners in primary care (Scott & Freeman, 1992). CBA offers furthermore a useful framework for healthcare decision-making (McIntosh et al., 1999). Second, the CEA is often used when alternative healthcare interventions with a single effect, but achieved to different degrees, are compared to rank the interventions by their effectiveness. An example of a CEA is the study of Lave et al. (1998). That study augments a randomized controlled trial to analyze the cost-effectiveness of two standardized treatments for major depression relative to each other and to the "usual care" provided by primary care physicians (Lave et al., 1998). Third, the CUA is often used when healthcare intervention can have different consequences, but when the health-state preference or the QALY is an important measure. Dalziel et al. (2006) evaluated the economic performance of a physical activity counselling program in general practice, to evaluate if the program resulted in more QALYs compared to general practices without the program. Fourth, the CMA is often used when healthcare interventions are compared which have similar outcomes. Talwalker et al. (2004) compared two different programs, which are both used for the diagnosis of primary sclerosing cholangitis (PSC), to see which program has the lowest costs. So, both programs have the same effect, the diagnosis of PSC, which is required when the researcher wants to perform a CMA.

These were some examples of the use of the different economic evaluation approaches in practice. For choosing the right economic evaluation approach, the research has to investigate the context of the problem, the possible outcomes of the intervention, and the perspective of the research.

2.2.6 Summary of characteristics

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15 Table 1: Characteristics of economic evaluation approaches

Cost-benefit analysis Cost-effectiveness analysis Cost-utility analysis Cost-minimization analysis Definition Compares costs

and health consequences of two or more interventions with the health consequences measured in monetary units. Compares costs and health consequences of two or more interventions with the health consequences expressed in a single natural unit. Compares costs and health consequences of two or more interventions with the health consequences measured in some measure of time adjusted by a utility that reflects a measure of value or

preference for the health state. Compares the costs of two or more interventions when there is evidence that the interventions have equivalent outcomes. Measurement / valuation of costs

Euros Euros Euros Euros

Identification of consequences Single or multiple effects, not necessarily common to both alternatives. Single effect of interest, common to both alternatives, but achieved to different degrees. Single or multiple effects, not necessarily common to both alternatives. Identical in all relevant respects. Measurement / valuation of consequences

Euros Natural units (e.g. life-years gained, disability-days saved, etc.). Health years or (more often) quality-adjusted life-years. None

Advantages - Because the consequences are measured in monetary value, it is an important framework for decision-making. - Consequences are measured in the same units as costs.

- Very useful when the goal is to rank healthcare interventions by their relative cost-effectiveness.

- Incremental cost-effectiveness ratios make the comparison of interventions easier.

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Disadvantages - It has the potential for discrimination because it favors treatment for people who are working or those who are

wealthier. - In practice, it is hard to value all consequences in monetary terms - Is limited by the inability to compare interventions with different outcomes/effects. - No attempt is made to value the outcomes in terms of quality or desirability. - No true consensus as to the most appropriate measurement approach for Quality-adjusted life-years. - Quality-adjusted life-years are hard to measure and may not be universally accepted. - Only useful when the outcomes of alternative interventions are the same or similar.

- Almost never the case that the consequences are the same for alternative interventions.

Equation * B + S - C (C - S) / E (C - S) / U C – S

Explanation abbreviations

C = Total costs of a healthcare intervention

S = Total savings of resources used in a healthcare intervention

B = Total benefits of a healthcare intervention, expressed in monetary value E = Total effects of a healthcare intervention, expressed in natural units U = Total health state preferences of a healthcare intervention, often expressed in quality-adjusted life-years

* Because economic evaluations compare two alternative interventions, the symbols represent changes of the costs and consequences of an intervention compared to an alternative.

2.2.7 Choice of economic evaluation

It is shown above that the different forms of economic evaluation measure and value the various costs and consequences to different extents. Which approach is the most appropriate form of analysis depends not only on the problem being tackled, but also the practical measurement challenges and the perspective of the research (Drummond et al., 1997). From the researchers’ point of view, the most important consideration is whether the complexity of the analysis matches the breadth of the research question. CBA and CUA enable the researcher to assess broader choices, since they address the issue of outcome valuation. CMA and CEA tacitly assume that the treatment objective concerned is worth meeting, and generally address more restrictive questions. However, none of the approaches is intended to be a magic formula for removal of judgment, responsibility, or risk from decision-making activities, though each is capable of improving the quality and consistency of decision-making.

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17 the same or similar. The goal of this research is to connect the results of an economic evaluation to the decision-making process within a general practice. One advantage of CBA is that the results can form an important framework for the decision-making process within healthcare organizations. Therefore, this research will choose CBA as economic evaluation approach. The balance-sheet approach will be used when it appears during the research that it is not possible to translate all the consequences in monetary units.

2.3 Costs and consequences

As described above, an economic evaluation exists of the identification, measurement, and valuation of costs and consequences. Within an economic evaluation, there is a comparison between two or more alternative interventions. Therefore, the analysis will be focused upon the difference in total costs between the two alternative interventions and the difference in total consequences between the two alternative interventions. This approach is called the differential approach, where the differences in total costs are called the differential costs or the net relevant costs, and the differences in total consequences are called the differential benefits or the net relevant benefits (Bhimani et al., 2008). In the next paragraphs, the calculation of costs and consequences in healthcare will be further discussed in more detail.

2.3.1 Costs

In every approach of economic evaluation, the cost must be calculated. In healthcare, these costs are first of all divided into costs borne by the healthcare sector (like drugs), by patients and their families (like travel), and by the rest of society or the other public sector (like health education) (Robinson, 1993b; Drummond et al., 1997; McIntosh, 1999). In each case their quantities would be measured and the total cost calculated by multiplying the quantities by the relevant prices.

The costs of the resource consumption in the first sector, the healthcare sector, are relatively straightforward and consist of items such as drugs, equipment, general practice visits, and so on. However, these include not only the costs of providing the healthcare intervention (treatment patient), but also all the continuing care cost (e.g. antibiotics) (Drummond et al., 1997). According to Robinson (1993b), these items may be divided into variable costs which vary according to the level of activity, and fixed costs which are incurred whatever the level of activity. In economic evaluation all healthcare sector costs are referred to as direct costs.

The second sector, the costs of patient and family resources, could consist of out-of-pocket expenses in traveling to the general practice, various co-payments, and expenditure in the home. However, one of the most important resources for the family and patient sector in treatment is time. This could be for instance the time of the patient in seeking and receiving care (Drummond et al., 1997). Within this category, costs can be both direct (out-of-pocket expenses in traveling) or indirect (psychological stress experienced by patients or their families) (Robinson, 1993b).

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18 diffuse to include them in the analysis, but there may be some occasions when they are large enough to require attention. However, this is almost only the case when the evaluation is being made from the widest perspective, namely the viewpoint of society. For example, public health legislation enforcing antipollution standards or specifying water purification levels may lead to increases in manufacturing costs and consumer prices (as well as providing health benefits) (Robinson, 1993b).

The categories described above are used to identify the costs and measure them in physical units (hours of staff time, quantities of drugs, etc.). The next stage of the analysis requires that they should be valued in monetary terms. For most direct cost items market prices will be available. For instance, treatment time can therefore be valued at the appropriate hourly rate. Overall, economic evaluation should seek to value all inputs in terms of their opportunity costs, that is, their value in their next best use, to measure what is being given up to use resources in healthcare (Robinson, 1993b).

2.3.2 Consequences

The consequences (or benefits) of a healthcare intervention can be divided in three categories, namely gains in health, other non-health value, and process benefits.

The first category, gains in health, can be measured in terms of effects (E) (e.g. life-years gained or disability days reduced), but also valued in terms of health state preferences (U) (e.g. quality-adjusted life-years) in a CUA or in terms of willingness-to-pay (WTP) in a CBA (Drummond et al., 1997). The technique of willingness to pay is based on the premise that the maximum amount of money an individual is willing to pay (sacrifice) for an intervention is an indicator of the utility or satisfaction to them of that intervention. The technique of willingness-to-pay is often criticized for attempting to assign a monetary value to things which are considered by many to be immeasurable with monetary value, e.g. the relief of suffering or the saving of a human life. Another criticism is that it is inevitably a function of ability to pay, which could have implications for equity (McIntosh et al., 1999). Although there are many criticisms of willingness-to-pay, it has to be noticed that such valuations are being made anyway, arising from the implicit judgments of decision-makers. Williams (1974) states that it is important to recognize that benefit measurement is necessary and valuable whether or not we go to the final step of attaching explicit monetary values to health states. So it is important to examine whether such valuation is feasible, valid and reliable.

The second category of consequences, other non-health value (V), are consequences that can be created by healthcare interventions, but which is not necessarily linked to the improvement in health state, for instance the value of information about the health of a patient. It is potentially a separate component of the value of healthcare interventions, but V is usually already incorporated in the measurement of E, U or WTP (Drummond et al., 1997). For instance, when an individual is considering their maximum WTP, they will take account of all the attributes of the service of importance to them, not just health gains (McIntosh et al., 1999)

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19 2.4 Healthcare decision-making

A considerable amount of healthcare decisions take place at the point of the clinical encounter, especially in primary care. Since every decision has an opportunity cost, ignoring economic information in primary care decision-making may have a broad impact on healthcare efficiency (Lessard et al, 2010). That is why economic evaluations can play an important role in different types of healthcare decision-making, like formulary decisions, reimbursement decisions and prescribing. The healthcare decision-making can take place at macro, meso and/or micro level. The macro level concerns decision-makers with a national or regional healthcare perspective who coordinate activities outside healthcare organizations. They are responsible for the availability of effective and affordable healthcare interventions for the whole population. Decisions inside healthcare organizations, for example definition of clinical guidelines or formulary decisions, fall within the scope of the meso level. The third level is the micro level, which covers the activities of individual healthcare professionals at a patient level (van Velden et al., 2005).

According to Brousselle & Lessard (2011), research has shown discrepancies between beliefs about economic evaluation’s potential role in the decision-making process in healthcare and actual practice. On one hand, decision-makers have generally recognized that economic evaluations and considerations must be taken into account in the healthcare decision-making process. Especially at the macro level, economic evaluation is increasingly being used. On the other hand, the extent of use at the local decision-making level (meso and micro level) remains limited (Eddama & Coast, 2008). Adopting an evidence-based economic evaluation approach to decision-making is a complex process that may encounter many obstacles, including factors related to decision-makers, contexts and economic evaluation (Lessard et al., 2010).

First, decision-makers often fail to consider economic evaluations because of access and time constraints and poor understanding of concepts, principles and methods. Second, several obstacles are related to decision-makers’ contexts (i.e. social, environmental or organizational settings), which include organizational, budgetary, political and social factors (Brouselle & Lessard, 2011). Since planning, managing and providing care do not entail the same requirements, levels of decision-making differ in their structures, objectives, informational requirements, and budgetary responsibilities, all of which have a significant impact on how decision-makers perceive economic evaluation as an aid for decision-making Economic evaluation may not be helpful because of the nature of management decisions, because decision-makers often question the relevance of study results for their particular context and are concerned about their applicability to real settings (Brouselle & Lessard, 2011; Eddama & Coast, 2009). Third, a number of obstacles center on limitations in the principles, concepts and methods of economic evaluations. These include concerns about the reliability, relevance, availability and presentation of economic evaluations (Eddama & Coast, 2008; Brouselle & Lessard, 2011; Teerwattananon & Russell, 2008). The major barrier is the complexity of studies and could explain decision-makers’ limited use of economic evaluations.

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20 contextualized, when it provides relevant information on costs and effects, when it is transparent and simple, and when it presents assumptions or arbitrary choices clearly and as minimally as possible (Brousselle & Lessard, 2011).

2.5 Research framework

In this section, there has been an overview on the literature of the main concepts of this research. First, systems of identifying costs and consequences are described. Second, the calculation of the costs and consequences are explained. Third, the influence of economic evaluations on the healthcare decision-making process is discussed. These main concepts are presented in Figure 1 below.

Figure 1: Research framework

Identification and quantification of costs Identification and quantification of consequences Results economic evaluation Healthcare decision-making

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21

3. Methodology

This section provides an overview of the methodology used to generate insights from practice, which helped to answer the research question. There will be an explanation of the used research approach and there will be a brief description of the general practice which will be central in this research. After that there will be an explanation of the way how data is collected from practice and on the way how data is analyzed.

3.1 Research approach

According to van Aken et al. (2012), there are two main research paradigms to be used in student field work in Business or Management, namely the explanatory paradigm and the design science paradigm. A project according to the explanatory paradigm aims to produce descriptive and explanatory knowledge, and follows the empirical cycle. A project according to the design science paradigm aims to produce solutions to field problems and can follow the problem-solving cycle. The empirical cycle can be used to generate improved or additional descriptive or explanatory theory, which can be used for theory development and theory testing research, while the problem-solving cycle can be used to generate a solution to a business problem, which can be used for academic problem solving. With academic problem solving, the focus is not only on a specific business problem of a company, but also on a generic type of business problem. This is also the case within this research about the costs and benefits of general practices. Since public accountability has increased and financial resources have become scarcer, primary healthcare organizations has been forced to reexamine the benefits and costs of its activities to assure that they implement effective interventions and allocate resources efficiently (Haddix et al., 2003). Therefore, this research will use the academic problem solving approach, and this business phenomenon will be the starting point of this research. After the selection of the business problem, the problem-solving cycle can be used to design a solution to a specific business problem. Therefore, this research will use a case study to find solutions to the business problem of the case.

A case study is a research approach which focuses on understanding the dynamics present within single settings (Eisenhardt, 1989). According to Yin (2003) a case study is an appropriate research method when (a) the research question of the study is formulated as a ‘how’ or ‘why’ question about (b) a contemporary set of events, (c) over which the investigator has little or no control. These conditions are all applicable for this research, since the research will focus on the question how a system of identifying costs and consequences can support the management of general practices in their exercise of management control. These costs and consequences are about a contemporary set of events which can’t be influenced by the investigator. Therefore, a case study will be an appropriate research approach for this research.

3.2 Case description

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22 almost 3600 patients. The employees consist of GPs, assistants, various therapists, secretaries, and an accounting employee. Therapeuticum Lemminkäinen is a general practice where regular primary care is complemented by the principles and applications of anthroposophic medicine. Therefore, the GPs spend more time with their patients to come to the correct complementary approach. First, they spend more time on the contact with the patient, namely fifteen minutes per consultation instead of ten minutes. Second, they spend additional consultation time with the therapists within the general practice to take care that the problem and the demand for care is understood correctly.

For the past years, according to figures from the insurer Menzis, Therapeuticum Lemminkäinen was able to work relatively inexpensive through lower prescription of medication, lower referral to secondary care, and through a comprehensive supervision of patients, especially for the young population, infants, toddlers, preschoolers and their parents. However, this approach cost the general practice money, because they can treat fewer patients in one hour in comparison with other general practices. Therefore, Menzis recommended the general practice to apply for the module M&I, based on the working process of the general practice (especially extra consultation time) and the possible savings it entails. From these figures, it appears that the positive figures for pharmaceuticals and referral to secondary care are nullified by the negative figures for mental healthcare. Instead of being ‘cheap’, the Therapeuticum seems to be ‘expensive’ now. Therefore a case study about the costs and consequences of this general practice will be very interesting. First, the costs and consequences of the general practice have to be measured and compared to a standard to analyze the possible differences. Second, the figures of Menzis have to be examined to explain how they measure these figures. Third, there will be a comparison of the figures measured at Therapeuticum Lemminkäinen and the figures of Menzis to analyze possible differences.

3.3 Research plan

According to Scapens (1990) case studies are being increasingly used as a research method for studying management accounting practice. He identifies some main steps in performing a successful case study, which will also be used in this research. These main steps are preparation, collecting evidence, assessing evidence, and identifying patterns. First, the researcher should review the available theories which may be relevant to the case, so the researcher will determine the way in which he approaches the case. This preparation phase is done in the literature section of this research, where the available theories are reviewed that may be relevant to this case.

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23 which give the researcher the change to ask follow-up questions. In total, 6 interviews will be conducted, all of which will last approximately half an hour. Several different employees of the general practice will be chosen, to acquire as much as possible data about the costs and consequences of the general practice. Furthermore, interviews with employees of Menzis will be conducted to examine how they measure their figures about general practices. The GPs are chosen for the interviews, because they are the employees who know the most about the consequences of their method of treating the patients. The product expert and the contract manager of complementary care of Menzis are selected for the interviews, because they know the most about the figures of the general practices. At each interview there will be asked for permission to record the interview. In this way, it will be easier to precisely transcribe each interview. Beside the interviews, there were also two meetings at the start of this research. The first meeting was arranged to identify the problem-statement within the general practice. The second meeting was a meeting to observe to employees of the general practice during a break, with the goal to find out more about the general practice. Furthermore, there was also a meeting with the GPs to conduct a time use survey to determine the FTE per GP. See the Table 2 below for the full schedule.

Table 2: Interview and observation schedule

Function Date Length

GP Therapeuticum Lemminkäinen

(Identifying problem statement)

10 February 2014 30 minutes Employees of Therapeuticum Lemminkäinen (Observation) 24 February 2014 30 minutes GP Therapeuticum Lemminkäinen (Interview) 20 May 2014 30 minutes GP Therapeuticum Lemminkäinen (Interview) 2 June 2014 30 minutes

Product expert Menzis

(Interview)

16 June 2014 30 minutes

Contract manager complementary care Menzis (Interview) 16 June 2014 15 minutes GP Therapeuticum Lemminkäinen (Interview) 30 June 2014 30 minutes

Contract manager GP care Menzis

(Interview)

11 July 2014 30 minutes

GPs Therapeuticum Lemminkäinen

(Time use survey)

6 August 2014 15 minutes

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24 patient and family sector and the other sector. First, questions related to the healthcare sector will be asked, for instance about the referral to secondary care and prescription of medicine. Second, the most important patient and family resources consumed in treatment is time, so questions about the time patients spent within a general practice will be asked. Third, questions about possible other costs will be asked. In the same way, questions about the consequences of the resources that are saved through the method of treating will be asked. Furthermore, questions about the consequences of the changed health state will be asked. Also questions about possible other value created will be asked.

In the third step, the evidence will be assessed. All the interviews will be coded by using the key concepts in this paper, described above. These codes will be used in order to analyze the data. The results will be discussed in the analysis section of this paper.

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25

4. Analysis

This section describes the major findings from the interviews and from the analysis of several relevant documents. The aim of this analysis is to calculate the costs and the benefits of Therapeuticum Lemminkäinen. These results will be compared with national figures of general practices, which are calculated by the Dutch healthcare authority (NZa) in their research of the costs and benefits of general practices in the Netherlands (NZa, 2012). In order to increase the validity of this study, this study will apply the same way of reporting the results as in the research of the NZa (2012). In the study of the NZa, data collection took place on the basis of the administration of the whole general practice. Based on the number of patients of the practice and the number of FTE GP-owners per practice, the outcomes were then calculated to ‘per 1.000 registered patients’ and ‘per FTE GP-owner’. So, the main units in which the results were reported in the study of the NZa are per 1.000 registered patients, and per FTE GP-owner. This study will use the same units to present the results.

In this analysis section, the following aspects will be analyzed. First, some background information and calculations of Therapeuticum Lemminkäinen will be made. Second, there will be an analysis of the costs of the general practice. Third, the benefits of the general practice will be analyzed. Fourth, there will be an analysis of the influence of the results on the management of the general practice.

In this study, all data presented is related to the year 2010, because all necessary data of general practices in the Netherlands for the year 2010 is known and calculated by the NZa (2012).

4.1 Background information Therapeuticum Lemminkäinen

The research of the NZa (2012) is a large-scale quantitative factual investigation, conducted among a sample of 396 general practices spread over five subpopulations, namely practices with one GP, practices with two GPs, practices with more than two GPs, health centers with GPs in paid employment and health centers with GP-owners. The first three subpopulations are general practices with only GP care, and the last two subpopulations are centers with multiple disciplines. Therapeuticum Lemminkäinen is a general practice with not only GP care, but with multiple disciplines. The GPs of Therapeuticum Lemminkäinen are not in paid employment, but are the owners of the practice. Therefore, Therapeuticum Lemminkäinen is part of the sub-population ‘health center with GP-owners’. So, in the analysis of the costs and benefits of Therapeuticum Lemminkäinen, the results will be compared to the outcomes of this subpopulation. In order to provide a complete framework, the outcomes of all general practices, which participated in the study of NZa, will also be presented in this study. However, the analysis of the figures will be focused on the subpopulation health centers with GP-owners.

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26 However, the number of FTE GP-owner of a general practice is not included in the administration of the general practice. To determine the number of FTE of the GP-owner, the following method is used. First, the number of patient-related day parts per week per GP-owner is determined, in which a week consists of 10 day parts (5 working days of each 2 day parts). Second, there is a generic raise for evening, night and weekend hours (in Dutch: ANW) and for non-patient-related hours. To determine these numbers, a time use survey is conducted at Therapeuticum Lemminkäinen. This survey contained the same questions as the survey used by the NZa to determine the FTE per GP-owner, so the results can be compared with each other. The time use survey is included in the appendix of this study. The results of this time use survey will now be presented and compared with the results of the research of the NZa in Table 3.

Table 3: Determination of the number of FTE per GP-owner

Average: All general practices * Health center with GP-owner * Therapeuticum Lemminkäinen ** Patient-related day parts

(maximum is 10 day parts)

7,5 7,5 7,75

Time spent on evening, night and weekend hours (% of total time spent)

8,0% 8,2% 7,9%

Time spent on non-patient-related activities (% of total time spent)

13,6% 13,8% 5,2%

Total percentage increase 21,6% 22,0% 13,1%

Number of FTE per GP-owner

0,912 0,915 0,877

* Data obtained from the study of the NZa (2012)

** Data obtained from a time use survey at Therapeuticum Lemminkäinen

The calculation of the number of FTE per GP-owner is based on the time use survey made by the NZa. In their study, the calculations are based on the outcomes of the time use survey over the first half of 2011. Therefore, the GPs of Therapeuticum Lemminkäinen were asked to complete the survey for the first half of 2011. According to a GP it was quite difficult to complete the survey for the first half year of 2011:

“I have tried to fill in the survey as well as possible, but I cannot say with full certainty that I have completed the survey correctly, since 2011 has been a while.”(GP1)

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non-27 patient-related activities unreliable. Therefore, in the calculation of the total number of FTE per GP-owner of Therapeuticum Lemminkäinen, the 5,2% of time spent on non-patient-related activities will be replaced by the 13,8%, the percentage of other health centers with GP-owners. So the total percentage increase for Therapeuticum Lemminkäinen will then be 7,9% + 13,8% = 21,7%. The number of FTE per GP-owner of Therapeuticum Lemminkäinen will then be the following: 7,75 * 1,217 = 0,943. This number is still not very reliable, since there might be some other errors in the time use survey of the GPs. Therefore, this study will mainly focus on the outcomes and comparison of the unit ‘per 1.000 registered patients’, since the number of patients are registered in the administration of general practices and are therefore more reliable. When a comparison is calculated per FTE per owner, the same number of FTE per GP-owner from the study of the NZa (2012) will be used, since the reliability of that study was quite high. So in that case, the number of 0,915 FTE per GP-owner will be used for Therapeuticum Lemminkäinen.

The total number of patients is also an important feature of a general practice, since this provides insight into the magnitude of the practice and thus the potential of the amount of work. Table 4 gives an overview of the total number of registered patients per GP-owner. Table 4: Number of registered patients per FTE per GP-owner

Number of patients: All general

practices * Health center with GP-owner * Therapeuticum Lemminkäinen ** Total number of registered patients 4.204 6.808 3.310

Total number of General Practitioners

1,768 3,211 2,000

Total number of FTE per GP-owner

0,912 0,915 0,915

Total number of registered patients per FTE per GP-owner ***

2.168 1.940 1.514

* Data obtained from the study of the NZa (2012)

** Data obtained from the administration of Therapeuticum Lemminkäinen *** Is calculated by dividing the total number of registered patients with the total number of general practitioners, multiplied with the number of FTE per GP-owner What is noticeable is that the number of patients per FTE GP-owner at Therapeuticum Lemminkäinen is much lower than the average number of patients per FTE GP-owner of all general practices and also lower than the average number of patients per FTE GP-owner of health centers with GP-GP-owners. According to the GPs of Therapeuticum Lemminkäinen, this is caused through the following reason:

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28 other hand by spending additional consultation time with the therapists to take care of the problem and to be sure that the demand for care is understood correctly.” (GP1)

The vision of Therapeuticum Lemminkäinen is to spend more time with their patients in order to find the right treatment method. They believe that this method results in some qualitative benefits for the patients. Therefore, in the next paragraphs, there will be an analysis of the costs and the benefits of Therapeuticum Lemminkäinen, to investigate if their method really results in some benefits.

4.2 Costs of general practices

In this paragraph, the costs of Therapeuticum Lemminkäinen will be analyzed from two perspectives. First, from the perspective of Therepauticum Lemminkäinen, which means that their costs will be compared with the costs of all general practices (which participated in the study of NZa) and with the costs of health centers with GP-owners. Second, an analysis will be made from the perspective of Menzis.

First, an analysis will be made from the perspective of Therapeuticum Lemminkäinen. In this analysis, the same categorization of costs will be used as in the study of the NZa, so a comparison can be made between the outcomes. In Table 5 below, the total costs of the general practice per 1.000 registered patients for 2010 are presented. In the last column, the costs more or less per patient are calculated, by dividing the difference between Therapeuticum Lemminkäinen and health center with GP-owner by 1000.

Table 5: Total costs of general practices per 1.000 registered patients for 2010 Costs per 1.000 registered patients All general practices * Health center with GP-owner * Therapeuticum Lemminkäinen ** Costs more/less per registered patient *** Staff costs € 50.090 € 51.739 € 63.690 € 11,95 Treatment costs € 2.412 € 2.021 € 2.783 € 0,76 Accommodation costs € 9.004 € 11.696 € 15.476 € 3,78 Depreciation € 166 € 316 € 395 € 0,08 Costs IT € 3.283 € 3.369 € 2.033 € -1,34 Transport costs € 1.295 € 1.037 € 125 € -0,91 Overhead costs € 12.571 € 17.548 € 11.340 € -6,21

Financial income and expenses

€ 2.019 € -277 € -110 € 0,17

Total costs (per 1.000 registered patients)

€ 80.842 € 87.449 € 95.732 € 8,28

* Data obtained from the study of the NZa 2012)