The New Public Management theory and European health-care reforms.

New Public Management (NPM) reforms followed the ascendancy of neoliberal ideas of the early 1980s in the U.S. and the U.K. and responded to fiscal and budget crises in such places as Europe and Canada. Successful foreign experiments, such as New York Mayor Rudolph Guiliani's ability to restore order in New York, were increasingly publicized in Europe, proving to the public that government services could be successfully delivered for less. The role of the state was also being questioned in areas where the quality of public services was deteriorating: in education, for instance, while high school budgets and staff were increased, academic outcomes worsened, and social ills (e.g., violence in school) increased. In agriculture, the many EEC reforms and the massive budget devoted to agricultural policy could not prevent the pauperization of farmers. Consequently, more individuals expressed a growing distrust of governmental actions, and, just as Prime Minister Margaret Thatcher expressed it when she declared at the Dublin European Council in November 1979, "We are not asking the Community or anyone else for money. We are simply asking to have our own money back," citizens want more value for their money (Borins 2002). Private consulting firms were also increasingly being asked to re-shape public services, particularly in Europe, and ideas and management methods were borrowed from the private and applied to the public sector. Further deregulation of public services, along with other initiatives to improve public-service quality, led to the adoption of new management techniques that eventually spread to many public sectors, including to some, like the health-care sector, that were thought to be relatively immune to this kind of reform.

The first part of this article will review the various aspects of the implementation of New Public Management in health care. Similar to its application in many other public arenas, the emergence of the NPM in health care had several components: greater reliance on market forces; a stronger demand for organizational performance; increased concerns about quality; a decentralization of decisions; and greater citizen participation. However, as described in the second part of this article, there were country-specific limitations, and higher levels of government continue to determine health-care priorities. Regulations designed to preserve quality of health services and equitable access to care, continue to remain strong.

New Public Management reforms

New Public Management is often seen as an organizational theory (Peters and Pierre 1998) that pays attention to implementation (Larbi 1998a, 1998b), or as a bundle of managerial thoughts (Ferlie et al. 1996) corresponding to a shift from public administration to public management. It has also been called "state managerialism" (Clarke and Newman 1997) and "new managerialism" (Hood 1991; Ferlie et al. 1996). Similar to its practice in many other public arenas, the application of New Public Management to the health-care sector has several features: using market forces to serve public purposes; demanding organizational performance; fostering greater accountability and transparency from providers; increasing patient financial responsibility; looking for savings; providing higher-quality services; bringing resource allocation closer to the point of delivery; using contracting-out; and enlarging the coalition of players.

Using market forces to serve public purposes

The creation in the early 1990s of internal quasi-markets in the U.K. that targeted large hospitals provides a good illustration of using market forces to serve public purposes (Larbi 1999; Stoker 1996). The National Health Service was not privatized (the public was against this), but competition was made a chief component of the system. Following the Thatcher government's white paper in 1989, Caring for People: Community Care in the next Decade and Beyond (United Kingdom, Department of Health 1989), the NHS set up, in 1991, two distinctive organizations to create an internal market: the District Health Authorities and hospital trusts. District Health Authorities were granted a fixed budget based on population characteristics and were responsible for medical planning for a designated geographic area, as well as for the purchase of care from hospitals and other health-care providers at the community level. The second organization comprised hospitals, and their status was modified from not-for-profit status to that of an autonomous trust.

Another prominent feature of these reforms was the fund-holding scheme: a budget was transferred from the District Health Authorities to group practices. The practice used that budget--a fixed sum (i.e., a capitated fee) that depended on the number of patients (between 1,500 to 1,800 people) and on patient category (e.g., elderly patients, pregnant women)--to purchase hospital care, prescriptions, and to cover physician practice operating expenses. Acting on behalf of his patients, the fund-holding physician negotiated the most suitable and effective care treatment available (e.g., specialized services, medical examinations, pharmaceutical prescriptions) directly with hospitals and private clinics of his choice, playing one care provider against another to lower costs and improve the quality of service.