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Management of Key Purchaser Risks in Devolved Purchase Arrangements in Health Care


  • Jackie Cumming


This paper examines the key risks and risk management strategies associated with devolving the purchase of publicly funded health care to non-governmental organisations, where the aim is to maintain at least the current level of equity of access. The key risk is greater ‘cream-skimming’ or risk selection, particularly with competitive purchase models based on patient choice of purchaser. The paper also examines the risks of poor purchaser performance and cost shifting. Minimising these risks would require considerable government regulation. This paper was commissioned and carried out to inform Treasury’s thinking in helping develop health policy under the National Party Government that was in power from August 1998 to November 1999. It is a background paper and does not provide policy advice, nor does it propose any particular course of action. The Treasury has chosen to make it publicly available in order to encourage public discussion.

Suggested Citation

  • Jackie Cumming, 2000. "Management of Key Purchaser Risks in Devolved Purchase Arrangements in Health Care," Treasury Working Paper Series 00/17, New Zealand Treasury.
  • Handle: RePEc:nzt:nztwps:00/17

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    References listed on IDEAS

    1. Deborah Haas-Wilson & Martin Gaynor, 1998. "Physician networks and their implications for competition in health care markets," Health Economics, John Wiley & Sons, Ltd., vol. 7(2), pages 179-182.
    2. Matsaganis, Manos & Glennerster, Howard, 1994. "The threat of 'cream skimming' in the post-reform NHS," Journal of Health Economics, Elsevier, vol. 13(1), pages 31-60, March.
    3. Whynes, David K. & Baines, Darrin L., 1998. "Income-based incentives in UK general practice," Health Policy, Elsevier, vol. 43(1), pages 15-31, January.
    4. Williams, Brian & Coyle, Joanne & Healy, David, 1998. "The meaning of patient satisfaction: An explanation of high reported levels," Social Science & Medicine, Elsevier, vol. 47(9), pages 1351-1359, November.
    5. Enthoven, Alain C., 1994. "On the ideal market structure for third-party purchasing of health care," Social Science & Medicine, Elsevier, vol. 39(10), pages 1413-1424, November.
    6. Cumming, Jacqueline & Scott, Claudia D., 1998. "The role of outputs and outcomes in purchaser accountability: reflecting on New Zealand experiences," Health Policy, Elsevier, vol. 46(1), pages 53-68, October.
    7. Donaldson, Cam & Gerard, Karen, 1991. "Minding our Ps and Qs? financial incentives for efficient hospital behaviour," Health Policy, Elsevier, vol. 17(1), pages 51-76, February.
    8. Jane Hall & Alan Shiell, 1993. "Health outcomes: a health economics perspective, CHERE Discussion Paper No 19," Discussion Papers 19, CHERE, University of Technology, Sydney.
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