Freeing the Health Care Market in Sweden

The background:

In 2009, a bundled payment model was implemented for total hip and knee replacement on a health system level in Stockholm…Prior to 2009, THR and TKR were predominantly performed by acute care hospitals under global budgets and DRG-based reimbursement schemes…Stockholm providers delivered high quality care, but patients were suffering from long waiting times due to insufficient capacity…

The price was set to $8,500 per procedure for the whole bundle…and represented a substantial decrease in price compared to the DRG reimbursement.

Preliminary study results:

  • Three new providers entered the market and volumes shifted from large acute care hospitals to smaller specialist units. Production volume increased significantly during the first year, most likely in response to the previously unmet demand, but thereafter decreased again. Waiting times were completely removed for this patient group.
  • Several of the providers responded to the new funding model and carried out changes to improve outcomes, reduce complications, reduce non-value adding activities and improve the patient experience.

Comments (11)

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  1. Buster says:

    People always act amazed when they discover that incentives matter! Just think about it: before surgeries were compensated fee-for-service, there was a waiting list. After a (relatively low) reimbursement was established, new firms entered the market and began providing the service. Hospitals (like people) don’t like to work for free. When a hospital is provided a global budget but paid nothing at the margin, the result is similar to working for free at the margin.

    The Dilemma is how do you motivate hospitals? Total fee-for-service (FFS) encourages inefficiency because of the need to track and bill for each item that is billable. FFS also encourages waste, where doctors and hospitals are overly-aggressive in the provision of care. On the other hand, a global budget encourages hospitals to look for novel ways to not care for patients. For example, there’s no rush to discharge an elderly patient who is convalescing because freeing up a bed would only result in a new admission that might require more resources (say, a surgery and a hip prosthetic) than someone just eating, sleeping and recuperating.

  2. Cindy says:

    This is great — I wonder if there’s political will for further reforms. It could be a tremendous benefit to patients down the line.

    Hopefully, this is well-publicized reform so that this model can be implemented in other areas.

  3. Edward Fuller says:

    Everything about this sounds excellent!

    Production volume increased in the first year, changes were made to reduce complications, to reduce non-value adding activities and improve the patient experience. However, “production…decreased again.” Does this mean that demand decreased? If so, then perhaps there’s a downside to this we don’t know about.

  4. Robert says:

    Now I know where I’m going for vacation.

    Visit Sweden: Our trains are always on time, our chocolate is beyond reproach, and our robotic legsare packaged and priced for your convenience!

    The incredibly interesting nature of advances in robotics aside, I agree that models of this sort work to discourage the inefficiency and waste that so often occurs in a system that rewards it. Kudos, Sweden. I look forward to my visit.

  5. Peterson says:

    Robert, I’ve been to Sweeden. It’s a beautiful place to visit.

    Im glad to see that they have taken steps to free up the healthcare market.

  6. Carlos Valdimar says:

    If only this was possible in the US…

  7. Louise says:

    Looks like they’re moving in the right direction all the while we’re moving in the wrong one…

  8. Charles Ceballos says:

    I somewhat agree with Edward’s point. If new providers are entering the market and improvements have been made to the system so that the quality of the service provided and the bundled payment model go hand in hand, then how do you explain the decrease in demand? Shouldn’t it be the other way around? I feel like I’m missing something here.

  9. Adrianne says:

    Good for the Swedish people! And all of those who have decided to do medical tourism to Sweden since the start of this “free market”

  10. Lancaster says:

    Perhaps freeing the health care market isn’t so bad after all..

  11. Alice says:

    I’m pretty sure this is still fee-for-service, it just doesn’t included in global budgets.