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The Management of Health Care

Technology in Ten Countries

October 1980

NTIS order #PB81-144628

Library of Congress Catalog Card Number 80-600162

For sale by the Superintendent of Documents, U.S. Government Printing Office

Washington, D.C. 20402 Stock No. 052-003 -00783-5

This report was developed as part of OTA’S study on the use of cost-effectiveness
analysis to evaluate medical technologies. Recognizing a common international con-
cern about the costs and benefits of medical technologies, OTA commissioned papers
describing the health care systems of nine countries and the mechanisms these coun-
tries use for managing the diffusion and use of medical technologies. Whenever possi-
ble, the authors included data on five specific medical technologies: the computed to-
mography scanner, renal dialysis, coronary bypass surgery, cobalt therapy, and auto-
mated clinical laboratory services. Equivalent information for the United States is pre-
sented and compared to that for the nine other countries in the summary and analysis
(ch. 11), which was prepared by OTA staff and Louise Russell, Ph. D., of The Brook-
ings Institution.
Initial drafts of the nine papers on the management of medical technologies in
other countries were reviewed by Dr. Russell and OTA staff. Helpful comments were
also provided by Henry Aaron, Ph. D., of The Brookings Institution. On November
1, 1979, most of the authors met for a l-day workshop in Washington, D. C., to dis-
cuss their papers and the implications of their findings. In the following weeks, they
completed their revisions. Helpful comments on the Japan paper were given to OTA
by Dr. John Bowers of the Macy Foundation and Professor Daizo Ushiba of the Inter-
national Medical Information Center, Tokyo. Dr. Irv Asher of the Food and Drug Ad-
ministration furnished specific information on drug and device regulation in several
countries, and Dr. Peter Frommer of the National Heart, Lung, and Blood Institute
provided helpful comments on coronary bypass surgery. A draft of the entire volume
was reviewed by two OTA advisory bodies: the Health Program Advisory Committee
and the Advisory Panel on the Implications of Cost-Effectiveness Analysis of Medical
Technology. OTA is grateful for the many contributions of all these individuals.
As a background study, this volume does not include policy options. It should be
noted that since international literature in the area of evaluating and managing med-
ical technologies is sparse, firm conclusions are difficult to reach—only a few conclu-
sions are stated in chapter 11. The many different approaches to medical technology in
other countries do offer a fruitful testing ground for new ideas, however, and OTA
hopes that this report will stimulate further activity, including comparative research.


Advisory Panel on The Implications of
Cost= Effectiveness Analysis of Medical Technology

John R. Hogness, Panel Chairman

President, Association of Academic Health Centers

Stuart H. Altman Sheldon Leonard

Dean Manager
Florence Heller School Regulatory Affairs
Brandeis University General Electric Co.

James L. Bennington Barbara J. McNeil

Chairman Department of Radiology
Department of Anatomic Pathology and Peter Bent Brigham Hospital
Clinical Laboratories
Children Hospital of San Francisco Robert H. Moser
Executive Vice President
John D. Chase American College of Physicians
Associate Dean for Clinical Affairs
University of Washington School of Medicine Frederick Mosteller
Joseph Fletcher Department of Biostatistics
Visiting Scholar Harvard University
Medical Ethics
School of Medicine Robert M. Sigmond
University of Virginia Advisor on Hospital Affairs
Blue Cross and Blue Shield Associations
Clark C. Havighurst
Professor of Law Jane Sisk Willems
School of Law VA Scholar
Duke University Veterans Administration
OTA Staff for Background Paper #4
Joyce C. Lashof, Assistant Director, OTA
Health and Life Sciences Division
H. David Banta, Health Program Manager

Clyde J. Behney, Project Director

The Implications of Cost-Effectiveness
Analysis of Medical Technology

H. David Banta, Study Director, Background Paper #4

Kerry Britten Kemp, Editor
Shirley Ann Gayheart, Secretary
Nancy L. Kenney, Secretary

OTA Publishing Staff

John C. Holmes, Publishing Officer
Kathie S. Boss Debra M. Datcher Joanne Mattingly
Frederick C. Robbins, Chairman
Dean, School of Medicine, Case Western Reserve University

Stuart H. Altman Patricia King

Dean Professor
Florence Heller School Georgetown Law Center
Brandeis University
Sidney S. Lee
Robert M. Ball Associate Dean
Senior Scholar Community Medicine
institute of Medicine McGill University
National Academy of Sciences Mark Lepper
Lewis H. Butler Vice President for Znter-institutional Affairs
Health Policy Program Rush-Presbyterian Medical School
University of California, San Francisco St. Luke’s Medical Center
Kurt Deuschle Frederick Mosteller
Professor of Community Medicine Professor and Chairman
Mount Sinai School of Medicine Department of Biostatistics
Harvard University
Zita Fearon
Consumer Commission on the Accreditation of Beverlee Myers
Health Services, Inc. Director
Department of Health Services
Rashi Fein State of California
Professor of the Economics of Medicine
Center for Community Health and Medical Care Mitchell Rabkin
Harvard Medical School General Director
Beth lsrael Hospital
Melvin A. Glasser
Director Kerr L. White
Social Security Department Rockefeller Foundation
United Auto Workers

Chapter Page
I . Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3

2. The Management of Medical Technology in the United Kingdom . . . . . . . . . . . 11

Barbara Stocking

3. The Management of Medical Technology in Canada . . . . . . . . . . . . . . . . . . . . 27

jack Needleman

4. Australian Health Care Systems and Medical Technology . . . . . . . . . . . . . . . . 57

Sydney Sax

5. Medical Technology in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79

Joel 1-1. Broida

6. Policy for Medical Technology in France . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 93

Rebecca Fuhrer

7. Technology Assessment and Diffusion in the Health Care Sector in

West Germany ., . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...119
Karin A. Dumbaugh

8. Medical Technology in the Health Care System of the Netherlands, . ........141

L.M.J. Groot

9. Medical Technology in the Health System of Iceland . . . . . . . . . . . . . . . . . . . . 157

David Gunnarsson and Duncan vB. Neuhauser

10. Controlling Medical Technology in Sweden . . . . . . . . . . .................167

Erik H. L. Gaensler, Egon ]onsson, and Duncan vB, Neuhauser

II . Summary and Analysis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. 191

Appendix—Description of Other Volumes of the Assessment. . . . . . . . . . . . . . . . . 22 I

Rising Medical Care Expenditures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
The Diffusion of Medical Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Description of This Volume . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Description of Five Medical Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 5
Chapter l References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7


Table No. Page

1. Annual Percentage Increase in the Consumer Price Indexand Health Care
Expenditures in Eight Industrialized Countries . . . . . . . . . . . . . . . . . . . . . . . . . . 3


Figure No. Page

l. Stagesin the Development and Diffusion of Medical Technologies. . . . . . . . . . . 4



the rapid rate of growth in health expenditures
can be stemmed simply by eliminating technol-
ogies and services that do not provide any bene-
fit. Unfortunately, however, this is not an ade-
quate solution to the problem of rising costs.
The reason is that most new technologies do ap-
pear to have at least some benefit, however
small or costly. Examples of technologies that
fall into this category are “halfway” technol-
ogies such as organ transplantation, artificial
organs, many cancer therapies, and current
treatment for coronary artery disease (11).
Since the growth of resources used for medi-
cal care, over and above the effects of economy-
wide inflation, is the primary reason for rapidly
rising costs, nations seeking to control health
care costs must effectively control the growth
and/or use of new resources. Inevitably, this ef-
fort will involve them in controlling the proc-
esses by which technologies are developed, eval-
uated, adopted, and used. And fundamentally,
this means that they will be forced to choose
among beneficial technologies, providing some
to the fullest extent, others to a limited extent,
and still others not at all.
4 Backround Paper #4: The Management of Health Care Technology it Ten Countries


Public intervention to control the diffusion a range of activities from first human use to
and use of specific technologies is likely to be re- large-scale clinical trials and demonstration pro-
lated to one or another of the four theoretical jects to demonstrate efficacy and safety (s). Ef-
stages in the process of development and diffu- ficacy is the benefit from use of a technology;
sion of medical technologies shown in figure 1. safety is a measure of the risk of a technology.
The first stage, basic research, produces new Finally, as a new technology appears to be of
knowledge about the biological mechanisms un- value, clinicians begin to use it and patients
derlying the normal functioning of the human begin to ask for it. As more and more physicians
body and its malfunction in disease (6). In the use the technology on more and more patients,
second stage, applied R&D, this basic informa- the extent of its use increases. This is the process
tion is used to create new solutions to problems of diffusion, Diffusion may end with the tech-
in the prevention, treatment, or cure of disease. nology’s attainment of an appropriate level of
The next stage, clinical investigation and test- use. Alternatively, it may end with the technol-
ing, involves the testing of new medical technol- ogy’s being abandoned, either because it was of
ogies in human subjects. This stage encompasses no value or because a more effective technology

Figure 1 .—Stages in the Development and Diffusion of Medical Technologies

SOURCE. Office of Technology Assessment, U S Congress, Development of Medical Technology Opportunities for Assessment (Washington, D C U S Government
Printing Office, 1976) (6)
has been developed, or with its being used too of the diffusion process. In the real world of
much or too little. medical care and health care policy, however,
such evaluation is often not done (5). Epidemio-
The model sequence depicted in figure 1 is at-
logical and statistical methods have been devel-
tractive because it offers a way to understand
oped to measure scientifically the benefits and
the process of development and diffusion of
risks of a technology under controlled condi-
medical technologies such as drugs, devices, and
tions. Increasingly, these methods, and especial-
procedures. In reality, however, medical tech-
ly the controlled clinical trial, have been pro-
nologies emerge from a process that is far less
posed as the basis for decisions concerning med-
systematic than the model implies. In the ideal
ical technology.
model of diffusion, for example, scientific eval-
uation of efficacy and safety is an integral part


All industrialized countries have begun to ex- economy. Following this is a section in which
periment with the kinds of mechanisms that will the country’s medical care system is discussed.
be necessary to effect changes in development, In the third section of each chapter, the coun-
diffusion, and use of medical technologies. The try’s policies concerning the R&D, evaluation,
general and specific public policies that affect and regulation of medical technologies are ex-
the development and diffusion of medical tech- amined. Along with institutions for biomedical
nologies in nine industrialized countries are dis- research, government funding of research, and
cussed in chapters 2 through 10 of this volume: priority areas of research, government policies
the United Kingdom (ch. 2), Canada (ch. 3), toward and support of the evaluation of medical
Australia (ch. 4), Japan (ch. 5), France (ch. 6), technologies are discussed. Also covered are
West Germany (ch. 7), the Netherlands (ch. 8), safety and efficacy regulation, health planning
Iceland (ch. 9), and Sweden (ch. 10). In chapter and related investment controls, utilization re-
11, U.S. policies pertaining to the development view, and both general health care financing ar-
and diffusion of medical technologies are com- rangements and financing arrangements specific
pared to the policies of the other nine countries. to technologies.
Also compared are the United States’ and other
To help illustrate the application of the coun-
countries’ experience with five specific technolo-
try’s general policies, in the fourth section of
gies: 1 ) computed tomography scanners,2) renal
dialysis, 3) coronary bypass surgery, 4) cobalt each chapter the country’s treatment of five spe-
cific technologies is examined. As background
therapy, and 5) automated clinical laboratories.
for the policy discussions in the remaining chap-
Generally, each chapter begins with an intro- ters of this volume, these five technologies are
ductory section in which the author briefly de- defined below, and their uses and costs briefly
scribes the country’s form of government and identified.


Computed tomography (CT) scanners.—The signed to produce images of abnormalities with-
CT scanner is a diagnostic device that combines in the skull (e. g., brain tumors). These machines
X-ray equipment with a computer and a cathode were developed in Britain in the late 1960’s.
ray tube (television-like device) to produce im- “Body scanners” able to scan the rest of the
ages of cross-sections of the human body (7). body as well as the head have been developed
The first machines were “head scanners, ” de- more recentlv.
- J
6. Backround Paper #4: The Management of Health Cure Technology it Ten Countries

Following its development, the CT scanner Concerns about the treatment of end-stage
was quickly hailed as the greatest advance in renal disease in both the United States and other
radiology since the discovery of X-rays. CT countries have focused on costs. In the United
scanning was rapidly and enthusiastically ac- States, it was estimated in 1975 that the average
cepted by the medical community. More recent- annual charge for dialysis received in a hospital
ly, however, three factors—the rapid spread of was $30,500; $27,500 for nonhospital dialysis;
CT scanners, the frequency of their use, and the $14,000 for the first year of dialysis at home,
expenditures associated with them—have com- and $7,000 for successive years (8). Transplan-
bined to focus attention on the contribution of tation charges averaged about $12,000. The
CT and other diagnostic medical technologies to treatment of end-stage renal disease has been
the recent growth of medical care expenditures. covered under the medicaid program since 1972,
The concern over expenditures has also caused and cost the program $573 million in 1976.
decisionmakers to examine policies pertaining Costs in 1979 were expected to exceed $1 billion.
to other medical technologies. In 1979, a CT
scanner cost, on average, more than $500,000 to Coronary bypass surgery.—Coronary bypass
buy and $400,000 to $500,000 a year to operate. surgery is a surgical procedure in which a graft
That year, the United States had more than is placed between the aorta and a coronary ar-
1,200 scanners, so the cost of scanning in 1979 tery to bypass a constricted portion of the artery
was more than $500 million. and thus improve oxygen supply to the heart
muscle (5). The surgery is used as a treatment of
Renal dialysis.—Hemodialysis and renal coronary artery disease, a disease caused by
transplantation are two life-extending therapies narrowing and blocking of the arteries that sup-
that were developed in the early 1960’s for vic- ply blood to the heart. This disease is the num-
tims of end-stage renal disease. End-stage renal ber one cause of death in the United States. In
disease is a clinical condition reached when a 1975, it caused 642,719 deaths.
person has such a degree of deterioration of kid-
ney function that without treatment he or she Coronary bypass surgery came into practice
will soon die. in the early 1970’s. Approximately 25,000 oper-
ations were performed in the United States in
Hemodialysis is the process of removing toxic 1973, and perhaps 100,000 in 1978. In 1977, the
waste products from the blood by means of an total cost of coronary bypass surgery in the
artificial kidney. The first dialysis machine was United States averaged $15,000 per patient. If
built in Holland in the early 1940’s, but could be 100,000 operations were performed in 1978, the
used only for short periods of time (6). Long- aggregate costs to the Nation were more than
term dialysis became possible when Scribner $1.5 billion.
and his colleagues developed the “Scribner
shunt. ” This device, a semipermanent apparatus The benefits of coronary bypass surgery for
that linked an artery to a vein, could be used to all classes of patients with coronary artery dis-
connect a patient to a dialysis machine, without ease have not been clearly demonstrated.
surgery for each session of dialysis. A patient
generally requires dialysis about three times a Cobalt therapy.—Cobalt therapy is a form of
week. radiation therapy (9). Radiation therapy is used
almost exclusively for the treatment of cancer,
Renal transplantation is a surgical procedure either to cure it or to alleviate its symptoms. In
whereby a healthy kidney from a living person the United States, there are approximately 300
or a person who has recently died is substituted new cases of cancer per 100,000 population each
for an individual’s nonfunctioning kidney. year. Including both new and previously discov-
Transplantation has become more and more re- ered cases, 430 people per 100,000 population
liable, but is still in a somewhat experimental are treated for cancer each year.
stage. The recipient’s body tends to reject the
kidney graft, and drugs are necessary to sup- About 70 percent of those who are treated for
press this rejection. cancer receive radiation therapy at some point
during their illness. It is difficult to evaluate the The automation of clinical laboratories began
benefits of radiation therapy. Not only is it in the late 1950’s with the marketing of the
generally used in combination with other thera- continuous-flow blood analyzer, a machine that
pies, but its benefits must be weighed against performs multiple tests on a single sample of
sometimes serious side effects. Furthermore, the blood. Newer machines have improved on the
therapeutic goal is often to alleviate rather than original blood analyzer, and clinical laboratory
to cure. functions in addition to blood analysis have
since been automated. By 1972, more than 50
In 1975, the cost of purchasing a cobalt ther- percent of U.S. hospitals had automated their
apy unit was about $90,000 to $125,000. Con- hematology and/or chemis try laboratories.
struction costs are high because of the need to
Automating clinical laboratory functions has
shield staff and the surrounding population
from dangerous radiation. both lowered unit costs for laboratory tests and
improved the reliability and validity of the test
results. At the same time, however, the ready
The issue with cobalt therapy, as with many
availability of automated equipment has stimu-
other large and expensive technologies, con-
lated the use of laboratory tests and increased
cerns the number and distribution of units.
the total volume of tests performed—to such an
Most experts believe that, like many expensive
extent, in fact, that the value of much of this
technologies, cobalt therapy should be centrally
testing is now in question.
located to ensure access and located in a special-
ized medical center to permit optimal use. In 1975, 5 billion laboratory tests were done
in the United States at an estimated cost of $15
Automated clinical laboratories.—The pri- billion (6). The number of tests was increasing
mary function of the clinical laboratory is to both for hospitalized and ambulatory patients.
analyze and provide data on samples of body Between 1969 and 1976, the average number of
tissues or fluids. By correlating these data with tests provided per patient per day in the hospital
firsthand observations and results of other tests, rose from 2.3 to 5,0, an average annual increase
physicians are better able to make accurate di- of 11.1 percent (1). During the same period, the
agnoses and to determine the proper therapy for average cost per test rose by $0.22, from $1.34
their patients. Appropriate and reliable data to $1.56. In 1976, it was projected that the total
from clinical laboratories are essential for cur- volume of laboratory tests nationally would rise
rent medical practice. at the rate of 11 percent a year (6).

1. AHA Indexes, “Growth in Laboratory Tests In- 4. Fineberg, H. V., “Gastric Freezing—A Study of
dicative of Increase in Service Intensity, ” Hospz- Diffusion of a Medical Innovation, ” in Medical
tak 53:46, 1979. Teclz~lology and tlze Healt)l Care Systet}l (Wash-
2. Altman, S., and Wallack, S., “Technology on ington, D. C.: National Academy of Sciences,
Trial–Is It the Culprit Behind Rising Health Committee on Technology and Health Care,
Costs? The Case For and Against, ” in Medical 1979) .
Tech )Iology: Tile Culprit Belli)ld Health Care 5. Office of Technology Assessment, U.S. Con-
Costs? edited by S. Altman a n d R . B l e n d o n , gress, Assessing the Efficacy and Safety of Medi-
DHEW publication No. (PHS) 79-3216 (Hyatts- cal Technologies, GPO stock No. 052-003 -
ville, Md: National Center for Health Services 00593-o (Washington, D. C.: U.S. Government
Research, and Bureau of Health Planning, 1979). Printing Office, September 1978).
3. Cohn, V., and Miluis, P., “They Make Good by 6. , Dezlelopment of Medical Techtlology:
Making Well, ” Waslzi)lgto)z Post, January 7, Opportu)lities for Assessment, GPO stock No.
1979. 052-003 -00217-5 (Washington, D. C.: U.S. Gov-
ernment Printing Office, August 1976). 9. Russell, L., Tech) zology i}z Hospitals (Washing-
7< Policy Implications of t}?e Computed ton, D. C.: Brookings Institution, 1979).
To)nog’raphy (CT) Scar?ner, G P O s t o c k N o . 1 0 . Simanis, J. G., and Coleman, J. R., “Health
(Washington, D. C.: U.S. Gov-
052-003 -00496-8 Care Expenditures in Nine Industrialized Coun-
ernment Printing Office, August 1978). tries, 1969 -1976,” social Secz{rity Blllleti)l 43:3,
8. Rettig, R., ln?plet~le)ltitlg the E) Id-Stage Re/zal 1980.
Disease Program of Medicare, draft report for 11. T h o m a s , L . , T//e l.i~~es of a Cell (New Y o r k ,
Health Care Financing Administration, grant N. Y.: Viking Press, 1974).
No. 18-P-90742/9-01 (Washington, D. C.:
RAND Corp., 1979).
The Management of
Medical Technology in
the United Kingdom

Barbara Stocking
London School of Hygiene
and Tropical Medicine
London, England

The United Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

The Health Care System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . * . . * . * * . 12

Mechanisms for Managing Medical Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Research, Development, and Evaluation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
The Purchase of Equipment. 16
Planning . . . . . . . . . s . . . . . 17
Specific Technologies. . . . . . . . . 18
CT Scanners . . . . . . . . . . . . 18
Renal Dialysis. . . . . . . . . . . 19
Coronary Bypass Surgery . . 21
Cobalt Therapy. . . . . . . . . . 21
Clinical Laboratory Testing: 22
Concluding Remarks . . . . . . . . . 23
Chapter 2 References . . . . . . . . . 24


Table No. Page

1. CT Body Scanners Installed or on Order in the United Kingdom . . . . . . . . . . . . 18


Figure No. Page

1. Framework of the NHS Structure in England . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
The Management of Medical Technology
in the United Kingdom
Barbara Stocking
London School of Hygiene
and Tropical Medicine
London, England


The United Kingdom, with a total population tries are led by individuals from the majority
of 55.5 million (23), consists of four countries: party in Parliament, so there is no separation of
England, Scotland, Wales, and Northern Ire- the executive and legislative branches of
land. It has a constitutional monarchy with gov- government.
ernment by a two-tier Parliament (the House of
Commons and the House of Lords). All four The House of Lords is composed of hereditary
countries are directly governed by Parliament at peers, as well as peers appointed for life. It is the
Westminster, though Northern Ireland has, in privilege of the Prime Minister to select a certain
the past, had its own Parliament. Despite direct number of individuals for life peerages each
rule, a certain amount of power has been de- year; those selected tend to be individuals who
volved to the separate countries, producing have had distinguished careers in various walks
some differences, for example, in how the health of public life. The House of Lords is of less im-
services are managed. In recent years, both portance than the House of Commons, but does
Scottish and Welsh nationalism have increased provide a useful check on parliamentary legisla-
and will almost certainly lead to further devolu- tion and can initiate bills itself. There is agree-
tion of power. The idea of separate assemblies ment from both major parties, however, that
for these countries, however, was rejected in a some reform of this body is due.
recent referendum.
The economy of the United Kingdom is
The two major political parties in the United mixed. A number of major services and indus-
Kingdom are Labour and Conservative, al- tries are nationalized (e. g., British Rail, the
though a number of other parties (e.g., the Lib- British Steel Corp., etc.). In many cases, these
erals, the Scottish Nationalist Party, etc. ) are industries are managed, not directly by Parlia-
represented in Parliament. Members of the ment, but by independent corporations whose
House of Commons are elected democratically, leadership, composition, and powers are laid
with each Member representing a particular down by Parliament. The National Health Serv-
constituency. The government is formed by the ice (NHS) is an exception in that a Secretary of
party with the majority of Members of Parlia- State for Social Services in Parliament does
ment in the House. The Prime Minister is the head the corresponding government depart-
leader of that party, and he/she forms the ment, i.e., the Department of Health and Social
Cabinet from the Members of that party in the Security (DHSS). ’ In recent years, particuiar]y
Houses of Parliament. The various government under Labour governments, the number of na-
departments and ministries are headed by Secre-
taries of State or Ministers, a subset of whom ‘The Ministry of Health was combined with the Ministry of
form the Cabinet. All departments and minis- Social Security in 1968, when it became DHSS.

tionalized industries has increased. In addition, in Britain, despite the very high quality of sci-
where industries have particular importance to ence and technology research carried out in Brit-
the economy, the government has stepped in to ish universities and research institutions.
support firms in the free enterprise sector (e. g.,
Rolls Royce, Chrysler). In discussing British attitudes towards tech-
nology, a somewhat different point should also
Britain’s relative lack of productivity, as com- be made. Although science and academic re-
pared to its European, American, and Japanese
search in Britain are of high status, technology
competitors, has been blamed on a number of has for a long time been considered somewhat
factors. The management side of industry is second rate. This attitude, perhaps, can best be
blamed for not modernizing its equipment and exemplified by the status of engineers. Engineers
for not being willing to risk involvement in new in the United Kingdom do not receive the same
ventures. These problems are, in turn, blamed respect as other professionals; in comparison to
on the government, which is said to have pro- the status of engineers in other countries, their
duced a lack of incentives for investment or for status is low, The large gap between the devel-
entrepreneurial activity. On the workers’ side, opment of inventions and innovations in re-
the unions are blamed for strikes, for enforcing search institutions and their actual implemen-
rigid demarcation rules, and for overmanning. tation or production by industry very likely
There would seem to be truth in the statements reflects the predominant attitude toward
that each of these factors has contributed. Nev- technology.
ertheless, the sum of all of these factors, not any
particular one, has caused Britain’s decline rela- Recently, concern over Britain’s declining
tive to other countries. economy has led to a slow recognition that in-
The problems of British industry give some dustry, technology, and innovation must be
insight into the attitudes towards technology. given increased status and more incentives. In
New technology is often rejected by the unions, particular, the previous Labour government
not for itself, but because it will lead to a reduc- took steps to ensure that Britain would not get
tion in jobs. Management may be fearful of a left behind in the microprocessor revolution.
confrontation with the unions or may not be Whether these steps are adequate and whether
willing to invest in innovations. The result is a more fundamental attitudes towards technology
fairly conservative attitude towards technology can be changed remains to be seen.


A national insurance system that covered the tients free of charge (apart from small payments
health care of most of the working population for drugs, spectacles, etc.).
was initiated early in the century, but it was not
until 1948 that Britain established its NHS. The basic tenets of the 1946 Act creating NHS
World War II changed many public attitudes still hold, although the Service, particularly its
and fostered the belief that a postwar social organization, has been modified by various
order should be created that ‘would include laws passed since. The most major change came
health care as a right for all. Although the in 1974 with the reorganization of NHS. Until
Beveridge plan for NHS was drawn up during that time, hospitals had been managed by re-
the war, legislation creating NHS was not gional hospital boards responsible to DHSS and
passed until 1946, and the Service was not final- ultimately to the Secretary of State in Parlia-
ly begun until 1948. Funds for NHS come from ment; community care, including district
national insurance contributions and from gen- nurses, school health services, etc., however,
eral taxation. All health care is provided to pa- had been the responsibility of local government
authorities. In 1974, the various facets of health the day-to-day activities, but is responsible to a
care were unified under one authority. Regional Health Authority. Statutory authority
for NHS is vested in the Area and Regional
Currently, the unified NHS in England is Health Authorities (all of whose members, apart
organized in a number of tiers. (See figure 1.) from the chairmen, serve unpaid). In Scotland,
The bottom tier is the “district,” serving perhaps
although the organization of NHS is similar,
a quarter of a million population. All hospital there are three tiers.
and community services are the responsibility of
a district management team. The district is part One or two points need to be made about the
of a larger “area” (although some areas contain structure of NHS. It is envisaged that actual
only one district). The area has a team of offi- management of health services should take
cers who are actually employed by the Service place at the lower levels, with the upper levels
but who are responsible to an Area Health Au- providing a coordinating and policymaking
thority appointed by the Secretary of State for function. There have been considerable diffi-
Social Services. The areas are overseen by “re- culties in the Service about the role of each of
gions.”2 A regional team of officers carries out the tiers, however, and there is some consensus
‘There are 14 regions in England, The other three countries in
the United Kingdom are comparable in size to an English region ern Ireland has 4 Health and Social Service Boards. Northern Ire-
and are therefore organized slightly differently: Scotland has 15 land is different from the other countries in that health and social
Area Health Boards; Wales has 8 Area Health Authorities; North- services are combined,

Figure 1 .—Framework of the NHS Structure in England

of State I

— o —

- - - - - -

\ 1 .
\ \

SOURCE Office of Health Economics, The Reorganised NHS (London White Crescent Press. 1977) (19)
that there is probably one tier too many. Be- and has generated much controversy, not least
cause much upheaval resulted from the 1974 re- because full implementation of the recommen-
organization of the Service, however, further dations would lead to a decrease in funds for the
disruption is not likely to be undertaken lightly. Thames regions (which cover the whole of Lon-
don) to provide for increases elsewhere. In fact,
Despite the position of DHSS at the top of the
the previous Secretary of State for Social Serv-
hierarchy, it is repeatedly pointed out that, sub-
ices, in office until 1979, took more of a middle
ject to conforming with general policy, the re-
road, giving increases in funds to all regions but
gions and areas are free to manage NHS as they
with the amount of growth proportional to each
see fit, and in particular, to allocate resources
region’s relative under- or over-provision. It re-
according to their own judgment. Nevertheless,
mains to be seen how the present Conservative
there is some confusion about how binding
Secretary of State will handle this problem.
DHSS’ advice is—confusion that is seen both in
the purchase of medical equipment and in other The resource allocation problem has high-
activities. In one sense, DHSS is quite outside lighted the difficulties likely to be faced in the
the Service in that it is the Regional and Area next few years. As in other developed countries,
Health Authorities rather than the Department health care costs in the United Kingdom have
who actually employ NHS staff. Since DHSS risen (although here they have been compara-
holds the purse strings and distributes money to tively well restrained, perhaps at the expense of
the regions, however, it obviously has consid- the quality of the Service). Since it is clear that
erable powers of persuasion. this situation of rising costs cannot go on in-
definitely, NHS is in for a period of little or no
According to DHSS, NHS spending for fiscal
growth. During that period, it will be hard to
year 1979-80 (excluding central services) was remove inequalities.
18.1 billion ($17.8 billion). ’ The Office of
Health Economics estimated that in calendar Finally, on NHS funding, it should be pointed
year 1978, NHS expenditures were running at out that the Health Authorities operate on a sys-
5.7 percent of the gross national product tem of cash limits. Each year they must remain
(GNP). 4 Apart from government expenditure on within these limits, though some allowance is
health, an additional small but increasing made subsequently for inflation. Major salary
amount of money is spent on private health increases negotiated at the national level and
services. There is also separate funding for bio- taking effect in the budget year in progress make
medical research through the Medical Research it difficult for Authorities to plan their budgets
Council (MRC). to remain within these limits. In some cases, this
difficulty has led Authorities to underspend dur-
How NHS funds should be distributed is a
ing the year, and then at the end of the year to
topic that has recently come in for considerable
use their surplus funds for major purchases such
scrutiny. Concern about inequality in the provi-
as medical equipment.
sion of health services led to the setting up of the
Resource Allocation Working Party (RAWP). To complete this section, a brief summary
RAWP recommended that resource allocation should be given of some of the other descriptors
should not be based on existing facilities per se, of NHS. Unfortunately, in government docu-
since these tend to generate their own demand; ments, some figures are given for England and
instead, money should be allocated to regions Wales, some for Great Britain (which includes
on a population basis modified by various fac- Scotland but not Northern Ireland), and some
tors that might indicate the need for health care, for the United Kingdom (including all four
such as standardized mortality ratios (11). The countries). This should be kept in mind when
formula RAWP recommended is quite complex reading this section. 5 In 1976, there were

‘The information in this section is taken from two publications

of DHSS, Annual Report 1977 (4) and Health and Personal Social
Services for England (s).
479,359 hospital beds in Great Britain, of which responsible for referrals to hospitals, consult-
about 300,000 were nonpsychiatric and the rest ants, etc., they play a major role in Britain.
psychiatric beds. There were 26,418 GPs in Great Britain in 1976.
The latest figures available on staff are for To give some idea of the utilization of NHS,
1975, when a total work force of 914,068 was some figures for 1977 can be cited. In England,
given for Great Britain, with something under 5.3 million inpatients were treated in the coun-
half of this total being nursing and midwifery try’s approximately 376,000 hospital beds. The
staff. For 1976, a full-time equivalent figure of average length of stay was 20.9 days, but re-
37,257 medical staff was given for hospital and duces to 9.2 days if pyschiatric, geriatric, and
community services. General practitioners younger disabled units are excluded. The total
(GPs), who provide the bulk of medical staff in attendancies of outpatients at consultant clinics
the community, are not included in this figure, was 33 million, not including accident and
since they are not NHS employees but work on emergency departments, and there are also ac-
contract to the Service through family practi- tive day patient programs in psychiatric and
tioner committees. (See figure 1.) Since GPs act geriatric units. On the average, a patient visits
as the front line for much of the Service and are his or her GP three times a year.


Research, Development, and Evaluation The processes for the evaluation of medical
In Britain, much technological innovation in technology are generally more haphazard. For
medicine has stemmed from university and new drugs, however, a rigorous code of practice
medical school research, particularly in bioengi- is followed. Trials of new drugs are usually
neering or medical physics departments. The sponsored by the drug manufacturer after ani-
pharmaceutical industries have always under- mal trials have been completed and found ac-
taken their own research, but the medical equip- ceptable by the Committee on Safety of Medi-
ment industries have tended to develop inven- cines. The clinical trials tend to take place in the
tions and ideas from academia. As more medi- NHS setting, although doctors are not paid for
cal industries, particularly those in diagnostic their involvement. Before a drug may be mar-
equipment, are setting up their own research keted, approval by the Committee on Safety of
laboratories, however, this situation may be Medicines is required.
changing. There are no formal procedures for the evalu-
ation of medical devices. Two agencies, how-
Funds for research in academia may come ever, do exert some oversight: 1) the Scientific
from a variety of sources—from university and Technical Branch of DHSS, and 2) MRC.
overheads, from government-funded research MRC is responsible for most of the clinical trials
councils, and quite commonly in the medical of new procedures in the United Kingdom (apart
field, from a number of trusts and foundations. from trials sponsored by pharmaceutical manu-
At the development stage, a number of routes facturers). MRC has a well-earned reputation
can be taken: The invention may be taken up by for the quality of its clinical trials, but does not
industry; the National Research and Develop- evaluate all new procedures and treatments.
ment Corporation may provide funds for devel- Evaluation of a particular procedure or piece of
opment work or may find a suitable firm to take equipment may be suggested by the committees,
up the idea; or DHSS, through its Scientific and units, or council of MRC, may be suggested in-
Technical Branch, may provide “pump-prim- dependently by a particular researcher in a
ing” funds for inventions which it feels may be grant application, or may be requested by
especially useful to NHS. DHSS. How many of these triaIs actually take
16 ● Backround paper #4: The Management Of Health Care Technology in Ten Countries

place depends on their importance in compar- too, the introduction and diffusion of medical
ison to other uses of MRC funds; there is no technology are not so well managed as might be
fixed budget for clinical trials. Britain is in a thought.
very favorable position for carrying out clinical
trials, however, because the costs of patient care The main reason that Britain has not had the
(including salaries of staff, etc.) are already be- pressures for more control which are in evidence
ing borne by NHS. The actual costs of a clinical in the United States is not so much that technol-
trial, then, are low, “particularly in comparison ogies are well managed as that NHS budgets are
to the costs of trials in the United States. MRC very tight and there are many competing claims
tends to emphasize randomized trials of new or on a Health Authority’s funds. Through the
existing treatments rather than the evaluation of NHS budgetary system, Britain has had some
diagnostic or other procedures, or on medical protection from the cost explosion of new tech-
equipment more generally. nologies seen in other countries.
The Scientific and Technical Branch of DHSS
exerts a more general overview of the field than The controls over medical equipment pur-
MRC. The evaluation activities of this branch chasing are quite variable in NHS. Some equip-
tend to focus on the safety of equipment and its ment (e. g., X-ray apparatus, renal dialysis
performance and reliability in clinical settings. machines, and automated laboratory equip-
Although the branch may provide funds for ment) is purchased under central contracting ar-
purchase of machines to be tested in the clinical rangements. DHSS—again Scientific and Tech-
environment, it is not involved in randomized nical Branch or its counterpart in Wales, Scot-
clinical trials. It may suggest to MRC, however, land, or Northern Ireland—negotiates contracts
that such trials are needed. with the supplying firms, and this equipment is
produced to DHSS specifications and evaluated.
Thus, clinical performance, and to some ex- Since DHSS does not directly place orders for
tent clinical trials, of medical technology are the equipment, however, there is no guarantee to a
major facets of evaluation in Britain. There is manufacturer that its equipment will be pur-
virtually no emphasis on evaluating the more chased by Health Authorities. Purchase will de-
general social and economic impacts of innova- pend on whether an Authority decides it needs
tions. Any such work that does take place prob- new equipment, and even if an Authority de-
ably arises independently in universities around cides that it does, it may buy from another man-
the country, although it may be supported by ufacturer (although the fact that the equipment
DHSS-controlled research funds or perhaps by has been built to certain standards and specifica-
the Social Science Research Council. tions is an incentive to use the firm with the
DHSS contract).
The Purchase of Equipment
The structure of NHS was discussed earlier, Even within the central contracting arrange-
but it perhaps needs to be reiterated here that it ments, there is some variability according to the
is Regional and Area Health Authorities who type of equipment. Orders for X-ray and radio-
decide how money should be spent, and it is up therapy equipment are placed through DHSS.
to them to decide what equipment is needed and With other equipment, such as automatic ana-
which make should be purchased.7 Thus, al- lyzers, the central contracting is for a base price,
though there is a nationalized health service in and individual Authorities negotiate with and
Britain, there is much more scope for variability purchase equipment from the firms directly.
than one might at first suspect. Consequently, There have been complaints about the central
contracting arrangements both from manufac-
“Much of the information in this section was taken from “Medi- turers, who have no guarantee of a number of
cal and Scientific Equipment in the NHS, ” Brit, Meal, J. 1(6120): sales and yet are selling at prices favorable to
1160, 1978 (16).
This is apart from the small amount of equipment purchased di- NHS, and from Health Authorities, who would
rectly by DHSS for evaluation. like more freedom to negotiate with firms.
Ch. 2— The Management of Medical Technology in the United Kingdom 17

Apart from the central contracting arrange- implemented and how they will affect NHS
ments, supplies, including medical equipment, await to be seen under the new government.
are in the hands of the Health Authorities them-
selves. The cheaper equipment (under 15,000 Planning
($11,000)) comes out of revenue expenditure To complete this section on medical technol-
and is handled through hospital budgets. If it ogy management, something must be said about
costs more than 5,000, equipment is consid- the NHS planning system. Since the 1974 re-
ered a capital expenditure and may be handled organization of NHS, a highly complex plan-
in a variety of ways depending on the area or ning system has been initiated. Under this plan-
regional policy. In some regions, a budget is set ning system, the lowest tier (i.e., the district)
aside for equipment and there are committees prepares a 3-year operational plan which is
set up at the regional level to decide on equip- passed up to the higher tiers and incorporated
ment (e.g., for radiology, for pathology, etc.).
(with appropriate discussion and modification)
This system may have advantages in that the into the higher tiers’ larger operational plan. In
supply of equipment is rationalized throughout addition, areas prepare 10-year strategic plans
the region and the actual purchase decided on which are incorporated into regional strategic
by specialists who understand the highly com- plans. These strategic plans are revised every 4
plex machinery.
years. In theory, by a process of passing down
information about policy from the top and re-
In other regions, there may be no special
ceiving these plans upwards from the bottom, it
budget for equipment; instead, areas may be
is hoped that a region, and ultimately DHSS
allowed to decide how much of their minor capi-
and the Secretary of State for Social Services,
tal allowance to spend on it. Devolving the deci-
can guide NHS in appropriate directions. Al-
sion downwards in this way has the advantage
though this planning system is in its early stages
that money is not automatically spent on equip-
and is having teething troubles, it is necessary to
ment, i.e., without comparison of that need to
mention it, particularly in the context of capital
other needs for capital. On the other hand, the
expenditure. Since capital will form an impor-
region may lose out on discounts for bulk buy-
tant part of a regional strategy for modifying its
ing and there may be other problems such as
service provision, it should be through these
duplication of equipment. It should be pointed
plans that modifications of capital stock are
out that requests for equipment in these various
systems tend to originate with clinicians;
whether requests are successful will depend to Capital budgets are allocated to regions in a
some extent on clinicians’ ability to argue their way similar to that described for resource allo-
case in the face of other competing claims on cation of revenue costs (i. e., the RAWP formula
resources. discussed above) (11). Although regions— and
also areas, if decisionmaking is devolved down-
Clearly, there is great variability in how NHS wards—are free to decide on how capital funds
handles the purchase of medical technology. should be spent, it is likely that major capital
The general question of supplies for NHS, of developments (e.g., new hospitals) will have
which medical equipment is one facet, has been been thoroughly discussed with DHSS and ap-
under examination recently by the Salmon proved by the Secretary of State. As an inter-
Working Party. There is agreement that all is esting aside, it is noteworthy that hospital bed
not well with the current mechanisms, and the closures cannot be made without the approval
working party recommended setting up a Sup- of community health councils, the community
ply Council to set policy, including policy for “watchdogs” of NHS. When these councils and
the evaluation of medical equipment (6). How a Health Authority disagree, the final decision is
far the working party’s recommendations are made by the Secretary of State.
18 Backround Paper #4: The Management
● Of Health care Technology in Ten countries

CT Scanners
ends, thereby making body scanning a possibil-
ity. DHSS was much less involved with the de-
In 1967, G. N. Hounsfield, working on pat- velopment of body scanners, and EMI provided
tern recognition studies at British manufacturer its own funds for the first prototype. This
EMI’s central research laboratory, built a crude machine was installed in Northwick Park Hos-
scanning device which produced pictures of in- pital in 1975. Although DHSS did not take part
animate objects. Although similar devices had in the evaluation of the machine, it did advise
been produced by others, particularly, W. H. Health Authorities to be cautious about pur-
Oldendorf and A. M. Cormack in the United chasing scanners until the evaluation was fur-
States, their ideas had not been taken up by in- ther advanced.
dustry. It was Hounsfield’s success in persuad-
ing EMI of the medical importance of his inven- In fact, events overtook the evaluation. With
tion which led to the manufacture of the first resistance to purchase of body scanners in of-
computed tomographic (CT) scanner. ficial channels, other sources of funds for such
scanners were apparently sought. In a number
DHSS was involved from a very early stage. of areas, various philanthropists donated scan-
EMI approached DHSS about the usefulness of ners to NHS; in other areas, appeals were set up
Hounsfield’s idea, and as a result, DHSS pro- to raise the necessary funds. Table 1 shows the
vided funds for the first prototype brain scan-
ner. The Department also arranged in 1971 for
this scanner’s clinical evaluation at Atkinson Table 1.—CT Body Scanners Installed or on Order
in the United Kingdom (October 1979)a
Morley’s Hospital in London (1). During 1973,
two additional first-production machines were Location Source of funds for machine
purchased out of the Department’s R&D funds England and Wales
and sited in well-known hospitals. Subsequent- Northwick Park DHSS
Brighton Donor
ly, DHSS purchased three more machines for Manchester (Medical School) University and NHSb
further evaluation. Birmingham Donor
Bristol Donor agency
Early on, it became obvious that CT brain Royal Marsden, Sutton Cancer research campaign
scanning was a remarkable breakthrough. The and additional sources
London (St. Thomas’) Endowment funds
results of evaluation studies furnished to DHSS London (University College) Donor
in 1976 by the six institutions with scanners led London (St. Bartholomew’s) Endowment funds
to the Department’s recommendation that each London (Middlesex) Endowment funds
Leeds Appeal
region purchase at least one brain scanner. By Conventry Appeal
August 1978, 33 brain scanners had been in- London (National Hospital) DHSS, donors, and
stalled or were on order in England and Wales. additional sources
London (Great Ormond St.) Appeal
The number did not increase greatly thereafter, London (Charing Cross) Donor
because of Authorities’ tendency to buy body Manchester (Christie) Appeal
scanners for both brain and body purposes. By Guild ford DHSS and NHS
January 1, 1979, there were 39 head scanners, Scotland
Edinburgh NHS
and 1 more was added during 1979. Glasgow NHS
Meanwhile, EMI had succeeded in decreasing Northern Ireland
the scan time from 5 minutes to about 20 sec- Belfast NHS
Outside NHS
Much of the information for these case studies was derived BUPA Donor
from particular individuals. These sources are given, but the in- Midhurst Donor
dividuals concerned are not responsible for any mistakes or misin-
A fuller discussion of CT scanning in Britain is given in B. M.
Stocking and S. L. Morrison, The Image and the Reality: A Case
Study of Medical Technology, 1978 (22).
Ch. 2–The Management of Medical Technology in the United Kingdom . 19

sources of funds for the capital costs of all body scanners should be given “to those centres
scanners installed or on order in October 1978. prepared to undertake further clinical evalua-
Eighteen body scanners were operational by tion” (11). The hospitals that are getting scan-
January 1, 1979, and another five became oper- ners as a result of appeals, though, are not nec-
ational during 1979. essarily the most capable of evaluating them.
Thus, although it is accepted that philanthropy
Early on, DHSS had set up a committee to can provide a very useful source of funds for
monitor the body scanner’s evaluation, but it NHS, in the case of CT scanners, philanthropy
was not until August 1978, when a large number has produced a number of difficulties.
of body scanners were already in use, that
DHSS issued a paper saying that whole-body Renal Dialysis

scanning did have a place in diagnostic radiol-

ogy (7). This letter went on to say: “In a few For patients with chronic renal failure, treat-
centres it is likely that general purpose scanners ment by dialysis or the receipt of a transplant
will need to be provided primarily for the body may be alternatives or may be complementary.
role. ” Thus, in the following discussion, figures are
given for both dialysis and transplant services.
Whole-body CT scanning has raised a num-
ber of important questions in the United King- Britain became involved in the provision of
dom. The central issue concerns how new tech- renal dialysis for chronic renal failure in the
nologies should be evaluated. A number of di- mid-1960’s. The British Government, through
agnostic techniques have been tried out in clini- the then Ministry of Health, became directly in-
cal settings before large-scale diffusion; CT volved in establishing dialysis units and in
scanning is unique in that questions have been evaluating the technique. By the end of the
raised about the usefulness of this as compared decade, the current network of dialysis centers
to other techniques and the need for randomized was established, and Britain was leading the
clinical trials of diagnostic equipment has been way in Europe in the provision of this service.
recognized. (Britain no longer holds this lead.)
The important issue of the role of philanthro- The Ministry of Health was also involved in
py in NHS has also been raised. In a number of setting up the network of transplantation units
cases, Health Authorities have been put into an alongside the dialysis units after a working par-
embarrassing position. Scanners have been of- ty on the subject had reported in the early
fered to them, but individual Area Health Au- 1960’s. Finally, central funds were used to setup
thorities have had to provide the operating costs the National Organ Matching and Distribution
(and probably eventually the funds for replace- Service and the National Tissue Typing Refer-
ment machines). Operating costs are estimated ence Laboratory (referred to jointly as “UK
at 50,000 ($110,000) per annum, and given Transplant”).
current tight budgets, these Authorities might After these early initiatives, the Ministry of
prefer to use their funds for other purposes. Health handed over the responsibility for fi-
There are also other consequences of philan- nancing the now 49 dialysis and transplant units
thropic gestures. Because local consultants have in England and Wales to the Regional Author-
usually been the stimulus behind appeals and ities. Particularly since reorganization of NHS
the local community itself has raised the funds, in 1974, DHSS has emphasized that resource al-
the local community expects to benefit by hav- location decisions are in the hands of the Re-
ing the scanner in its own hospital. This may or gional and Area Health Authorities.
may not be the best location for it. It is certain
that some of the early scanners donated by phil- 10

anthropists did not go into the most appropriate Much of the information for this case study was taken from a
1978 publication of the Office of Health Economics, Renal Failure:
locations for a proper clinical evaluation. Even A Priority in Health? (18) and from discussion with author Wil-
now, DHSS recommends that priority for body liam Laing (15).
20 Backround Paper #4: The Management
● Of Health care Technology in Ten Countries

Despite this devolution of responsibility, There has, then, been considerable British
renal dialysis has reached sufficient prominence Government intervention in renal dialysis and
in public debate for the British Government to transplant services. To understand why the Brit-
become involved again. In particular, in late ish Government has felt obliged to take specific
1977, funds were provided through the special action, it is necessary to look at the figures for
medical development (SMD) earmarking system the service provision with estimates of need. In
for extra dialysis machines for children. The the late 1960’s, three major surveys were under-
SMD money is for the initial stages of new pro- taken in the United Kingdom to estimate the lev-
grams. The conditions set are that the object of els of chronic renal failure in the population.
expenditure should be just emerging from the From these surveys resulted the often quoted fig-
experimental stage and that the period of direct ure that 40 new patients per 1 million popula-
financial support should be short term. No pro- tion aged 5 to 60 years would need treatment
vision was made for recurring revenue costs per year. Even this must be considered an under-
with the pediatric dialysis machines. Thus, Re- estimate, since it is now accepted that people
gional Authorities already battling with very who were excluded from the treatable category
tight budgets were not enthusiastic about the of- because of associated conditions (e.g., diabetes)
fer of machines. In fact, in some cases, the ma- could now be treated. Also, there are obviously
chines were not accepted. many individuals over the age of 60 who need
treatment, and it is a matter of priorities about
More recently, in the 1978 budget, the British
whether and at what age treatment should no
Government again entered the scene, this time
longer be offered.
quite outside its stated policy of minimal in-
tervention in resource allocation. In the budget, The figures reported for the United Kingdom
3.5 s million ($7.7 million) was allocated to for 1978 (2) show that 2,946 patients were alive
cover the costs of treating 400 extra patients, on dialysis machines (about two-thirds of whom
with provision for the running costs for at least were on home dialysis). For the same year, 820
2 years. It is unclear whether these machines live or cadaver transplants were reported. The
were ever purchased, and if so, whether they are transplant rate of 15.3 per 1 million population
in fact in use. per year compares well with the 4.7 per 1 mil-
The British Government has always been in- lion population average for Europe as a whole.
volved in the transplant service, because this The overall rate for all patients being treated by
service is a nationally based system. In partic- dialysis or with a functioning transplant in the
United Kingdom in 1978 was 92.3 per 1 million
ular, DHSS has taken initiatives to increase the
numbers of cadaver kidneys available for trans- population. The number of new patients ac-
plant through the use of kidney donor cards. In cepted for either form of treatment in 1978 was
current law, in the absence of any clear state- 19 per 1 million population. If this figure of 19
patients per 1 million population is compared to
ment of the potential donor’s wishes, the person
lawfully in possession of the body must make the survey figures of an estimated 40 new pa-
tients per 1 million population per year, a seri-
reasonable inquiry to ascertain whether the
deceased, the spouse, or any surviving relative ous shortfall in the number of patients who are
receiving treatment compared to the estimated
objects to the organ donation (with all the
number of patients who could benefit is ap-
attendant problems of securing their approval).
Kidney donor cards signed by the potential parent. These figures, linked to the publicity
donor, if carried by a large number of the popu- there has been on the subject, are clearly reasons
lation, would therefore be expected to increase why the British Government has felt obliged to
the number of kidneys for transplantation. In step in.
1978, DHSS intensified its campaign to bring The questions raised by by the situation re-
the existing donor card system to the public’s at- garding the treatment of patients with kidney
tention, hoping to increase the number of cards failure are quite unusual, because it is one of the
carried. few instances in which a directly lifesaving pro-
Ch. 2— The Management of Medical Technology in the United Kingdom 21

22 Background Paper #4: The Management of Health Care Technology in Ten Countries

Nuclear Energy (now incorporated in TEM In- chines should be purchased. The current policy
struments) sold machines in Britain, and these guidelines (8) state only that each designated
machines, too, were purchased with NHS re- radiotherapy center should have a minimum of
gional hospital board funds, although the then two megavoltage machines. In fact, the centers
Ministry of Health was involved in central con- are quite variable. Four of the five Scottish
tracting arrangements. Central R&D funds were centers, for example, have chosen accelerators,
not used to develop equipment and purchase whereas the fifth has decided to use only cobalt
early machines for clinical evaluation. 14 machines.
At the time, there were 50 radiotherapy cen-
ters in England and Wales—a number of them in
Clinical Laboratory Testing:
the London teaching hospitals, others in major Laboratory Automation
cities around the country. Each of these centers The first single-channel automated laboratory
purchased a cobalt therapy machine; some, de- analyzers became available at a time when there
pending on their patient load, purchased more was much concern about the increasing work-
than one. The decision to purchase machines loads in pathology laboratories in the United
was in the hands of the hospitals designated as Kingdom. The then Ministry of Health’s re-
radiotherapy centers, and there seems to have sponse to the first commercially available ma-
been little call from other hospitals for these chine, the Technicon system, was to ask hospi-
machines. tals not to buy these analyzers. Because of the
In April 1979, there were 105 cobalt machines pressure of the workloads, a number of teaching
in Great Britain, almost all of them of British hospitals and regional hospital boards did go
manufacture. This figure probably represents a ahead and buy machines in the early 1960’s,
peak. Even though patient loads may increase, despite the Ministry’s request. Meanwhile, by
and in addition replacement machines will have providing funds for development and offering
to be purchased, there is a tendency to replace guarantees of purchase as an inducement, the
cobalt machines with linear accelerators. The Ministry of Health attempted to encourage Brit-
advantages of linear accelerators are that: 1) pa- ish manufacturers. The one machine that re-
tient throughput is faster, and 2) these machines sulted from this encouragement was not very
are easier to use, because the size of the source is successful.
smaller and can be more readily pinpointed to By the mid-1960’s, two-channel and then mul-
reach a tumor. tichannel machines were becoming available,
It is unlikely that linear accelerators will and it was at this time that the Ministry of
replace all cobalt machines. Cobalt therapy may Health began working with Vickers to produce
be more suitable for some treatments, and co- a multichannel analyzer. It was already being
balt machines are less complex to maintain and suggested that laboratory services should be
also considerably cheaper than linear acceler- centralized, and it was with this aim in mind
ators. At present, a cobalt machine costs about that the Vickers development was supported.
4100,000 ($220,000), a linear accelerator about Vickers did produce a satisfactory machine. The
double that price. Cobalt machines do require Ministry of Health purchased 22 Vickers ma-
purchase of new cobalt sources about every 4 to chines for NHS, and Health Authorities then
5 years, however, and these cost about 15,000 paid their running costs. Health Authorities
($33,000). subsequently purchased additional Vickers ma-
chines, as well as analyzers produced by other
Both types of machines are bought through manufacturers. The figures on exactly how
central contracting arrangements, but there is many single-channel and multichannel analyz-
no policy on whether accelerators or cobalt ma-
with DHS now commonly involved in the development of
equipment and purchase of early machines for clinical evaluation,
current practice represents a departure from this.
Ch. 2— The Management of Medical Technology in the United Kingdom 23

ers are in NHS are probably not known. A rea- been centralized to some extent, but since they
sonable estimate is that there are about 19 to 20 are much less machine-oriented, there has been
multichannel machines in each English region, less pressure on these branches of NHS.
making a total of perhaps 280 for England
Some concerns have been raised about the
implications of the increased volumes of data
DHSS is still involved in automated analyzers produced by automatic analyzers, and DHSS
in that it negotiates central contracts with man- funded a study to investigate the question. ”
ufacturers. As described earlier, however, this This study indicated that the increased informa-
negotiation does not guarantee any sales; it tion was marginally beneficial, but the issue is
merely sets a base price. Health Authorities are still frequently raised.
then able to negotiate directly with manufac-
Another question concerns the reliability and
turers for a particular machine and purchase it
safety of machines and the accuracy and repro-
ducibility of the data they produce. DHSS-
One major policy that has affected the num- funded evaluations of new automated equip-
ber of machines purchased is the centralization ment address these questions, as well as the total
of laboratories, a policy set out in a health cir- costs of purchasing, operating, maintaining,
cular in 1970. The aim is that each district (the and manning the machines in relation to labora-
lowest tier in NHS, serving about a quarter of a tory workload (10).
million population) should have only one labor-
atory for clinical chemistry. Again, because of
the potential for automation, hematology is also
centralized. Histology and microbiology have

Britain’s fairly conservative attitude towards ogy and another or between equipment and
technology has been noted; notwithstanding other uses of the funds must be made in the con-
this attitude, in the health sector, calls for the text of this overall budget. Because these choices
latest equipment are common from the public are rarely stated explicitly, however, there is a
and doctors alike. In fact, a certain amount of sense in some quarters that technology gets pri-
dissatisfaction is felt by health workers because ority funding over some of the less glamorous
they do not have the latest technologies avail- NHS activities, particularly, the so-called “Cin-
able to them. The reasons for the lack of availa- derella” services such as care of the elderly, the
bility throughout the country of the newest gen- handicapped, etc. The relatively slow growth of
eration of each technology have already been NHS in the next few years is likely to sharpen
described: NHS operates on a budget set by the whole debate on technology and its role in
Parliament, and choices between one technol- British health care.
24 Background paper #4 : The
● Management of Health Care Technology in Ten Countries

1. Ambrose, J., and Gooding, M. R., “EMI Scan in 13 English, T., Secretary, Society of Cardio-Tho-
the Management of Head In juries,” Larzcet racic Surgeons, Papworth Hospital, Cambridge,
1:847, 1976. England, personal communication, 1979.
2. Brunner, F. P., et al., Proceedings European Di- 14$ Kidney, D., Department of Health and Social
alysis and Transplant Association 16(3), edited Security, London, personal communication,
by B. Robinson (Tunbridge Wells, England: Pit- 1979.
man Medical, 1980). 15. Laing, W., consultant to Office of Health Eco-
3. Connally, C., Regional Scientific Officer, nomics, London, personal communication,
South-East Thames Regional Health Authority, 1979.
Croydon, England, personal communication, 16, “Medical and Scientific Equipment in the NHS,”
1979. Brit. Med. J. 1(6120): 1160, 1978.
4. Department of Health and Social Security, 17, Oakley, C., Hammersmith Hospital, London,
Annual Report 2977, Cmnd. 7394 (London: personal communication, 1979.
HMSO, 1978). 18. Office of Health Economics, Renal Failure: A
5. Health and Personal Social Services for Priority in Health? (London: White Crescent
England (London: HMSO, 1977). Press, 1978).
6. “Health Service Management Report of 19. The Reorganised NHS (London: White
the Su’pply Board Working Group, ” DHSS Cresce;t Press, 1977).
health circular HC(78), June 21, 1978. 20. Riley, C., Royal Sussex County Hospital, Brigh-
7. letter to Regional Medical Officers, ton, England, personal communication, 1979.
Aug. 25, 1978. 21, Stocking, B., “X-Rays Highlight the Doctor’s
8. “Organisation of Radiotherapy Services Dilemma,” New Scientist 81(1137):84, 1979.
for the’ Treatment of Cancer, ” NHS develop- 22. Stocking, B. M., and Morrison, S. L., The Zrn-
ment circular, October 1978. age and the Reality: A Case Study of Medical
9. Priorities for Health and Social Services Technology (Oxford: Oxford University Press
in Engl;nd (London: HMSO, 1976). for the Nuffield Provincial Hospitals Trust,
10. “Procedure for Determining Test Costs 1978).
in Pathology Laboratories” (London: HMSO, 23. Whitaker’s A/manack (London: J. Whitaker and
1975). Sons, Ltd., 1978).
11. Report of the Resource Allocation 24. Whitehead, T. P., and Wootton, I. D. P., “Bio-
Worki~g Party (London: HMSO, 1976). chemical Profits for Hospital Patients, ” Lancet
12. The Way Forward (London: HMSO, 2:1439, 1974.
1977). ‘
The Management of
Medical Technology in Canada

Jack Needleman
Lewin and Associates, Inc.
Washington, D.C.

Canada: Country Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
The Health Care System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
National Health Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28
Provincial Management of the Health Care System. . . . . . . . . . . . . . . . . . . . . 30
Mechanisms for Managing Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 34
Evaluation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 35
Regulation and Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...-38
Specific Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 48
Renal Dialysis.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Cardiac Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 50
Radiotherapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 51
Clinical Laboratory Equipment and Automation. . . . . . . . . . . . . . . . . . . . . . . 52
Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 53
Chapter 3 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54


Table No. Page

I.Percent of GNP Directed to Personal Health Care in Canada and the
United States . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 33
2. Guidelines for Special Services in Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . 36
The Management of
Medical Technology in Canada
Jack Needleman
Lewin and Associates, Inc.
Washington, D.C.


Canada has a population of 23 million peo- accentuated in recent years by the growth of the
ple. 2 Although its land area is second only to Quebec separatist movement and election of a
that of the Soviet Union, it is basically an urban separatist government in that Province.
country, with 56 percent of its population in
Canada is a confederation made up of 10
metropolitan areas of over 100,000 population.
Provinces and 2 Territories. Confederation,
Most of Canada’s population lives along the
agreed to in 1867 and embodied in the British
“fourth North American coastline,” the Saint
Lawrence River and Great Lakes, and on the Pa- North America Act, was an essential compro-
cific coast, and much of the prairie population mise necessary to address the political conflict
lives fairly close to the Canadian/U.S. border. between the French and English communities
and to pave the way for independence from Eng-
Settled initially by both the French and Brit- land. 3 Governments at both the Federal and
ish, Canada in the 18th century was an arena of Provincial levels are parliamentary in form.
imperial competition between them. The coun- Compared to the constitutional division of re-
try continues to have separate French- and Eng- sponsibilities in the United States, the constitu-
lish-speaking communities, each with its own tional division between the Federal Government
educational, social, and religious institutions, and the Provinces in Canada is more clearly
and is officially bilingual. For many years, the defined and more strictly observed. In addition
English-speaking community has dominated the to the formal wording of the British North
national economy. Even in Quebec, where the America Act, social and political factors create
French community is concentrated (approxi- continued pressures to maintain this separation.
mately 80 percent of the population is franco-
Social programs, including health programs
phone), the English were economically domi-
for the general population, fall within the sphere
nant until recently. There has been extensive im-
migration to Canada and the country is ethni- of activities reserved for the Provinces. 4 In order
to overcome the constitutional bar to Federal
cally diverse, but the split between the English-
administration and bring Federal resources to
and French-speaking communities remains a
bear on social problems, a pattern has devel-
central factor in Canadian society. It has been
oped in Canada in which the Federal Govern-
1 3
The author gratefully acknowledges the invaluable assistance Canada is an independent nation, but its constitutional ties to
of Roger LeCompte of Lewin and Associates, Inc. the United Kingdom are still strong. For example, the Queen of
‘According to Statistics Canada (14), the estimated population England is formally head of state and appoints a Governor-Gener-
of Canada in 1974 was 2,334,000. The two largest Provinces were al to represent her. The constitution, the British North America
Ontario, with a population of 8,063,000, and Quebec, with Act, is at Westminster.
6,119,000. The next largest Province was British Columbia, with Formal Federal responsibility for health care is limited to such
only 2,382,000. The smallest was Prince Edward Island, with public protection activities as food and drug regulation, regulation
116,000. Two territories—the Yukon and Northwest Territories— of radioactive materials, quarantine, and providing health services
combined had an estimated population of 56,000. to special groups such as Indians and Eskimos.

28 Backround Paper #4: The Manangement
● Of Health Care Technology in Ten Countries

ment shares the costs of many provincially ad- finance, farming, trade, and extractive indus-
ministered social programs. Federal legislation tries comprising major areas of economic activi-
defines the services for which costs will be ty. Within the private enterprise economy, there
shared, the population that must be covered, is acceptance of government ownership at both
other conditions of participation, and the cost- the Federal and Provincial levels. In general,
sharing formula. Provincial legislation is en- there is greater public acceptance of government
acted consistent with the Federal conditions. efforts to direct economic activity in Canada
than there is in the United States.
The Canadian economy is a diversified pri-
vate enterprise economy, with manufacturing,

The Canadian health care system—with both The development of national health insurance
private and public components, in which pri- and the organization of Provincial activities to
vate providers of care and public financing pre- manage the health care system are briefly re-
dominate—is similar to that of the United viewed in the discussion that follows. Each
States. In 1975, personal health expenditures in Province exercises considerable autonomy in
Canada were $452 per capita (14). Of this the health area, and in the remainder of this
amount, 46 percent went to the country’s ap- chapter, Ontario and Quebec are used as prin-
proximately 1,200 hospitals, and 18.5 percent cipal examples. b
went to the country’s approximately 35,000
physicians (157 per 100,000 population). Ex- National Health Insurance
penditures on personal health care were 6.2 per-
cent of the gross national product (GNP), com- Over the past 25 years, the major change in
the Canadian health care system has been the in-
pared to 7.6 percent for the United States in the
troduction of national health insurance. Na-
same year.
tional health insurance was debated immediate-
Almost all hospitals are nonprofit institu- ly after the Second World War, but no action
tions. A substantial number of the hospitals was taken at the time. A program of national
have been established by local governments, health grants for health facility construction and
under separate board of trustees, with local manpower training was enacted in 1948, how-
responsibility for budget deficits. In 1975, there ever, and it is likely that this program helped
were 6.8 beds per thousand population, 5.2 create pressure for health insurance by develop-
acute care beds, 1.5 long-term beds (3). Average ing a supply of health care resources which the
length of stay was 11.5 days overall, 8.8 days in private insurance programs could not adequate-
acute care units. Admissions to acute care units ly finance.
were 162.4 per thousand population, and total
Health insurance was enacted piecemeal—
days of care in these units were 1,445 per thou-
hospital insurance was enacted first in 1957 and
sand. Average acute bed occupancy was 76.1
percent. b
The use of Ontario and Quebec as principal examples is not
meant to imply that their experience is typical. Those familiar with
‘Much of the overall presentation on the Canadian health care Canada have indicated since the first draft of this paper that the ex-
system that appears here is based on the following study con- perience of other Provinces has been different both because of their
ducted by the author and others: Lewin and Associates, Inc., Gov- smaller, more manageable health care systems and the availability
ernment Controls on the Health Care System: The Canadian Expe- of more complete data. Ontario and Quebec were selected for fo-
rience, 1976 (11). The information from that study has been up- cused study because of the author’s previous work (11) and be-
dated to reflect changes in financing and other events since the cause they are the largest Provinces. (Their combined 14 million
study was completed. Extensive interviews were conducted in sev- population constitutes over 60 percent of the total population of
eral Provinces for the 1976 study. For the paper presented here, Canada (I), ) It was also believed that Ontario and Quebec would
Ontario and Quebec were revisited to assess changes in patterns of have the most complex technology issues and be applying more
technology management and to review specific technologies. resources than other Provinces to their resolution.
Ch.3. 3—The Management of Medical Technology in Canada 29 ●

medical insurance a decade later in 1966. In Columbia began making nongroup medical cov-
both cases, rising costs were critical factors in erage available in 1965, when the only nonprofit
the decisions to develop government programs. carrier providing this type of coverage failed.
Several economists have noted that the major
In 1965, the Hall Commission released its re-
increase in supply of hospital beds and physi-
port calling for the establishment of a Federal
cians occurred before the programs were
program. The Medical Care Act was passed in
enacted (1).
1966 for implementation in 1968. In July 1968,
The patterns of development of the hospital only two Provinces —Saskatchewan and British
and medical insurance programs were similar. Columbia—were prepared to enter the Federal
In the period from 1945 to 1950, after proposals program. In 1969, five more entered—New-
for a national health insurance program had foundland, Nova Scotia, Manitoba, Alberta,
been shelved, three Provinces, Saskatchewan, and Ontario. Quebec and Prince Edward Island
British Columbia, and Alberta, independently joined in 1970, and New Brunswick in 1971.
developed their own hospital insurance pro-
Both the hospital and medical insurance pro-
grams. A fourth, Newfoundland, had a partial
grams follow the general Canadian policy of
insurance program. By 1955, a consensus for
establishing minimum standards to make a Pro-
hospital insurance had developed, and discus-
vincial program eligible for cost sharing but
sion of the topic at a Federal-Provincial con-
leaving the actual administration of the pro-
ference being held at the time was requested by
gram to the Provinces. Compared with the de-
the Provinces.
tailed programmatic and administrative require-
In 1956, the Federal Government made a con- ments that are imposed in U.S. Federal-State
crete proposal for a phased-in insurance pro- programs such as medicaid or aid to families
gram, beginning with insurance for hospital with dependent children, the conditions im-
care. This proposal received the general support posed for cost sharing in Canada are limited and
of the Provinces, and the Hospital Insurance general. The Hospital Insurance Act and regula-
and Diagnostic Service Act was enacted in 1957. tions combined are only 19 pages; the Medical
Five Provinces entered into the program at its Insurance Act is 9 pages. Although there are re-
inauguration in 1958, the four with existing pro- quirements that specific administrative func-
grams and Manitoba. Prince Edward Island, tions (such as setting payment rates, licensing
Nova Scotia, and Ontario entered in 1959, and and inspection of hospitals, planning and devel-
Quebec in 1961. opment of hospital resources) be performed,
and that the agreement with the Federal Govern-
Medical insurance developed in a similar
ment describe the arrangements for them, the
manner, alhough there appears to have been less
Federal regulations do not specify or place con-
consensus among the Provinces to take this next
ditions on how these activities are to be carried
step in the phased-in program that the Federal
out. The greatest detail is in the sections detail-
Government had proposed in 1956. In 1961, a ing the costs that would be eligible or excluded
Royal Commission on Health Services (the Hall
from Federal cost sharing, which in each pro-
Commission) was appointed to review the medi- gram were to be approximately 50 percent of the
cal insurance situation. Several Provinces acted
Provincial costs. ’ Beyond establishing the gen-
on their own before the Hall Commission re-
eral framework of the programs and cost-shar-
ported. Saskatchewan introduced compulsory
ing formula, Federal involvement has been lim-
Provincial medical insurance in 1962, and al-
ited to establishing mechanisms for coordina-
though this led to a physicians’ strike, a com-
tion and joint Federal-Provincial program re-
promise that retained the public program was
view, and to providing technical assistance to
reached, In 1963, Alberta increased the regula-
Provinces when they request it.
tion of the contents of medical insurance con- 7

tracts and provided premium subsidies for those The cost-sharing formula for both programs involved some re-
distribution of costs to the poorer Provinces, with the medical in-
unable to pay. This program covered 70 percent surance formula more favorable than the hospital insurance
of the population. The Government of British formula.
JO . Background Paper #4: The Management of Health Care Technology in Ten Countries

During the rapid inflation in health care costs roles for institutional providers of health care.
in the late 1960’s and early 1970’s, the Federal They are regulators and inspectors, providers of
Government became increasingly uneasy over consultant services, and health system planners.
its fiscal exposure in a program whose costs it There are nine major functions that the Prov-
could not control. After several years of nego- inces perform:
tiation and considerable conflicts with the Prov-
inces, the cost-sharing formula was changed.
● budget review and financial management
Beginning in 1977, the basis of Federal contribu- consultation;
tions to the hospital and medical insurance pro-
● administrative consultation to improve
grams was shifted so that Federal contributions general management and performance in
effectively were indexed to the rate of growth in special areas such as dietary, nursing, and
GNP. a These arrangements have increased the ● inspection of facilities;
flexibility of the Provinces in allocating medical ● institutional bed need planning;
care funds among services, but also put the ● other health services planning and project
Provinces completely at risk for expenditure in-
creases higher than the growth of the Federal ● review of construction plans and supervi-
sion of construction;
Several other general trends have developed ● research and statistical analysis;
with respect to Federal involvement in the ● medical review of the appropriateness of
health care system over the past several years. institutional care; and
One is a growing concern over manpower is- ● health sector labor relations.’
sues, particularly increases in physicians, which
Most commonly, a Province groups the func-
has led to substantial changes in immigration
policy. A second trend has been toward major tions of budgeting, administrative consultation,
planning, and inspection into an institutional or
emphasis on health promotion and disease pre-
vention activities. The rationale for this empha- hospitals division. This is what Ontario has
sis was outlined in a 1974 report by the Minister done. Under this type of arrangement, the re-
of Health Marc Lalonde (10). search and statistics functions and medical con-
sultation office are outside the institutional divi-
Provincial Management of sion as general service and support activities for
the entire health department program.
the Health Care System
Quebec has a radically different arrangement
Provincial involvement in the Canadian from Ontario’s. The Quebec Ministry of Social
health care system is extensive. Provincial Affairs is a combined health and social services
responsibilities include manpower licensure, department. A functional organization was
public health activities, and direct provision of adopted in a reorganization of activities in 1970.
some health services. In terms of expenditures, Health and social service orientations were to be
the Province’s primary involvement is in admin- integrated within each function. Thus, the ma-
istering the hospital and medical insurance jor divisions for both health and social pro-
programs. grams were planning, operations and program-
ing, finance, labor relations, and inspection. A
Organization for Health Systems Management more recent reorganization has modified this
Largely as a result of the hospital insurance slightly, establishing separate units for the areas
program, the Provinces play a large number of of health, social programs, and income security,
‘The mechanisms to introduce this indexing involve transfers to
along with separate planning, programing, fi-
the Provinces of Federal income tax credits, with equalization
among the Provinces and some cash payments. Additional cash
contributions to the Provinces are to be made to contribute to Pro- ‘Most Provinces have only recently become involved in labor
vincial programs for nursing home care, adult residential care, the relations issues, and the situation in this area is in flux. In Ontario,
conversion of mental hospitals, home care, and ambulatory for example, the Ministry’s personnel unit has been involved with
services. the issues, but has not sat at the negotiating table.
Ch. 3—The Management of Medical Technology in Canada . 31

nance, labor relations, and capital budgeting independent decisions about administration and
functions for each. services they would offer. Hospital budget
review by Provincial governments was designed
Despite considerable variation among Prov-
only to forecast the costs of the hospital in-
inces in the administration of the hospital in-
surance program and to exclude costs not
surance, medical insurance, and nursing home
covered by the Hospital Insurance Act.
benefit programs, in each Province there initial-
ly was substantial decentralization. As the This arrangement proved unstable. Provin-
Provinces have begun viewing their individual cial governments quickly came to review every
health activities as elements of a general strategy detail of administration to assure that Provin-
toward ensuring adequate health services, how- cial moneys were to be well spent. Budgets were
ever, they have attempted to bring the units reviewed and set on a line-by-line basis. Each
administering these activities into greater staff position had to be justified in the operating
proximity. budget, and the basic operation of any depart-
The degree of integration of these activities ment was subject to review. In the capital budg-
et, the purchase of a new wing, a sterilizer, or a
within each Province reflects in part the degree
desk might require Provincial approval. Hospi-
of acceptance within the Province of the concept
tals could not deviate from the approved budget
of the Provincial government as medical system
without Provincial authorization.
administrator. In Quebec, this concept has been
eagerly embraced. In Ontario, the concept has To administer the wide range of oversight re-
been generally accepted, but Provincial respon- sponsibilities, Provincial hospital insurance pro-
sibility is viewed as being shared with the medi- grams recruited staffs with expertise on each
cal community and public. Indeed, since exten- phase of hospital administration. Provincial
sive political pressure forced the Ontario Minis- staffs included financial experts and account-
try of Health to back away from ordered bed ants, general administrators, nurses, and dieti-
closings in 1974 and 197s,10 the Ministry has tians. These individuals, generally called “con-
hesitated to take actions to direct the develop- sultants” by the Provincial governments, served
ment of the hospital system, relying instead on as budget review personnel, as health service
general budgetary and fiscal constraints to con- planners, as consultants to hospitals on opera-
trol institutional demand for new beds and serv- tions, and as Provincial licensing inspectors.
ices, and on its consulting process to encourage
change. In the late 1960’s, many Provinces began to
feel that the existing budgeting systems were
The key to the programs of institutional con- awkward to administer and unduly restrictive
trol with respect both to overall expenditures to hospital management. Efforts were made to
and service levels and investment in new or up- develop systems that would allow hospital ad-
graded services and equipment is the Provincial ministrators and boards greater flexibility in
system for reimbursement. running their institutions. The systems that
were developed have been called generically
Hospital Budgeting Arrangements “global budgeting.” Under global budgeting, an
The Canadian Provinces have been adminis- institution can shift funds among categories of
expenses, so long as its overall budget is not ex-
tering hospital insurance programs for approx-
ceeded. In some Provinces, the initial global
imately 20 years. At the start of the hospital in-
budget or parts of it are still fixed by detailed
surance program, the intent was to leave the
line-by-line review; in others, flat percentage in-
hospitals privately managed and free to make
creases are applied to previous budgets or costs.
This was done in such a way that some of the projected savings In the 1960’s, Provincial governments gen-
accrued to the Province. In some cases, beds were closed. In erally made funds readily available for hos-
others, beds remained open, but an amount estimated to equal the
savings was taken from institutional budgets. In still other cases, pitals. Hospital programs were popular, be-
the closings were canceled. cause hospitals were visible and could serve as
32 Background Paper #4: The Management of Health Care Technology in Ten Countries

sources of local employment, and the Federal stantial impact on the rate at which resources
Government paid half the costs. Since funds float into the health care system. As table 1
were readily available, if an institution could demonstrates, the percentage of GNP directed
make a reasonable case for new staff or a toward personal health services in Canada has
remodeled wing or some other expenses, the re- declined slightly since peaking in 1971.
quest was usually granted. Budgets were deter-
mined prospectively, but it was understood that Each Province developed its own constraints,
but Ontario’s mechanisms are typical of the
funds would generally be available at the end of
range of approaches available. Introduced over
the year if difficulties were encountered; risk,
therefore, was minimal. This decade was also a a period of 4 to 5 years, these controls have
period of catchup for hospital employees’
wages, a process in which few Provinces in- ● refusing to budget for inpatient volume in-
terfered. creases, except in areas of rapid population
A growing concern over the costs and effec-
tiveness of hospitals and health care began to
● refusing to budget for additional labora-
tory and radiology services for inpatients;
emerge in the late 1960’s. The health insurance ● refusing to budget for increases in outpa-
plans had become the largest component of the
tient volume;
Provincial budgets, and the rapid inflation in
the health sector burdened Provincial revenues
● imposing a moratorium on physical plant
and hindered initiatives in other areas. In construction and renovation;
response to these problems, the Federal Govern-
● requiring hospitals to find the funds for
ment initiated a study of the costs of health serv- new, approved services within their exist-
ices in Canada. The report of the Task Force on ing global budget;
the Costs of Health Services in Canada, com-
● mandating bed closings; 11
pleted in 1969, discussed a wide range of issues,
● limiting the amount of a salary and pension
including the dispersion and utilization of new increase that would be funded by the Prov-
technology (8). Almost every Province did com- ince; 12
parable studies, examples being the study of the
● reducing each hospital’s budget in 1 year by
Commission of Inquiry on Health and Social an amount equal to 60 percent of deprecia-
Welfare (Castonguay-Nepveu Commission) in tion and in another year imposing a 2-per-
Quebec, the Manitoba White Paper, the Llew- cent reduction in the base; 13 and
elyn-Davies-Weeks Studies in New Brunswick,
● manipulating the inflation projection .14
the report of the Health Planning Task Force in Some Provinces, including Alberta (which
Ontario, and the Foulkes report of the Health
Security Program Project in British Columbia.
Beginning about 1970, partly as a result
of these studies and partly concurrently with
them, Provinces began implementing hospital
constraint programs. The introduction of global
budgeting was accelerated by the concern over
costs. By applying an overall increase to budg-
ets that matched or was lower than the projected
inflation rate, Provinces could avoid debating
individual line-item cuts. They could encourage
greater efficiency without being required to
identify areas where it could be achieved. Gen-
erally, the inflation estimates were tight but
realistic. The hospital constraint programs the
Provinces introduced appear to have had a sub-
Ch. 3– The Management of Medical Technology in Canada 33 ●

Table l.— Percent of GNP Directed to Personal Health Care

in Canada and the United States (1960-76)

Personal health care Hospitals Physicians

United United United
Year Canada a States b Canada States Canada States

1979 (2)

ever, hospitals have confronted a decline in the Construction has been curtailed, in some cases
amount of real dollars available for public pro- sharply. l6 Provinces that had previously rou-
grams. It is in this more restrictive context that tinely approved all capital funds requested have
most discussions of expanded technology have had either partial reductions, or in some years,
occurred. all new projects cut from the budget. Hospitals
have been told no funds would be available for
The specific trends in capital financing and
new services-and that such services would have
service development show similar patterns. In
to be begun within the global budget. In the
the 1960’s, capital investment by the Provinces
was heavy, 15 with most of this investment going capital budgeting process, the Provinces are try-
ing to move from single-year to multiple-year
into renovations or bed construction to match
projections, Some of these trends and the man-
population growth. There was little effort to im-
agement of capital investment in technology are
prove the efficiency of capital use by limiting
discussed further in the next major section of
construction to increase occupancy levels. It is
this chapter.
difficult to judge whether specialized services
were expanded to the point of oversupply, be-
Physician Reimbursement
cause there are no general inventories of units or
overall assessments of their efficiency. Discus- The primary mode of physician reimburse-
sions with Provincial authorities and hospital ment in Canada is fee-for-service payment. Ini-
administrators, however, suggest that efforts tially, the Provinces adopted a modification of
within individual Provinces to avoid extensive the existing fee schedule established by the med-
duplication were generally successful, although ical societies and generally used for Blue Cross
there was some duplication of highly prestigious reimbursement. In all Provinces but Quebec, in-
services. creases in overall fee levels and other conditions
of participation are negotiated between the
As part of the more recent effort to constrain
Province and medical associations. In Quebec,
costs, the Canadian Provinces have begun look-
physicians are represented by three unions, one
ing much more critically at capital expansion.
for general practitioners, one for specialists, and
The Federal Government did not share the cost of construction
or fixed equipment as part of the hospital insurance program. It In Quebec, for example, the new Minister of Social Affairs
did establish some direct grant programs for construction of hospi- entered office in 1970 and ordered all health construction—with a
tals, medical education, and research facilities, however, and did total value in excess of $400 million—halted. After a lengthy re-
share the cost of movable equipment. view, a limited number of projects were allowed to continue.
34 ● Background paper #:4 The Management of Health care Technology in Ten Countries

one for residents and interns. The negotiations association, although this too can vary. The
have been marked by varying degrees of conflict treatment of new procedures is discussed in the
from Province to Province and year to year: context of regulation and reimbursement in the
next section of this chapter.
The size of fees for individual procedures are
generally developed by the Provincial medical


Canada has a large and well-trained medical
community, and the medicine practiced is tech-
nically advanced. The major issue in the man-
agement of medical technology in Canada is the
speed of diffusion of cost-increasing technology
that appears to offer some potential benefit to
patients. Although fiscal constraints introduced
over the last several years have made this issue
more acute, nowhere in Canada have medical
services been withheld because the associated
expense would be too high.
In reviewing Canada’s experience with regard
to managing medical technology, four points
are critical to providing a context for under-
standing the operation of the system:
● The Provinces’ protection of their authority
against Federal encroachment has left al-
most all decisions in this area at the Provin-
cial level. Even in the area of technical as-
sistance, Federal activity is limited and con-
ducted cooperatively with the Provinces.
● Most technology management decisions re-
lated to the diffusion of technology are
made in the context of the hospital budget-
ing process. Indeed, for the hospitals, the
technology issues are subordinate to the
budgeting process. In recent years, because
of economic conditions, most Provinces
have introduced considerable fiscal con-
straints into their programs. Thus, unlike
supply controls in the United States, which
operate independently of the financing sys-
tem in an environment in which funding is
relatively easy to obtain, supply controls in
Canada are initially linked to fiscal control,
and—particularly in Ontario and Quebec
—have recently operated within an envi-
ronment of extremely limited resources.
Ch. 3– The Management of Medical Technology in Canada 35

(5). Federal expenditures accounted for approx- Evaluation

imately $69 million. Over half of these Federal
health research funds were spent through the The evaluation of new medical technology in
Medical Research Council, an independent body Canada, like that in the United States, is sub-
reporting to Parliament through the Depart- stantially a matter of independent clinical re-
ment of National Health and Welfare. Most of search and experience reported through the pro-
the remaining Federal funds were directly pro- fessional literature and discussed at professional
vided by the Department of National Health meetings. Indeed, Canadian clinical evaluation
and Welfare, and a substantial portion of these activities are integrated with U.S. activities
went to manpower development and construc- through the literature and professional meet-
tion of research facilities. ings, and because of the difference in size be-
tween the U.S. and Canadian medical systems
The other Federal support for extramural and research efforts, Canada draws substantial-
medical research came from the Department of ly on research done in the United States. For the
Veterans Affairs for support of research on most part, work has focused on assessments of
chronic diseases, the National Research Coun- efficacy. An increasing but still limited amount
cil, and the Defense Research Board. The De- of work, however, is focusing on cost-effective-
partment of National Health and Welfare also ness and cost-benefit assessments.
pursued a modest intramural research program
in areas including pharmacology and phar- Two types of evaluations that are particularly
maceutical chemistry, nutrition, pesticides, important in terms of the decisions that Prov-
food additives, clinical laboratory procedures, inces address on a daily basis are discussed
epidemiology, and physical fitness. In recent below. First are assessments of the appropriate
years, Federal support for medical research has rate and degree of diffusion of medical technol-
declined because of a general tightening of Fed- ogy. Second are evaluations of the appropriate-
eral spending that has affected all Federal re- ness of individual pieces of equipment,
search activities.
Guidelines for Special Services
In addition to the Federal Government, some
Provinces support medical research. The most Provinces have felt a need for Federal assist-
stable Provincial support is in Quebec. The ance in developing guidelines for reviewing pro-
Quebec Medical Research Council receives posals for new and expanded services in hospi-
much of its revenue from the Quebec Medical tals. Their primary need has been for guidance
Insurance Board, which is mandated to pay the on the appropriate organization and physical
Research Council 0.2 percent of the total space and equipment needs for a new service.
amount paid Provincial physicians. Their second need has been a basis for assessing
how many units are needed in an area.
Another major source of medical research
In accord with the general pattern of devel-
funds in Canada are national voluntary agen-
oping a joint Federal-Provincial committee or
cies, These include the National Cancer Insti-
working party to address these types of issues, a
tute, Canadian Arthritis and Rheumatism Socie-
working party on special services was created in
ty, Canadian Cystic Fibrosis Foundation, Cana-
1972. This group had representation from the
dian Association for the Mentally Retarded,
Muscular Dystrophy Association of Canada, Federal and Provincial agencies administering
and Multiple Sclerosis Society of Canada. Such the hospital and medical insurance programs.
voluntary agencies attend meetings of the Inter- The first guidelines prepared by the Working
departmental Committee on Medical Research, Party on Special Care Units in Hospitals were
which provide a forum for sharing information published in 1975 and covered nine units or pro-
on medical research support (7). grams—intensive care, coronary care, dialysis,
36 ● Backround Paper#4: The Management of Health Care Technology in Ten Countries

cardiac surgery, nuclear medicine, physical consultants is formed. A typical guideline has 10
rehabilitation medicine, narcotic addition treat- components:
ment, patient hostel, and burn (9). Guidelines
1. patient load;
have since been developed for additional serv-
ices, and some of the original guidelines have
2. bed requirements;
been revised. A list of the guidelines currently
3. recommended distribution on of units;
available is presented in table 2.
4. administrative policy, procedures, and
For the development of guidelines on a specif- 5. staff establishment and coverage;
ic service, a task force of several Federal of- 6. staff training and qualifications;
ficials, several Provincial officials, and medical 7. specific supporting departments and serv-
8. space allocation, utilization, and specific
Table 2.—Guidelines for design features;
Special Services in Hospitals 9. equipment; and
The following guidelines have been prepared by the Fed-
10. relationship with other departments and
eral-Provincial Working Group on Special Services in Hospi- services.
tals. These guidelines were requested by the Federal-Pro-
vincial Advisory Committee on Health Insurance, Ottawa. As this list makes clear, considerable emphasis
Some of the guidelines are updated versions of guidelines is given to issues of organization, staffing, and
previously published by the Working Group.
program quality. Planning guidance is usually
Expected publication date—November/December 1979 contained in the discussion of patient loads and
burn unit
Day surgery unit recommended distribution of units. In some
Dental care units in hospitals cases, the recommendation is quite specific. 19 In
Detoxification unit other cases, the guideline is more general. None
Diabetic day care unit
Narcotic day addict ion treatment unit of the guidelines explicitly considers the eco-
Nuclear medicine in hospitals nomics of alternative configurations of services.
Patient hostel unit
Rehabilitation medicine unit Once the Federal-Provincial guidelines are
Respiratory technology services unit developed, the Provinces are free to adopt or
Expected publication date—December/January, 1979-80 modify them as they see fit. Ontario and Que-
●Diagnostic ultrasound facilities in hospitals
●Geriatric day hospital bec have both made many changes in individual
. Geriatric unit in a hospital guidelines, and such changes have served as the
●Intensive care unit basis for subsequent revision by the Federal-
. Total parenteral nutrition
Provincial working party.
Expected publication date—April/May 1980
. Adult psychiatric services provided by general hospitals The introduction to the Ontario guidelines,
Child and adolescent psychiatric services provided by

general hospitals
published in 1976, describes the process used in
●Cardiac care faciIit ies and services: the Province (13):
—Ambulatory elect rocardiography monitoring
—Cardiac care In considering the means by which the guide-
—Cardiac catheterization lines might be reviewed, it was evident that a
—Cardiac surgery conventional task force approach would repeat
—Cardiovascular nuclear medicine
—Cardiac pacemaker
much of the work done by the federal-provincial
—Cardiac stress testing working party. It was decided that the ideal
—Echocardiography situation would be evaluation and modification
—Intermediate cardiac care based on the comments of all those directly
—Noninvasive laboratories involved—clinically or administratively—in the
●Perinatal intensive care unit operation of the units throughout the province,
. Regional renal failure program If this could be achieved, the degree of multi-
●Spinal cord injury unit disciplinary involvement would be maximal and
NOTE. A report on emergency services in Canada IS also available.
SOURCE: Health and Welfare Canada, Ottawa, personal communication, 1979,
Ch. 3— The Management of Medical Technology in Canada 37

province-wide participation would be assured. ferral service, the committee had given this
A questionnaire was devised to evaluate the question short shift. The Province had also
guidelines for each unit. With the endorsement wanted an assessment of the relative efficiency
of both the Ontario Hospital Association and of nuclear medicine vis-a-vis other imaging
the Ontario Medical Association, all of the ac- services, but that assessment was not provided.
tive treatment hospitals in Ontario were invited
to participate in the evaluation process. The ac- Currently, there is a freeze on the expansion
ceptability of the approach was indicated by a of nuclear medicine in Quebec, although exist-
response rate which ranged from 88 percent up ing units have been allowed to upgrade equip-
to 100 percent for the various types of units.
ment on the basis of the recommendation of a
The task force used the responses as the basis separate committee. The Provincial government
for modification of the guidelines. A provincial- would like to resolve the issue and allow more
ly acceptable adaption —not a rewrite—was the diffusion if it is appropriate, however, and will
intended goal. The degree of acceptability of the probably take several steps in this direction.
guidelines varied according to the unit. For
some, only minor changes were required. In the First, it will probably form another study
case of nuclear medicine, the responses indicated committee, this one including radiologists, in-
that the guidelines would require major revision ternists, and surgeons, that is, representatives of
for use in Ontario; therefore the Task Force alternative specialty services and of the prin-
sought the assistance of the OMA. The section cipal “consumers” of these services. One clear
on nuclear medicine appointed an ad hoc com-
mittee which, guided by responses of 46 depart- lesson of the earlier experience is that advisory
ments of nuclear medicine, drafted a new set of committees should be organized in such a way
proposed guidelines. These were then recircu- that conflicts and differences in professional
lated to the hospitals and the resulting comments judgment are surfaced rather than hidden.
were used in preparing the final version.
Second, it will probably tie approval of a new
To adapt the Federal-Provincial guidelines or nuclear medicine unit to the creation within the
to assess appropriate service distribution inde- hospital of an imaging department that will
pendently, a Province will often establish a combine the radiology, nuclear medicine, and
study committee. Such committees are usually ultrasound capacities. The creation of imaging
expert professional panels charged to address departments that combine these capacities,
specific planning or operational issues (e. g., the coupled with the continued fiscal pressures that
appropriate distribution of units for a given force hospitals to budget more tightly, is seen as
service) or to conduct an assessment of existing one way of moderating the competition among
hospital programs and recommendations on specialties and encouraging the development of
programs to be closed, an appropriate mix of service capacities by mak-
The performance of these study committees ing the tradeoffs and overlaps among alterna-
has been mixed. In Quebec, for example, a com- tive techniques clearer.
mittee comprised of nuclear medicine specialists Third, Quebec will probably require the cre-
(a separate specialty from radiologists in Can-
ation of a formal evaluation protocol for the
ada) concluded that nuclear medicine was an es- nuclear medicine service to provide information
tablished, proven, and basic diagnostic service
on the appropriate use of the service and its role
that should be available in all institutions with
relative to other services. This was an idea that
over 100 beds and with adequate staff, and that
was suggested 4 years ago, but never imple-
80 to 100 new cameras should be added within
mented. The expressed view of the Provincial
the Province.
planning officials was that a formal evaluation
The Quebec Government had strong reserva- process as was originally conceived is almost
tions about the committee’s findings. Provincial impractical for a new technology such as nucle-
officials felt that, although the committee had ar medicine, because the technology itself is un-
been charged with assessing whether nuclear dergoing development and change, and because
medicine was a basic diagnostic service or a re- physicians using the technology are learning
38 Backround Paper #4: The Management
● of Health Care Technology in Ten Countries

and continually modifying their practice pat-

terns. Provincial officials believe that evalua-
tion for purposes of assessing the extent of ap-
propriate diffusion is possible, but that it should
be limited in scope, geared to incremental as-
sessment (of the impact of the procedure and
judgments on diffusion), and repeated as appro-
priate over time. Critical to the process of eval-
uation is framing the questions to ensure that
the right issues are addressed at the proper level
of detail.

Selection of Specific Equipment

Somewhat removed from the question of
overall services distribution or rate of diffusion
is the question of the specific equipment that
should be purchased for a unit. This becomes an
issue, because since a Province reimburses cap-
ital expenditures, it must approve the specific
Most Provinces have an equipment specialist
whose primary responsibility is to review indi-
vidual equipment requests. These individuals
are often quite knowledgeable and may also
have access to technical experts in such areas as
radiology or laboratory; however, the informa-
tion they have about the relative operational
performance of different equipment may be
One advantage of the development in some
Provinces of regional bodies to review capital
budget requests (which is discussed in the next
section of this chapter) has been the provision of
additional information to hospitals making
equipment decisions. In Ontario, for example,
the Province requires all laboratory equipment
purchases over $5,000 and all general equip-
ment purchases over $20,000 to be reviewed by
local organizations. These local organizations
have generally set up provider advisory com-
mittees to review the requests, and the experts
on these committees will often share their ex-
periences and discuss alternative equipment
choices as part of the review. Comparable
discussions take place in Quebec.
Several years ago, a proposal was circulated
calling for the establishment of a Federal unit to
compile information on the performance of al-
Ch. 3— The Management of Medical Technology in Canada 39 ●

When a new drug is to be placed on the mar- Program administrators feel that a strict post-
ket, the manufacturer is required by law to pro- marketing approach may be inappropriate with
vide specified information, including a quanti- respect to new technology. For certain types of
tative list of all ingredients, evidence of clinical new products, they are requesting voluntary
effectiveness, the formulation of dosage forms, participation of manufacturers in monitoring
and reports of any adverse effects. This infor- the scope of diffusion and identifying clinical in-
mation is evaluated by the Health Protection vestigators studying these products. The prod-
Branch to assess whether the drug is safe and ucts subject to this premarketing review include
effective. implants, cardiac pacemakers, intrauterine de-
vices, intraocular lenses, and long-wear con-
Once a new drug is on the market, its sale can tact lenses.
be banned by the Health Protection Branch if
the adverse drug reaction program indicates All Canadian applications of radioactive iso-
that the drug is unsafe and injurious to health. topes are controlled and licensed by the Atomic
The drug quality assessment program aims at Energy Control Board (AECB). 21 The Radiation
producing objective evidence on the quality of Protection Bureau of the Department of Nation-
drugs already on the Canadian market and dis- al Health and Welfare serves as a health and
seminating this information to members of the safety advisor to AECB. Medical approval of
health professions, governments, and the gener- license applications is required from the Bureau.
al public. The physician named on the license is personal-
ly responsible for the use of particular radio-
Another major activity of the Health Protec-
nuclides. Each license is set out for the physi-
tion Branch is designed to allow greater price
cian, specifying —on the basis of AECB’S assess-
competition for drugs. This activity involves in- ment of the training and qualifications of the in-
specting manufacturing facilities, assessing dividual physician— the types of radionuclides
claims and clinical equivalency of competing the physician can use, their application, and
brands, and providing information to con- their dosage.
cerned professionals and to the general public.
Also, the Health Protection Branch has a Bu- Provincial Health Planning Processes
reau of Medical Devices that conducts a pro- The Canadian Provinces have not invested re-
gram for medical devices analogous to that of
sources in health services planning separate
the U.S. Food and Drug Administration (FDA). from the regulatory processes. Most efforts to
Unlike the U.S. program, which includes an ex- develop bed need projections, criteria for special
tensive premarketing approval process, how-
care units, or statements of Provincial goals
ever, the Canadian program is principally a with respect to the organization and distribution
postmarketing effort. The difference between of specific services have been made in response
the two countries’ programs in part reflects the
to project applications. As has happened fre-
fact that the United States is a manufacturing
quently with U.S. health planning agencies, the
country, whereas Canada is an importing
first request in a given area triggers the process
country. of developing standards and criteria and a Pro-
The postmarketing system in Canada is vincial plan for the service.
judged by those operating it to function well. It The standards development process, as noted
involves responding to user concerns, some lit- above in the section on guidelines for special
erature review, and contact with U.S. regu-
services, involved both joint Federal-Provincial
lators, since problems generally appear in both efforts and strictly Provincial activities. It also
countries. The program is not bound by specific tended to be informal and to involve Provincial
procedures, and when problems are identified,
the Canadian Government may require modifi- 21
The description that follows is adopted from Health and Wel-
cation or withdrawal of the product. Hospitals fare Canada, Working Party on Special Care Units in Hospitals,
are generally alerted to identified problems. Special Cure Units in Hospitals, 1975 (9).
40 Background Paper #4: The Management of Health Care Technology in Ten Countries

officials and selected medical consultants. The able authority over the regional medical and so-
general public has had little opportunity for par- cial service system.
ticipation or comment, but that situation is
Initially, the councils were involved in plan-
changing somewhat. The three largest Prov-
ning for emergency medical services, handling
inces—British Columbia, Quebec, and Ontar- consumer complaints about health services, as-
io —all have some local regional organizations
sisting institutions to establish common services
that are involved in both planning and review of
and group purchasing, and reviewing and com-
specific project requests. The organizations’
menting on individual institutional projects and
level of activity and degree of involvement vary
Department of Social Affairs’ statements of re-
in each Province.
gional and Provincial health and social service
British Columbia was divided into regional priorities.
districts in 1957, and regional planning boards
Beginning in 1976, the regional councils’
(essentially councils of municipal government)
scope of authority was dramatically increased.
were established in each. One subfunction of
Quebec changed the basis for financing capital
these regional planning boards was health. In
(discussed below) and gave the councils authori-
1967, “regional hospital districts” coterminus
ty over the expenditure of substantial funds.
with the general planning districts were created
Several of the councils, most notably that in
as administrative mechanisms to authorize
Montreal, have responded not only by review-
bonds to support hospital construction and es-
ing specific project requests, but also by devel-
tablish taxes to repay the bonds. (A separate or-
oping more general mechanisms for reviewing
ganization was required constitutionally to
patterns of service delivery and encouraging
allow for taxing authority. ) The regional hospi- change. These efforts have generally been domi-
tal district boards and the regional planning
nated by hospital representatives sitting on a
boards are identical, although most districts
separate commission within the council struc-
have established advisory committees of hos- ture. The program of fiscal constraints and the
pital representatives and, in some cases, lay-
potential cost savings associated with consoli-
dating services, however, have helped the coun-
The net effect of the establishment of these cils achieve some restructuring.22
boards in British Columbia appears to be that
Quebec’s regional councils are currently in-
greater attention is devoted to regional health
volved in a major planning initiative mandated
planning. The districts have been developing re-
by the Provincial legislature. This is an ex-
gional plans specifying the role of individual in-
amination of the distribution of medical staff ex-
stitutions, and in the absence of a Provincial
pertise and activities among teaching hospitals,
health plan, these serve as key planning docu-
a two-phase project in which the councils are
ments. Most boards have little independent
working with the hospitals and universities and
health planning capacity and rely heavily on
in which the Quebec Ministry by law cannot
Provincial government staff for advice and sup-
participate. The first phase has required the
port. Only two districts have their own staffs
university-affiliated hospitals to specify a
and are particularly active. One of these, medical staff organization and identify the
Greater Vancouver, has reported some conflict range of services and expertise they have avail-
with the Province over specific projects. able. During the second phase, these plans will
The Province of Quebec has been divided into be reviewed and recommendations will be made
12 regions, and each region has a regional health concerning adjustments to the distribution of
and social services council (CRSSS). The region-
al councils began operation in 1972, their first
responsibility being to oversee the elections for
a provincially mandated reorganization of hos-
pital boards. The responsiblities of the councils
are conceived as evolving to include consider-
Ch. 3– The Managment of Medical Technology in Canada 41

medical expertise and services, with concomi- centralized centers of activity. Since then, ef-
tant proposals for shifting staff. forts have been underway to establish district
health councils with advisory responsibiIities.
The planning initiative in Quebec is being The first district council was established in
pursued deliberately and with extensive par- January 1974, and approximately 20 district
ticipation from all parties. Such an effort is vir- councils have now been formed.
tually inconceivable in any other Province.
Apart from the integrating effect of the medical There is no district health council established
schools, one factor that makes this planning ini- in Toronto. Two hospital organizations share
tiative possible in Quebec—and unlikely in what would be the council’s responsibilities—
other Provinces —is the legal domination of hos- the University Teaching Hospital Association
pitals by the Quebec government. The passage for university-affiliated hospitals, and the
of legislation mandating a complete restructur- Hospital Council of Metropolitan Toronto for
ing of hospital governance in Quebec reflects a community hospitals. These organizations share
level of acceptance of Provincial control that is an executive director and staff. That hospital
unmatched in other Provinces. Furthermore, in associations are playing the role of district
Quebec, there has developed general acceptance health councils in the largest Provincial metro-
by both physicians and government of the legiti- politan area, although not a comment on the
macy of negotiations between them regarding quality of work done by these organizations, is
not only insurance payment rates, but other indicative of Ontario’s attitude regarding the
conditions of work. In other Provinces, the le- importance of public participation (as well as
gitimate scope of negotiation is often viewed as Toronto politics regarding the selection of ap-
more limited. propriate public representatives).
It should be noted that the initial development The district health councils in Ontario were
of 12 councils with advisory power in Quebec conceived of as providing advice in the areas of
represented a weakening of a more extensive de- personal health and hospital services, communi-
centralization proposal. The original proposal ty health services, mental health, environmental
was for three regions with extensive authority to health, and linkages to social services. Their
determine institutional operating and capital potential role as managers of the local health
budgets. After considerable debate about system was left undefined, but they were to be
whether Provincial authority should be dele- given considerable authority to review local
gated, a legislative compromise was reached. capital spending plans.
Since then, the Provincial government has dele-
gated authority on an administrative basis. The Ontario Ministry of Health did not want
the councils to become bureaucratic, so it at-
A similar debate occurred in Ontario, where tempted to avoid the development of extensive
district health councils are currently being staffs in each district. Each council has an ex-
organized. In 1972, the Ontario Ministry of ecutive director. To provide technical staff sup-
Health was reorganized to achieve one goal— port and to provide contact points within the
the development of a capacity to develop inte- Provincial government, the Ministry established
grated community health delivery systems and area planning coordinators and created area
planning capacity. Central to the development health teams. The area teams consist of individ-
of such a capacity was the concept of local ual members of the staffs of each Ministry divi-
bodies with extensive health planning and sion who have been assigned responsibilities for
health systems management responsibility that specific districts or groups of hospitals.
would receive staff support and expertise from
the Provincial level. This concept became en- Because of their involvement in other func-
meshed in a general Provincial debate on re- tions, area planning coordinators have not
gional government. Because the local organiza- served as an effective bridge between the district
tions were not established, the Ministry was re- health councils and area health teams. The area
organized again that same year to reestablish teams appear to have been effectively estab-
42 Backround Paper #4:: The
● Managment of Health Care Technology in Ten Countries

lished, however, and are a major source of for-

mal organizational linkage across functional
lines. One effect of this has been to facilitate
hospitals’ access to the Ministry on the opera-
tional level by establishing clear contact points.
Ontario’s district health councils have not yet
assumed the full range of activities or role in the
system originally contemplated for them. They
are doing almost no planning separate from re-
viewing and making recommendations on serv-
ice and capital expenditure requests. Although
the Province has approved many of the changes
developed for Windsor, approving not only the
perinatal unit, but also development of two
chronic care units and the purchase of a new
computed tomography (CT) scanner, the guid-
ance the district health councils have received
from the Ministry on reviewing service and cap-
ital expenditure requests has been late—and be-
cause of the fiscal constraints, no action has
been taken on the councils’ recommendations.

Hospital Budgeting and the Diffusion

of Technology
As noted above, the hospital budgeting proc-
ess is the central process in which resource
allocation decisions are made. This process has
two components. One is establishing the oper-
ating budget for the hospital, which may con-
tain an adjustment to provide additional operat-
ing funds for new services or to staff new equip-
ment. The second is establishing the capital
budget, with provision for spending on plant,
fixed equipment, and movable equipment.
There is enormous variation in the methods
different Provinces use to provide funds for
capital investment. Part of the reason for this
variation is that the Federal Government has
not shared the cost of construction and fixed
equipment through the hospital insurance pro-
gram. Although separate funds have been avail-
able from the Federal Government for hospital
construction and construction to support medi-
cal education, the costs of plant and fixed equip-
ment have generally been Provincial responsi-
bilities. Movable equipment has been eligible
for cost sharing, and Provincial governments
have had the option of expensing grants each
year or paying depreciation.
Ch. 3— The Management of Medical Technology in Canada 43

Almost no funds have been provided for Hospitals in Quebec are expected to finance
equipment projects and new services in Ontario. minor equipment purchases out of the funds
The Province has approved acquisitions but generated by those preferred accommodation
told hospitals that they will not have their charges or contributions. Construction and
depreciation or operating expenses increased to other renovations under $1 million and pur-
reflect the addition, a situation characterized as chases of specialized equipment are to be re-
“approved but not funded. ” Of the seven ap- viewed by the regional council, and approved
proved CT scanners in metropolitan Toronto, requests are funded jointly out of the council
for example, only two were funded by the Min- funds and hospital funds. The council can con-
istry. The remainder had to be funded out of tribute no more than 80 percent of the cost of
global budgets or philanthropy. renovation of equipment and may in fact con-
tribute less, requiring the hospital to fund up to
One exception, in terms of the provision of
the entire amount of the project itself.
capital funds, has been a program under which
the Ontario Ministry will provide 100 percent of Certain types of equipment purchases, al-
the capital funds for projects that will recover though they will be funded through the council,
their costs in operating fund savings within 5 must be approved by the Province. Included in
years. The hospital’s operating budget, how- this category at one time were purchases of di-
ever, is reduced by the savings. To make it more agnostic radiology, therapeutic radiology,
attractive, the program will be changed so that nuclear medicine, data processing, laboratory
if a hospital provides the initial capital funds, it automation, and anesthesia and recovery equip-
will be allowed to recover these plus interest, ment. The category now includes only pur-
and subsequent operating savings will be shared chases of computer applications and data proc-
on an equal basis between the hospital and the essing equipment.
Construction projects over $1 million in Que-
In Quebec, until 1976, all capital funds were bec are funded entirely by the Province. These
provided directly by the Province. As part of projects must be reviewed by the regional coun-
the 1976 delegation of authority to the regional cil and approved by the Province. Funds needed
health and social services councils, there was for the operating expenses associated with new
major restructuring of capital financing that capital or service charges are also reviewed and
shifted some financing to the regional councils could be added to the global budget by the Pro-
and hospitals themselves. Until 1976, hospitals vincial government. Over the past 4 years,
had been reimbursed by the insurance program however, no additional funds were added.
at a standard ward rate. When patients volun-
General construction funds have been tight in
tarily sought semiprivate or private rooms, they
Quebec over the last several years. In 1975-76,
would be charged separately for them. In es- 25

they were $42 million. The accommodation

tablishing hospital budgets, Quebec had used charge generated an additional $20 million.
the revenues from preferred accommodation When the new financing system was put into
charges to offset the amount needed from the place, the Province estimated the amount that
Provincial hospital insurance program. Under was being spent on equipment and renovation
the restructured system, hospitals were required under $1 million (the expenditure classes to be
to place 45 percent of these funds into a special funded by these charges) and set the charges to
fund for capital expenditures. Another 45 per- realize this level of revenue. The charges have
cent was to go to the regional council, and 10 since been increased but there has been no sys-
percent went to the Provincial government to tematic analysis of whether current changes
redistribute to regions with less of this revenue. provide a sufficient level of funding.

25Blue Cross and other insurers remain active in a market for in-
Discussions with individuals in Quebec sug-
surance covering these charges and other medical charges not gest that the accommodation charge is provid-
covered by the insurance program. ing only a marginal amount of funds. The 10-
44 Backround Paper #4: The Management
● of Health Care Technology in Ten Countries

percent fund for reallocation has been inade- ices, 6) investments that reduce operating costs,
quate and the Provincial government has aug- 7) cancer treatment services, 8) crippled chil-
mented it. The Montreal Council estimated that dren’s services, 9) energy-saving investments,
it received $40 million per year in requests, and 10) other. Priority was to be given to proj-
divided evenly between renovations and equip- ects in the first, third, and sixth categories.
ment, of which it authorized $15 million and di-
Although the Province has reserved the right
rectly contributed $6 million to $7 million. It is
to change district health councils’ priorities and
receiving $3 of special equipment requests for
has established its own ranking system, how-
every dollar it authorizes.
ever, Provincial staff indicate that, in reviewing
Limited funds have required Provinces and the councils’ priorities for funding in 1979-80,
regional bodies to establish priorities among they selected the top three to five projects from
projects. A variety of mechanisms have been each council in order to assure that the top
employed. In Ontario, beginning with fiscal priorities from each would be represented, and
year 1978, hospitals were asked to submit their then established a ranking among these. Indeed,
proposed capital projects and proposed new and no one contacted in the Ministry or hospital
expanded services to the district health councils. community cites any case in which district
No guidance was provided to the councils on the council priorities have been modified. There is,
priorities they should employ for their review. 26 however, one footnote to this priority-setting
In addition to this lack of guidance on priorities, exercise. For 1979-80, no new funds were made
the councils received no information from the available for new or expanded services, so all
Province specifying which projects from the projects approved in that year, regardless of
previous year, if any, had been funded and rank, had to be funded out of individual institu-
which should be reconsidered in the current tions’ global budgets.
year. Because of these problems, for fiscal year
In Quebec, because of the local council fund-
1981, the University Teaching Hospital Associa-
ing and institutional autonomy over spending
tion refused to carry out a priority-ranking
on specific activities, the arrangements for
process for new and expanded programs.
establishing priorities are different from those in
The Province of Ontario has expressed con- Ontario, but their effect is comparable. Having
flicting attitudes on the degree of autonomy the received guidance from the regional council on
district health councils will have. On the one its funding priorities, hospitals submit their
hand, it has reserved the right to change the equipment and renovation priority lists to the
priorities coming from the district councils. council. In Montreal, the lists are initially
Along this line, Provincial staff indicate they reviewed by a commission within the council
have developed their own priority-ranking sys- consisting of two representatives each of the
tem, including a set of numerical weights that medical schools, teaching hospitals, community
applies to project ranking. This system has not hospitals and chronic hospitals, and one repre-
been shared with the district councils or Provin- sentative of the psychiatric hospitals. This com-
cial hospitals, but its general shape can be sur- mission makes the final decisions within the
mised from the guidance the Province has given council on projects under $100,000. For projects
the districts. The guidance on capital spending over $100,000, the commission makes recom-
established 10 project categories: 1) correction mendations, but the council makes the final
of hazards, 2) conversion from active treatment decisions.
to chronic care, 3) regional bed shortage, 4) im-
The commission within the Montreal council
provements in services, 5) consolidation in serv-
has conducted or sponsored studies on a variety
of issues. These have ranged from mundane but
economically costly issues of storm window re-
placement in hospitals to a review of regional
nuclear medicine facilities to determine which
departments would be allowed to update their
Ch. 3—The Management of Medical Technology in Canada 45 ●

equipment. (Following the nuclear medicine lack of any assessment of the marginal impact of
study, the council arranged for group purchase these decisions.
of equipment at a discount. ) The priority-setting
Those in Canada regularly point out that
process during the first 2 years of its operation
was reported by some participants to be ex- decisions concerning the health system, par-
ticularly resource decisions, are political. The
tremely disordered and inequitable, in part be-
introduction of assessment methods would not
cause of council weaknesses, in part because the
change this. By highlighting the effect of the cur-
hospitals failed to set priorities effectively.
rent decisions, however, it might inform judg-
There was a feeling that the process had im-
ments concerning how these decisions should be
proved, however, and that despite the low pro-
modified in the future. There is the risk for
portion of funded projects to total requests, the
government that such evaluations, if public,
hospitals were substantially satisfied with the
would fuel pressures for higher spending. The
Provincial governments are sensitive to constit-
As in Ontario, the Quebec government re- uent pressures on these issues, and several in-
serves the right to change recommendations dividuals in Ontario and Quebec reported in-
from the regional councils. There have been creasing public pressure to expand resources in
only a few cases in which it has exercised its the health sector .27
right, partly because the councils have par-
If decisions are made to increase the capital
ticipated in the process by which the planning
funds available to the health sector, the formal
parameters were set.
systems for establishing priorities to allocate
In closing this discussion, two outstanding these funds appear to be in place in these Prov-
issues should be noted. The first is that the lack inces. Until now, however, especially in On-
of new program funds has been a major prob- tario, constraints have been so tight that choices
lem for Provincial hospitals. Despite discussion among priorities have been more formal than
of changes in the reimbursement system, the substantive. One question confronting these
global budgets of most hospitals have remained systems is whether they can in fact operate in an
substantially unadjusted for several years, and environment of real allocation decisions, or
in real terms, the base has in fact declined. This, whether the increased funds and greater rele-
more than the capital limits, has affected the in- vance decisions would generate a higher level of
stitutions’ capacities to mount new programs. conflict than the systems could absorb. Related
Although the lack of funds has encouraged in- to this, a second question is whether Provinces
ternal economies, service adjustments, and con- can marginally increase the level of investment
solidation of service as a means of coping with and cost growth, or whether, unable to do this,
tight resources, it has also prevented some con- they will move from famine to feast as they
solidations by not providing a structure for moved from feast to famine in the early 1970’s.
shifting resources to hospitals that have received
the consolidated programs. Hospitals’ Responses to Investment
and Service Constraints
The second issue is that the Provinces have
not developed a long-term basis for determining The fiscal constraints in general, and capital
the level of resources in health care. Indeed, a and service constraints in particular, have sig-
global approach to this problem is not neces- nificantly changed the environment in which
sary. Some Canadians, for example, decided hospitals operate. Hospitals have reacted to this
that, in light of perceived excess capacity and in- in a wide variety of ways, some supporting pub-
efficiencies and in view of other Provincial pri- lic policy, some attempting to undercut it. Five
orities, funds to the health system would be re-
stricted. They did not attempt to determine the 27
The front page headline in the July 24, 1979 Toronto Star, for
optimal level, but instead began reducing serv- example, played to public concerns by announcing “Our Hospital
Nightmare: You Could Die Waiting. ” The next day, the Health
ices at the margin. Although this approach is Minister’s response was headlined “I’ll Fight for Needy Hospitals—
reasonable, as implemented it suffers from the TimbreIl. ”
46 Backround Paper #4 : The
● Management Of Health Care Technology in Ten Countries

aspects of hospitals’ responses in the technology francophone University -of-Montreal-affiliated

area are particularly notable. Hotel de Notre-Dame. Also cited is a growing
interest among hospitals in referring highly
First, in addition to attempting to achieve
specialized laboratory tests to other hospitals
greater efficiencies to adjust to the constraints
rather than duplicating the capacity. Efforts in
and create internal funds for capital and service
Hamilton, Ontario, where hospitals have devel-
expansion, hospitals have tightened the man-
oped an in-common laboratory and agreed to
agement of their capital and operational budget-
consolidate special services such as neurosur-
ing system. To respond both to the overall con-
gery, cardiac surgery, and burn treatment at in-
straints on available funds for capital and new
dividual institutions, represent a notable exam-
operating expenses and to the requirement that
ple of this.
they present formal lists of priorities to regional
bodies, hospitals have had to define their pri- Within this small but growing movement
orities clearly. toward consolidation, the medical schools have
played mixed roles. There is general acceptance
One approach that hospitals have used to de-
in Canada that highly specialized services
fine priorities has been to establish budgeting
should be centralized at teaching hospitals, but
committees that include physicians from the
the medical schools have varied significantly in
major departments, such as medicine, surgery,
the degree to which they have acted to try to
radiology, and pathology. Such committees
achieve coordination of services among their
change the decisionmaking process from one in
teaching affiliates. McGill and Laval in Quebec
which the hospital’s administrators must res-
were cited as examples of schools which had ac-
pond to departmental requests individually to
tively promoted coordination and consolida-
one in which the competing claims on limited re-
tion. The University of Toronto and University
sources are reviewed and resolved in discussions
of Montreal were noted to be far less involved.
that include physicians representing the differ-
An area of fruitful future inquiry would be to
ent interests. Thus, the establishment of hospital
understand the factors that have led to these dif-
budgeting committees represents a major reor-
dering of decisionmaking in these institutions.
Among its effects are to reduce staff alienation A third element that can be noted among
from the budgeting process, to broaden the some Canadian hospitals is a renewed growth in
range of the expertise and perspectives brought philanthropy and private development cam-
to bear in assessing relative priorities, to enable paigns. Several hospital administrators view ef-
more effective challenge of planning assump- forts in these areas as increasingly important;
tions and project justifications, and sometimes they consider it a major need and challenge to
to generate unexpected solutions to problems. A explain to the public why, even with a govern-
main force assuring the effectiveness of such ment insurance program, private contributions
committees, however, is the reality of the exter- are necessary. Philanthropy has made acquisi-
nal constraints. tions possible when government funds were not
available. In Quebec, for example, funds for all
A second element in the hospital response has
CT scanners in the Province were made avail-
been an increasing acceptance of service consoli-
able either by private philanthropists or from
dations and shared-service arrangements. The
hospital endowments. Purchases in Quebec
obstetrics and pediatrics consolidation in Mon-
were all made with Provincial approval. In On-
treal and Windsor have already been noted.
tario, by contrast, not only approved scanners
Other examples that are cited by Canadians are
were purchased with philanthropic funds, but
arrangements for the shared use of a CT scanner
several unapproved scanners, as well.
by radiologists at Toronto General Hospital and
Mount Sinai Hospital (these facilities are across The fourth notable element of hospital re-
the street from each other) and a similar shared- sponse is the acquisition of unauthorized equip-
use arrangement between the anglophone ment. Such acquisition has occurred primarily
McGill-affiliated Jewish General Hospital and in Ontario, where in Toronto, for example,
there are three unauthorized CT scanners. Simi- tutional nuclear medicine facilities. Efforts to
larly, it was reported that when this Province expand the reimbursement in the medical insur-
delayed decisions on ultrasound equipment, ance program to cover these facilities have been
many hospitals simply purchased it. The situa- resisted.
tion in Ontario in part reflects the fact that since
hospitals were being asked in most cases to fund Professional Fees and the Issue of
such purchases out of their global budgets with Freestanding Units
no increase in funds, obtaining approval offered
no financial advantage. It also reflects hospitals’ The process by which professional fees are set
belief that certain services are critical to main- was described in the section on the health care
taining quality and staff. (The hospitals with the system in Canada. Several people involved in
unauthorized CT scanners have referral neurol- the fee-setting process were sensitive to the issue
ogy and neurosurgery services. ) Finally, it re- that fees can create incentives for higher utiliza-
flects their belief that the Province will not at- tion or abuse of services. To some extent, this
tempt to discipline or penalize the hospitals that pressure is countered by the general concern
make unauthorized purchases. The Province of within the medical societies that incomes by spe-
Ontario has never ordered a hospital to sell off cialty be equalized, and by the existence of one
or discontinue an unapproved service, and po- interspecialty group that reviews the relative
litical pressures might make such an order infea- fees for new procedures.
sible. Furthermore, the Province continues to
pay radiologists the professional component of The Ontario Medical Association indicated
their fees, and this practice further undermines that, as a general rule, it tries to set an initial fee
belief in the Province’s will to crack down. that is based on the recognition that as the pro-
cedures become more routine, there will be less
Individuals in Quebec indicated that in that physician effort. It also identified some proce-
Province a similar situation involving the ac- dures, such as chronic dialysis, for which the
quisition of unauthorized equipment was ex- original fee was reduced, and others for which
tremely unlikely, because the Provincial gov- the fee increases were kept below average until a
ernment has previously demonstrated consid- more appropriate relative value was reached.
erable willingness to deal aggressively with hos-
pitals, and because regional councils’ control As noted above, the fiscal constraint program
over renovation and equipment funds provides has led to some interest among Canadian physi-
a clear disciplinary mechanism. cians in developing freestanding units for such
services as CT scanning, nuclear medicine, and
Finally, a fifth element of hospitals’ response ultrasound. The principal Provincial control
is represented by hospitals’ attempting to shift over this private proliferation of high technol-
expenses from their global budget outside to ogy is the fee system, since unless there is a tech-
other aspects of the health insurance system. As nical component to the fee as well as a profes-
part of their constraint programs, Ontario and sional component, the Provinces will not reim-
Quebec stopped adjusting hospital outpatient burse equipment and technician costs. In gener-
budgets for higher volume. (In Ontario, how- al, Provinces have held the line against such
ever, the Province has given slightly higher freestanding units.
across-the-board budget increases to the outpa-
tient budget than the inpatient budget. This is It can be argued that the development of free-
intended to encourage and promote shifts from standing units should not be resisted because
inpatient to outpatient care. ) One institutional such units can better respond to outpatient
reaction has been to refer ambulatory patients needs and may operate more efficiently. For the
to nearby private physicians for tests that will Provinces to allow this development, however,
be covered under the medical insurance pro- they would have to be assured that inappropri-
gram, These referrals have generated some in- ate utilization could be prevented and that the
terest among physicians in developing noninsti- insurance programs would realize some of the
financial benefits of a shift of diagnostic services high-billing physicians. Similarly, the in-hospi-
to an outpatient setting. tal review systems run by the Provinces are lim-
ited. Despite the fact that the global budget in-
centive is to reduce length of stay and unneces-
Utilization Controls
sary admissions, many Canadians believe that
Utilization controls in the Provincial insur- current hospital utilization is unnecessarily
ance system are limited. Most focus on outpa- high, and some hospitals have therefore begun
tient care and are designed to identify fraud or implementing internal review programs.

The preceding sections of this chapter have 100,000 population. In 1978, there were 20 to 25
attempted to present an overview of the man- units in Canada. Among the major unresolved
agement of medical technology in Canada, in- issues for the Provinces in addressing the diffu-
cluding the issues being addressed in the system sion of the technology are: 1) how to reconcile
and the formal and informal processes involved the population and volume-based projections of
in making the technology decisions. In this sec- units with patterns of neurological and neuro-
tion, an effort is made to shed additional light surgery practice and the demands for scanners
on the earlier discussion through examinations at hospitals providing these services, 2) how to
of specific technologies. The reviews presented assess the relative utility of this CT equipment
are not comprehensive, but do provide informa- vis-a-vis other services, and 3) how to assess the
tion on the number of units, basic planning ap- utility of a whole-body scanner relative to a
proaches, and Provincial experiences that il- head scanner. In general, while attempting to
luminate the technology management process. obtain answers for these questions, most Prov-
inces have moved conservatively, but not dog-
CT Scanners matically, in limiting CT scanner services.
The original Federal-Provincial guidelines for Ontario had 17 authorized scanners as of Jan-
special care units did not address CT scanners. uary 1, 1979. As of that date, three had not been
In March 1977, a member of the Federal-Provin- installed. The pattern of authorized expansion
cial working party drafted a report on CT scan- of scanner services was as follows:
ning citing the EMI standard of one unit per
500,000 population. A definitive standard was Total authorized scanners
not attempted, however, because it was felt that 1974 ......., . . . . . . . . ... , 1
1975 ................... . 2
changes in the technology would quickly out- 1976 ..., ... , . . . . . . . . . . . . 6
date it. Although an interim report was pre- 1977 ................... . 8
pared, the working group recommended that, 1978 ................... . 10
because CT scanning technology had raised a 1979 ................... . 17
number of issues in radiology and nuclear medi-
Recently, a joint Ministry /Ontario-Medical-As-
cine, the report not be issued and that a national
sociation committee revised the criterion to one
symposium on diagnostic imaging be held. A
per 500,000 population and recommended add-
symposium took place in October 1978. Since
ing several additional scanners. Five of the ap-
that conference, a group has been working on a
proved scanners are located in Metropolitan To-
draft guideline on CT scanning, and it was
ronto. Two of these have restricted use—one at
scheduled to complete this work in May 1980.
the Hospital for Sick Children, the other at the
The delay in Federal-Provincial guidelines left Princess Margaret Hospital, which is the Pro-
the Provinces to address the issue of diffusion. vincial cancer center. As noted above, in some
Most Provinces adopted an initial standard of cases, patterns of sharing CT scanners have
one unit per 1 million population or one per developed.
In addition to the approved scanners operat- would make referral scans from other regional
ing in the Toronto area, there are three unau- hospitals available free of charge. Since the hos-
thorized scanners. Unauthorized scanners have pitals with approved scanners in the city are
developed in Ontario for several reasons: charging for referral scans, this was seen as one
way of creating pressure on the Ministry. )
● Only two of the approved scanners in the
When one hospital with an approved scanner
Toronto area were funded by the Ontario
had to close its scanner for several months and
Ministry; the others had to be financed out
contracted with a hospital with an unapproved
of global budgets, The hospitals that in-
scanner to provide scanning services, however,
stalled unauthorized scanners were there-
the Ministry sought an amendment to the Pro-
fore at no more financial risk than the hos-
vincial law establishing scanners at specific
pitals that installed approved scanners.
hospitals to permit reimbursement to the hos-
Furthermore, one unauthorized scanner
pital with the unapproved scanner for the provi-
was donated and the benefactor guaranteed
sion of scanning services of the approved
that operating expenses would be met; a
second scanner was purchased used, there-
fore at reduced cost. There is reported to be a 2-month backlog for
● Hospitals expect that at some point the On- outpatient referral scans in Ontario. One ob-
tario Ministry will pick up the operating ex- server thought that this backlog was an artifact
penses on the unapproved scanners. resulting from inadequate operating funds for
● With the Ministry considering hospital the scanners. Noting that many scanners are op-
closings or definitions of hospital roles, erating only 8 hours a day because of staff limi-
possession of a scanner is viewed as impor- tations, that observer suggested that the backlog
tant in terms of allowing an institution to could be significantly reduced or eliminated if
remain in the forefront, Hospitals believe the scanners were operating for longer periods.
their position in a restructured system will
Quebec has maintained tight control over
be based on the equipment and services
scanners. There are only seven units in the
they offer —regardless of whether the
Province, with two on order. The Montreal
equipment and services have been ap- Neurological Institute has two—one head, one
proved. body. Of the remaining units, all are body scan-
. Ontario continues to reimburse radiologists
ners. There are procedures for referral and shar-
for the professional component of their fees
ing among hospitals. The pattern of scanner ex-
for CT scanning even at unapproved scan- pansion in Quebec has been as follows:
ners, thereby making use of these scanners
attractive to radiologists. Head Body Total scanners in use
. Scanners are attractive to hospitals in terms 1973 ., . . 1 0 1
of maintaining physician staff loyalty. Un- 1974 . . . . 1 0 1
1975 . . . . 1 0 1
like cardiac surgery, a service which re- 1976 . . . . 1 2 3
quires a cardiac surgeon, scanning is a ba- 1977 . . . . 1 4 5
sic diagnostic technique that many physi- 1978 . . . . 1 6 7
cians want to have available.
After receiving requests for three additional
The Ontario Ministry’s actions toward unau- scanners, the Province conducted a general re-
thorized scanners in Toronto have been incon- view of its policy. Officials felt particularly
sistent. The three hospitals with unauthorized uneasy regarding two questions—the relation-
scanners were ordered to set up a separate cost ship of scanning to other diagnostic services and
center for the scanner and segregate the costs the true utility of the whole-body scanner. Que-
associated with it; the hospitals complied. Re- bec has therefore decided to limit the scanners in
portedly, CT scanner expenses are being ex- the Province to the current units and will not
cluded from their global budgets. (One hospital consider adding to these units until the six have
with an unauthorized scanner announced that it an average annual volume of 2,800 examina-
50 Backround Paper #4: The Management
● of Health care Technology in Ten Countries

tions each, and a rigorous evaluation of scan- 1978, there were 16 hospital-based chronic di-
ning from both a health and economic perspec- alysis units, with 97 dialysis machines. There
tive is completed, either in Quebec or some were three acute dialysis units in other hos-
other location. Both Ontario and Quebec are pitals. All of these were inpatient based; there
considering sponsoring such an evaluation. were no outpatient dialysis units (12). Three
other centers provided for home dialysis and
Renal Dialysis had 52 dialysis stands. There are six hospitals
in Quebec doing approximately 125 transplants
Federal-Provincial guidelines and assessments a year.
of renal dialysis place it in the overall context of
treatment of end-stage renal disease. Those doc- Quebec’s dialysis goal established in 1978 was
uments place an emphasis on home dialysis to to increase the proportion of home dialysis from
maximize autonomy, and on kidney transplants 20 percent to 30 to 40 percent by 1981, a figure
as a major service that should be available. comparable to rates in Ontario, the United
States, and Europe. This was to be done by ex-
The Federal and Ontario planning guidelines panding the efforts of the three centers for home
call for a hospital-based unit to support 25 to 50 dialysis. Outpatient dialysis was to be substi-
new patients a year, a planning estimate that re- tuted for inpatient dialysis, with one center
quires approximately six beds (9). The original serving as a pilot project. The existing hospital
Federal guidelines state that the program should units were viewed as sufficient, particularly if
be based on a population of no less than 1 mil- home dialysis and outpatient dialysis were de-
lion and that “depending upon criteria for selec- veloped. Transplants in Quebec were projected
tion and the aggressiveness of the case-finding to increase to 145 in 1981; the six transplant
programs, this population base may be expected units were viewed as sufficient to meet this de-
to yield at least 25 new cases per year, and pos- mand. Indeed, by some planning standards,
sibly many more” (9). The guidelines further that is more than the number of transplant facil-
note (9): ities needed, but the Province announced as pol-
If the treatment were wholly successful, the icy a decision not to seek a regrouping of the
program would obviously grow until patients current centers. In short, the Provincial plan
began to die of old age, or other causes. Assum- called for shifts in the modes of treatment for
ing a death rate of 10 percent per annum of those end-stage renal disease, but no regrouping of the
at risk, a program based on 25 new patients per hospitals providing these services.
annum would increase to a total of more than
200 patients in 15 years and would not stabilize Since Quebec’s planning was completed, the
until 250 patients were on treatment. demand for dialysis services has increased. Cur-
rent facilities are, by general agreement, satu-
A revised Federal-Provincial Guideline on Re-
rated. The Province has not yet determined
gional Renal Failure Programs has been com- whether the prevalence of end-stage renal dis-
pleted and is awaiting publication. The revised ease is increasing or if indications for dialysis
guideline expands the discussion of renal trans-
have changed. It seems prepared to meet the
plantation and organ retrieval requirements.
needs imposed by the unexpectedly high de-
In 1979, Ontario had 10 hospitals with inpa- mand, but views home dialysis and outpatient
tient dialysis units. Sixteen hospitals, including dialysis as the areas to emphasize.
some with important programs, provided home
dialysis. In the period from April 1, 1978 to Cardiac Surgery
March 31, 1979, 9,394 outpatients and 1,854 in-
Coronary bypass surgery has been increasing
patients received dialysis services. There were in both Ontario and Quebec. In Ontario, in
201 transplants. 1977, there were 1,675 reported cardiac revas-
The Quebec planning documents analyze the cularization procedures; in 1978, this number
current dialysis and transplant programs in the grew to 1,947. In Quebec, in 1977, there were
Province and call for specific changes (12). In 1,678 bypass procedures and 2,412 other open-
Ch. 3– The Management of Medical Technology in Canada . 51

heart procedures; in 1978, there were 1,891 and mendations for each unit concerning the defi-
2,690, respectively. A study of the effect of the ciencies that should be addressed. A conclusion
surgery in Quebec showed that of those receiv- by this task force that services need to be ex-
ing the surgery, 55 percent returned to activity panded or upgraded will create pressures in the
but 45 percent did not. The increase in this sur- Province for additional spending.
gery was noted in both Provinces, but in neither
In Quebec, there are currently 11 cardiac sur-
Ontario nor Quebec was the increase viewed as
gery units. Cardiac surgery has been the subject
a major problem.
of three task force reports by the Province. The
More concern was expressed over the appro- first task force, consisting of cardiac surgeons,
priateness of the distribution of cardiac surgery was appointed in 1970 or 1971. Its report justi-
units and the quality of care they render. Im- fied the existence of each cardiac surgery unit in
plicitly, it is assumed that appropriate controls the Province, including two with workloads
on the proliferation of units will control mar- well under 100 operations per year. One impact
ginal surgery. The appropriateness of care at es- of this report was to increase the Ministry of
tablished units has been the subject of several Social Affairs’ distrust of the medical communi-
studies in each Province. ty, discouraging for several years the use of
practicing Provincial physicians on government
In Ontario, the problem has been treated pri-
studies of medical services.
marily as a quality issue. Along this line,
guidelines have been established for a minimum The most recent study was completed by a
of 150 operations per year per unit; a staff of task force chaired by a McGill University car-
two surgeons, two cardiologists, and 24-hour diologist and former dean of the medical facul-
coverage by residents or others; and affiliation ty. That report set out criteria for evaluating
with a health sciences center. The guidelines in units, but made no recommendations on wheth-
use were reviewed and revised by a 1973 task er specific units should be closed. On the basis
force on cardiovascular surgery. The task force of that report, the Quebec Ministry sent letters
consisted of three surgeons, two internists, a to two hospitals requesting that they terminate
pediatrician, and three Ministry of Health staff. their cardiac surgery activities. One hospital ter-
It recommended the closing of one unit in Wind- minated this service. At the other, two addi-
sor and the establishment of a second unit in tional surgeons were recruited, and the rate of
London. Both these recommendations were surgeries went up over the 100-per-year level.
Currently, there are 10 hospitals in Ontario at
which cardiac surgery is performed; 4 are in The situations regarding radiotherapy are
Toronto. Only one, at Sudbury, is not a teach- substantially different in Ontario and Quebec.
ing hospital. The Sudbury unit was established In Ontario, the expansion of radiotherapy has
in 1967, and its performance has been closely been strictly controlled. The Canadian Cancer
monitored. A 1976 task force reviewed its per- Treatment Foundation, a nonprofit organiza-
formance, complication and mortality rates, tion with Federal, Provincial, and voluntary
and approved the continuation of surgery there support, conducts a cancer research program
for 2 years, but recommended that the team stop and has been given responsibility for coor-
elective valve surgery. Several other units with dinating treatment within the Province. In the
low volumes are also examining the referral of treatment area, it operates seven treatment
elective valve surgery. centers in the Province. Radiotherapy and im-
plants are centralized at five centers. Other
A task force on cardiovascular surgery in
hospitals may do chemotherapy, surgery, and
Toronto that will soon complete its work is ex-
limited implants.
pected to report that facilities there need to be
upgraded. If this task force follows the pattern The Canadian Cancer Treatment Foundation
set by others, it will also have specific recom- has always budgeted its own centers, including
52 . Background Paper #4: The Management of Health Care Technology in Ten Countries

selecting and purchasing equipment, and is not Neither Province has formal policies regarding
reimbursed on a fee-for-service basis by the in- the appropriate equipment levels in laboratories
surance programs. The foundation has usually or points at which automation should be al-
had a tight limited budget, so it has tended to lowed. Prior to the creation of regional review
impose internal budgeting constraints. The On- bodies, decisions regarding both were made by
tario Ministry is not involved in reviewing its the equipment specialists in the institutional
budget, but is convinced that the foundation has units of the Provincial Ministries and were in-
handled its resources well. The Canadian Can- fluenced by the relative availability of funds. As
cer Treatment Foundation has been a major co- a result, until the fiscal constraint program was
ordinator of cancer treatment facilities in introduced, most projects that were even mar-
Ontario. ginally justified were approved. One study done
in Quebec estimates that laboratory facilities are
In Quebec, as of March 1977, there were nine used at approximately 64 percent of capacity.
hospitals with megavoltage radiotherapy serv-
ices (most with orthovoltage equipment as well) The fiscal constraint program has introduced
and one hospital with orthovoltage equipment additional discipline into the system, although
only. Three of the hospitals offering megavol- noneconomic decisions continue to be made.
tage services were outside the Montreal region, With few new funds available to pay for addi-
the rest within it. Of the megavoltage equip- tional equipment, facilities have been reviewing
ment, 19 of 25 pieces of equipment were cobalt their needs more closely. The equipment spe-
60 units. There were eight linear accelerators. cialist in Ontario reported that hospitals have
After reviewing the number and quality of ra- slowed their purchases of new equipment and
diotherapy units in the Province, the Quebec have been retrofitting or replacing modules in
Ministry ‘concluded that there was sufficient autoanalyzers to upgrade the equipment. The
capacity in the area outside of Montreal to meet limited budgets encourage automation where it
the projected needs of new patients there. No is less expensive, and in Quebec, unions are
additional centers or equipment were to be au- becoming concerned with the threat of automa-
thorized there. (Subsequent to arriving at this tion and job reductions encouraged by the con-
conclusion, the Ministry reconsidered the as- straint program.
sumptions it had made regarding the utility of Another accommodation that has emerged is
existing orthovoltage equipment; it has not yet the development of in-common laboratories, in
published a modification of its conclusions. ) which hospitals share the expense of joint facil-
ities for some tasks. The lab in Hamilton has
In Montreal, the Ministry concluded ‘that been held out as a successful model. The Toron-
some units were underutilized, others operating to in-common laboratory, however, has not
at full capacity. It called for a reorganization of been a success. This laboratory was reported to
radiotherapy units to consolidate them into have management difficulties. In addition, a
units that would be able to better handle the major function the Toronto laboratory was
service demands and to regroup staff medical re- serving was to identify laboratory capacity for
sources to upgrade both medical education and specific procedures in individual hospitals and
treatments. The plan for this reorganization was to arrange for transportation of samples from “
to be developed in consultation with the region- other hospitals that needed those tests; once the
al council and the universities, and a survey and network was established, the laboratory orga-
analysis by the regional council are underway. nization was not necessary to manage the proc-
ess. In both Quebec and Ontario, there is resist-
Clinical Laboratory Equipment ance to the network concept, and activities to
and Automation develop networks remain limited.
Detailed information was not available on the The introduction of the regional councils into
number and distribution of automated labora- decisionmaking on this equipment has added
tory equipment in either Ontario or Quebec. another element to hospital decisionmaking. In
Ch. 3– The Management of Medical Technology in Canada . 53

Ontario, the Province requires requests for all The consultation is not completely successful. A
pieces of laboratory equipment over $5,000 to survey of hospitals in the Toronto area revealed
be reviewed by the local council. In Toronto, that these hospitals purchased many items of
this requirement has led to the creation of an equipment whose purchase had been recom-
Advisory Committee on Laboratory Services mended against.
made up of pathologists from each of the major
hospitals. The committee has functioned rea-
sonably well, in part, because it has also become In Quebec, although final approval of labora-
a source of consulting expertise to the individual tory equipment is at the Provincial level, the
hospitals. Pathologists are able to share their ex- regional councils review and advise on pur-
periences with specific equipment and to direct chases. As a result, and given the involvement
individual hospitals away from equipment with of hospital administrators in this review, com-
which they have been dissatisfied or which does parable opportunities for commenting on equip-
not really meet their need. There has been some ment choices and programmatic needs exist. Re-
opportunity to review programmatic needs, but spondents could cite only one case in which a
this has been less systematic and effective than piece of equipment was obtained after a nega-
the sharing of experience on specific equipment. tive recommendation.

This review of the management of medical been introduced only over the past 7 to 8 years,
technology in Canada underscores several as- and it remains to be seen whether augmentation
pects of this issue as it has developed in that of government funding represents a permanent
country. The first is that there is no separate new feature of the financing system or is a short-
medical technology policy. The factor that has term reaction that is part of a period of adjust-
influenced the introduction and expansion of ment from times of generous to times of more
technology is the overall level of funding of hos- restrictive levels of public funding.
pital services. The funding level, in turn, has
A third aspect of the Canadian experience is
been determined in a political context in which
the role that medical schools have played as in-
health services have been in competition for re-
tegrating forces in consolidating services. That
sources with other government programs and
role has been facilitated by the apparent accept-
with the private sector. Capital spending has
ance in Canada of a hierarchical relationship
been limited and new technology rationed, but
among university-affiliated hospitals and be-
only because of these general constraints—not tween university-affiliated and community hos-
because of programs specifically designed to
pitals. In the United States, where similar hier-
limit new investments.
archies do not exist, community hospitals are
often in competition with teaching hospitals for
A second aspect of the experience of Ontario new technology and sophisticated services.
and Quebec is the general acceptance of the le-
gitimacy of resource decisions being made in the Finally, it should be noted that the fiscal con-
public sector. There is conflict over the level of straint program has had an influence on the de-
funding, but for the most part hospitals and the cisionmaking processes in hospitals, a situation
public accept the government’s role in determin- that must exist if any long-term changes in the
ing it. There are exceptions to this, however. hospital system are to occur. Among the most
The most notable example is evidenced by the notable changes is the structured involvement of
existence of unapproved CT scanners in Toron- key members of the medical staff in the internal
to. Another is evidenced by hospitals’ increasing review and evaluation of alternative uses of cap-
efforts to review and expand philanthropy. Sig- ital funds. The medical community is increas-
nificant constraints on hospital financing have ingly participating in establishing priorities for
54 Background Paper #4: The Management of Health Care Technology in Ten Countries

capital spending by hospitals and appears to be choices on medical practice and the availability
accepting responsibility for the impact of these of medical services.

1. AndreoPoulis, S., National Health Insurance: tawa: Health and Welfare Canada, Health Insur-
Can W; Learn From Canada? (New York, N. Y.: ance Directorate, 1975).
John Wiley and Sons, 1975). 10. Lalonde, M., A New Perspective on the Health
2. Gibson, R. M., “National Health Expenditures, of Canadians: A Working Document (Ottawa:
1978,” Health Care Financing Review l(l), sum- Government of Canada, 1974).
mer 1979. 11. Lewin and Associates, Inc., Govenzment Con-
3. Health and Welfare Canada, Annual Report, trols on the Health Care System: The Canadian
1974-1975: Hospital Insurance and Diagnostic Experience (Springfield, Va.: National Technical
Semices (Ottawa, n.d.). Information Service, 1976).
4. , Health Economics and Statistics Divi- 12. Minist&e des Affaires Sociales (Ministry of So-
sion, Review of Health Services in Canada, 1974 cial Affairs, Quebec), Guide I’Allocation des Re-
(Ottawa, 1974). sources: Services Spi?cialises et Ultra-Sp@cialises
5. National Health Expenditures in Can- (Quebec, 1978).
ada, 19’78 (Ottawa, April 1973). 13. Ontario Ministry of Health, Guidelines for Spe-
6. personal communication, 1979. cial Services in Hospitals: Ontario Version (To-
7. ;Review of Health Seruices in Canada, ronto, 1976).
2974 (Ottawa, April 1974). 14. Statistics Canada, Ottawa, personal communi-
8. , Task Force on the Costs of Health Serv- cation, 1979.
ices in Canada, Report (Ottawa, 1969).
9. Working Party on Special Care Units in
Hospit&, SpeciaZ Care Units in Hospitals (Ot-
Australian Health Care System
and Medical Technology

Sidney Sax
Special Adviser on Social Welfare Policy
Commonwealth of Australia

Australia: Country Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57

The Health Care System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 57
Development of Common wealth Health Benefit Schemes (1950-72) . . . . . . . . 58
Changes in Health Care Financing Since 1972 . . . . . . . . . . . . . . . . . 61
Public Policies That Affect Medical Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . 64
Hospitals’ Cost-Sharing Arrangements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 64
Regulation of Charges in Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Medical Fees and Third-Party Coverage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 69
Education and Research . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 72
Specific Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 73
CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Renal Dialysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 74
Coronary Artery Bypass Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Cobalt Therapy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Laboratory Automation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 75
Chapter preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 76


Table No, Page

1. Number and Distribution of CT Scanners in Australia . . . . . . . . . . . . . . . . . . . . 74
4 ●

Australian Health Care Systems

and Medical Technology
Sidney Sax
Special Adviser on Social Welfare Policy
Commonwealth of Australia


Australia is an island continent with a pop- country are major ports of entry. These include
ulation of 14. s million and an area close to 3 Sydney, with a population of 3.2 million, and
million square miles. Its greatest east-west main- Melbourne, with 2.7 million.
land distance is 2,400 miles, and its north-south
spread is almost as great. With an overall pop- Six States have been federated under the name
ulation density of 3.5 persons per square mile, of the Commonwealth of Australia. The Com-
large areas of Australia are sparsely populated. monwealth also includes two mainland Terri-
Huge, dry inland areas carry little, if any, popu- tories, one of which is self-governing. At the
lation. More than 80 percent of the people live time of federation in 1901, all governmental
in urban environments, which lie mainly along powers other than those exclusively vested in
the coastal fringe. Large and prosperous cities the Parliament of the Commonwealth by the
along the southern and eastern shores of the Constitution were retained by the States.


The Australian health care system is pluralis- health functions of the Commonwealth per-
tic, complex, and not tightly organized. It in- tained to quarantine and the health needs of vet-
volves three levels of government (Federal, erans. consequent upon a 1946 constitutional
State, and municipal), as well as public and pri- amendment, however, the Commonwealth was
vate providers and institutions. In spite of the given powers to make laws about pharmaceu-
increasing role for government in the financing tical, hospital, and sickness benefits, and med-
of health services, most medical and dental care ical and dental services. In addition to these
is provided by private practitioners on a fee- powers, the Commonwealth also has used its
for-service basis. This has been—and will con- constitutional powers to make grants for health
tinue to be—an important feature of Australian purposes to the States and nongovernment orga-
health services. nizations.
Prior to 1946, most major health functions State governments have the major responsi-
were retained by the States, and the primary bilities with respect to the public provision of
‘Much of the descriptive information pertaining to the Austra- health services. These governments are respon-
lian health care system in this chapter is based on personal conver- sible for the public hospital systems, mental
sations with Australian health authorities or unpublished, confi- health services, public health regulation, and
dential documents to which the author has access in his capacity as
Special Adviser on Social Welfare Policy for the Commonwealth. licensing. The statutory obligations of local
For this information, specific references are generally not cited. governments vary from State to State, but the


58 . Background Paper #4: The Management of Health Care Technology in Ten countries

major health responsibilities of these govern- Development of Commonwealth Health

ments are in the area of environmental control Benefit Schemes (1950=72)
and in the provision of a limited range of per-
sonal preventive services. From 1950 to 1972, four major Common-
wealth benefits schemes were introduced to as-
Public hospitals in Australia are very heavily sist patients to purchase health care. They con-
subsidized by State governments. These, in cerned: 1) pharmaceutical benefits, 2) medical
turn, are assisted by the Commonwealth, which benefits, 3) pensioner medical services (PMS),
meets half of the approved aggregate net operat- and 4) hospital benefits. These schemes, along
ing costs of public hospitals in each State. Public with mental health services, health benefits for
hospitals accommodate both private patients veterans, and the Commonwealth Department
and public patients. Private patients are treated of Social Security, are discussed below.
by their own doctors on a fee-for-service basis
and charged inclusively (at subsidized rates) by Pharmaceutical Benefits
the hospital for accommodation and nonmedi-
cal services. Public patients are not charged at A pharmaceutical benefits scheme was intro-
all and are cared for by doctors engaged by the duced in the early 1950’s. Currently, about
hospital. Any patient who is not insured can 1,000 items are listed in a Commonwealth phar-
elect to be treated as a public (or “hospital”) maceutical benefits schedule. Australian doctors
patient. may prescribe items other than those listed on
the schedule, but government benefits on these
Private hospitals, established during the 19th items will not be paid. For items on the sched-
century for those who did not want to be ad- ule, ordinary patients contribute only $2.75 per
mitted to the public hospitals, are run both com- item, and pensioner patients pay nothing. Phar-
mercially and by religious and charitable or- macists bill the Commonwealth Department of
ganizations. Patients at private hospitals are Health for the balance of their charges, which
treated by their own private doctors on a fee- are fixed in agreements.
for-service basis.
There is no separate charge for pharmaceuti-
The 790 public and 340 private hospitals in cal items supplied through public hospitals, be-
Australia provide approximately 71,000 and cause the public hospital’s bill is an inclusive one
21,600 beds, respectively, totaling 6.5 beds per that covers the costs of accommodation, nurs-
1,000 population (11). In addition, 1,190 nurs- ing, and pharmaceutical supplies. For pharma-
ing homes supply 58,000 beds, or 4.1 beds per ceuticals in private hospitals, however, patients
1,000 population. In 1978, the Commonwealth’s pay separately. Federal Government payments
10 medical schools graduated 1,260 persons for pharmaceutical services and benefits at pres-
with a first medical degree. The total number of ent amount to approximately $320 million per
medical practitioners in Australia was 23,600, year (10).
yielding a ratio of 1 doctor to 600 persons. It is
predicted that by 1990 the ratio will have in- Therapeutic substances in Australia are sub-
creased to 1 doctor to 500 persons (9). ject to close surveillance by the Commonwealth
Department of Health, which administers the
Commonwealth medical and hospital benefits pharmaceutical benefits scheme.2 Drugs and
schemes were introduced in the 1950’s. Since medicinal preparations are added to or deleted
1972, the Commonwealth Government has from the schedule of pharmaceutical benefits
made frequent and major revisions in health following recommendations from the Pharma-
care financing arrangements. The development
of Commonwealth benefits schemes prior to 2
Therapeutic substances of various kinds are subject to con-
1972 and the changes that have been made since trolled clinical trials in the major Australian medical centers. Com-
paratively few prospective, controlled trials of surgical therapy,
1972 are described in the next two sections of however, have been done. The same might be said of changing
this chapter. technologies in diagnostic mediums.
Ch. 4–Australian Health Care Systems and Medical Technology 59

ceutical Benefits Advisory Committee. The item of doctor’s service. Having settled the doc-
Commonwealth Department of Health, which tor’s account, the patient submitted the receipt
provides technical services to the advisory com- of the bill to his or her insurance fund. The in-
mittee, evaluates applications for listing. In surance fund paid the fund benefit and also
order to exert some control over the cost of the paid, as agent for the Commonwealth, the
pharmaceutical benefits scheme, the Depart- Commonwealth benefit. For reimbursement of
ment also negotiates with manufacturers on the the latter, the fund subsequently claimed on the
prices of products listed as pharmaceutical Commonwealth Department of Health.
A matter of concern to those who believed in
Responsibility for ensuring that therapeutic full coverage was the size of the copayment that
goods comply with standards of safety and ef- patients had to meet out-of-pocket under this
fectiveness rests with the National Biological scheme. Originally, it had been intended that
Standards Laboratory, which tests samples for the copayment would amount to about 10 per-
compliance with standards, evaluates manufac- cent of the bill. Although there were fluctua-
turers’ protocols, and inspects manufacturing tions, however, the amount did not fall below
plants. In addition, the Commonwealth Depart- 30 percent until the medical benefits scheme was
ment of Health exercises control over the im- amended in 1970.
portation of therapeutic goods with regard to
quality, safety, and efficacy. It maintains a The new scale of benefits introduced in 1970
register of adverse drug reactions from reports was directly related to the fees most commonly
received from the professions in Australia and charged for specified medical services. Each
from overseas. It also provides technical serv- benefit was set so that the common fee for the
ices for the Australian Drug Evaluation Com- item of service would not exceed the total bene-
mittee. This committee is an independent group fits by more than $5.00. In respect of general
established to evaluate specific drugs referred to practitioners’ services, the patient was expected
it and other drugs which it thinks require eval- to meet very small amounts out of pocket.
uations beyond that normally undertaken prior
to listing as a subsidized pharmaceutical benefit. Pensioner Medical Service
Reports concerning adverse reactions suspected
to be caused by prescribed medications are sent PMS commenced in 1951. It paid for medical
to the Adverse Drug Reactions Advisory Com- attention by general practitioners, without any
mittee, which examines the reports and assesses charge to the patients, for all recipients of age,
the likelihood that a prescribed medicine was re- invalid, widow’s, and war service pensions, and
sponsible for the observed symptoms. All doc- their dependents. The Commonwealth Govern-
tors are promptly advised of the committee’s ment entered into an agreement with the Austra-
findings. lian Medical Association (AMA) under which
doctors were paid reduced fees by the govern-
Medical Benefits ment for services provided to eligible pensioners
and their dependents.
A voluntary insurance scheme introduced in
the early 1950’s was intended to provide broad Because the AMA repeatedly expressed dis-
coverage for medical expenses, while at the satisfaction regarding the levels of reduced fees
same time preserving the traditional doctor-pa- and the enrollment in the PMS of pensioners for
tient relationship. Payment of Commonwealth whom the pensions means test had been pro-
medical benefits under this scheme was made gressively relaxed, after 1969 individuals who
contingent on the patient’s membership in a reg- qualified for pensions solely because of some
istered medical insurance fund. Insured patients specified liberalization of means tests were ex-
chose their own doctors and were charged what- cluded from automatic eligibility for PMS mem-
ever fees these doctors thought appropriate. A bership, pensioner pharmaceutical benefits, and
Commonwealth benefit was payable for each free treatment at public hospitals.
60. Background Paper #4: The Management of Health Care Technology in Ten Countries

Hospital Benefits stances, less than the charges levied. In 1966,

however, the special accounts system was
A hospital benefits scheme was introduced in
amended so that hospital insurance subscribers
1952. This enabled public hospitals, in State
were guaranteed the payment of hospital benefit
public hospital systems, to introduce charges for
at the full rates for which they were insured, up
accommodation in public beds and to utilize
to the amount of the hospital bill, irrespective of
means tests to determine patients’ eligibility for
the length of hospital stay.
treatment in public beds. The Commonwealth
paid a small basic benefit (“ordinary benefit”) In the original hospital benefits scheme, pa-
for all public hospital patients, whether insured tients in approved and licensed nursing homes
or not, an “additional hospital benefit” for were entitled to hospital benefits. In the early
subscribers to voluntary hospital insurance 1960’s, separate provision was made for the
schemes, and a benefit at or above the ordinary payment of a Commonwealth nursing home
rate for patients covered by PMS.3 benefit.’ This benefit was paid without means
test on behalf of any person, whether insured or
Initially, the benefits paid from Common-
not, accommodated in an approved public or
wealth funds under this scheme made a substan-
private nursing home. No insurance fund bene-
tial contribution towards the cost of maintain-
fit was payable to nursing home patients, but
ing patients in public hospitals. In 1958, the cash
patients who had been contributing to a hospital
benefits the Commonwealth paid in respect of
insurance fund now could receive the Common-
insured patients amounted to some 20 percent of
wealth nursing home benefit. In 1969, a supple-
the total share for public ward accommodation
mentary extensive care benefit was introduced
in all States. Because Commonwealth hospital
for those nursing home patients who were
benefits did not keep pace with increases in hos-
deemed to require more extensive nursing care
pital costs, however, State governments had to
than others.
pay increasingly larger subsidies to their public
hospital systems, and voluntary insurance funds
Mental Health Services
progressively raised their subscription rates to
provide coverage against higher charges. Apart from some minor exceptions, services
for the mentally ill were originally provided by
When the hospital insurance scheme was first
State governments. Although psychiatric serv-
established, insurance funds set subscription
ices have become better integrated with other
rates at levels that were sufficiently low to be at-
types of health care over the past 20 years or so,
tractive to most people. They were able to set
the largest part of inpatient psychiatric care is
such rates, because benefits were not payable
still provided in State mental hospitals. There
for chronic illnesses, for hospital treatment ex-
are some 90 State psychiatric hospitals in Aus-
ceeding a certain period each year, or for ail-
tralia, with about 25,000 available beds. These
ments existing at the time a member joined a
hospitals treat a total of approximately 70,000
fund. Since these exclusions debarred from ben- inpatients each year and also provide substan-
efit some of those who were most in need, in
tial outpatient and domiciliary care services.
1959 the Commonwealth introduced a “special More than 85 percent of these hospitals’ costs
accounts” system, enabling registered funds to
are met from State funds. In two States, patients
offer benefits for subscribers in respect of claims
in State mental hospitals may be charged for the
that otherwise would have been disallowed un-
accommodation and services that they receive;
der the exclusion rules. Deficits incurred by
hospital charges to patients incapable of manag-
organizations operating special accounts were ing their own affairs may be met from the pa-
covered by the Commonwealth. Initially, the
special account benefit scales were, in many in- 4
The Commonwealth also entered a new field in the early 1960’s,
namely, the institutional care of physically and mentally handi-
0nly patients who satisfied a means test at the hospital were capped children. A handicapped children’s benefit subsidized the
treated free in public hospitals; all others were required to pay. costs of accommodating handicapped children in homes main-
The additional “hospital benefit” was intended to encourage peo- tained by religious or charitable organizations that employed nurs-
ple to buy insurance. ing and special staff.
Ch. d–Australian Health Care Systems and Medical Technology ● 61

tients' estates. In other States, there are no sonnel. The peacetime bed complement of each
charges. of these institutions is between 100 and 120.
Limited medical facilities also are available at
When insurance-based schemes of hospital
other service centers.
benefits were being introduced in the 1905’s,
mental hospital patients tended to be long-term Commonwealth Department of Social Security
cases and were not recognized as good insurance
risks. Largely because of this, there was little The Department of Social Security plays an
likelihood of their becoming subscribers to in- important role in the disbursement of a wide
surance funds; these patients, therefore, were variety of cash benefits. It also makes grants to
not generally eligible for insurance fund hospital approved nonprofit organizations for a large
or nursing home benefits. More recently, how- portion of the capital costs of residential and
ever, there has been a sharp decline in the aver- nursing home type accommodations for the
age length of stay in State mental institutions, aged and infirm, and for the provision of shel-
and mentally ill patients are being viewed as tered workshops and accommodations for the
better risks. In addition, an increasing number disabled. In addition, the Department subsidizes
of public general hospitals and also some pri- the States for the provision of home help serv-
vate hospitals are providing psychiatric care. ices, senior citizen centers, and welfare officers,
Mentally ill patients in public and private hospi- and it runs the Commonwealth Rehabilitation
tals, and in nursing homes, may receive Com- Service, which provides treatment and training
monwealth and insurance fund benefits in the for selected disabled persons who are deemed
potentially able to work. Fourteen Common-
same way as other patients in these institutions.
wealth rehabilitation centers provide work
preparation and work adjustment services to
Health Benefits for Veterans
about 4,500 clients annually.
The Commonwealth Department of Veterans’
Affairs has major responsibilities in the health Changes in Health Care
field. It provides a wide range of cash benefits Financing Since 1972
and personal health services to those who have Since 1972, there have been major and fre-
served in war and to dependents of such exserv- quent revisions of the medical and hospital ben-
ice personnel, Treatment is provided free of
efits schemes previously described. The history
charge, either through departmental institutions of changes in arrangements for financing health
or through the general facilities available in the care in Australia since 1972 illustrates the dif-
community, for all disabilities that have been ficulties faced by Australian Governments in
recognized as due to war service. seeking to provide universal health insurance
The Department of Veterans’ Affairs adminis- coverage, while also attempting to limit govern-
ters six large general hospitals that provide care ment outlays and inflation.
for virtually all types of cases, excluding ob-
stetrics. These hospitals are concerned mainly Introduction of Medibank by
with the management of acute episodes of ill- the Labor Government (1972-76)
ness. Patients who do not require the facilities of In December 1972, a reforming Labor govern-
a fully equipped general hospital are accom- ment came to office, and the following year, leg-
modated in the Department’s five auxiliary hos- islated for a new health insurance scheme
pitals. There are 3,100 beds in veterans’ hos- known as Medibank.5 This scheme, which came
pitals. At these hospitals, undergraduate and 5
1n addition to Medibank, a community health program was in-
postgraduate medical education is conducted in troduced by the Labor government in 1973 to provide capital and
association with university medical schools and recurrent financial assistance to the States and nongovernment or-
professional colleges. ganizations to: 1) establish and improve community health and
health-related services, 2) promote disease prevention, health
The armed forces run six hospitals that are maintenance, and rehabilitation, and 3) improve coordination of
health services in the community and their links with other health
maintained at the expense of the Common- and welfare services. Approximately 700 projects involved a Com-
wealth Government and staffed by service per- monwealth expenditure of some $70 million in 1976-77 (1).
62 Backround Paper #4: The Management Of Health Care Technology in Ten Countries

into operation on July 1, 1975,6 was financed ment was committed to the reduction of infla-
out of general revenues. It provided for univer- tion, which at the time was running at very high
sal coverage entitling all Australian residents to levels. In pursuit of its objective, it aimed to re-
specified medical and hospital benefits. A duce Commonwealth expenditures so that budg-
Health Insurance Commission was established et deficits could be contained. In the area of
to operate the plan. health, the new government sought to maintain
universal health insurance, but to concentrate
Medical benefits to all residents (including government expenditures on the needy.
pensioners who previously had had restricted
entitlements, and individuals who were covered An important feature of the new Medibank
by workers’ compensation and third-party mo- health insurance plan which the conservative
tor vehicle insurance) were paid at 85 percent government introduced in October 1976 was a
of schedule fees, subject to a maximum copay- levy on taxable income at an annual rate of 2.5
ment of $5 for any item of service. Coverage percent, with ceilings of $150 for taxpayers
was extended to consultation involving eye re- without spouses or dependents and $300 for
fractions, whether performed by doctors or families. Exemptions were provided for persons
optometrists. at the lower end of the income scale and for cer-
The basic hospital benefit under Medibank tain pensioners and veterans. Individuals and
was a universal entitlement—without any families not otherwise exempt could “opt out” of
means test—to free standard ward care, in- Medibank coverage and gain exemption from
cluding medical treatment, in recognized public the levy by buying private medical and hospital
hospitals. Provision of this benefit involved the insurance (both) to an approved level.
negotiation of agreements between the Com-
Levy payers and those exempted from the
monwealth and individual States.
levy (for reasons other than the purchase of pri-
Under these agreements, the Commonwealth vate insurance) received medical benefits under
undertook to meet so percent of the aggregate Medibank in the same way as they had under
net operating costs of the public hospitals in the previous scheme. They also had the right to
States that agreed to provide free medical treat- accommodation and treatment as “hospital pa-
ment for “hospital patients” (public inpatients tients” free of charge in recognized public hos-
and outpatients) at their public hospitals. Treat- pitals without being means-tested. An addition-
ment for “hospital patients” was to be provided al right to purchase supplementary “hospital
free of charge by staff employed by public hos- only” coverage privately at subsidized rates
pitals on a salaried or contractual basis. Patients enabled persons with little income to insure for
who chose to be admitted to public hospitals as hospital benefits equal to the minimum fees
private patients were to be charged agreed on charged to private patients in public hospitals.
daily fees. For patients in private hospitals, the Persons so-insured could be treated at public
Commonwealth paid a daily benefit of $16 di- hospitals by their own doctors (rather than as
rectly to the hospital. “hospital patients” treated by doctors engaged
by the hospitals). The assistance also helped
Benefits available from the government could
them to choose care in private hospitals.
be supplemented by private insurance, especial-
ly for private status in hospitals. Private in- The conservative government also introduced
surance contributions in respect of supplemen- new Commonwealth/State cost-sharing agree-
tary service remained tax deductible. ments on public hospital costs. Previously, the
Commonwealth had paid 50 percent of the net
Reform of Medibank by the operating costs of public hospitals in each State,
Conservative Government (1976-77) whatever these costs turned out to be. It now
At the end of 1975, the Labor government lost came to exert leverage over public hospital costs
office. The newly elected conservative govern- by paying 50 percent of only those operating
Medibank came into operation on July 1, 1975, but agreements costs in each State which it had previously ap-
with all the States were not completed until several months later. proved in the State’s aggregate budgets.
Ch. 4–Australian Health Care Systems and Medical Technology 63

A compulsory reinsurance pool replaced the Additional Reforms by the

“special accounts” system for hospital care, and Conservative Government (1978-79)
the Commonwealth contributed a flat $50 mil-
lion annually to that pool. This subsidy was far With the 1976 and 1977 health care financing
less than the special account outlay would have arrangements, the conservative Commonwealth
been and also imposed a firm ceiling on the Government had gone some way towards
achieving its objective of reducing the propor-
Commonwealth’s liability. The reinsurance sub-
tion of expenditures from the Commonwealth’s
sidy was available only on objectively deter-
budget. It was still not satisfied, however, and
mined grounds: hospitalization for more than
introduced new arrangements in November
35 days in a year. Special accounts in relation to
medical services ceased. 1978. By this time, the government was con-
cerned about the effect of health insurance ar-
The regulation of private health insurance rangements on the consumer price index. It also
funds was strengthened. Individuals who opted believed that the existing insurance arrange-
out of Medibank had to be covered uncondi- ments were too complex.
tionally, at least for levels of benefit equivalent
to those provided by Medibank. Private funds The new scheme the government introduced
could not reject or discontinue the insurance of in 1978 was less complex than the previous one.
any subscriber; nor could they limit the pay- It abolished the health insurance levy and pro-
ment of benefits from the basic tables. All tables vided for the Commonwealth to pay a new uni-
to which the funds could apply limitations and versal medical benefit from general revenue.
exclusions had to be expressed as supplementary The new medical benefit covered 40 percent of
tables. This requirement ensured that contribu- schedule medical fees, subject to a maximum pa-
tors to higher tables participate in the basic tient contribution of $20 for any one item for
tables and so share the risks of all other basic which the schedule fee was charged, and was
contributors. paid through private insurance health funds, Al-
though additional coverage was not compul-
In 1977, the Commonwealth Government sory, private health insurance funds were per-
agreed upon an insurable nursing home benefit. mitted to offer supplementary medical benefits.
This benefit was payable in each State at a level They also continued to provide hospital
which—when combined with a specified com- benefits. Funds were given considerable free-
pulsory out-of-pocket patient contribution 7— dom and flexibility to devise attractive benefit
would cover fully the Commonwealth-ap- packages.
proved controlled fees charged to 70 percent of
patients in private (“nongovernment”) nursing Accommodation in standard wards of public
homes in each State. Hospital insurance organi- hospitals with treatment by doctors engaged by
zations became liable for payment of the full the hospitals continued to be made available
amount of nursing home benefits in respect of free of charge to those who were not privately
their standard (basic) hospital benefit table con- insured for hospital care.
tributors. The amount of benefit payable by the
private insurers in such cases was the Com- For pensioners and their dependents who
monwealth basic benefit (about $25 a day) plus, were not privately insured, doctors continued to
where appropriate, an extensive care benefit accept reduced payments of 85 percent of sched-
(which was raised from $3 a day to $6 a day). ule fees from the Commonwealth. People who
Uninsured nursing home patients, who were not were unable to pay their medical bills could be
entitled to benefits from hospital benefits classified by their doctors as “disadvantaged. ”
organizations, continued to receive both the For individuals in this new group, doctors billed
basic and extensive care benefit from the Com- the Commonwealth Department of Health and
monwealth Department of Health. received 75 percent of the schedule fee in full set-
‘The out-of-pocket contribution amounted to about 90 percent tlement; they were not permitted to seek any ad-
of the age pension. ditional payments from the patients themselves.
60. Background Paper #4: The Management of Health Care Technology in Ten Countries .

All these new arrangements were estimated to Health care has always been financed to a
add $305 million a year to Commonwealth large extent by the public sector in Australia.
budget outlays and to reduce receipts from the With the introduction of Medibank in 1975,
health insurance levy by about $320 million in a however, the public sector’s share of expendi-
full year (2). Because the arrangements were tures rose from 62 percent in 1974-75 to 72 per-
largely tax financed, their effect on the con- cent in 1975-76 (7,8). By far the largest share of
sumer price index was favorable. the increase in public sector expenditure was
borne by the Commonwealth Government. The
Hardly 6 months had elapsed before the Com- Commonwealth’s share of total health expend-
monwealth Government announced yet another itures rose from 30 percent in 1974-75 to 48 per-
change. In May 1979, it decided to pay no uni-
cent in 1975-76, while the States’ percentage fell
versal Commonwealth benefit at all on small from 32 to 24 percent.
bills up to $20 for any item of service, and to
pay the full amount in excess of $20 in respect of The changes the conservative government
the schedule medical fee for each item. Arrange- made in health care financing in 1976 resulted in
ments for pensioners and the disadvantaged a reduction in the Commonwealth Govern-
were continued. Because some 80 percent of ment’s share of total health expenditures to 42.6
medical services attract a schedule fee of less percent in 1976-77 (7,8). The States’ share re-
than $20, the upshot of this arrangement should mained reasonably consistent at 23.6 percent for
be a savings to the Commonwealth of approxi- both fiscal years 1975-76 and 1976-77, and pri-
mately $200 million a year and a reduction in vate sector spending rose to over 35 percent
the number of claims processed by the private
after the change. The share of health costs borne
health insurance funds.
by individuals has now returned to about the
same level it was at prior to the introduction of
Rising Health Care Costs (1974-78) Medibank.
For some time, but particularly during and
after the financial year 1974-75, Australian Nearly 58 percent of all health expenditures in
health care costs had been rising rapidly. Total 1976-77 was for institutional care (7,8). Public
public and private expenditures on health in- hospital costs continue to account for over one-
creased from $4.19 billion in 1974-75 to $7.15 third of all current expenditures on health care,
billion in 1977-78 (7,8). As a percentage of gross and other institutional care accounts for an ad-
national product, they rose from about 4 per- ditional one-fifth of health expenditures. By far
cent in the mid-1950’s to 7.89 percent in 1977-78 the largest share of institutional care, 70 percent
(7,8). The rate of growth in expenditures has in 1974-75 and about 76 percent in the next 2
been declining since-1976. years, is financed by the public sector.


The arrangements for financing health care in insurance. Major policy decisions on these mat-
Australia, described in the previous section of ters are made by the Commonwealth Govern-
this chapter, exert a considerable influence on ment on the basis of recommendations sub-
the supply and utilization of medical technol- mitted by the Minister for Health (5,13,14).
ogy. These arrangements, a discussed below,
exert their effects through 1) hospitals’ cost- Hospitals’ Cost= Sharing Arrangements
sharing agreements, which affect the supply of
public hospital facilities and staff and provide Cost-sharing arrangements for public hospi-
opportunities for rationalization; 2) regulation tals, since July 1, 1975, have been elaborated in
of charges in hospitals; 3) negotiation of fees agreements between the Commonwealth and in-
and salaries: and 4) regulation of Private health dividual States. These bilateral agreements pre-
Ch. 4–Australian Health Care Systems and Medical Technology ● 65

scribe hospital services to be provided and cost review of hospital resources, standards, meth-
shared, categories of patients to be charged, and ods, and procedures; rationalization of existing
processes for agreeing to hospital budgets and facilities and services; and evaluation of propos-
rates of charges. Commonwealth and State offi- als for the upgrading or expansion of public hos-
cials meet formally twice each year in bilateral pital services, including the introduction of
negotiating sessions. At these sessions, they high-cost technology.
discuss estimates of income and expenditures,
formulate budgets, and review experience in the Rationalization of Existing Hospital
light of known revenue shortfalls or overex- Facilities and Services
penditures in relation to approved budgets, The
In recent years, as government and insurers
officials’ recommendations are submitted to the
have covered large proportions of incurred
Commonwealth Minister for Health and the
costs, there have been few financial inhibitions
State Minister responsible for the particular
on the use of medical services. Knowing that the
State’s health portfolio for their approval.
marketplace is no longer effective as a rationing
Negotiations take place in an atmosphere in process, State and Commonwealth officials aim
which there is no agreed on absolute ceiling on to replace it by conscious planning or the im-
the level of expenditure for medical care and position of controls to change the behavior of
hospital services that the country can afford, health professionals and the community.
but in which there is doubt that marginal in-
creases in the hospital budget will produce bene- HOSPITAL BEDS/DAYS
fits comparable to those that will result from Because there is a generous overall supply o f
similar outlays in other sectors. The Common- beds in public hospitals, there is no need to add
wealth need not approve the full level of subsidy to the pool. When new facilities are provided,
required to meet 50 percent of the aggregate net they arise not because of shortages, but because
operating costs experienced by one or more of the age or geographic or functional maldistri-
States, and in the context of national budget- bution of existing hospital facilities. Without
framing, when the Commonwealth decides how making any commitment, the Commonwealth
much it is prepared to allocate to the public Government has proposed that public hospital
hospital system, it has repeatedly rejected services should be reduced by the application of
budgets prepared by officials. Commonwealth two principles (11):
expenditures under the arrangements in 1978-79 ● as additional staffed beds are opened, every
are estimated at about $1,040 million. (Com- effort should be made to achieve offsetting
monwealth subsidies to private hospitals totaled closures of other staffed beds wherever that
$73 million (7).) may be feasible, and
● public hospital patient days should be re-
The formulation and development of hospital
cost-sharing policies, which are subject to minis- duced within 4 years from approximately
terial endorsement, is undertaken by a National 1,300 to approximately 1,100 days per
Standing Committee comprised of senior health 1,000 population per annum.
officials from the Commonwealth and from It is considered important that the rationaliza-
each of the States and Territories, and by State tion program should cover all hospitals (public,
standing committees established under Com- private, and veterans) and related facilities
monwealth/State administrative arrangements. (such as nursing homes and mental hospitals);
These standing committees provide a forum for otherwise, contraction in one area could lead to
the exchange of views on budgetary matters and expansion in another. In the nongovernment
on a range of hospital and related health policies nursing homes area, growth control already ap-
which the Commonwealth and the States use to plies. A guideline now used on a State or re-
seek effectiveness, efficiency, and cost contain- gional basis is that there should be not more
ment in the delivery of public hospital services. than 50 nursing homes beds per 1,000 popula-
These objectives are sought through continuing tion aged 65 years or more. It is not thought to
66 Background paper #4: The Management
● of Health Care Technology in Ten Countries

be necessary for the Commonwealth Govern- so that they can participate in reviews of hospi-
ment to take steps to discourage the transfer of tal utilization.
patients from recognized hospitals to mental
hospitals, because the States now carry the ma- Evaluation of Proposals for
jor burden in regard to mental hospitals and can Expansion of Public Hospital Services
be expected to take whatever action is necessary
Eighty percent of short-term acute hospital
to avoid their expansion. care is delivered in public hospitals, which must
comply with conditions of subsidy determined
by State Health Authorities. These conditions
Hospital utilization rates are high in Austra-
are increasingly likely to reflect the arrange-
lia, with annual utilization approximating 1,600
ments agreed to in Commonwealth/State dis-
patient days (about 1,300 patient days in public
cussions and negotiations with respect to the
hospitals and 300 in private hospitals) per 1,000
hospitals’ cost-sharing arrangements.
population (11). Some States provide satisfac-
tory levels of care with far lower rates of hospi- In public hospitals, an item of new equipment
tal use. Evidence exists that many patients are in valued up to $50,000 can be treated as “expend-
hospitals because hospitalization is the most able” and the cost of its purchase be regarded as
convenient answer to a problem which may be an operating cost. Thus, a good deal of medical
as much social, domestic, or financial as it is technology can be introduced and expanded
medical (11). without being subjected to the acquisition scru-
tiny described below. All investments exceeding
There are large differences in length of stay
for the same illnesses and operations. These dif- $50,000, however, are treated as capital, and
State governments are the sources of funds.
ferences can be only partially explained by so-
Consequential growth in operating costs is
cial and geographical factors. Surveys of cus- taken into account before State facilities are ex-
tomary practice also have shown large varia-
panded, because there can be no assurance that
tions in surgery rates between different areas—
the Commonwealth Government will agree to
even after allowing for difference in age com-
share these costs unless they have been specifi-
position. For example, the highest rate for ton-
cally approved.8
sillectomy is five times the lowest rate, the rates
for appendectomy and gallbladder removal STATE EVALUATIONS OF TECHNOLOGIES
both show a threefold variation; and the rates
Australian Health Authorities agree that the
for hysterectomy show an almost fivefold varia-
most specialized facilities and services should be
tion (4,6).
concentrated in large units rather than dispersed
Commonwealth and State Health Authorities haphazardly because:
agree that hospitals should be influenced to re-
. large populations are required to support
duce inappropriate inpatient utilization. Unnec-
specialist units of economic size, especially
essary inpatient care generates staff and technol-
in neurosurgery, thoracic surgery, radio-
ogy costs almost as great as those generated by
therapy, and plastic surgery (some of the
essential care. The admission of patients who
expensively equipped diagnostic technolo-
could be treated at lower cost elsewhere contrib-
gies should be included in this group of
utes to excessive use of hospitals and of their
associated technologies.
It is generally agreed that, to monitor custom-
ary practice, it is necessary to have good medi- ‘In private hospitals, all capital charges are borne by the own-
ers. Private hospitals, therefore, tend to invest in facilities and
cal record systems, prompt analyses of records, equipment that assure a quick and good return. They tend to keep
and displaying of the results for consideration. away both from investment in training and emergency care facili-
Attempts are being made by Health Authorities ties which require generous staffing and from investment in the
most sophisticated and expensive technologies. A high proportion
to upgrade present record practices and proce- of private hospital work consists of common forms of elective sur-
dures and to organize medical staff in hospitals gery and of obstetrics.
Ch. 4–Australian Health Care Systems and Medical Technology . 67

. specialists require a regular and adequate for the acquisition of technology equipment by
flow of patients to maintain their skills; and public hospitals:
● the provision of a comprehensive range of
1. initiation of a request to the State Health
in a single site assists in the cross
referral of patients between specialists.
2.justification of the proposal,
State Health Authorities discourage the pro- 3.technical assessment,
vision by local or district hospitals of more than 4.allocation of funds,
a limited range of services (e. g., general medi- 5.preparation of specification,
cine, relatively minor surgery, minor trauma, 6.invitation of tenders or quotation,
physical and psychiatric rehabilitation, uncom- 7.technical evaluation of tenders,
plicated obstetrics, and outpatient consulta- evaluation of tenders,
tions). Because these hospitals provide ready ac- 9.approval of funds,
cess for local communities, however, the Au- 10. acceptance of tenders, and
thorities support their staffing and provision. 11. evaluation of practice.
In most States, advisory committees help the Public hospitals are generally under the im-
State Health Authority determine criteria for mediate administrative control of boards of
the provision of sophisticated services in public directors incorporated under State laws. Public
hospitals. These advisory committees have been hospital boards consist of both elected and ap-
particularly helpful in the process of rationing pointed members, several of whom wield con-
sophisticated new technologies in a public hos- siderable influence in their communities. They
pital system subject to increasingly firm cost see their task partly in terms of determining
controls. policies for the management of hospitals in ac-
cordance with the conditions of subsidy deter-
In New South Wales, for instance, the assess- mined by State Health Authorities and partly in
ment of a request for equipment to be purchased
terms of acquiring resources. g
by a particular hospital will take into account
factors which include: In pursuing ‘resources, the boards frequently
find allies among the doctors using the public
● guidelines for the provision of specialized hospitals. Jointly with these doctors—and usu-
services, ally supported by the medical and local commu-
● the hospital’s capacity to make effective use nities seeking the best and the brightest in an en-
of the equipment, vironment in which taxpayers foot most of the
● the extent and state of existing equipment bill—public hospital boards are able to exert
in the hospital, and strong pressures on governments. With public
● the availability of similar facilities in other hospital charges fixed at uniform rates, the ac-
hospitals in the area.
quisition of additional facilities and staff will
The hospital’s capacity to make effective use of not be reflected in a particular hospital’s bill,
equipment will depend on the availability of ac- but such facilities will attract better qualified
commodations, the presence of enough trained specialists and add to the prestige of the hospi-
staff to manage the technology, and a sufficient tal’s board of directors. In this atmosphere,
workload to justify the purchase of new equip- guidelines for the rationalization of medical
ment. Policy guidelines for the provision of can- technology are subjected to political processes
cer services, open-heart surgery, neurosurgery, and may be set aside, particularly as the earn-
and other highly specialized services have been 9

published and widely distributed by the Health 1n some States, approval for the acquisition and installation of
expensive new equipment in a public hospital is conditional on the
Commission of New South Wales. hospital’s raising a substantial share of the capitaI by voluntary
local effort. This system operates to the advantage of affluent com-
Similar activities in other States have resulted munities, however, and is therefore in the process of being dis-
in the establishment of the following 11 stages carded.
68 Background Paper #4: The Management of Health Care Technology in Ten Countries

ings derived from the technology by doctors The expert national advisory panel would ad-
using it will come largely from the Common- vise on questions pertaining to new technol-
wealth and health insurance funds. ogies, such as (3):
● whether a new technology is for broad gen-
eral use or for use by specific types of pa-
Awareness of the need for some national sys- tients;
tem of evaluation, in addition to the technology ● whether medical benefits should be paid for
assessment procedures that are now applied to the new technology, and if so, whether the
technologies used in the public hospital systems technology should be restricted to specific
of individual States, has grown. locations;
● whether benefits should be paid for use of
In 1978, the Commonwealth Committee on
the technology in an extended experimental
Applications and Costs of Modern Technology
evaluation period (if there are doubts about
in Medical Practice identified the folIowing as
its efficacy);
issues needing examination in the development ● whether the introduction of the new tech-
of criteria for the location and use of technology
services (3): nology into the benefits schedule might af-
fect national health expenditures in signifi-
. whether the current availability of the vari- cant ways; and
ous technologies is appropriate; ● whether there is likely to be a change in the
● whether essential resources or support serv- patterns of use of related technolog=s.
ices are available to ensure adequate stand- The central repository of technical informa-
ards in the provision of a particular techno- tion would (3):
logical service;
● whether it is possible to determine opti- ● receive reports from the expert national
mum sizes of population services by highly panel;
specialized technologies; ● collect information on:
● whether it is possible to indicate the patient —the effects of technological services on
throughput per year that is desirable to patient outcomes,
maintain professional expertise and an effi- —the economic effects of technical services
cient service; and on the health system and the public, and
● whether limits should be imposed on the —the winding down of displaced or ineffec-
provision of any technology. ‘ tive technologies; and
● supply information to the States or other
This committee suggested that policy guidelines interested bodies as required.
for rationalizing technologies should be devel- The Committee on Applications and Costs of
oped by consultative advisory committees in
Modern Technology in Medical Practice has
each State and that these committees should
proposed a sequential process for using the
have a formal link to a national advisory com-
R&D process as a method of regulation. The
mittee in order to achieve uniformity through-
main components of the proposal are (3):
out Australia. It further suggested that duplica-
tion of resources in any specialty should be ● modification of the operation of the medi-
avoided unless need could be demonstrated and cal benefits schedule in such a way that the
the cost justified. experimental nature of and doubts about
the effectiveness of some technologies are
The Commonwealth Committee on Applica- recognized;
tions and Costs of Modern Technology in Med- ● initiation of carefully designed evaluation
ical Practice recommended both the establish- studies of all new medical technologies; and
ment of an expert national advisory panel on ● establishment of a system to oversee and
medical technology and the creation of a central monitor the development, introduction,
repository of technical information (3). and diffusion of new technologies.
Ch. 4–Australian Health Care Systems and Medical Technology 69

pitals have much higher charges for high stand-

ards of amenity.
As some 50 percent of the beds in public hos-
pitals are used for treating private patients, the
comparatively low charges for private care in
public hospitals have an indirect effect on
charges in private hospitals. To maintain their
competitive position, private hospitals have to
hold their charges down. Another indirect effect
is to hold down the cost of hospital insurance
subscriptions; this, in turn, holds down poten-
tial rises in the general consumer price index,
which is seen by the Commonwealth Govern-
ment as a desirable objective, because wages are
indexed. A perverse effect of artificially low
charges in private hospitals, however, is the
stimulus such charges offer entrepreneurs who
own the hospitals to generate revenue by ex-
panding their technological equipment to take
advantage of leasing and hiring arrangements
with doctors who are paid by fees for services
rendered through use of that equipment.

Medical Fees and Third-Party Coverage

With the high levels of third-party coverage
that Australia has experienced since 1970, the
price elasticity of demand at the margin has
been negligible. The medical profession has
strenuously protected this position by advocat-
ing that fee increases should always be followed
by increases in subsidized insurance benefits,
and at the same time by insisting that it has the
sole authority to determine fees. This does not
mean that fees have ever been determined at the
national level by AMA. Representatives of local
AMA branches and specialist societies have
shared in the function of recommending fees.
The recommendations of these groups ultimate-
ly led to the adoption of a schedule of “recom-
mended” fees in each State, but individual doc-
tors were not bound to follow this schedule.
In recent years, AMA has used a formula for
adjusting fees in accordance with changes in
unit costs. This has guaranteed gains from any
growth in productivity (e.g., achieved by reduc-
ing home visits and so providing more office
services per day, or by technological advances
in diagnostic procedures) or from extensions in
the capacity to earn income (e.g., by abolition
70 Backround paper #4: The Management of Health Care Technology in Ten Countries

of the honorary system in public hospitals) .11 Under threat in 1970 that the Commonwealth
Furthermore, in issuing their fee recommenda- Government would introduce a “participating
tions, State branches have usually gone beyond doctor scheme,” under which only the fees of
the formula-indicated percentage changes by doctors who agreed to charge the “common fee”
rounding off upwards or by seizing opportuni- would attract insurance benefits, the profession
ties related to foreshadowed increases in insur- agreed to formal mechanisms for determining
ance benefits. All these factors have combined fees for benefits purposes. An independent arbi-
to establish systematic and consistent fee varia- tral body, recently headed by a judge, has re-
tions between States. viewed and determined these fees ever since.
The price that the doctors—particularly the spe-
Prior to 1970, specialist fees were not the sub-
cialists—exacted for conceding to the govern-
ject of AMA’s recommendations. Some special- ment on this matter was acceptance of their fee
ist bodies circulated fee lists, but these did not proposals unchanged. Before agreement was
enjoy the same authority as the recommenda- reached, they were promised a maximum co-
tions for general practitioners published by
payment of $5, provided the common fee was
AMA. Individualism in fee setting was particu-
charged. The rise in fees and benefits resulted in
larly blatant in the field of surgery, where, for
the immediate growth of Commonwealth medi-
example, in April 1967, the insured charges for
cal benefits from $54.9 million in 1969-70 to
appendectomy ranged from $35 to $180, the
most common fee being $60 (14). This disper- $127.1 million in 1971-72 (14).
sion of specialist fees, while possibly increasing The increase in the amount being paid to doc-
the price elasticity of demand, was inconsistent tors was not accompanied by any assurances
with the objectives of those who believed that about the effective level of coverage that insured
the central purpose of health insurance was to people could expect, because the government,
remove random fluctuations in consumers’ dis- the professional associations, and the insurance
posable incomes caused by medical care expend- organizations were given no authority over in-
itures. dividual doctors’ fees. A parliamentary commit-
tee’s previous proposal that doctors should
With absence of a proper relationship be- agree to inform their patients of their own fees
tween doctors’ fees and medical benefits being
and of the established common fee was rejected.
seen as the “fundamental deficiency in the medi- In 1975, an attempt was made under Medibank
cal benefits scheme” (14), the concept of a sched- to induce doctors’ adherence to common fees by
ule of common fees for all items of service making available to patients the alternative of
evolved. The intention was that variance receiving free treatment from public hospitals
around the central fee would diminish; the
(for both inpatient and ambulatory care). Doc-
dominant issue, therefore, became the amount
tors engaged by the hospitals on a salaried, ses-
of the central fee. Related to this were questions
sional, or contractual basis to provide such
about who would determine the central fee and treatment, however, were not at any time ap-
by what process, as well as about what sanc- pointed in sufficient number to have much im-
tions would ensure the fee’s application.
pact, and the policy was not pursued with any
vigor after the demise of the Labor government
in 1975.
prior to 1975, Australia had an honorary system for providing
hospital care to public patients. Originally, it arose from associa-
So the country was left with a system in
tion between charity to the sick poor and medical education (14). which there was no effective power countervail-
The teaching hospitals were staffed at senior levels by leaders of ing that of the doctors and no built-in control of
the profession who spent part of their time in unpaid teaching and
in caring for indigent patients. Similar arrangements were adopted
usage, but in which there was a high level of
in other hospitals, despite the appointment of increasing numbers subsidized underwriting of private medical fees
of salaried specialists and resident medical officers. The honorary through health insurance. This system stimulus
staff derived benefit by treating their private patients in public hos-
pitals on a fee-for-service basis and by coming to the notice of re-
was sure to give impetus to the growth of ex-
ferring practitioners. penditures. Neither patient nor doctor had
Ch. 4—Australian Health Care Systems and Medical Technology . 71

reason to base treatment decisions on the cost of benefits paid by the Commonwealth on their be-
services rendered, so doctors increasingly half amount, respectively, to 85 and 75 percent
tended to perform or request any procedure that of the common fee. All other persons pay the
had diagnostic or therapeutic possibilities ir- copayment out of pocket or insure to cover it.
respective of its cost. Medical technology was Because a high proportion of these individuals
set to diffuse rapidly in such an environment, do insure, expensive, excessive, and inefficient
and this it did. use of technology is likely to persist.
The situation has been aggravated by the Administration of the medical benefits
granting of rights of private practice to salaried scheme, however, can be used to influence the
public hospital specialists. The salaries and con- costs, utilization, and quality of medical serv-
ditions of service of these doctors are deter- ices. One mechanism that is infrequently used,
mined by industrial courtsl2 and are generous. although its availability may exert influence, is
Rights of private practice are usually allowed on a system of Medical Services Committees of In-
the basis that up to about one-fifth of the spe- quiry. Committees are set up under law to in-
cialist’s hospital salary can be earned in private quire into the practice of doctors who are be-
practice as an additional personal income. Any lieved to provide excessive and unnecessary
amount in excess of that portion is paid into a services in private fee-for-service practice.
trust fund which finances travel, study, and re-
search activities of the specialist group at each Rules can be devised by the Minister to mod-
hospital. ify the level of fees, and accordingly, the ben-
When expensive hospital equipment and staff efits payable, under various circumstances de-
are used by the salaried specialists exercising pending on the type and nature of the service.
their rights of private practice, the hospital is The Commonwealth Medical Benefits Schedule
paid a share of the fees earned. Thus, in radiol- Revision Committee makes recommendations in
ogy and pathology, it is not unusual for the pub- regard to the inclusion of new items into the
lic hospital to take 60 percent of the fees earned benefits schedule, the deletion of items, amend-
by its salaried specialists in private practice. ments of the description of items, and the com-
There can be no sharper conflict of interests for bination or grouping of items of service. It also
recommends appropriate fees for benefits pur-
a hospital management wishing to limit exces-
poses for new items and investigates anomalies
sive utilization of diagnostic tests and proce-
dures than that which arises when the hospital is in fees.
paid a substantial portion of the fees that are The Commonwealth Medical Benefits Advis-
earned from them—especially when the man- ory Committee considers claims for increased
agement knows that increased utilization will fees in cases in which a service is of unusual
generate income for the hospital without mak- length or complexity. It also considers whether
ing any real call on patients’ disposable professional services rendered in specified cir-
resources. cumstances should be excluded from payment of
Recent changes in health insurance arrange- medical benefits. Medical benefits for tomogra-
ments were aimed at restoring price as a factor phy, for example, have been restricted to serv-
to be taken into account. The abolition of Com- ices rendered in the management of gIaucoma.
monwealth medical benefits for fees up to $20 Medical benefits for health screening services
for any item will apply to all persons who are are not authorized unless the Minister for
not pensioners or designated “disadvantaged. ” Health directs otherwise. Medical consultations
The disincentive to excessive provision for pen- for medical checkups in the course of normal
sioners and disadvantaged persons is that the practice do qualify for benefits. Benefits are not
payable for mammography unless the patient
Industrial courts have been established for all industries in has been referred to a specialist radiologist and
Australia and are concerned with the salaries and conditions of the referring doctor has reason to suspect the
service of employees. presence of malignancy.
72 Backround paper #4: The Management
● of Health Care Technology in Ten Countries

The fee level for an item is intended to pro- by 36.6 percent over the previous year (9). In
vide a fair and reasonable return to the doctor the next year, the rise was only 14 percent and
for the rendering of that service in most circum- in 1977-78 it was 10.7 percent (12).
stances. Adjustments to common fees are made
regularly. Factors which have a direct bearing Education and Research
on the need to review and restructure items in-
Material related to the value and utility of
clude evidence of the reduced capital cost of specific diagnostic procedures has been pre-
equipment, cheaper alternative equipment, and pared by the Commonwealth Department of
increased throughput. As a result of recommen- Health for circulation to medical colleges and
dations made recently by the Committee on societies to generate discussion concerning the
Medical Technology (3), fee levels are being ex- cost effectiveness of the related technological
amined in accordance with the concept that they services. In a similar vein, officers of the De-
should reflect efficient use of facilities. partment of Health and AMA have approached
the Australian medical schools with a view to
Special arrangements have been made for having medical students exposed to some in-
pathology services. A new schedule of services formation about the cost effectiveness of tech-
and fees for pathology services has reduced the nological services.
number of individual pathology items, adjusted AMA has been awarded specific grants to de-
fees to stimulate the reasonable use of modern velop and implement peer review systems
cost-saving technology, and generally improved throughout the nation. A period of some 2 years
the rules relating to multiple testing of the was taken up in informing the profession at the
pathology specimens. Requests for pathology grassroots level about the concept. A resource
services must be in writing and the requesting center has now been established, and peer re-
practitioner must be clearly identified. Pro- view (including utilization review of work done
viders of services must retain the requests for a in the hospital) is slowly becoming accepted as a
specified period to enable examination in con- formal goal by the medical profession.14 Infor-
nection with Medical Services Committees of mal review activity has always been undertaken
Inquiry. Medical benefits for most pathology at the larger teaching hospitals.
services will not be payable unless the practi-
tioner providing the service has been approved The Commonwealth Department of Health
as a provider by the Minister for Health, and has approximately $1.5 million a year available
before approval is granted, the provider is re- to it to fund health services research studies and
quired to give an undertaking to abide by a code health service development projects. In addi-
of conduct prohibiting fee-splitting and other tion, health services research funds are available
undesirable practices. in the States and to a limited extent at univer-
sities. Some examples of current studies and
projects are:
It is not yet clear to what extent patients will
cover themselves by insurance to meet their bill; “Other factors were involved when overall cost rises were so
steep. These included a very rapid escalation in labor costs in hos-
nor is it clear whether the recent health insur- pitals at a time of sharp inflation. Population growth accounted
ance amendments will have any effect on the use for14 only a small proportion of this rise in expenditures (12).
Peer review of medical services was requested by the Com-
of technology. Nevertheless, total health ex-
monwealth Government at the time of introducing health insur-
penditures in Australia, which had been grow- ance amendments in October 1976. The Australian Medical Asso-
ing very rapidly during the brief period when ciation was subsidized to set up voluntary systems, and was ad-
tax-financed universal coverage was provided, vised that failure to respond satisfactorily within 3 years could re-
sult in some kind of compulsory program. Both peer review and
did show progressively lower rates of growth as hospital accreditation had been resisted in Australia, although
the proportion of public sector expenditure numerous informal review activities were common. Hospital ac-
dropped. For instance, in 1975-76, when a basic creditation was not seen to be necessary by State Authorities,
who, in fact, maintained close supervision of most hospitals
level of universal coverage was provided out of through their conditions of subsidy of public hospitals and licens-
tax revenues, total expenditures on health rose ing of private hospitals.
Ch. 4–Australian Health Care Systems and Medical Technology 73 ●

● Accreditation of Australian hospitals. —To tials between the surgery units at two Mel-
develop standards of accreditation for Aus- bourne hospitals.
tralian hospitals, including a series of pilot ● Retrospective evaluation of coronary care
studies to refine the methodology. in Queensland. —To study various levels of
● Medical administrative standards in hospi- intensity of coronary care with respect to
tals. —To develop medical administrative intrahospital survival and cost to the com-
standards by conducting a survey of the munity.
formal organization of medical staff in ● The impact of computed tomography (CT)
Australian hospitals, and analyzing the ef- in Australia. —To evaluate CT services,
fectiveness of the organizational patterns. with particular attention to cost effective-
● Cost effectiveness of treatment of end-stage ness and cost efficiency, and to develop
renal disease. —To analyze the treatment of guidelines for patient selection.
end-stage renal disease with special empha- ● Evaluation of CT and ultrasound. —A pro-
sis on the available alternative methods of spective clinical evaluation of the parallel
treatment. and complementary use of CT and ultra-
● Evaluation of the role of specialist medical sound in diagnostic imaging of the body,
units in a teaching hospital. —To compare excluding intracranial examinations.
and evaluate the treatment received by pa- ● An educational program to reduce exces-
tients with similar disorders who are ad- sive use of clinical biochemistry laboratory
mitted either to specialist units or general tests within hospitals. —To reduce the over-
medical wards at random. use of pathology tests in hospitals by the
. Prospective evaluation of coronary care in use of an educational program aimed at in-
two States. —To undertake a pilot study in- fluencing doctors responsible for ordering
volving selected hospitals in Queensland tests.
and New South Wales on the effectiveness ● Evaluation of a large-scale screening pro-
of a range of facilities in treating certain grams. –To evaluate a multiphasic health
coronary conditions. testing service (study completed under the
● The autopsy in quality insurance in hospi-
auspices of the University of New South
tal practice. —To use autopsy data to exam- Wales).
ine the effectiveness and quality of care and These studies raise a number of questions.
services. Should all technologies be evaluated? If that is
. An evaluation of the cost effectiveness of our belief, there are substantial resource im-
surgical and related hospital services. — T o plications. Even when evaluations are well
develop a cost accounting system which done, a remaining question is this: Will any-
will identify and analyze the cost differen- body be influenced by the results?

achieved outside the public hospital system, in
private office practice, or in private hospitals.
Against the background of intention and
practice outlined in the preceding section of this

estimated to be due to population changes, about 60 percent to

higher prices and wages, and 32 percent to increased volume and
intensity of usage. Most of this growing volume and intensity of
usage is attributable to the comparatively less sophisticated tech-
nologies, such as chest X-rays, audiometry, electrocardiography,
electro-encephalography, respirometry, and endoscopy.
74 Background Paper #4: The Management of Health Care Technology in Ten Countries

chapter, Australia’s experience with specific have rigidly curtailed the introduction of CT
medical technologies is presented below. scanners into public hospitals and do not sup-
port an expansion of this technology at present.
CT Scanners In addition, the New South Wales Health Com-
mission has determined that referrals of patients
CT scanners were introduced to Australia in for CT scanning in public hospitals should be re-
the mid-1970s. By December 1978, there were stricted to those made by clinical specialists in
28 in use and 1 on order. They were distributed disciplines relevant to the examinations being
among the States in public and private facilities conducted.
as listed in table 1. Scanners are identified as
“head” and “general purpose” scanners (rather In the private sector, these direct restraints
than “head” and “body” scanners), because 75 are not possible. Private installations are not
to 85 percent of examinations carried out on the regulated. Medical benefit arrangements have
body scanners in Australia are head scans. been reviewed recently, however, and as a result
of the review, fees have been reduced so that
With 29 scanners, there will be approximately profits will not be so high as to encourage a
1 CT scanner per 500,000 population. Since 15 rapid expansion of CT scanning in the private
of the scanners are located in Sydney and Mel-
bourne, the peripheral populations of large
States have difficulties of access. Government- Renal Dialysis
subsidized aerial ambulance services and other
subsidized transport schemes for those living in Renal dialysis maintenance programs were in-
remote areas are designed to overcome these stituted in 1964, 1 year before the first successful
problems. renal transplant. Since then, the capacity to
treat patients with renal failure has been pro-
As a noninvasive technique with high diag- gressively expanded. A total of 1,124 patients
nostic accuracy, CT scanning has caught the are alive with functioning kidney grafts, a rate
imagination of Australia’s medical profession. of 78 per 1 million population. The rate for pa-
Nevertheless, in recent years, special concern tients on dialysis is 77 per 1 million population.
has been shown about the effectiveness and
economics of CT scanning. Its role in patient A national policy for the management of
management and its advantages and effects on chronic renal insufficiency was developed by the
other neuroradiological investigations have National Health and Medical Research Council,
been under review in all States. Because im- and this policy has been accepted and imple-
provement in patient outcome and advantages mented on a voluntary basis. Transplantation is
over isotope scanning have not been satisfac- seen as the objective for all potentially suitable
torily demonstrated, State Health Authorities recipients, but both dialysis and transplantation

Table I.–Number and Distribution of CT Scanners in Australia (1979)

Distribution of scanners in
Number of scanners by type public and private facilities Total number of
State/territory Head General purpose Public Private scanners/facilities
New South Wales . . . . . . . . . . . 1 9 5 10
Victoria. . . . . . . . . . . . . . . . . . . . 2 3 2 3 5
Queensland . . . . . . . . . . . . . . . . 2 2 2 2 4
South Australia . . . . . . . . . . . . . 1 2 2 1 3
Western Australia . . . . . . . . . . . 1 3 2 2 4
Australian Capital Territory . . . — 1 1 — 1
Tasmania ., . . . . . . . . . . . . . . . . — 1 1 — 1
Northern Territory. . . . . . . . . . . — 1a 1a — 1
Total . . . . . . . . . . . . . . . . . . . . 7 22 16 13 29
On order.
Ch. 4–Australian Health Care Systems and Medical Technology 75

are used in an integrated combined approach to teaching public hospitals; and State policies are
the management of renal insufficiency. to maintain their principles of regionalized radi-
otherapy facilities. In New South Wales, an ef-
Renal dialysis units are located exclusively in fort is being made to include cobalt therapy in
the public hospital system, where they are sub- an integrated and planned oncology program
ject to controls on expansion and where State based in public hospital units.
Health Authorities are committed to a policy of
rationalization. Home dialysis is coordinated Laboratory Automation
and supervised at major hospital units. Cooper-
ation and coordination among dialysis units has Laboratory automation has quite a different
been remarkably close. character from the technologies discussed
above. Major laboratory automation was intro-
Coronary Artery Bypass Surgery duced to Australia in 1960, and its acquisition
by public hospitals is subject to the general rules
Coronary artery bypass surgery was introduced for equipment purchases previously described.
in 1971 and has been limited to nine public
teaching hospital units which are subject to the Rationalization of some services occurs with-
rationalization policies of State Health Author- out formal government intervention through the
ities. As the following figures for annual opera- use by several hospitals and private practition-
tions show, the controlled diffusion of this tech- ers of particular services provided by large pub-
nology in Australia has been quite rapid. lic hospital laboratories. All State Health Au-
thorities promote and facilitate cooperative ar-
Year Number of operations rangements, and these Authorities have estab-
1971 . ...................... 158
1972 . ...................... 283 lished some major regional biochemistry serv-
1973 . ...................... 366 ices. In all cases, participation in regional or
1974 . ...................... 621 area services is optional. Technical advisory
1975 . . . . . . . . . . . . . . . . . . . . . . . 1,070 committees assist the Authorities in planning in-
1976 . . . . . . . . . . . . . . . . . . . . . . . 1,506 tegrated or cooperative arrangements.
1977 . . . . . . . . . . . . . . . . . . . . . . . 1,978

At this stage, further diffusion to additional Outside public hospital and government labo-
ratories, automation has been very widely dif-
units in public hospitals is not proposed. There
are indications, however, that a private hospital fused. It is found in private hospitals, in univer-
may enter the field; this entry cannot be con- sity laboratories, in both single and group pri-
trolled under present legislation. vate medical practices of pathologists, and in
large commercial laboratories. In these situa-
tions, the major influence on the amount of test-
Cobalt Therapy
ing is that exerted by specially designed codes of
Cobalt therapy was introduced to Australia conduct that supplement the influence of health
in 1959. It is centralized in each State at selected insurance arrangements.

In conclusion, it must be said that there are rewarding, efforts aimed at improving the orga-
being heard in Australia some voices that ques- nization and coordination of services and the
tion medicine’s extravagant support of lives of prevention of disease and disability.
suffering and torment. The major question is
whether society should not dispute the proposi- A large proportion of patients suffer chronic
tion that life should be maintained regardless of diseases, disabilities, discomforts, and worries
other factors. Some claim that resources should that will seldom go away quickly. These pa-
be diverted to other pressing, and possibly more tients endure more and more encounters with
76 . Background Paper #4: The Management of Health Care Technology in Ten Countries

specialists, technical personnel, and machines, What about the 3 percent of Australian children
while perceiving less and less continuity of care who are born with a serious disability? While
and coordination of interests on their behalf. few of them can be cured now, is there not clear-
They often leave the technical services disillu- ly scope for the application of modern technol-
sioned—with little change in their problems—to ogy to their problems? As the result of an inten-
find themselves in a community served by splin- sive and comprehensive genetic counseling pro-
tered sources of help that leave unbridged gaps gram, Perth is said to have one of the lowest in-
between the health and social services that the cidence of muscular dystrophy in the world.
patients require.
It may be appropriate to end this discussion
What about, for example, the thousands of with the following comment. Stimulus to the
handicapped children in remote areas of Austra- social sciences and their technology may yield
lia who do not receive sufficient help? Can a greater benefits than the mindless multiplication
clear case not be made for studies in communi- of diagnostic and therapeutic technologies in
cation and transport technology which would hospitals. If Henry Sigerist was right in asserting
be of assistance to such children? To take anoth- that the target of medicine is to keep people ad-
er example, is the prevalence of child abuse in justed to their environment, or to help them re-
our society not an indictment of our inept han- adjust when they have dropped out because of
dling of a problem which could be eradicated? illness or injury, then we have a social goal.

1. Annual Report of the Director-General of ing Health Expenditure, ” news release 52/79
Health 2976-77 (Canberra: AGPS, 1977). (Canberra, May 1979).
2. “Budget Speech, 1978/79” (Canberra: AGPS, 8. National Health Account: A Study (Canberra:
1979). AGPS, 1978),
3. Committee on Applications and Costs of Mod- 9 . Report of the Committee of Officials on Medi-
ern Technology in Medical Practice, report cal Manpower Supply (Canberra: AGPS,
(Canberra: AGPS, 1978). 1979).
4. Gadiel, D., “Private Medical Insurance and 10. Report of the Pharmaceutical Manufacturing
Elective Surgery: The Experience With Hyster- Industry Znquiry (Canberra: AGPS, 1979).
ectomy, ” paper presented at the ANZSERCH/ 11. “Report on Rationalisation of Hospital Facili-
APHA Joint National Conference, Perth, May ties and Services and on Proposed New
23, 1979. Charges: A Discussion Paper” (Canberra:
5. Hospital and Health Services Commission AGPS, 1979).
(Australia), “A Discussion Paper on Paying for 12. Sax, S., “Impact of Federal Health Insurance
Health Care” (Canberra: AGPS, 1978). and Health Resources Allocation Policies in
6. McEwin, R., “Morbidity Monitoring in New Australia, 1975-79, ” paper presented at the An-
South Wales, Australia: Incidence of Discre- nual Meeting of the American Public Health
tionary Surgery, ” paper presented at the Slst Association, New York, November 1979.
General Scientific Meeting of Royal Australa- 13, Medical Care in the Melting Pot (Syd-
sian College of Surgeons, Kuala Lumpur, May ney: A;gus and Robertson, 1972).
1978. 14. Scotton, R. B., Medical Care in Australia (Mel-
7. Minister for Health (Australia), “Curbing Ris- bourne: Sun Books, 1974).
5 ●

Medical Technology in Japan

Joel H. Broida
National Center for Health Services Research
Hyattsville, Md.

Japan: Country Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 79
The Health Care System. . . . . . . . . . . . . . . . . . . . . . ....?.... . . . . . . . . . . . . . . 80
General Organization of the System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 80
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 81
Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Administration and Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 82
Policies Toward Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 83
Evaluation of Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Regulation of Drugs and Medical Devices . . . . . . . . . . . . . . . . . . . . . . . . . . . . 84
Reimbursement and Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Cost-Containment Efforts. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 85
Specific Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Renal Dialysis.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 86
Radiation Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 89
Chapter 5 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 90


Table No.
1. Japanese Health Insurance plans, Beneficiaries, and Enrollments . . . . . . . . . . . . 81
2. Number of Hemodialysis Units in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
3. Number and Percent of Chronic Renal Disease Patients Receiving Different
Types of Hemodialysis in Japan . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
4. Percent of Chronic Renal Disease Patients Receiving Home Dialysis in
Selected Countries and Areas . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 87
5. Number and Distribution of Teletherapeutic Apparatus in Use in Japanese
Hospitals and Clinics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 88
Medical Technology in Japan
Joel H. Broida
National Center for Health Services Research
Hyattsville, Md.


Civilization in the Japanese Archipelago be- the principal alphabet (Kanji), which is made up
gan several thousand years ago in the neolithic of several thousand characters; and two other
age (17). Japan is made up of 4 main islands and alphabets (Hiragana and Katakana), each of
more than 3,000 smaller islands, covering a land which has 46 letters. The literacy level in Japan
mass of over 377,000km 2. Over 111 million per- is extremely high and education is an important
sons reside on less than 3 percent of the land. societal goal.
Nearly 70 percent of the land is covered by
The economy of the past was labor intensive
mountains and forests, and 27 percent is used
and had many, many small industries. Japan, of
for farming and industry. necessity, entered into international trade be-
The Meiji Restoration in the mid-1800’s cause of the lack of raw materials needed in
marked the beginning of the modernization of manufacturing processes. Much of Japan’s rapid
Japan. At that time, Japan opened its doors to economic progress has occurred in the post-
the rest of the world and took steps to modify World War II recovery period, after the country
and update its industries, political institutions, and its productive capacity had become almost
and the pattern of society. Today, the govern- totally inoperative. Accomplished primarily be-
ment is a parliamentary system with three cause of a focused effort, the country’s achieve-
branches: legislative (the Diet), executive (Prime ment has been rather remarkable.
Minister and Cabinet), and judicial. National In recent years, there has been a massive shift
policies are administered at the local level by to high technology. Industries in Japan, through
governments in each of the country’s 47 Prefec- the guidance and support of government agen-
tures (States). cies, have concentrated on developing high lev-
els of productivity for a limited number of man-
Buddhism, introduced to Japan from China ufactured products. Marketing methods for the
and Korea, and Shinto, a religion native to distribution and sale of these products, further-
Japan, are the primary religions. Japan has a more, have helped make these industries highly
rich cultural history ranging from the theatrical competitive in world markets.
arts, including Noh and Kabuki, to significant
literature and poetry. Other forms of art and The tradition of lifetime employment security
music from the past still hold a prominent place has played no small part in the success of Jap-
in today’s society. anese industry. In addition, Japan has a rather
elaborate social security system. This system,
Japan is essentially ethnically homogeneous which provides for medical, annuity, industrial
and has one language. In order to be able to accident, and unemployment insurance, has un-
read the daily newspaper, one must have a doubtedly had an impact on the lifestyle of the
working knowledge of three different alphabets, Japanese people.

80 . Backround paper #4: The Management of Health Care Technology in Ten Countries


The days of acknowledgment that “illness grams, emphasis on physical fitness, and the use
was God’s punishment” went out to sea when of feet and bicycles for transportation, these
Western medicine was introduced to Japan in measures will probably continue to move in the
the 1740’s by Dutch and German physicians same positive direction.
(20). Isei, the medical law, was adopted during
the Meiji Restoration in 1873 and established General Organization of the System
medical schools for the education of physicians.
Medical care in Japan has been, and continues
Japanese physicians were and are today primari-
to be, dominated by solo general practitioners
ly concerned with “. . . affairs to protect peo-
in clinic (office) settings. There are 1.18 physi-
ple’s health, to cure their illnesses, and to foster
cians per 1,000 population, but the distribution
medical science. ” Japan’s Constitution states
of physicians varies markedly by Prefecture,
that “in order that all the people may lead a
from a high of 1.8 to a low of 0.5 physicians per
healthy and decent life worthy of man, the right
1,000 persons (4). Operating parallel with, but
to life and the pursuit of happiness shall be
separate from, clinic practice is a “closed-staff”
respected” (20).
hospital system. Clinic physicians rarely have
A series of questions come to mind when one hospital privileges and hospital specialists
wishes to explore and understand the medical seldom conduct part-time private practices. A
care system within the milieu of a country like situation in which hospital specialists are sal-
Japan. What is the state of the art in Japan with aried at substantially lower incomes than clinic
respect to health and medical care? What kind physicians, who practice on a fee-for-service
of financing system is there? Who administers basis, has caused some abandonment of hospital
and plans for the health sector? Finally, what specialty practice for lucrative solo general
problems seem to be emerging and how are pro- practice.
grams evaluated? Answering these questions in
Nearly 43 percent of the solo practitioner
brief will provide at least an overview of a
clinics possess 1 to 20 short-term (72 hours or
health and medical care system that is both
less) holding beds. These units, although not of-
“alive and dynamic. ”
ficially classified or regulated as hospitals, ac-
At the outset, it is important to realize that count for 18.7 percent of the short-term beds in
Japan ranks as a modern postindustrial soci- Japan. In 1975, Japan had 8,294 hospitals with
ety and has an advanced medical care system. 1,164,098 beds, or 10.4 beds per 1,000 popula-
Most observers in the United States turn to the tion (4). When the clinic and specialty beds are
East—that is, to Western Europe—for informa- added to this complement, the bed/population
tion about their medical experience, but rarely ratio is estimated to be 12.8 beds per 1,000 pop-
go West— to the Orient—to learn from centuries ulation, or 70 percent higher than the ratio in
of experience. When seeking to add to the body the United States (4).
of knowledge for future decisionmaking, ob-
Hospitals are owned and managed under
servations in all directions might be more
many auspiccs throughout Japan. Some are
owned by private physicians, whereas others
Japan scores high in the health indicator are owned and administered by insurance plans,
arena, with an infant mortality rate of 8.9 infant unions, industries, churches, and various levels
deaths per 1,000 live births for 1977 (12). At the of government. The private sector owns be-
other end of the lifecycle, Japan boasts about its tween 70 and 75 percent of the general hospitals
life expectancy achievements, namely, 77.95 (50 percent of the beds) and 95 percent of the
years for females and 72.69 years for males (12). psychiatric hospitals (9,27). Private ownership
With the newly developing health promotion has had a definite impact on use patterns and ex-
centers, the use of selective health screening pro- penditures for medical care, as evidenced by the
Ch. 5–Medical Technology in Japan 81●

reported 33-day average length of stay in the evolved over the 40-year period since passage of
short-term general hospitals (9). This length of the basic Health Insurance Act of 1922. The
stay has been explained in two ways. First, be- original Act was a broad law covering the work-
cause of limited housing space and a paucity of ing population. By compelling employers to of-
nursing homes, patients have nowhere other fer health insurance to their employees, this
than hospitals to convalesce. Second, the aver- statute set the stage for the development of vari-
age cost per day in the hospital is rather low, ous health insurance plans. Amendments added
and a significant portion of this cost is covered subsequently required the plans to provide cov-
by sickness insurance. erage to dependents of workers, the poor, and
the aged. Most recently, benefits were added to
Traditional public health and environmental provide special coverage for persons with high-
health programs (i.e., institutional inspections,
cost (catastrophic) illnesses.
food and water supply inspections, etc. ) are ad-
ministered by the 852 Prefectural and local Six health insurance plans have developed
health centers (4). These health centers also pro- since passage of the 1922 Act, and these plans
vide preventive services to the population as a collectively cover the entire population: Seikan
whole. Preventive services, which are not in- Kempo, which is government-managed; Kyosai
cluded as covered benefits in the insurance pro- Kumiai, which is administered by the Ministry
gram but are provided on a large scale through of Finance; Kokuho, which is administered by
these centers, include screening (early detection) Prefectural and local governments; and three
programs for selected conditions (e.g., hyper- other plans which function independently. (See
tension, stomach cancer, diabetes), immuniza- table 1.) All six plans have been set up as non-
tions and physical exams for infants and school profit organizations.
age children, plus special categorical programs
The compulsory health insurance system in
for maternal health, hypertension, etc. It is
Japan has been financed by two methods: 1) em-
obvious from visiting the health centers that
ployer-employee contributions, and 2) subsidies
persons from all socioeconomic strata frequent derived from general tax revenues. Employer-
them. These facilities truly function as public
employee contributions are in actuality insur-
ance premiums derived from a specified percent
(8.3 percent) of the employee’s basic salary. The
Financing employer, by law, contributes at least 50 per-
Nearly the entire Japanese population pos- cent of the premium and the employee pays the
sesses health insurance coverage which has remainder.

Table I.—Japanese Health Insurance Plans, Beneficiaries, and Enrollments”

Plan and year Number of Percent of all

established Beneficiaries persons insured insured persons
Seikan Kempo, 1926 Employees off firms having 5 to 1,000 persons 27,721,000 25.1 %
Kumiai Kempo, 1926 Employees of firms having more than 1,000 persons 25,573,000 23.1
Hiyatoi Kempo, 1953 Day laborers 752,000 0.7
Senin Hoken, 1940 Seamen 753,000 0.7
Kyosai Kumiai, 1962 National and local government employees; public 11,969,000 10.8
corporations; private school teachers and staff
Kokuho, 1938 Employees of firms having fewer than 5 persons; persons 43,853,000 39.6
who are self-employed, retired, aged, and others not
covered by employees insurance
Total 110,631,000 1OO.OO/O
82 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Over the past several years, the Government Fees for each service that is provided in a
of Japan has been called on to subsidize five of medical care settings are negotiated on an an-
the six health insurance plans to cover unex- nual basis. The Bureau of Insurance of the Min-
pected, and in some cases continuing, deficits. istry of Health and Welfare is charged with the
Only one of the plans (Kumiai Kempo) has con- development of a fee reimbursement scheme
sistently shown a surplus, and surplus funds are proposal for the providers and medical facilities
passed on to the enrollees in various forms (i.e., (14). Under a system adopted in 1943, each item
premium reduction, extra benefits, recreation of medical service is assigned a certain number
facilities, hospital facilities). of points, depending on such things as the item’s
relative complexity. The actual medical fee for a
On the consumer side, in addition to the in-
particular item is then calculated by multiplying
surance premium paid to their respective insur- the respective points by a certain unit cost,
ance plan, insured persons (workers) pay a
which was set at 10 yen ($0.027) per point in
small, fixed amount out of pocket for care,
1977. Proposed changes in fees are presented,
whereas their dependents (family) pay 30 per-
debated, and negotiated within the Central
cent out of pocket up to a 39,000 yen ($108) I
Social Insurance Medical Council, an advisory
maximum liability during a calendar month
body to the Ministry of Health and Welfare that
(2).2 In late 1973, an amendment (Kogaku Ryo-
is made up of representatives from medicine,
yohi) was added to the basic insurance law as a
dentistry, the insurance plans, and so forth. The
means to meet high-cost illness (catastrophic)
specific tariff schedule for drugs, for example, is
expenses for dependents beyond the 39,000 yen reviewed annually and in recent years has also
threshold. This program, administered by each
been revised annually. The strongest body in the
insurance plan, was designed to prevent eco-
policymaking process of fee-schedule devel-
nomic catastrophes that heretofore had resulted
opment is probably the Japanese Medical Asso-
from high-cost illness. Patients in Japan have
the right to seek care from any provider, and the
provider in turn is able to bill any of the ap-
propriate health insurance plans for the services Administration and Planning
rendered. The Ministry of Health and Welfare has the
primary responsibility for the regulation, ad-
Reimbursement ministration, and conduct of public health pro-
Physicians, dentists, other health providers, grams. This Ministry regulates the health insur-
and medical care institutions are reimbursed for ance plans, but generally delegates the respon-
care by the insurance plans under a standard- sibility for day-to-day administration to each
ized set of fee schedules. Lists of fees for each plan. For insurance plans that are government-
item of service (consultation, teaching, lab by sponsored, however, the Ministry retains this
test, drug by generic class, specific surgical pro- administrative responsibility.
cedure, X-ray by type, etc. ) are published, and
Health planning has traditionally been from
all claims for reimbursement must be submitted the bottom up (local to national) through com-
by medical care providers on standard forms.
mittee consensus. In the past, national health
Clinics and hospitals have a choice (annually) to planning was categorical in nature. Early in the
elect the use of “fee-for-( each) service” or an “all- 1960’s, the concept of comprehensive planning
inclusive rate. ” In general, hospitals select the became more practical, particularly since there
“all-inclusive rate” scheme, and solo practi- had been rapid socioeconomic changes in the
tioners choose the “fee-for-service” method.
country as a whole (4). Today, it has been
noted, the Ministry of Health, on an ad hoc ba-
sis, calls on and utilizes input from various insti-
‘For conversion of Japanese yen to U.S. dollars, the exchange
rate used throughout this paper was Y360 = $1.00 (U.S.).
tutes and university experts on substantive plan-
For the legally poor and the elderly (persons over 70 years old), ning issues, and also solicits citizen participation
no copayment is required. (the latter having become rather popular in re-
Ch. 5—Medical Technology in Japan 83

cent times). In this manner, it develops both The Ministry of Health and Welfare recently
short- and long-range health plans and updates became actively involved in a newly formed
these as changes are needed. World Health Organization/Pan American
Health Organization (WHO/PAHO) health
As part of the Ministry’s medical manpower planning consortium that will serve as a con-
development plan, the policy of establishing tinuing forum for the exchange of methodolo-
new medical schools (one per Prefecture) has gies and program experience in health planning.
been implemented since 1970. This effort will be Some WHO-collaborating health planning cen-
terminated in a few years. The Ministry is plan- ters have been established. In addition, the Min-
ning to improve postgraduate medical educa- istry has a plan to establish an International
tion in primary care by training doctors for edu- Medical Care Cooperation Center to promote
cation technology or sending trainees to the medical care cooperation, particularly with de-
United States. veloping countries.


The introduction and adoption of a signifi- delivery of health and medical care in Japan,
cant volume of new forms of medical technol- there is not only a consciousness of increased
ogy in Japan is similar to that in other well-de- costs, but a concerted effort to carefully allocate
veloped industrialized countries. Over the past scarce funds and resources. It may be that this
two decades, vast amounts of sophisticated new effort will provide some impetus to a more thor-
medical technologies have been developed and ough evaluation of medical technology.
used to augment the provision of medical care in
hospitals, as well as in private solo practitioners’ Research and Development
clinics. The function of these technologies is to
The Japanese Medical Association functions
prevent, detect, or treat illnesses once thought prominently in the promotion, development,
to be the cause of “unnecessary disease, disabili-
and support of research, and in the introduction
ty and untimely death” (21).
of new technology (25). This has been particu-
The devices industry has grown rapidly in Ja- larly true in the past for historical reasons. Prior
pan. In 1974, receipts totaled 254.3 billion yen to 1955, the vast majority of physicians con-
($706 million), an increase of 26 percent over tinued their training 6 to 10 years beyond the
the year before (14). Electronic equipment in Doctor of Medicine degree to attain the higher
general has shown very rapid growth, rising Doctor of Medical Science degree (Igaku-
from 21.6 billion yen ($60 million) in 1971 to Hakase) (4,26). In 1955, postgraduate training
35.7 billion yen ($99 million) in 1974 (14). Pa- was reconstructed into a 4-year program in re-
tient monitoring and diagnostic equipment sales search, completion of which resulted in the
increased from 1.9 billion yen ($5.4 million) in granting of the same higher degree. Some of the
1971 to 5.5 billion yen ($15 million) in 1974 physicians who completed their training in these
(14). Drugs account for annual sales for the programs became and continue to be the nucleus
industry of 2,161 billion yen ($6 billion), a of the technological innovators in Japan. In
figure that rose about 15 percent from 1975 to 1968, a number of medical students challenged
1976 (14). the new process, reportedly because they be-
lieved that too much emphasis was being placed
Because of the rapid development and dis- on research and not enough on clinical medicine
semination of new medical technology in Japan, (25). The immediate impact of the change that
the evaluation phase in many cases has been ig- resulted was a decrease in clinical research and
nored or set aside for future action. Today, par- widespread inability of medical schools to at-
ticularly with the ever increasing costs of the tract new faculty interested in and/or with ex-
84 Background Paper #4: The Management of Health Care Technology in Ten Countries

pertise in research. Currently, the impact of this sufficient endorsement from the medical com-
turn of events is being tempered by government munity to warrant general use.
and private foundation sponsorship of research
fellowship programs abroad. The long-range ef- Much more technology has been developed
fects of the change are not yet being felt. for the early detection of cancer, particularly
The development and introduction of new stomach cancer, than for detection of cerebro-
medical technologies in Japan—whether these vascular disease. A great deal of research is cur-
be in the form of instrumentation, procedures rently underway in Japan to increase the speed
for patient management, or drugs—follows a of diagnosis with the so-called automated cy-
common pathway. In general, a new technology tology process using optical scanning technol-
is developed by researchers and clinicians from ogy. Research for this and a series of related
the leading medical schools, sometimes with the projects has been supported for several years by
aid of technical specialists from industry. The funds from the Ministry of Health and Welfare
quasi-governmental Science and Technology and MITI. Before there is any diffusion and dis-
Agency often provides grants-in-aid to support semination of the new technology, however, re-
the research, as do the Ministry of Health and searchers want to perfect it to the level at which
Welfare and the Ministry of International Trade there will be no sacrifice of accuracy for speed.
and Technology (MITI).
In recent years, the major focus for the de- Evaluation of Medical Technology
velopment of medical technology in Japan has
been to find the means to change the tide of the The use of a new medical technology in Japan
is dependent on its introduction by an eminent
three leading causes of death: 1) cerebrovascular
disease (stroke), 2) cancer, particularly stomach professor or clinician and its subsequent en-
cancer, and 3) heart and other vascular diseases, dorsement by peers or professional groups. The
with special emphasis on chronic renal disease process of peer evaluation applies to all forms of
(12). Basic scientific research on cerebrovascular medical technologies —drugs, devices, and pro-
disease is currently being carried out at the cedures—whether they are developed within
Japan Stroke Prevention Center, Institute of Japan or are imported.
Health Science in Shimane, in cooperation with
the U.S. National Institutes of Health. Animal Once the original investigator’s coworkers
model studies, which it is hoped are transferable and peers feel the technology has promise, the
to man, have been concentrated on the develop- investigator usually publishes the findings in
ment of stroke-resistant strains of rats and on technical scientific or medical journals. If and
the means of the treatment of persons who have when the investigator’s peers recognize the po-
been found to be stroke-prone (5,28). tential and value of the technology, they repli-
Also being carried out are clinical studies with cate the work and often make improvements on
scanning devices to detect persons with vascular the basic idea. Subsequent publication of their
changes. A limited number of experimental findings is recognized as a positive sign to the
stroke intensive care units, some with hyper- original investigator, who then with his peers
baric chambers, have been set up by private formally introduces the technology for review
hospitals in an effort to reduce mortality of per- and approval by the Pharmaceutical Affairs
sons who have had cerebral hemorrhages. Bureau of the Ministry of Health and Welfare.
Other modalities for the prevention and treat-
ment of stroke, including diet modification, Regulation of Drugs and
drugs for the treatment of hypertensive disease, Medical Devices
and neurosurgical procedures, are being ex-
plored. None of these modalities, however, Drugs and medical devices are currently reg-
have been introduced on a broad scale; nor have ulated in Japan under the Pharmaceutical Af-
any of them been fully evaluated or received fairs Law (15), which passed the Japanese Diet
Ch. 5—Medical Technology in Japan 85

on August 10, 1960. Products intended for use standard law focuses on safety, in particular,
in humans are controlled by the Ministry of the safety of electrical instruments and appa-
Health and Welfare, through its Bureau of Phar- ratus. Performance standards have been estab-
maceutical Affairs. The Bureau of Pharmaceu- lished for 140 devices, including electrocardio-
tical Affairs is assisted in implementing the graphs, gastroscopes, and blood pressure me-
Pharmaceutical Affairs Law by the Pharmaceu- ters. The law also requires manufacturers to reg-
tical Affairs Council, an advisory group with 13 ister their products.
committees and 55 subcommittees. The commit-
tees and subcommittees of the Pharmaceutical Reimbursement and Medical
Affairs Council deal with such matters as the Technology
approval of manufacture and import of new
drugs (Committee on Drugs), the establishment As was mentioned earlier, when a new service
of quality standards for medical devices (Com- is proposed for a fee in Japan, it must first be
mittee on Medical Devices), measures to assure debated by the Central Social Insurance Coun-
the safety of drugs (Committee on Safety of cil, In its informal evaluation, the Council con-
Drugs), and review of drugs already on the mar- siders what is known about the benefits and
ket for effectiveness and safety (Committee on risks of the proposed technology at that time.
Drug Efficacy Re-Evaluation). The fee established is intended to cover the price
of the service. Thus, for example, the fee for a
Whenever a new drug is proposed for market- drug should be the actual purchase price. In
ing, data concerning its safety and efficacy must practice, however, these purchase prices vary
be submitted to the Bureau of Pharmaceutical considerably in different institutions and dif-
Affairs. The Committee on Drugs of the Phar- ferent parts of the country, so the Minister of
maceutical Affairs Council reviews the data and Health and Welfare establishes one fee.
makes a recommendation, but the final decision
on market approval is made by the Bureau of The fees for drugs have been consistently low-
Pharmaceutical Affairs. Of interest is the fact ered in recent years, reflecting market prices.
that drugs already marketed in other countries The lowering of fees discouraged excessive drug
apparently are approved more readily than use in the early 1970’s, and the reduction of
totally new drugs. market prices probably results from competi-
tion in the Japanese drug industry. In 1974, a
Once the drug is approved, it is entered in the new free medical treatment system for the aged
Japanese Pharmacopoeia and may be marketed. “brought about a tendency to excessive depend-
In addition, the Bureau of Pharmaceutical Af- ence on drug therapy and eventually resulted in
fairs requires good manufacturing practices to great increase in drug consumption” (14).
assure quality products. Because of their expo-
sure to a series of manmade tragedies resulting Cost-Containment Efforts
from environmental contaminants, the Japanese
are especially sensitive to the issue of safety. A A rather dramatic increase in medical care de-
national drug monitoring system of 465 hospi- mands following the introduction of new tech-
tals that report adverse drug reactions is admin- nology has been documented by the ongoing
istered by the Bureau of Pharmaceutical Affairs Medical Care Survey for Social Insurance (Sha-
(14). A surveillance system is also operated by kai Iryo Chosa) (19) of the Ministry of Health
the Bureau of Insurance through its Division of and Welfare’s Information and Statistics De-
Medical Affairs. partment. In the period from 1964-74, for exam-
ple, it was observed that new technology in-
Although medical devices are regulated under creased the frequency of visits 2.4 times and the
the pharmaceutical affairs law, any medical de- level of expenditures 6.9 times (19). These in-
vice that is in conformance with standards pro- creases have been attributed, in part, to the in-
mulgated under the industrial standard law, crease in the variety of available laboratory
may be manufactured or imported without a tests and the increased testing capacity of lab-
product license. Regulation under the industrial oratories resulting from automation.
86 . Background Paper #4: The Management of Health Care Technology in Ten Countries

In general, it is thought that the new technol- selves have been documented through the Medi-
ogy has contributed to better diagnostic ability cal Care Survey, their causes remain to be dem-
and therapy, and subsequently has had a posi- onstrated empirically before any attempts are
tive influence by the improvement of the quality made to modify public policy. Because there is
of care (19). Some people, however, feel that at now a great deal of concern about the rising
least part of the observed increases in use of the costs of medical care, the Ministry has been con-
technology maybe due to provider incentives in ducting a variety of studies to pinpoint the
the fee-for-service payment system, which may underlying causes and is attempting to develop
result in duplication and possible abuse or ex- methods to contain medical care costs.
cess service (19). Although the increases them-

The use in Japan of medical technologies like raphy (11). Conclusions from some of their
radioisotopes, radiotherapy, computed tomog- studies (11) indicate that the medical profession
raphy (CT) scanners, renal dialysis, premature in Japan has not fully accepted the CT scanner
incubators, and drug therapy has shown rapid as a single, foolproof diagnostic tool. The use
growth in recent years. Specific technologies are by some practitioners of both CT scanning and
discussed below. its diagnostic predecessors, however, may be
duplicative, resulting in an unnecessary added
CT Scanners expenditure in the delivery of medical care. Any
unnecessary expenditure is being absorbed by
CT scanners were first introduced in Japan in society through the health insurance premium-
1975. At that time, the device used was the EMI reimbursement system.
scan imported from England. Since then, similar
devices have been developed and manufactured Renal Dialysis
in Japan for domestic use. Initially, the CT scan-
ner was used primarily as a diagnostic instru- The introduction of hemodialysis in Japan, al-
ment, but over time it has come to serve also as most 25 years ago in 1955, marked the begin-
an adjunct and guide for radiation therapy for ning of an era for the treatment of persons with
cancer. acute renal failure (8). Therapy for those with
chronic renal failure was made available about
In 1978, a survey was conducted to determine
10 years later.
the number and type of CT scanners that were
in place in a number of industrialized countries. For the first 10 to 15 years, the diffusion and
In this inventory, Japan, with 180 head scanners distribution of renal dialysis units in Japan were
and 112 body scanners, ranked second out of 8 rather limited. In 1972, however, this form of
industrialized countries (10). There were 2.6 therapy was introduced as a reimbursable bene-
scanners per 1 million persons in the population fit through all of the six major health insurance
(10). As of April 1979, Japan had an estimated plans that collectively cover the entire Japanese
516 (304 head, 212 body) scanners in operation, population. From December of 1966 to mid-
or approximately 4.6 per 1 million persons 1978, the number of hemodialysis units in Japan
(23,24). reportedly increased from 48 to 11,671 (8).
Table 2 illustrates a nearly 50-percent increase
Japanese researchers and clinicians have con- in the number of units from 1976 to 1978.
tinued to develop and evaluate scanners since
the introduction of this new technology. In par- The number of patients receiving dialysis has
ticular, Japanese researchers have compared CT been increasing annually at a rather rapid rate.
scanners with other forms of diagnostic method- There are now over 200 renal dialysis cases per 1
ologies, e.g., radionuclide imaging and angiog- million population now receiving dialysis in
Ch. 5—Medical Technology in Japan . 87

Table 2.—Number of Hemodialysis Units Table 4.—Percent of Chronic Renal Disease

in Japan (1976-78) Patients Receiving Home Dialysis in
Selected Countries and Areas

Percent of patients
Country (or area) receiving home dialysis
Japan (1976). . . . . . . . . . . . . . . . . . . 0.6%
United States (1976) . . . . . . . . . . . . 23.7
Washington State. . . . . . . . . . . . 75.0
Indiana. . . . . . . . . . . . . . . . . . . . . 60.0
Northeast United States . . . . . . 15.0
United Kingdom (1977). . . . . . . . . . 66.0

SOURCES: E. Friedman, et al., “Pragmatic Realities In Uremia Therapy, ” N. .Errg

J. Med. 298(7):368, 1978 (3); and C Blagg, “Incidence and Prevalence
of Home Dialysis,” Journal O f Dialysls 1“475, 1977 (1)
Japan, which is probably the highest rate in the
world (8). This is not to say that the prevalence only in a medical care setting by physicians.
of kidney disease in Japan is necessarily higher Lastly, Japanese health insurance plans pay the
than is reported in other countries, but that di- physicians higher fees for dialysis in the hospital
alysis therapy is quite accessible and available. and clinical settings than in home settings. By
Health insurance is probably a rather significant exerting a stronger influence on the physicians’
“enabling factor” in this context. choice of treatment site, this last reason prob-
ably overshadows the others.
As of July 1978, 99 percent of patients requir-
Along with the number of patients, the costs
ing renal dialysis in Japan received their treat-
for the provision of renal dialysis treatment
ment in the hospital or at specialized hospital- have been rapidly escalating. The equipment in
affiliated centers; less than 1 percent of Japanese 1976 dollars averages about $5,000 for the ap-
patients who require dialysis had home dialysis, paratus (coil type $5,120, plate type $4,200, and
which is used more commonly in other coun- hollow fiber type $6,420) and $70 per treatment
tries (1,3,6,7,8,17). (See tables 3 and 4.) There
for the disposable parts (8). Each treatment
are several reasons for the lack of use of home costs $200 in the outpatient setting, or $31,200
dialysis in Japan. First of all, the vast majority per year per patient (8). The cost across the na-
of the families live in one- or two-room apart-
tion for Japan for the year 1976-77 for 20,000
ments. The installation of a dialysis unit would
patients was estimated at $624 million (8).
crowd the already limited quarters and might
require special plumbing facilities. Secondly, A number of promising avenues (e.g., the de-
the administration of dialysis is considered by velopment of reusabIe filters) to stem the cost
physicians to be a medical treatment which, be- tide are being approached and explored by uni-
cause of its specialized nature, can be provided versities. In addition, concerted efforts are being

Table 3.—Number and Percent of Chronic Renal Disease Patients

Receiving Different Types of Hemodialysis in Japan (1976-78)
88 Backround Paper #4: The Management of Health Care Technology in Ten Countries

made by physicians to increase patients’ sur- seded by the “super-voltage” modality cobalt
vival rates, and just as importantly, to improve (6°CO). More recently, Japan has developed even
the quality of their survival. When appropriate, more advanced technology to augment cobalt
for example, kidney transplantation is being therapy, by the introduction of electronically
recommended to more candidates. Today, few- generated therapeutic impulses, with cyclo-
er than 200 kidney transplantations are per- trons, betatrons, and linear accelerators. These
formed in Japan per year (8). It has been re- new radiation methods, along with cobalt ther-
ported that 8 to 10 percent of the kidneys are ob- apy, are often combined with surgery, chemo-
tained from cadaver donors and that the re- therapy, immunotherapy, and hyperbaric
maining 90 percent are obtained from related oxygen.
donors (8). There is also a drive to promote
The predominant source of teletherapy used
night hospital dialysis and home dialysis. Final-
in Japan today is cobalt therapy. The other
ly, basic research projects supported by the gov-
ernment and foundations are well underway to “super-voltage” sources are limited in number,
and in many cases still under development. Co-
develop an effective low-cost artificial kidney.
balt units that emit over the 1,000-curie range
have been shown to be most effective and are
Radiation Therapy
more commonly found in hospital teletherapy
Radiation therapy or teletherapy for cancer in units. (See table 5.) A 1978 survey conducted by
Japan has taken, and continues to take, several the Science and Technology Agency’s Bureau of
forms. Initially, the treatment of choice was Nuclear Safety indicated that there were 589
with X-radiation referred to as orthovoltage. cobalt and 10 cesium units in use in Japan (22).
During the past two decades, other forms of These units ranged in power from less than 100
radiation therapy have been added to the can- to over 5,000 curies. Almost half (48.1 percent)
cer treatment armamentarium. A more potent of the cobalt units and 70 percent of the cesium
treatment source that followed X-radiation was units are in the over 2,000-curie class, which ap-
cesium (137CS), and this source was then super- pears to be the treatment of choice (22,29).

Table 5.—Number and Distribution of Teletherapeutic Apparatus

in Use in Japanese Hospitals and Clinics (March 1978)
Ch. 5—Medical Technology in Japn 89

No country, including Japan, has been able to A third problem that is being anticipated in
provide a problem-free health care program to Japan is the potential impact of the country’s in-
its people. Japan’s major problem now is dealing creased life expectancy achievement. It is esti-
with chronic disease. Once a country conquers mated that by the year 2025, more than 18 per-
its basic communicable disease and sanitation cent of the population will be over the age of 65
problems, it enters an era in which the chal- (13). This important segment of the population
lenges come from chronic illness, environmental will require special health services, health facil-
and industrial hazards, and other similar threats ities, housing, income maintenance, and other
to mankind. The leading causes of death shift specialized services. These services must be
from infectious diseases like tuberculosis, ty- planned for and financed by today’s working
phus, and smallpox to cerebrovascular disease, population for a period of 40 years hence in
cancer, and other similar conditions. As infla- order to avert future problems. The emphasis,
tion, recession, and unemployment affect the therefore, has been on planning and program
general economy, they also affect the health development for the aged population to prevent
sector—and their impact makes the combating future problems. If this activity proceeds at its
of these chronic conditions of postindustrial projected pace, there will be few if any prob-
society especially difficult. lems. Only time and experience will reveal the
success of this preventive action.
A second area of concern in Japan is the
rising costs of medical care. National medical The fourth and final set of problems pertain
care expenditures (NMCE) have risen over 20 to medical manpower distribution and health
percent per year for the past several years care technology. A visit to a physician’s clinic
(e.g., from 1970 to 1975, NMCE increased by a will reveal a well-trained physician who prob-
total of 154 percent, from 2,553 billion yen ably has specialty training. Unfortunately, some
($7,091,667) in 1970 to 6,478 billion yen of the physician’s skills are underutilized be-
($17,994,444) in 1975) (4). At the present time, cause of the closed-staff hospital system. Re-
approaches to modify the insurance program laxation of this barrier would alleviate at least
are under serious discussion. In June of 1978, part of the problem. In the clinic setting, it is
the Ministry of Health and Welfare submitted to clear that medical technology permeates the air.
the Diet a proposal to reform the health in- One will probably find a rather large variety of
surance program (i.e., to increase the premium, sophisticated diagnostic and therapeutic equip-
increase the out-of-pocket payment for outpa- ment. That is, technology can be observed as
tient drugs, equalize insurer and dependent out- the rule rather than the exception. Technology
of-pocket liability, etc.). This proposal, pri- assessment, on the other hand, has not kept
marily a cost-containment measure, was intro- pace with the introduction of new modalities.
duced at the end of the legislative session of the Because of the recent recognition of the need for
Diet and was tabled for further study. Since that cost savings and cost-containment measures to
time, elements of the proposal have been de- stem the tide of spending during these inflation-
bated by organized medicine, industry, unions, ary times, however, it is anticipated that more
and the general public. The debate and exchange assessment will be done in the future to deter-
of ideas is a healthy sign, but unless action on mine the use, benefits, risks, and costs of tech-
this measure is taken soon, the Ministry of nology to society.
Finance will be unable to continue to cope with
the deficits of the health insurance plans.

68-095 - 80 - 7
90 Background Paper #4: The Management of Health Care Technology in Ten Countries

1. Blagg, C . , “Incidence and Prevalence of Home Insurance Societies in Japan (Tokyo, September
Dialysis,” Journal of Dialysis 1:47s, 1977. 1977).
2. Broida, J., and Maeda, N., “Japan’s High Cost 17. Odaka, M., “Current Status of Dialysis Patients
Illness Insurance Program, A Study of Its First in Japan,” Artificial Organs oapan) 2( Suppl. ): 7,
Three Years, 1974-76,” Pub!. H. Rpts. 93(2):153, 1978.
1978. 18. Office of the Prime Minister (Japan), Bureau of
3. Friedman, E., et al., “Pragmatic Realities in Ure- Statistics, Statistical Handbook of Japan, 1976
mia Therapy, “N. Eng. ]. Med. 298(7):368, 1978. (Tokyo, 1976).
4. Hashimoto, M., “Health Care and Medical Sys- 19. O h m u r a , J . , “Analysis of Factors Affecting the
tems in Japan, ” Bulletin of the Institute of Public Need and Demand for Medical Care, ” Social
Health (Tokyo) 27(1):6, 1978. Sci. Med. 12(6A):494, 1978.
5. Horie, R., et al., “An Essential Difference Be- 20. Ohtani, F., One Hundred Years of Health PYo-
tween Stroke-Prone SHR (SHRSP) and Stroke- gress in Japan (Tokyo: International Medical
Resistant SHR (SHRSR), ” Jap. Heart ]. 19(4): Foundation of Japan, 1971).
630, 1978. 2 1 . Rutstein, D., et al., “Measuring the Quality of
6. Inou, T., “Current Status of Artificial Organs in Medical Care: A Clinical Method, ” N. Eng. ].
Japan,” Artificial Organs (Japan) 1(1):19, 1977. Med. 294(11):582, 1976.
7. “Current Status of Artificial Organs in 22. Science and Technology Agency (Japan), Nucle-
Japan,’ ; Artificial Organs (Japan) 2( Suppl. ):1, ar Safety Bureau, “Statistics on the Use of Radia-
1978. tion in Japan” (Tokyo, 1979).
8. , and Odaka, M., “The Situation of Di- 23, Suemasu, K., Vice Director, National Cancer
alysis in Japan, ” Proceedings of the Seventh In- Center Hospital, Tokyo, personal communica-
ternational Congress of Nephrology, Montreal, tion, June 20, 1979,
Canada, 1978. 24. Sugimura, T., Director, National Cancer Center
9. Jonas, S., “Japan Strains Under Complex Health Research Institute, Tokyo, personal communi-
System,” Hospitals, ]AHA 49:58, 1975. cation, June 8, 1979.
10. Jonnson, E,, et al., “CT Scanner Race: United 25. Tanaka, T,, “Medical Care in Japan, Yesterday,
States Declared Winner or Loser,” N. Eng. ]. Today, and Tomorrow, ” Social Sci. Med.
Med. 299(12):665, 1978 12(6A):49, 1978,
11. Kobayashi, T., et al., “Computed Tomography 26. Ushiba, D., and Suzuki, J., “Medical Education
of Primary Liver Cancers, ” Nippon Acta Radiol, in Japan, ” Social Sci. Med. 12(6A):530, 1978.
38(3):744, 1978. 27. Yamamoto, M., and Ohmura, J., “The Health
12. Ministry of Health and Welfare (Japan), Bureau and Medical System in Japan, ” Inquiry 12
of Statistics, Population Statistics (Tokyo, (suppl.):45, 1975.
1978). 28. Yamori, Y., et al., “Pathogenic Mechanisms and
13. Health and Welfare Services in Japan Prevention of Stroke in Stroke-Prone Spontane-
(Toky~, January 1977). ously Hypertensive Rats, ” in Hypertension and
14. , Pharmaceutical Affairs Bureau, Phar- Brain Mechanisms: Progress in Brain Research,
maceutical Administration in Japan (Tokyo, edited by U. De Jong, et al., vol. 37 (Amster-
1977). dam: Elsevier/North-Holland Biomedical Press,
15. Pharmaceutical Affairs Law, Law No. 1978).
145, A;g. 10, 1960 (Tokyo, 1966). 29. Yasukochi, H., “Survey of Teletherapy in Ja-
16. National Federation of Health Insurance Socie- pan,” Nippon Acta Radiol. 36(2):97, 1975.
ties (Kemporan), Health Insurance and Health
Policy for Medical Technology
in France

Rebecca Fuhrer
Department of Health Services and Biostatistics
Harvard School of Public Health
Cambridge, Mass.

Policy for Medical Technology in France
Rebecca Fuhrer
Department of Health Services and Biostatistics
Harvard School of Public Health
Cambridge, Mass.


Physically the largest country in Western Like other countries in Western Europe,
Europe, France has approximately 53 million in- France has a parliamentary democracy. The
habitants. Almost 75 percent of the population present form of government was adopted in
lives in urban areas, and 16 percent lives in the 1958 following a referendum which established
Paris metropolitan region. The average popula- the Fifth Republic. Executive power is exercised
tion density is 97 inhabitants per square kilome- by the President, who is elected for 7 years and
ter, with a range from 44 inhabitants in the appoints the Prime Minister. The Prime Minis-
Limousin Region to 821 in the Paris area. ter leads the government and makes recommen-
dations concerning presidential appointments to
The active working population includes ap-
other Cabinet positions.
proximately 21.7 million people, of whom 13.3
million are men and 8.4 million women. Life ex- The Prime Minister and the Cabinet are re-
pectancy at birth is 69.1 years for men and 77.2 sponsible to Parliament. Parliament, consisting
years for women (41). The birth rate, which in of the National Assembly and the Senate, has
recent years has been declining, is now 14 births legislative power. Deputies to the National
per 1,000 inhabitants; the mortality rate is Assembly are elected directly by their constitu-
about 10.1 deaths per 1,000 inhabitants (41). As encies for periods of 5 years. Senators, whose
in other Western countries, the proportion of term of office is 9 years, are elected indirectly by
persons over the age of 65 has been increasing. Deputies to the National Assembly, Departmen-
In 1977, they represented 13.8 percent of the tal General Councilors, and delegates from mu-
population. A summary of basic demographic nicipal councils.
data for France is presented in table 1. Most legislation is initiated by the Prime Min-
ister. 1 The Prime Minister not only proposes
Table 1 .—Basic Demographic Statistics for Francea new laws to Parliament, but, he/she has the ex-
clusive right to initiate governmental expend-
Population . . . . . . . . . . . . . . . . . 52,973,000 itures. Parliament has censuring power over the
Males . . . . . . . . . . . . . . . . . . . 25,949,106 Prime Minister’s government, by its vote on the
Females . . . . . . . . . . . . . . . . . 27,023,887
Population density . . . . . . . . . . 97 inhabitants per kmz budget and 4- or 5-year economic and social
Urban population. . . . . . . . . . . . 75 percent development plans. Once laws have been ap-
Birth rate . . . . . . . . . . . . . . . . . . 14.0 per 1,000 inhabitants proved by Parliament, the Prime Minister is
Death rate. . . . . . . . . . . . . . . . . . 10.1 per 1,000 inhabitants
Life expectancy at birth responsible for ensuring their execution.
Males . . . . . . . . . . . . . . . . . . . 69.1 yearsb
Females . . . . . . . . . . . . . . . . . 77.2 yearsb Government administration, with Ministries
Infant mortality rate . . . . . . . . . 12.3 per 1,000 Iive births providing the infrastructure, is very centralized
Active working population . . . . 21,756,000
in Paris. France is divided into 95 Departments,
each of which functions both as an administra-
I The Prime Minister initiates about 95 percent of proposed legis-
lation. Parliament itself initiates only about 5 percent.

94 ● Backroundd paper #4: The Management of Health Care Technology in Ten Courtries

tive unit of the Central Government and as a There are 22 Regions, consisting of two to
local unit administering its own concerns. In eight Departments each. Each Region is admin-
each Department, a Departmental Prefect is ap- istered by a public corporation consisting of the
pointed by and represents the Central Govern- Regional Prefect (the Departmental Prefect of
ment and all the Ministries. The Departmental the Department in which the Region’s capital is
Prefect is also responsible for executing policies located), the Regional Council, and an Econom-
established by the Departmental General Coun- ic and Social Commission. Advised by the Eco-
cil, a directly elected body in each Department. nomic and Social Commission, the Regional
Local units of governmental jurisdiction in Council is the policymaking body. Its decisions
France are the communes. Each commune has are executed by the Regional Prefect.
an elected municipal council and a mayor that The French economy is a free enterprise sys-
the council elects. tem in which the State and public sector (i.e., in-
Regions in France were given explicit new dustries and commercial establishments under
powers and functions by the Regional reform State control)3 play very important roles. Eco-
law of 1972, which became effective in late nomic growth has been very rapid since World
1973.2 The aim of Regional reform was decen- War II. In recent years, the gross national prod-
tralization, especially in the domain of econom- uct (GNP) has continued to increase, although
ic and social development, so as to facilitate bet- the inflation rate has been very high since 1974
ter response to Regional needs and more effec- (I5 percent in 1975), and unemployment, espe-
tive utilization of available resources. Economic cially among the young, is a serious concern. Of
and social development plans have guided ma- salaried workers in France, about 10 percent are
jor national development concerns since 1947. employed in the agricultural sector, 39 percent
France is now in its seventh economic and social in the industrial sector, and the remaining 51
development plan and is working on goals for percent in the commercial and services sector.
the eighth. In the past decade, plans have been
increasingly oriented towards a Regional
‘Unlike the Department, the Region is neither an administrative ‘The public sector is comprised of: 1) government monopolies in
subdivision of the Central Government nor an independent admin- industries such as transportation and energy, and 2) nationalized
istrative unit. It therefore has no authority other than that dele- banks, insurance companies, automobile manufacturers, and oil
gated by the Government. companies that compete in the private sector.


Brief History of the System tablished by the church as centers for lodging
A dominating principle in the evolution and the poor. Hospital services were free, and re-
growth of the French health care system has sources—human and material—were gifts. Af-
been the continuing respect for the practice of ter the French Revolution of 1789, the hospitals’
“medicine liberale” (liberal medicine). Four were accorded a civic rather than religious
basic principles, though somewhat modified in status, but their function and resources were not
practice, still dominate the functioning of the altered. In 1851, the civic responsibility was en-
French health care system: 1) the physician is forced explicitly, and each commune or munici-
free to prescribe as he/she wishes, 2) medical pality had to support its own hospital. 4
confidentiality is maintained, 3) the patient is The private hospital sector really developed
free to choose his or her physician, and 4) the along two different tracks. First, small, private
patient pays the physician directly. “cliniques,” for-profit hospitals offering limited
Historically, French physicians cared for pa- 4
In some cities, e.g., Marseilles and Paris, public hospitals today
tients in their homes. Public hospitals were es- are still called “public assistance hospitals. ”
Ch. 6–Policy for Medical Technology in France ● 95

services to privately paying patients, most often National health care expenditures’ in France
were started by physicians. Second, private, account for 7.36 percent of the country’s GNP
nonprofit hospitals for workers were started by (42). In 1976, public and private hospitals con-
some large industries. Care at these institutions sumed 43.8 percent of national health expendi-
was free and physicians were reimbursed by the tures (42).
enterprise. Other private, nonprofit institutions
were established to address specific health prob- Health Policy, Administration,
lems (e.g., tuberculosis, cancer, mental health). and Planning
Medical care in France today continues to be Although government administration in
provided by both the private and public sectors. France is highly centralized, along with efforts
(See table 2.) Most ambulatory care is furnished to decentralize economic and social develop-
ment, there have been increasing efforts to de-
centralize the administration of health and so-
Table 2.—Public and Private Health Care cial services. 6 Health policy is established na-
Providers in France (1979) tionally by the Ministry of Health. 7
Provider Public Private In each Department, there is a Departmental
Physicians . . . . . . . . . . . . . . 3 0 % 7 0 %
Directorate of Health and Social Services (Di-
General practitioners. . . . (32) (68) rection Departementale de l’Action Sanitaire et
Specialists . . . . . . . . . . . . (28) (72) Sociale, DDASS), which serves as an external
Institutions. . . . . . . . . . . . . . 73C
Beds . . . . . . . . . . . . . . . . . (72) (28)d unit of the Ministry of Health (44). Heading the
DDASS is the Departmental director of health
and social services, who is directly responsible
to the Departmental Prefect. He/she is assisted
by various specialists (e.g., the Departmental
medical officer, who is responsible for ensuring
that institutions adhere to the decisions of the
DDASS enforces both the regulations of the
Ministry and the regulations of the local author-
ities. It has administrative authority over public
hospitals in the Department, must approve the
by private practitioners. Some ambulatory care, hospitals’ budget and help establish the prix de
however, is furnished by outpatient depart-
ments associated with large public hospital cen- ‘National health expenditures includes only operating expendi-
tures (not capital expenditures). Two categories of operating ex-
ters, by mutual fund societies run by industries penditures comprise national health expenditures: 1) medical care
or unions, and by neighborhood health centers. expenditures (i.e., expenditures for hospital care, ambulatory and
home health care, routine and preventive medicine, affiliated med-
Institutional care is provided by: 1) public in- ical activities such as industrial medicine, medical goods and de-
vices); and 2) health expenditures (i. e., expenditures for medical
stitutions (including public hospitals) that are research, medical education, administration of the health care de-
sponsored by the Department or commune, but livery system, and community health).

are subject to administrative authority of the The organizational and administrative structure of the French
health system is very complex. Full understanding of this structure
Ministry of Health (Ministere de la Sante); 2) is not needed to examine issues related to medical technology.
private, nonprofit industry-related or special Readers interested in other details, however, are referred to D.
purpose facilities; and 3) private, for-profit, Ceccaldi, Les Institutions Sanitaires et Sociales, 1979 (15).
‘The exact name of the Ministry concerned with health can
hospitals (called “cliniques”) which usually offer change when a new Minister assumes power, or when the existing
surgical, medical, and/or obstetrical services. Minister feels that a socially relevant problem is of considerable
Most psychiatric hospitals, although originally importance that it should be included in the ministerial title. Since
the establishment of the Fifth Republic in 1958, the name has
private nonprofit or for-profit institutions, are changed numerous times. For the purpose of simplicity, though,
now public facilities. the term Ministry of Health is used throughout this chapter.
96 ● Background Paper #4: The Management of Health Care Technology in Ten Countries
Ch. 6—Policy for Medical Technology in France ● 97

● “Hospitals” (“hopitaux”) or second catego-

ry hospitals (hopitaux de deuxieme catego-
rie). — “Hospitals” are usually affiliated
with hospital centers (see below) and col-
laborate in providing for the health care
needs of a health care district. These in-
stitutions are supposed to provide at least
one unit for each of the following: general
medicine, general surgical, maternity,
chronic care, pediatric, and infectious dis-
ease. They are also to have outpatient serv-
ices, a clinical laboratory for basic anal-
yses, and electroradiology. Medical per-
sonnel are salaried and are usually part-
time employees.
. Hospital centers (centres hospitaliers). —
Hospital centers are one jurisdictional enti-
ty, but may consist of several institutions.
They are usually located in the capital city
of the Department and are supposed to be Physicians and Nurses
able to provide for all the primary and sec-
ondary care needs of the health care dis- As shown in table 5, in 1977, there were some
trict. Hospital centers offer a larger variety 91,000 physicians in France, or roughly 172 per
of specialty services than “hospitals” do. 100,000 inhabitants. Of the total, one-third
They also have more full-time medical per- were private practitioners. 12 The number of
sonnel, especially in radiology, clinical lab- nurses totaled 219,000, or 412 per 100,000 in-
oratory, and anesthesiology. They some- habitants.
times participate in medical training and Just as they do in the United States, physi-
are often the base for a nursing school. Spe- cians in France tend to cluster in urban areas,
cialized hospital centers (centres hospital i- especially around university hospital centers.
ers specialises) provide specialized care There is a 5:3 ratio of generalists to specialists,
within a single medical area, e.g., psychia- and the distribution of physicians throughout
try, tuberculosis. the country reflects and parallels this ratio.
● Regional hospital centers (centres hospital i-

ers regionaux, CHR), called university hos- In the period 1967-79, the number of physi-
pital centers (centres hospitaliers universi- cians in France increased by approximately 80
taires, CHU), when they are in the same percent (41,46). To stem this rapid growth, the
city as a medical school. The CHR is usu- government has instituted more restrictive med-
ally in the Regior’s capital city. Not only ical school selection procedures.
must the CHR have the facilities to meet the The rapid increase in the number of physi-
basic needs of its health care district, but it cians is affecting the number of physicians seek-
must have the highly specialized facilities to ing salaried positions in order to guarantee a
provide the tertiary care for the entire Re- minimum level of income for themselves. In re-
gion. CHUS play a significant role in medi- cent years, the number of salaried physicians in
cal education and research. France has been increasing. Furthermore, an
Table 3 lists the number of different types of ever increasing number of salaried physicians
public hospitals (classified prior to 1978 revi- 12
When hospitals and universities started to collaboratein medi-
sions) and beds for France. Table 4 summarizes cal education, a university-hospital career track was created. The
the distribution of types of beds for the public prestige associated with this career has made it competitive with
and private sectors. private practice.
98 ● Backround Paper #4: The Management of Health care Technology in Ten Countries

Table 4.–Number and Distribution of Facilities and Beds in Public and Private Institutions in France (1975)

Public institutions Private institutions Total

Beds per Beds per Beds per
Number of Number 1,000 Number of Number 1,000 Number of Number 1,000
Type of facility/bed facilities of beds population facilities of beds population facilities of beds population
specialties . . . . . . . . . . . 852 145,850a 2.8 680 29,262 0.6 1,532 175,112 3.4
specialties . . . . . . . . . . . 489 70,569b 1.3 1,265 66,249 1.2 1,754 136,818 2.5
Obstetrics . . . . . . . . . . . . . 614 16,374 0.3 716 14,695 0.3 1,330 31,069 0.6
Convalescent/rest. . . . . . . 218 7,099 0.1 452 21,217 0.4 670 28,316 0.5
Functional rehabilitation . 53 3,426 0.1 134 12,007 0.2 187 15,433 0.3
Other: long stay. . . . . . . . . 24 2,314 0.1 – – – 24 2,314 0.1
Tuberculosis . . . . . . . . . . . 55 9,163’ 0.2 195 15,038 0.3 250 24,201 0.5
Psychiatry . . . . . . . . . . . . . 78d 16,913 0.3
222 15,103 0.3 414 137,535 2.6
114e 105,519 2.0
f f
Total . . . . . . . . . . . . . . . . 1 ,044f 377,227 7.2 2,534 173,571 3.3 3,578 550,798 10.5

Table 5.—Number of Physicians are working full time. The increase is especially
and Nurses in France (1977) impressive in the public hospital sector. In 1965,
Number per
only 3.3 percent of all physicians were full-time
100,000 salaried employees in public hospitals, com-
Profession Number inhabitants pared to 13.6 percent in 1977 (15,46).
Private practitioners~ . . . . . . . . 63,531 119.4 The nursing population has not increased to
General practitioners . . . . . . . . 39,262 73,8 meet hospital staffing needs. Although the Gov-
Specialists. . . . . . . . . . . . . . . . . 24,269 45,6
Salaried physicians. . . . . . . . . 27,911 52.5
ernment has made efforts to attract people to
General practitioners . . . . . . . . 18,453 34.7 nursing by increasing salaries and career oppor-
Specialist. . . . . . . . . . . . . . . . . . 9,458 17.8 tunities, results have not yet been observed. It
Subtotal—general may be that the low status of the nursing profes-
practitioners . . . . . . . . . . . 57,715 108.5
sion, combined with difficult working condi-
Subtotal—specialists. . . . . . 33,727 63.4
tions, is retarding change.
Total . . . . . . . . . . . . . . . . . . 91,442 171.9

Health Insurance
Registered nurses. . . . . . . . . . . 152,575 286.9
Nurses aides, nurses
France has a comprehensive Social Security
auxiliaries, nurses system (Securite Sociale), with a highly elabo-
in sanatoriums. . . . . . . . . . . . 17,364 32.6 rate sickness insurance mechanism13 that covers
Psychiatric nurses . . . . . . . . . . 49,143 92.4
virtually the entire population. Between 99 and
Total . . . . . . . . . . . . . . . . . . 219,082 411.9
100 percent of the French population is now
Midwives . . . . . . . . . . . . . . . . . . 8,899 16.7 The term health insurance would be a partial misnomer, be-
cause the orientation is definitely toward curative rather than pre-
ventive care. Only limited coverage for screening and periodic
checkups is mandated by national policy. A national system for
preventive services for mothers and children is established under
systems not discussed in this chapter.
Ch. 6—Policy for Medical Technology in France ● 99

covered by one form of sickness insurance or All four regimes have similar hierarchical
another. The country’s Social Security system structures to facilitate service at levels close to
had its formal origin in the law of April 5, 1928 the insured. In the General Regime, which cov-
(22), which was revised and became operational ers approximately two-thirds of the population
in 1930. At first, insurance was mandatory for (and is expanding), the reimbursement system is
certain groups of workers, but was administered operated by 122 primary sickness insurance
through private social insurance and mutual aid funds (caisse primaire d’assurance maladie).
funds. Reforms of 1945 and 1967 reorganized These 122 funds—there is usually one such fund
the administration of the Social Security system per Department—are fiscal intermediaries that
and also created a national health insurance provide reimbursement to hospitals or patients,
system (3,22,48). as appropriate. A Regional sickness insurance
fund (caisse reionale d’assurance maladie)
Administration and Financing operates in each Region, and is responsible for,
among other things, developing and coordinat-
Because there was resistance on the part of the ing prevention activities in the area of occupa-
different worker groups to having one admin-
tional health and accidents. At the national lvel
istrative system, different administrative “r%-
is the National Sickness Insurance Fund (Caisse
gimes” were established under the Ministry of
Nationale d’Assurance Maladie, CNAM), a
Health to cover different categories of workers.
public institution under the trusteeship of the
Currently, there are four large regimes within
Ministry of Health and the Ministry of Econom-
the Social Security system. These regimes and
ics and Finance. The National Sickness Insur-
the workers for whom they offer health insur-
ance Fund receives insurance fund contributions
ance coverage are:
from employers and employees and then dis-
1. General Regime (Regime Generale).–All burses endowments to the primary and Regional
salaried workers in industry, commerce, funds. It ensures on a national level the fiscal
etc., not covered by “special regimes” (see solvency of the primary sickness insurance
below). funds with regard to the provision of coverage
2. Special Regimes (Regimes Speciaux). — for the two groups of risks: 1) sickness, materni-
Salaried workers in special industries such ty, disability, death; and 2) work-related ac-
as railroads, mines, electric and gas com- cidents and occupational health (15).
panies, and in the civil service.
3. Nonagricultural Independent Professions Coverage
(Professions Independents Nonagricoles).
Although there are several health insurance
—Autonomous, nonsalaried workers, in-
administrations or sickness funds covering dif-
cluding craftspeople, small business own- ferent categories of workers, the coverage the
ers, private practitioners in medicine and
various funds provide is similar. Reimburse-
ment coverage for the following is provided (3):
4. Agricultural Regime (Regime Agricole). —
Salaried agricultural workers and inde- ● fees for general and special medical care;
pendent farmers. ● fees for dental care;
Social Security contributions are slightly dif- ● cost of drugs, prosthetics, medical devices
ferent for each regime, but over the years have
or appliances, biological and radiological
tended to move in the direction of increasing
uniformity. Although contributions are the
shared responsibility of the employer and em- ● cost of hospitalization in all public and
ployee, the employer pays by far the larger private nonprofit health institutions, and in
share (78 percent (48) or more) of the subscrip- all private for-profit health institutions that
tion rate. Social Security policy is set by the have made an agreement with the national
Ministry of Health, but the sickness funds ad- sickness funds and meet basic technical re-
minister independently. quirements (accreditation);
100 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

. cost of transportation by ambulance and daily hospital charge for institutional service,
other means; and and 2) the quantity of different “medical ac-
● cost of surgical operations. tions” performed at the hospital by or under the
supervision of a physician. Compensation for
The patient’s copayment varies with the type
medical actions is provided in the form of hono-
of care received. Although there are minor in-
rariums for specific types of actions, either
surance fund differences for the rate of reim-
directly to the individual physician or indirectly
bursement, the following percentages are the
through the institution.15 (Honorariums are dis-
responsibility of patients covered by the Gen-
cussed in more detail in the section on physician
eral Regime (3): reimbursement. )
● 10 percent of expensive and essential drugs; The prix de journe (daily hospital charge) for
● 20 percent of medical and paramedical fees each public hospital and private nonprofit hos-
and laboratory procedures in public or pri-
pital in the public service is fixed in each De-
vate nonprofit hospitals or hospital outpa-
partment by the Departmental Prefect, who is
tient departments;
advised on this matter by the Departmental di-
● 20 percent of hospital costs during the first
rector of health and social services. The prix de
30 days;
journe is calculated for each hospital by divid-
● 25 percent of medical and paramedical fees
ing the sum of the institution’s real costs for the
for care provided at the physician’s private
previous year plus its deficit by the number of
office or for a home visit; and
bed days in that year, and then multiplying this
● 30 percent of other expenditures, such as
figure by the inflation-related index recom-
laboratory expenditures outside the hospi-
mended by the Ministry of Health.
tal, drugs other than essential ones, outpa-
tient dental care, eyeglasses, and small (Real costs of year N
medical devices-or appliances. Prix de journee = + Deficit of .vear N) x Inflation=
for year N + 1 Number of bed days related
The copayment often can be eliminated through in year N index
various exceptions recognized by the social in-
The reimbursable daily hospital charge for
surance system. For certain procedures and tests
that are considered “high cost, ” for example, each private for-profit hospital is based on an
agreement or “convention” between the individ-
computed tomography (CT) scans, the patient is
ual institution and the Regional sickness fund. If
fully covered and the sickness insurance fund re-
a hospital is not conventioned, its reimbursable
imburses at 100 percent.
daily charge is set by the Departmental Prefect,
Many individuals belong to independent mu- and the charge is considerably lower than it
tual aid funds or purchase private insurance to would be if the hospital were conventioned.
cover copayment costs.14 If the patient is a
member of a mutual aid fund, care is provided For the past few years, there has been an in-
by the mutual aid society or reimbursement for creasing interest in prospective reimbursement
the copayment is provided through the mutual as a method for cost containment. Several pub-
lic service hospitals are now using prospective
aid fund.
reimbursement on an experimental basis.
Hospital Charges and Reimbursement
It is important to note the continued impact in
France of the principle of liberal medicine. Hos- 15
In the case of salaried physicians working for public hospitals
pital charges in both the public and private sec- (or in some nonprofit private hospitals), the principle of liberal
tors are calculated along two primary axes: 1) a medicine that the patient pays the physician directly is not fully
respected. Honorariums for the physicians’ actions are paid to the
In 1975, there were more than 8,000 mutual aid societies with a hospital, but the physicians themselves receive a set salary. Recent
membership of approximately 33 million. The number of societies legislation allows full-time salaried physicians to have a very
is constantly decreasing, but total membership is constantly in- limited number of private beds, or perform certain medical acts on
creasing. a private patient basis. For these acts, they are directly reimbursed.
Ch. 6–Policy for Medical Technology in France ● 101

Physician Fees and Reimbursement ness funds, or if no agreement is reached, by an

Fees for medical care provided by or under interministerial committee. As shown in table 6,
the supervision of physicians are based on a sys- fees for physicians’ acts vary depending on
tem of valuation of medical actions. Assisted by whether services are rendered through private
the Permanent Commission on the General No- practice, private institutions, or public institu-
menclature of Professional Acts (Commission tions. The key letters are assigned higher values
Permanence de la Nomenclature Generale des for physicians’ services provided in the public
Acts Professionnels), the Ministry assigns a key sector than they are for services provided in the
letter (i.e., C for consultation, K for medical public sector. The higher values in the private
manipulation, B for laboratory, Z for radiolo- sector reflect the inclusion in the physician’s
gy) and a coefficient or relative weight to every honorarium of certain material costs, which for
medical action that must be done by or under the public sector are included in the hospital’s
the supervision of a physician (16). Thus, for ex- prix de journee.
ample, an appendectomy is worth 50K, whereas Most private practitioners are conventioned
an EKG is worth 12K (36). Monetary values are with the sickness funds.l6 Physicians who are
assigned to the key letters, and these can and do conventional are not supposed to charge more
change over the years; the coefficients for specif- than the conventional fees.17 In certain situa-
ic medical actions, which presumably reflect the tions, specified below, the conventioned fees are
action’s relative complexity, however, usually waived:
remain constant.
1. the physician holds certain categories of
Upper limits on physicians’ fees for office university or hospital titles (e. g., the
visits and medical actions—the monetary values
assigned to the key letters—are determined ei-
ther by conventions between physician groups
or individual physicians and the national sick-

Table 6.—Key Letters and Unit Values of Honorariums for Medical Actions
Performed by Physicians in the Public and Private Sectors in France (1977)
102 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

equivalent of assistant, associate, or full For those in the second category, a panel of
professor, or clinical department head) or peers and representatives of the sickness funds
has passed highly competitive specialty makes a judgment, which once attributed, is not
exams; rescinded. Waivers for long visits or special
2. the physician possesses medical authority treatment are judged on a case by case basis. As
accrued through research, publications, of January 1, 1979, 15 percent of conventioned
seniority, etc; or physicians had waivers for conventioned rates,
3. a visit is excessively long or special treat- 5 percent of general practitioners had waivers,
ment is provided. and 29 percent of specialists had waivers. The
fees of conventioned physicians who have wai-
For physicians who are in the first category, a vers are not to be excessive and are to be set
waiver is granted automatically if requested. “with good measure and tact” (25).


France is a country with a highly traditional come primarily from the state’s budget to the
culture, and perhaps because of that, some am- sponsoring Ministry. (See figure 1.)
bivalence and skepticism underlie the attraction
Responsibility for coordinating, stimulating,
of modern medical technology. For the most
and monitoring all publicly funded scientific
part, however, technological innovation is
and technical research rests with the General
greatly appreciated and sought after. Further-
Delegation for Scientific and Technical Research
more, with the economic growth of recent dec-
(Delegation Generale a la Recherche Scientif-
ades, medical technology has diffused very rap-
ique et Technique, DGRST), which operates un-
idly. There is strong national interest in—and
der the authority of the Undersecretar y for Re-
financial support for—the development of
search. Advised by the Advisory Committee for
French-produced technology for domestic and
Scientific and Technical Research (Comite Con-
export use.
sultatif de la Recherche Scientifique et Tech-
Numerous policies regulate the introduction, nique), which is comprised of 16 prominent sci-
diffusion, and utilization of medical technol- entists from the public and private sectors,
ogies in France. Discussed below are govern- DGRST defines and implements, either directly
ment policies in the areas of R&D, regulation of or indirectly, any specific research policy in
drugs and medical devices, health facilities and France (2,14). Its basic purpose is to ensure that
equipment planning, and reimbursement. short-term research goals are in accord with the
longer term objectives of the economic and so-
Research and Development cial development plan and national priority
areas of interest.
An Undersecretary for Research, attached to
the Prime Minister’s office, is responsible for the DGRST attempts to coordinate collaboration
national publicly funded research budget. This between public and industrial research groups.
research budget, or research envelope (envelope In 1977, public funds accounted for 57 percent
recherch~), includes the budgets of individual of R&D expenditures in France, but 61 percent
public research institutions.18 Each public re- of total R&D expenditures was utilized by pri-
search institution is sponsored by the Ministry vate industry. The National Agency for the Pro-
most closely alined to the subject area of re- motion of Applied Research and Development
search, and each institution’s research funds (Agence Nationale de Valorisation de la Re-
18 cherche), a recently expanded agency under the
The research envelop does not include all public research Ministry of Industry, stimulates innovation by
funds. For example, it does not include military research and tele-
communications research. The research envelope coordinated by partially subsidizing prototypes and by assisting
DGRST in 1977 represented 52 percent of all public research funds. in the subsequent development phase.
Ch. 6—Policy for Medical Technology in France ● 103

Figure I.–Simplified Organizational Chart for Public Research Efforts in France (1978)

Prime Minister I

Committee on

Sponsoring Principal research
ministrv c institutions

Atomic Energy Commission
Industry IRIA f
Institute for Computer
Science Research
Universities National Center for
Scientific Research

Health National Institute General Delegation on I
of Health and Medical Scientific and Technical
Research Research I
Pasteur Institutei

I Environment and
Technical and Scientific
Center for Buildings I

1 Central Laboratory of
Bridges and Roads

Agriculture INRA’
National Institute
\ for Agronomic
Other ministries Various
institutions I
104 . Background Paper #4: The Management of Health Care Technology in Ten Countries

DGRST reviews and makes recommendations The scientific merit of research proposals is
concerning all public research institutions’ judged by different advisory commissions with-
budgets to be presented to the Prime Minister in INSERM and CNRS, depending on whether
and the Interministerial Committee on Scientific the proposals are self-generated grant proposals
and Technical Research (Comite Interministerial or are submitted in response to ATPs. INSERM
de la Recherche Scientifique et Technique, receives a certain amount of money to help sub-
CIRST) for annual budgetary approval. In addi- sidize ATPs from the National Sickness Insur-
tion to the budgets of individual public research ance Fund. INSERM judges the proposals for
institutions, the research envelope includes scientific merit, but if the ATP is based on a pri-
funds for DGRST to allocate to concerted ac- ority area of the National Sickness Fund, the
tions (actions concertees) in areas of research Fund makes the final decision about whether to
which DGRST has identified as having priority allocate funds.
(e.g., biomedical engineering, biology and myo- Evaluation studies have been subsidized by
cardial function, computers and social sciences,
ATPs, concerted actions, and the sickness
reproductive and developmental biology, nutri-
funds. Most evaluation studies conducted are
tional and agricultural technology, immunol-
either clinical trials or efficacy studies of one
ogy, organ transplants). Funds for concerted ac-
form or another. A recent reorientation to in-
tions are given to university research groups, re-
clude cost effectiveness is illustrated both by the
search units of the research institutes, and to in- inclusion of cost-effectiveness studies as an
dustry (18).
INSERM research priority and by the allocation
The Coordinating Committee for Biomedical of ATP funds to evaluate radiologic examina-
Research (Comitee de Coordination a la Re- tion methods and determine their cost-effective-
cherche Biomedicale, CCRBM) of DGRST su- ness ratios (20).20
pervises the activities of the various organiza-
The state and its central policy guidelines
tions that conduct or sponsor biomedical re-
have played an important role in scientific de-
search. As shown in figure 1, the principal
velopment since the creation of the Fifth Repub-
public institutions are: 1) the National Institute lic. A 10-year research policy (1980-90) has been
of Health and Medical Research (Institut Na-
proposed and is now (January 1980) being re-
tional de la Sante et de la Recherche Medicale,
fined and elaborated by scientists. Among the
INSERM), 2) National Center for Scientific Re-
various long-term priority areas that have been
search (Centre National de la Recherche Scien-
identified are biomedical technologies (microbi-
tifique, CNRS), and 3) the universities. The
ology, genetics, biomedical engineering), medi-
Pasteur Institute, a private, nonprofit founda-
cal care evaluation research (nutrition, medica-
tion that also does biomedical research, is par-
tion), and health economics (19). For the past
tially subsidized by the state.
few years, France’s total public and private in-
INSERM and CNRS both allocate research vestment in R&D has been 1.8 percent of the
funds to their own in-house research labora- gross domestic product. There is a plan to in-
tories and to research units at the universities; crease the public sector’s investment in R&D
both can also identify priority areas for research
and request research proposals that are called
programed thematic actions (actions thematique
programme, ATPs). ATPs are 3-year contracts
to support the operating expenses, equipment,
and temporary personnel for assistance with
items such as data collection or interviewing. 19
The salaries of reseachers at public institutions, who after a 4-
year probationary period are tenured employees, must be paid
with general research funds and cannot be met with funds for
Ch. 6—Policy for Medical Technology in France ● 105

during the 1980’s, so that the country’s total formulary. Once the drug has met these criteria
public and private investment in R&D amount and been placed on the formulary, its price is set
to 2.2 percent of the gross domestic product— by the Ministry, and advertising must conform
the same percent as in West Germany and Japan to certain restrictions. At the same time,
at present. however, the market for the drug is greatly
Evaluation and Regulation of Drugs
Medical devices are not regulated for efficacy
and Medical Devices before being placed on the market. Sometimes,
Medical technology in France is regulated however, the evaluation of a new medical de-
directly, indirectly, or not at all, depending on vice is stimulated by the National Sickness In-
the technology in question. New medical proce- surance Fund. Since the Fund provides reim-
dures are not regulated at all, because one of the bursement for medical devices, it can decide to
principles of liberal medicine which is still re- provide reimbursement for a limited quantity of
spected in France is that the physician is free to a new device on the condition that INSERM or a
prescribe or treat as he/she wishes. If a new pro- university group be permitted to evaluate the
cedure is not in the nomenclature of medical new device’s efficacy. This evaluation provides
acts reimbursed by the sickness funds, however, information that can be used in deciding wheth-
reimbursement to the patient for the procedure er or not the device should be placed on the list
may not be provided. (In some cases, though, a of devices for which reimbursement will be pro-
new procedure can be integrated into an existing vided (47). To obtain reimbursable status, a de-
category of acts for which reimbursement is vice must be shown to be efficacious. The eval-
provided. ) uation of medical devices that is required by
Social Security can be considered an indirect
Medications are regulated both directly and form of regulation.
indirectly. Decisions regarding which drugs can
be sold in France are made with the assistance of Health Facilities and Equipment
expert commissions by the Directorate of Phar- 21

macy and Medications (Direction de la Pharma- Planning: The Carte Sanitaire

cie et du Medicament) at the Ministry of Health. The carte sanitaire, the system of health facil-
Drugs to be sold in France are required to meet ities and services charts that is used for health
fairly stringent standards of experimentally planning, was created by the Hospital Reform
demonstrated efficacy, safety, etc. A recent leg- Act of 1970 (35). Since 1972, various decrees
islative change by the European Economic and circulars have detailed how the system
Council (EEC) may eventually provide an alter- should function (see, e.g., 4,5,6,7,8,10,26,27,
native for market approval: If a drug has been 28,29,30,31,34,35). Creation of the carte sani-
approved for sale in any two EEC countries, taire was aimed at stimulating reorganization
then the other EEC countries are expected to and equalization of the distribution of health
grant permission fairly automatically (26,33, care facilities and services. By regulating their
34). This legislative change will not actually be expansion and redistribution, the carte sanitaire
enforced for a few years. regulates the availability of resources for geo-
graphic areas and population groups. Expansion
Although there are no advertising or price
or creation of services must be approved region-
restrictions on drugs that have been approved
ally or nationally to ensure that growth relates
for sale (including most over-the-counter
to need.
drugs), such restrictions are imposed on drugs
that are included on the reimbursable list of the
Social Security System. In order to be placed on
this formulary, a new drug must be shown to be ‘*Carte sanitaire, the French term for the system of health facili-
ties and equipment charts that are used for health planning, is the
more efficacious, have fewer side effects, or cost term used to refer to that system throughout the remainder of this
less than another drug which is already on the chapter.

68-095 13 - 80 - 8
106 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

A method for needs determination is estab- each of the specific medical technologies on this
lished nationally. The Ministry of Health, ad- list has its own chart, and usually an index of
vised by the National Commission on Medical need. Authorization for acquisition from the
Equipment (Commission Nationale de l’Equip- Minister of Health, the Regional Prefect, or the
ment Sanitaire), recommends norms for equip- Departmental Prefect, depending on the tech-
ment/population ratios. 22 The charts that con- nology and type of facility, is required for any
stitute the carte sanitaire are prepared on either item on the list.24 In the case of a public institu-
a population or specific equipment basis by the tion, if authorization for purchase of an item is
Regional Prefect, and they list existing and au- granted, the state may—but is not obliged to—
thorized-for-purchase equipment and locations, subsidize part of the purchase cost. If authoriza-
population projections, and where applicable, tion is not granted, purchase by a public or pri-
the discrepancy between actual supply and pro- vate institution would be illegal .25 The cost of
jected supply and projected need. unauthorized equipment could not be included
in a public or private hospital’s capital or oper-
The Ministry of Health reviews and approves
ating costs, nor could it be included in calculat-
the charts prepared regionally; except in speci-
ing a public hospital’s prix de journee,
fied cases, however, he/she leaves actual needs
determination (and the local request and ap- At the present time, there are 11 technologies
proval process) to the Regional and Departmen- on the “heavy equipment” list of the carte sani-
tal authorities. Health facilities planning for in- taire that applies to both public and private in-
dividual Regions and districts within the Region stitutions. 26 They are (modified May 1976) (31):
is coordinated by the Regional Prefect, who is
1. autoanalyzers,
assisted by the sectorial interhospital group, the
2. heart-lung machines,
Regional interhospital group, and the Regional
3. hyperbaric chambers,
Commission on Medical Equipment (Commis-
4. linear accelerators with sources greater
sion Regionale de l’Equipment Sanitaire).23 In-
than 10 MeV (million electron volts),
terregional planning and decisionmaking for
5. radiotherapy machines: cobalt bombs and
certain facilities or equipment that are consid-
linear accelerators with sources less than
ered to be assessed best from a national perspec-
or equal to 10 MeV,
tive are the responsibility of the Ministry of
6. scintillation cameras,
Health advised by the National Commission on
7. radioisotope scanners,
Medical Equipment. The carte sanitaire must be
8. artificial kidneys,
reviewed by the Ministry each time a new eco-
9. information-processing equipment whose
nomic and social development plan is being pre-
cost exceeds 150,000 francs (13,53 0)27 for
pared, about every 5 years. At the initiative of
purchase, or 5,000 francs ($1,175) per
the Ministry or Regional Prefect, it can be re-
month for rental and operation,
viewed at other times, as well.
100 laser photocoagulators, and
The Ministry of Health has issued a list of 11. CT scanners.
“heavy equipment” (equipements lourds), and
These have been established for surgical, medical, obstetrical, ent from that for institutions in the public hospital service. When a
and extended-care-facility beds, and also for certain medical tech- private sector institution requests approval for equipment acquisi-
nologies. tion, replacement, or expansion, the appropriate approval body
The members of the Regional Commission on Medical Equip- must respond within 6 months of the demand. Otherwise, approv-
ment are recommended by the Ministry and include representa- al is granted by default. Public service hospitals are granted a 6-
tives from various organizations and institutions who are directly year authorization, whereas for-profit hospitals are granted a 2-
or indirectly involved with hospital care. These include representa- year25
tives from the Regional and Departmental government agencies, Enforcement of the prefect’s decisions is the responsibility of
from elected representatives, from private practitioners, from both the Departmental or Regional medical officer.
the public and private hospital sectors, from the medical univer- Additional technologies are included on the heavy equipment
sity, from the sickness funds, etc. The membership of the National list27 that applies to the private sector.
Commission on Medical Equipment is analogous to that of the Re- For conversion of French francs to U.S. dollars, the exchange
gional Commission. rate used throughout this chapter was 4.25 francs = $1.00 (U.S.).
Ch. 6–Policy for Medical Technology in France ● 107

The Regional Prefect has jurisdiction for au- the carte sanitaire at the Ministry anticipate that
toanalyzers, heart-lung machines, hyperbaric this change, combined with the present empha-
chambers, artificial kidneys to be used only for sis on health care cost containment, will provide
acute kidney failure, and information-process- the impetus to enforce this regulation.
ing equipment in private facilities. All equip-
ment in public facilities, 28 excluding CHRS and The Hospital Reform Act creating the carte
CHUS, are in the jurisdiction of the Departmen- sanitaire was passed in 1970. In a circular on
tal Prefect. The remaining items are the respon- July 13, 1976, however, the Minister indicated
sibility of the Minister. The Minister is advised that the carte sanitaire’s regulations were not be-
with respect to items in the private sector by the ing taken seriously and were therefore having
National Commission on Medical Equipment. no apparent impact (12). At the time of the cir-
cular, the carte sanitaire system had been func-
Indexes of need are recommended by the Na- tioning for only 3 years, and its work had been
tional Commission on Medical Equipment. To mostly descriptive and hardly at all normative.
help determine an index, the Commission may Since then, the situation has been improved by
call on experts, including physicians and manu- more concerted efforts. The latest available data
facturers, in the specific area of interest. Given for the private sector 1977 (43) indicate that not
the diverse representation and expertise of the only are fewer beds being requested, but that a
National and Regional Commissions, indexes of lower proportion of the requests are being au-
need are presumably unbiased or balanced and thorized. What is important to observe, how-
based on the latest available information and ever, is the lag between the declaration of pol-
methodology for needs determination. If the in- icy, the presumed implementation of policy via
dexes are perceived by the General Directorate regulatory mechanisms, and the expected im-
of Health or others at the Ministry of Health to pact of the policy.
be inadequate or inappropriate, however, ef-
forts to revise them are initiated.
Reimbursement and Medical
The carte sanitaire can affect the capital ex- Technology
penditures of an institution and determine the Reimbursement for professional fees and
availability of specialty units and beds, and in- technology charges is provided for differently in
directly, personnel. By explicitly indicating that the public and private sectors. For public service
certain districts are “underequipped” the carte institutions, technology capital and operating
sanitaire can and has induced health costs. The costs are included in the hospital’s prix de jour-
system also brings to light the fact that certain nee. For private facilities and practitioners, part
districts are “overequipped. ” Until December of these costs is included in the reimbursable
1979, the carte sanitaire regulations allowed the daily hospital charge and part is included in the
appropriate authorities to close down “un- honorarium fee.
needed” beds and heavy equipment—for the pri-
vate sector. In practice, however, little if any- As has already been mentioned, the percent-
thing, was done to redistribute equipment from age of reimbursement to the patient depends on
“overequipped” districts.29 The power to close the technology in question. More complex tech-
down unneeded facilities has now been extended nological procedures engender a higher rate of
to public hospitals. Individuals responsible for reimbursement, i.e., the patient pays less or
nothing at all. Prior to the use of certain high-
cost procedures, authorization should be ob-
tained from the sickness funds. If authorization
is denied, the patient is liable for the cost. (The
mechanism of prior authorization is discussed
below in conjunction with cobalt therapy. )
108. Background Paper #4: The Management of Health Care Technology in Ten Countries

As described in the preceding section of this approved only for facilities with clinical on-
chapter, France has numerous policies that regu- cology departments.
late the introduction, diffusion, and utilization The rate of diffusion of CT technology, as
of medical technologies. Some of these policies
controlled by the index of need, was affected by
are fairly recent, and it is too early to assess an important factor— the desire to foster the
their impact. The following examples of experi- development of a French-fabricated scanner.
ence with specific medical technologies, how- The scanner had been included in a priority area
ever, provide insights into the existing relation- for development identified by DGRST: comput-
ship between the policies and the technologies. er science technology. In addition, government
subsidies for developing CT equipment had
CT Scanners been provided to the French manufacturer CGR.
A highly expensive capital investment, the The index of one scanner per million inhabitants
CT scanner was subject to regulation by the was chosen so that there would not be a rapid
carte sanitaire even before it was specifically saturation of the CT market and room would be
added to the list of heavy equipment by the left for CGR to compete. The index was not
decree of September 1975 (31). Because of the medically restrictive, because the relative diag-
computer component of the machine, the CT nostic value of the scanner had not been fully
scanner was regulated as technology in the cate- established. The first perfected CGR scanner
gory of information-processing equipment ex- was installed in January 1977.
ceeding specified cost limitations. This category Using the current index of need, France
was in the jurisdiction of the Prefect. As soon as
should have 54 CT scanners by 1983. As of Jan-
the Minister placed the CT scanner on the list of
uary 1, 1979, 30 CT scanners (20 head, 10 body)
heavy equipment, however, she indicated her
were installed in France, and 26 more (13 head,
intention to obtain ministerial jurisdiction for
13 body) have been authorized (43). 30 Nine of
this technology. Ministerial jurisdiction for CT the twenty-two Regions do not have scanners,
scanners in the private sector was obtained
although they have been authorized, and Corsi-
shortly thereafter (32).
ca’s population size does not justify one. Other
The first CT scanner in France was purchased Regions have attained their limit and would like
with assistance from the Ministry of Health by more.
the Public Assistance Hospital of Marseilles.
The high level of interest in the diagnostic
That purchase was made in March of 1975, be-
value of the scanner has stimulated the award-
fore a CT scanner facilities chart and gov-
ing of grants and contracts through INSERM,
ernment-recommended indexes of need had
the National Sickness Fund, and DGRST for re-
been issued.
search on the value of this technology to med-
The current index of need, one CT scanner ical decisionmaking. The impetus and efforts to
per 1 million inhabitants, is a combined index evaluate a medical technology in terms of the
that includes both head and total body scanners. impact of the information it provides are a
This index was agreed on by an expert commit- rather new phenomenon in France, but one
tee of renowned physicians, researchers, and which has persisted. When the National Com-
manufacturers called together by the National mission on Medical Equipment was requested to
Commission on Medical Equipment. The com- reassess the index of need in light of the in-
mittee recommended that scanners be approved
only for institutions associated with research
units; it also recommended that brain scanners ment subsidies have been installed since 1975 (43), Most of these
scanners are in private (for-profit and nonprofit) establishments;
be approved only for those facilities with neuro- some are prototype machines for evaluation, All 15 were author-
surgery departments and that body scanners be ized.
Ch. 6—Policy for Medical Technology in France ● 109

production of body scanners, researchers work- Renal Dialysis

ing on the subject of diagnostic value of the
scanner were also invited to participate. Further Research on renal dialysis apparatus was go-
evidence of the persistence of the phenomenon ing on in France in the late 1940’s, but the
was the recommendation that total body scan- clinical use of hemodialysis machines did not
ners be installed where research could be con- begin until 1965. Since kidney disease fell into
ducted to evaluate the machine. Requests for the category of chronic diseases, Social Security
proposals (ATPs) from INSERM followed this funds covered the entire cost related to the treat-
requirement. In addition, the National Sickness ment. Considerations of the patient’s ability to
Fund is currently supporting several scanner pay, therefore, were not a determinant of the
evaluation projects. choice of patients for treatment. This choice was
left—and remains—entirely up to the clinician.

Requests for scanner purchase authorizations The very early indicators of need for dialysis
have been coming in more slowly than expected equipment, which affected the diffusion of this
by the Ministry and CGR. The supposition is technology, were based on the availability of
that the political problems involved in deter- trained professionals and the purchase of equip-
mining which radiology service in a Region or ment, as well as the increasing prevalence of
hospital center gets a machine have slowed kidney failure. These early indicators came
down the process. In the United States, each from a group of experts representing INSERM,
hospital within a medical or hospital center that specialists in nephrology, and the Ministry of
includes several hospitals usually has independ- Health. The goal in the mid- to late 1960’s was
ent administrative authority; in France, though, to have enough renal dialysis facilities to treat
a hospital center is one jurisdictional entity. 10 new cases per 1 million inhabitants. The
treatment goal was revised in 1968, for the sixth
Since each hospital can have its own radiology
department, or several smaller departments, economic and social development plan (1971-
each of which is headed by a chief of radiology, 75), to 30 cases per million. The current goal, 50
reaching agreement as to which radiology de- new cases per 1 million inhabitants, has been
partment within the hospital center will get the achieved in practice, and the present intention is
machine can sometimes be difficult. This prob- not to increase the number of facilities. The de-
lem is thought to have affected the requesting mand for facilities should start leveling off by
process. 1985 because of advances in nephrology that are
expected to prevent chronic renal failure (39).
The carte sanitaire includes renal dialysis
The CT scanners that have been installed are
operating at capacity. Inpatients have an aver- machines as heavy equipment that must meet
age delay of 3 to 4 days between the request for interregional planning objectives (11). The
a scan and the performance of the procedure. Ministry of Health has jurisdiction for the carte
For outpatients, the delay is closer to 4 weeks. sanitaire for dialysis machines used for chronic
All scans are reimbursed by Social Security at renal failure in hemodialysis centers; and the
100 percent, because they are considered high- Regional or Departmental Prefect has jurisdic-
cost procedures. tion for machines used in such centers to treat
acute renal failure. The current carte sanitaire
index prescribes 30 dialysis machines per 1 mil-
Whether the scanner is being utilized appro- lion inhabitants for chronic renal failure (24).
priately is not known. Most physicians perceive (This includes machines to train people for
a need for more installations, however, and this home dialysis, and surveillance to ensure that
perception, combined with CGR’S capacity to machines are being used for this purpose is
supply the demands, fosters the expectation that called for. ) That index is qualified by an addi-
the present index will be revised with the next 3 tional index that guarantees at least five ma-
or 4 years. chines for each CHR. This means a possible in-
110 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

dex of 35 machines per 1 million inhabitants.

The directives specify the desired minimum
number of machines per center (eight), and they
assign the power to the Region to determine the
locale so that patient convenience is planned
for. Each machine is supposed to be used to treat
four patients.
Although the carte sanitaire does not include
home dialysis machines, present policy is to en-
courage the expansion of home dialysis and kid-
ney transplants when medically and socially ap-
propriate. The expectation is that stopping the
expansion of dialysis machines in centers will in-
crease the use of home dialysis and transplants.
The goal is to treat approximately 50 percent of
new cases at centers and to treat the other 50
percent by other methods (e.g., home dialysis,
peritoneal dialysis, transplants, etc. ) (39). A
ministerial circular in January 1977 specified a
goal of 25 percent home-dialyzed patients
among chronic renal disease patients (13).
Statistics on the prevalence of dialysis use and
related information are maintained by the Divi-
sion of Hemodialysis and Transplantation with-
in the General Directorate of Health at the Min-
istry. This Division is advised about hemodialy-
sis equipment by the Commission on Hemodial-
ysis and Transplantation. There are 151 hemo-
dialysis centers in France (9,13,43). As of 1977,
there were 7,096 individuals with chronic renal
failure on dialysis (9,13,43). Within this group,
83.4 percent (5,920 persons) were treated at the
151 dialysis centers, and 16.6 percent (1,176)
were on home dialysis. The percentage of pa-
tients on home dialysis tends to vary inversely
with the rate of transplant operations. Further-
more, this percentage varies in different parts of
the country: In the Paris Region, for example,
38 percent of dialyzed patients are on home
dialysis, whereas in the Rhones-Alpes Region,
only 9.8 percent are. Approximately 650 kidney
transplants were performed in 1978 (39). Data
on the number of machines to treat acute renal
failure were not available.
INSERM supports several research projects
on the subject of the treatment of chronic renal
failure. One collaborative venture, originally
supported by the Ministry of Health, the Na-
tional and Paris Region Sickness Insurance
Ch. 6—Policy for Medical Technology in France ● 111

Since the charges for coronary bypass surgery for the large linear accelerators. With the reclas-
are the physician’s honorarium as reflected by sification of small linear accelerators into the co-
the total number of K’s, in fact, neither the balt bomb category, there is a small excess of
Ministry nor the sickness funds can even pro- this category of equipment (278 authorized ma-
vide accurate data on the number of procedures chines instead of 263) (43). This excess means
performed. that the Ministry probably will not approve
more machines in this category unless a situa-
The general belief among physicians seems to
tion arises in which: 1) a population-based need
be that coronary bypass surgery is used cau-
for additional equipment develops (which is
tiously, and the rate of coronary bypass surgery
very unlikely), or 2) there is a need for replace-
seems to support that belief. The rate of cor-
ment of existing equipment.
onary bypass surgery in France, about 19 pro-
cedures per million inhabitants, is far lower The replacement clause of the law pertaining
than that in the United States, about 370 per to the carte sanitaire does allow replacement of
million inhabitants (21). One possible reason for a cobalt bomb with a small linear accelerator.
the lower rate in France is the channeled access Though some regard the linear accelerator as
to the surgery there. Referrals for surgery are therapeutically preferable, in order to impede
made by cardiologists only after treatment rapid replacement of cobalt bombs, the Minis-
failure with medications. Generally, surgery is try has qualified the clause to allow replacement
prescribed only for those patients, usually fairly with linear accelerators only in establishments
young (35 to 45 age group), who have had cer- considered “heavy centers, ” i.e., centers that
tain types of myocardial infarctions or for have a wide range of high-energy equipment.
whom medications have not been effective in This action could foster more concentrated ra-
treating cardiac pains. The rate of surgery has diotherapy services, which would be more in-
been increasing (21), however, and one cannot convenient for patients having to travel longer
predict if the rate has reached a plateau or will distances for treatment.
continue to increase.
For each piece of radiotherapy equipment it
Cobalt Therapy possesses, every facility has an authorization for
ownership from the Ministry of Health. If an in-
The first cobalt treatment machine was in- stitution does not really use its machine, or uses
stalled in France in 1955. In the beginning, co- it infrequently, as may be the case for some pri-
balt machines were mostly in the private sector. vate clinics that had cobalt machines early, it
Figure 2 illustrates the rate of diffusion of ra- sells its machine and associated authorization to
diotherapy equipment (i.e., cobalt bombs and another institution within the health services re-
small linear accelerators combined). gion or Department. This procedure is not one
The carte sanitaire specifically lists linear ac- that the Ministry recommends, but it is not real-
celerators and cobalt bombs as heavy equip- ly illegal and is tacitly accepted.
ment needing special approval (31). Both are In addition to the aforementioned measures
subject to approval of the Ministry of Health. for regulating the acquisition and existence of
The first indexes of need were one linear acceler- this technology through the carte sanitaire,
ator and five cobalt treatment machines per 1 there does exist a Social Security System mech-
million population. In May of 1976, these were anism which presumably is intended to regulate
revised to reflect utilization patterns. The pres- its use. When radiation treatment is prescribed,
ent indexes are one large linear accelerator
a request for prior authorization of the treat-
(capable of more than 10 MeV) and five cobalt ment is submitted to the sickness fund. If a
bombs and/or small linear accelerators (capable response is not provided within 10 days, tacit
of 10 MeV or less) per 1 million inhabitants. approval is implied. (Although prior authoriza-
The carte sanitaire for radiation therapy tion is supposed to be granted before treatment
made explicit in three Regions the unmet need is provided, in practice it is often granted after
112 . Background Paper #4: The Management of Health Care Technology in Ten Countries

Figure 2.—Diffusion Curve for Installed Cobalt Machines and Linear Accelerators < 10 MeV in France
No. of
mac hines









treatment. ) In the event that authorization is Several years ago a study commissioned by
denied, the patient who has received treatment the Ministry produced results that indicated to
is liable for the cost and there is no reimburse- the Ministry that the coefficients for radiother-
ment. It was not possible to obtain data on how apy (Z key-letter) were inflated (45). Despite
frequently reimbursement is denied. Few docu- criticisms of this study, the coefficients were re-
ments discuss the procedures for prior author- duced. Radiotherapy is considered a high cost
ization, and the procedures are not often men- therapeutic mode, and the sickness insurance
tioned by physicians as being part of the treat- funds cover the cost completely.
ment/reimbursement process. This suggests that
prior authorization is not widely perceived as a At the present time, possible changes of the
powerful regulatory mechanism. Whether its carte sanitaire indexes for radiotherapy equip-
weakness results from inadequate staff at Social ment are under discussion. The discussion has
Security to fully review authorization requests, arisen for two reasons. First, preparation of the
or from a small proportion of inappropriate re- eighth economic and social development plan
quests, cannot be determined on the basis of requires review of the carte. Second, the experi- “
available data. ence of using the linear accelerators, large and
Ch. 6—Policy for Medical Technology in France ● 113

small, for several years has changed the treat- pital laboratories, as well as for freestanding
ment protocols again and may have altered the laboratories.
equipment needs.
Following the 1972 decrees identifying heavy
Automated Clinical Laboratories equipment, the Ministry of Health requested an
The first autoanalyzer installed in France was inventory of existing equipment. Data concern-
a Technicon product installed in 1959-60. Since ing the distribution of autoanalyzers in 1973
1972, autoanalyzers have been included on the should therefore be fairly accurate. Any subse-
heavy equipment list of the carte sanitaire. This quent figures, however, underestimate the num-
equipment is under the jurisdiction of the Re- ber of autoanalyzers. This is because the Pre-
gional or Departmental Prefect. For the carte fect’s approval for purchase is required only if a
sanitaire, autoanalyzers are defined as bioassay laboratory wants to purchase a large machine,
equipment capable of performing 250 analyses or wants to obtain several small ones simultane-
or exams per hour, or more than 5 analyses or ously for integration into a unified apparatus. It
exams simultaneously. The equipment can be is not uncommon—and according to some, it is
one apparatus or an assembled apparatus of quite frequent—for a laboratory to build up so-
several components. phisticated apparatus by purchasing small in-
dependent components in a sequential and
The index for determination of need is not planned fashion. In this manner, a laboratory is
based on population, but based on the volume able to obtain a more sophisticated and power-
of tests performed by the laboratory. A clinical ful machine, while avoiding government regula-
laboratory must perform a total number of tests tion and thereby not having its equipment ap-
valued at a minimum of 2 million B (key-letter pear in the Ministry’s statistics. Even when a
category for laboratory honorariums) in order technology’s diffusion is closely regulated, it ap-
to purchase automated equipment. This carte pears, ingenuity can sometimes circumvent the
sanitaire index is for public and private hos- regulatory process in a very legal fashion.

The carte sanitaire system has been opera- and Departmental Prefect. Each Prefect could
tional for close to a decade. Experience has im- make a decision independent of the other’s,
proved judgment and clarified the problem thereby undermining the intended coordination
issues. With the present preparations for the of the carte sanitaire. To improve overall co-
eighth economic and social development plan, ordination, some individuals at the Ministry
and the concomitant review of the carte sani- want to have one decisionmaker for a given type
taire, two major issues are being raised at the of equipment in both private and public insti-
Ministry of Health. tutions.
One issue is revision of the authorization The second major issue being raised at the
process. The 1970 law establishing the carte Ministry is revision of the carte sanitaire in-
sanitaire and the many decrees and circulars dexes. Health care providers consider many of
that describe, define, and redefine its procedures the indexes overly restrictive. Individuals with
have created a system that is bureaucratically responsibility for the carte sanitaire at the
heavy, confusing, and at times counterproduc- Ministry of Health consider it advantageous not
tive. Under the existing authorization process, to revise the population-based indexes for
equipment, 32 however, until there
is better i
for example, a private institution and a public
institution (other than a CHR or CHU) that formation about the use and the utility of the
want a heart-lung machine would submit their equipment.
requests to, respectively, the Regional Prefect 32
Other than the scintillation camera.
114 ● Background Paper #4: The Management of Health Care Technology In Ten Countries

The carte sanitaire system has the potential health care costs. These costs have been rising at
for ensuring that the French population’s health the rate of 17 to 20 percent each year for the past
needs are being met and that health care facil- few years. Whether efforts to limit the supply of
ities are not overabundant. Its early effects are available technology resources will stem the in-
now being observed, but it is too soon to say creases, however, is still not known.
whether the system will be effective over a
longer period. As noted above, because of the
sanctioning process, the carte sanitaire system The carte sanitaire is a good example of
does have loopholes. Further, it appears that French social laws. The policy is simple, clear,
stricter enforcement of the carte sanitaire au- and flexible: Regionalization of health services
thority is necessary to the correct the system’s planning, indexes of need based on the consen-
functioning. Finally, it should be noted that al- sus judgments of experts, required review of the
though the carte sanitaire was introduced to indexes. The regulations, by contrast, are both
foster coherent health services planning and to very detailed and subject to frequent modifi-
redistribute services so that the needs of local cations and additions, which often makes their
populations are met, in some cases the carte implementation complex bureaucratically. As
sanitaire can be counterproductive. The concen- the carte sanitaire illustrates, the legislative
tration of facilities at technology heavy centers system’s flexibility in terms of permitting fre-
that have evolved in part because of some of the quent changes can at times lead to a situation
criteria for authorization, for example, may that is confusing and somewhat less rational
limit some patients’ access to these facilities by than the rational policy which fostered the legis-
necessitating their having to travel farther for lation. The result is a system that has many
treatment. It is too early to say whether the positive attributes that are counterbalanced by
carte sanitaire system has had an impact on defects and other problems.

1. Bachelot, F., Cancer et Radioth~rapie (Paris: Fir- search Systems in Europe (Amsterdam: Ekevier,
mim-Didot, 1977). 1973).
2. Blanpain, J., National Health Insurance and 15. Ceccaldi, D., Les Institutions Sanitaires et Soci-
Health Resources: The European Experience ales 7th cd., vols. 1 & 2 (Paris: Edition Foucher,
(Cambridge, Mass.: Harvard University Press, 1979).
1978). 16. Centre d’Etude des Revenus et des Coats (Center
3. Bridgman, R. F., “Medical Care Under Social for the Study of Revenue and Costs), Le Coik de
Security in France,” International journal of vol. 35-36, 1977; VO]. 45,
Health Seruices 1(4):331, November 1971. 1978; vol. 46, 1978 (Paris: Documentation Fran-
4. Bulletin Officiel du MinistZre de la Sant2 (Paris), ~aise, 1977-78).
circular 85, Feb. 26, 1973, 17. Comet, D. (cd.), Legislation des I%pitaux Pub-
5. , circular 159, May 2, 1973. lics (Paris: Editions Berger-Levrault, 1974).
6. , circular 260, July 16, 1973. 18. D616gation G@n@rale 3 la Recherche Scientifique
7. circular 261, July 16, 1973. et Technique, DGRST (General Delegation on
8. j circular DGS/52/PR, Feb. 2, 1974. Scientific and Technical Research), L.e Progr&
9. f circular 204, June 12, 1974. Scientifique, No. 196 (Paris: Documentation
10. , circular 530, Nov. 3, 1975. Fran~aise, September/October 1978).
11. circular 495, PC2, June 15, 1976. 19. Le Progr& Scientifique, No. 202 (Paris:
12. ; circular 592, PC2, July 13, 1976. Documentation Fran~aise, September/October
13. circular 21, Jan. 19, 1977. 1979).
14. Burg, C., “The Organization and Support of 20. , “France Recherche et Industrie” (Paris,
Biomedical Research in France,” in Medical Re- 1975) (updated by personal communication).
Ch. 6—Policy for Medical Technology it France ● 115

21. Dubost, C., HGpital Broussais, Paris, personal 41. Annuaire Statistique de la SantZ et de
communication, May 1979. l’Actio; Sociale (Paris, 1979).
22. Dupeyroux, J. J., Droit de la St?curitZ Sociale 42. et al., Les Comptes de la Santi7: M@tll-
(7th cd., Paris: Dalloz, 1977). odes e; Series 195o-I 977, Economique et Sant@
23. Institut Nationale de la Sant~ et de la Recherche (vol. 8, Paris: Documentation Fran~aise, 1979).
M@dicale, INSERM (National Institute of Health 43. , Direction Generale de la Sant@ (General
and Medical Research), ATP: 70-78-102, Paris, Directorate of Health), Sous-Direction de la Pro-
1978. spective et da la Carte Sanitaire (Subdivision on
24. ]ournal Officiel d e l a R2publique Fran~aise Planning and the Carte Sanitaire), Paris. per-
(Paris), Arr~t~, Aug. 28,1973. sonal communication, 1979.
25. , Arrf!t6, Mar. 30, 1976. 44. , L e s Etablissernents Sanitaires e t So-
26. , Decr6t 72-1062, Nov. 21, 1972. ciaux: Le R a p p o r t Ggni%al 1977-1978 (paris,
27. , Decr@t 72-1068, Nov. 30, 1972. 1978),
28. Decr6t 73-54, Jan. 11, 1973. 45. , Prix de Reuient de la Lettre Cle en Ra-
29. ~ Decr6t 73-1042, Nov. 15, 1973. dioth-apie (Paris, Mar. 2, 1973).
30. Decr6t 74-569, May 17, 1974. 46. , SantZet SZcurit~ Sociale, Tableaux 2972
31. ~ Decr6t 75-883, Sept. 23, 1975. (Paris: Documentation Fran~aise, 1973).
32. Decr6t 76-844, Aug. 24, 1976. 47. Prieur, C., former Director, Caisse Nationale de
33. ; Decr6t 78-191, Feb. 9, 1978. l’Assurance Maladie, CNAM (National Sickness
34. Decr6t 78-988, Sept. 28, 1978. Insurance Fund), Paris, personal communica-
35. ; Loi 70-1318, Dec. 31, 1970. tion, May 1979.
36. , “Nomenclature G6n6rale des Actes Pro- 48. U.S. Department of Health, Education, and
fessionals, ” 1979. Welfare, Social Security Administration, Office
37, , Ordonnance 58-1198, Dec. 12, 1958. of Research and Statistics, Social Security Pro-
38. , Ordonnance 58-1199, Dec. 12, 1958. grams Throughout the World: z!v5, research re-
39. Legrain, M., H6pital de la Salpetri@re, Paris, port No. 48, DHEW publication No. (SSA) 76-
personal communisation, March 1979. 11805 (Washington, D. C., 1976).
40. MinistZre de la SantE (Ministry of Health), An-
nuaire Statistique de la Sant@ et de /’Action So-
ciale (Paris, 1978).
Technology Assessment and
Diffusion in the
Health Care Sector
in West Germany

Karin A. Dumbaugh
Graduate Program in Health Policy and Management
Harvard School of Public Health
Cambridge, Mass.

Page ‘
West Germany: Country Description. . . . . . . . . . . . . . . . . . . . . . .............119
population . . . . . . . . . . . . . . . ● . . . . . . . . . . . . . . . ....................119

Form of Government. . . . ..... .. .*.**.. . 119

Nature of the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........119
The Health Care System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............120
Health Care Institutions and Providers . .............................120
Health Insurance. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............120
Federal Financing of Capital Investments in Hospitals . . . . . . .............123
State Planning for Hospital Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .124
Mechanisms for Managing Medical Technology. . .........................125
Research and Development. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......126
Support for Evaluation Studies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....128
Regulation for Safety and Efficacy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .129
Health Planning . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................129
Utilization Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............130
Fee and Rate setting . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , ............130
Reimbursement of Hospitals . . . . . . ...............................130
Use of Evaluation Results in Managing Medical Technology . . . . . . . . ......130
Specific TechnoIogies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............130
CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............131
Renal Dialysis. . . . . . . . . . . . . . **.*** *..***, ****.,* ****.** * * * 132
● ● ● ● ●

Coronary Bypass Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......134

Cobalt Therapy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............135
Clinical Laboratory Testing and Automation . ........................135.
Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............136
Chapter 7 References . . . . . . . . .****** ● .*****. ● ******* ● *.****. ● * . * * * * * 136


Table No. Page

1. Expenditures of Sickness Funds in West Germany as a Percentage of GNP .122
2. Annual Percentage Increases in Total Expenditures by Sickness Funds in
West Germany . . . . . . . . ● ...,**** 123
3. Grants and Contracts in the Areas of Biomedical and Health Services Research
in West Germany . . . . . . . . . . . . . . . . . . . . . . * * , * , * * * * * . * . * . . . . . . . . 1 2 7 .

4. Distribution of CT Scanners in West Germany ● ☛ ☛ ☛ ☛ ☛ ☛ ☛ 131 , . . . 4 . . ● * . * * * * .

Technology Assessment and Diffusion in
the Health Care Sector in West Germany
Karin A. Dumbaugh
Graduate program in Health Policy and Management
Harvard School of Public Health
Cambridge, Mass.


Population ernmental associations, however, than by the

Federal and State governments.
In 1977, approximately 61.4 million people
lived in West Germany (including West Berlin). Social Democrats and Free Democrats, by
Of these, roughly 48 percent were males. About forming an alliance and thus creating a slight
54 percent of all males and 29 percent of all majority in Parliament, have run the country
females were employed. The vast majority of jointly since 1969. The Social Democrats usual-
workers, roughly 97 percent of them, were not ly draw more than 40 percent of the votes, and
self-employed, but working for an employer or the Free Democrats tend to garner slightly more
a relative (l). than 5 percent. The counterbalancing voting
The population pyramid reflects a very low block in this democracy are the Christian Dem-
birth rate. As a result of this birth rate, the ocrats. Although they outpolled the Social
population of West Germany has declined Democrats in the last election, the Christian
slightly since 1974, and so has the number of Democrats could not get the Free Democrats to
people in the labor force. The government esti- aline themselves with their party. The influence
mates that in 1979 about 20 percent of the popu- of other political parties (except for a new
lation was over 65 years of age and this percent- alliance of environmentalist splinter-groups and
age is expected to remain constant for the next 5 parties popularly referred to as the “Green Par-
years. The male/female population ratio for ty”) has slowly diminished, partially as a result
those over 55 years of age shows a substantial of the requirement that any party that wishes to
surplus of females, resulting from two World take part in the governmental process obtain a
Wars, In terms of health care services require- minimum of 5 percent of the votes in the pro-
ments, increasing utilization of services by the portional election system.
aging, predominantly female population is ex-
pected to continue in the future. Nature of the Economy
The two major political parties have similar
Form of Government views about the Federal Government’s role in
West Germany is a federal republic with 10 the economy. Starting with Erhardt’s postwar
States (Lander) and West Berlin. These 10 States direction toward a “free market economy, ”
and West Berlin have a fair amount of auton- Ministers of Finance have attempted to create
omy in terms of educational and health policies. favorable conditions for economic growth and
Health care policy is determined more by sick- development, as well as a supportive social pol-
ness funds (Krankenkassen), which are nongov- icy to shield the individual from the effects of
illness, disability, and unemployment. Serious In 1978, government R&D expenditures con-
thought has been given over time to the dis- stituted over 3 percent of the gross national
placement of labor that can be caused by struc- product (GNP), and more than 6 percent of all
tural economic changes, such as technology or Federal, State, and municipal expenditures (3).
changes in trading policies. Such thought, for Paraphrasing the words of Volker Hauff, the
example, was given to the social and labor legis- Federal Minister of Research and Technology,
lation that accompanied the treaty that created these expenditures on research and technology
the European Economic Community (EEC). are considered necessary to the West German
economy and to its social fabric, because they
To generalize, there is broad political support
for a Federal economic policy that aims to de-
velop a solid economic and social infrastruc- ● expand the understanding of basic science,
ture, and for Federal intervention in the market ● improve productivity and enhance the
to achieve these policy objectives. Thus, the ability of the West German economy to
Federal Government subscribes to a policy of compete on world markets,
support for technological growth, and even ● conserve resources, and
some State and local governments have com- ● improve living and working conditions.
missioned research to determine how they might
achieve a technological advantage for their
State or local economy.


Health Care Institutions and Providers ics. (The exceptions are teaching hospitals,
which sometimes have clinics for teaching pur-
There are 3,416 hospitals in West Germany, poses. ) As a result, patients who in other coun-
which in 1977 discharged 10 million inpatients. tries might be treated as outpatients are often
Of these hospitals, 36.8 percent are public, 33.4 hospitalized.
percent are voluntary institutions, and 29.8 per-
cent are proprietary hospitals (l). With about 12 In 1977, West Germany had 125,274 doctors,
hospital beds per 1,000 population, West Ger- for a physician-per-population ratio of 1 per
many has more beds per capita than any other 490, one of the highest in the world. There were
country in the Western world, with the possible 32,121 dentists, 2 6 , 8 1 1 p h a r m a c i s t s , a n d
exception of Sweden. 235,598 nurses, nurses aides, or midwives (l).
In 1977, the average length of stay in all of the physicians, 56,334 were based in hospi-
hospitals was 20.8 days; in an average acute tals, 58,222 in private practice, and 10,718 in
care hospital, it was 15.8 days. In a sample administration and research. In 1977, 53.1 per-
survey by the German Hospital Association cent were general practitioners, and 46.9 per-
(Deutsche Krankenhausgesellschaf t), the aver- cent specialists (l).
age length of stay in 1978 was 15.5 days, with a
range from 13 days in Hessen to 21 days in West
Health Insurance
Berlin. This customary long length of stay is not
discouraged by an occupancy rate of 84.8 per- West Germany has a system of social insur-
cent in 1978, down from 93.2 percent in 1960 ance which was established in 1883 and now
and 88.5 percent in 1970 (1,7). Because there is a covers more than 99 percent of the population
separation between physicians who are per- with virtually full service benefits. In 1978,
mitted to treat patients inside of hospitals and 1,360 semiautonomous sickness funds (Kran-
physicians who practice outside of hospitals, kenkassen) administered the decentralized pro-
hospitals generally do not have outpatient clin- gram, under the general supervision of the
Ch 7— Technology Assessment and Diffusion in the Health Care Sector in West Germany ● 121

Federal Ministry of Labor (Bundesministerium all those who do not fit into one of the specific
fur Arbeit) (1). occupational groups, or who are not exempt by
virtue of their high incomes from having to join
The statutory health insurance program man-
a particular sickness fund, membership in the
dates a wide range of benefits, including service
largest sickness fund, the Allgemeine Ortskran-
benefits for medical and dental diagnosis and kenkasse (AOK, or general local sickness fund)
treatment, for preventive examinations, and for
is mandatory. In 1977, AOKS covered 44 per-
drugs. Sickness cash benefits are also provided cent of the working population and 57 percent
to cover periods of unemployment due to ill-
of the retired (1). The large proportion of elder-
ness. Sickness funds may expand on the basic
ly members with high utilization rates in AOKS
explains why these sickness funds charge gen-
Employers and employees make equal contri- erally higher premiums than do Ersatzkassen.
butions to the program in fixed amounts rang- The Federal Government establishes broad
ing from 10 to 13 percent of insurable earnings
legislative guidelines with respect to the opera-
up to 20,600 deutsche marks (DM) ($10,842)1
tion of the health insurance system. Agreements
income per year, and averaging 11.3 percent in
on contract, payment, and benefit packages of
1979 (2). Contributions on behalf of retired and the various sickness funds may not violate these
disabled pensioners are made by the Social Pen- guidelines. In all other matters, the government
sions Insurance Fund (Sozialversickerung), and may not interfere in the decisions negotiated be-
contributions for persons receiving unemploy- tween the sickness funds and the State Associa-
ment benefits or assistance and maintenance al- tions of Insurance Doctors (Arzteverbande).
lowances are made by the Ministry of Labor.
Of the DM 69.8 billion ($36.7 billion) spent
The 1,360 sickness funds are organized on by sickness funds in 1977, 29.3 percent was paid
communal, regional, State, and Federal levels. to hospitals for inpatient care, 17.9 percent to
These funds are organizationally and financially physicians for ambulatory care, 6.6 percent to
autonomous, i.e., independent of government dentists, 7.7 percent for dentures, 14.1 percent
and responsible for balancing their own income for drugs, 4.8 percent for other products, 7.0
and expenditures. On the national level, they percent for sickness cash benefits, 1.4 percent
organize themselves into associations of sick- for prevention, 2.5 percent for prenatal care,
ness funds (Krankenkassenverbande) to safe- and 4.1 percent for other services (1).
guard their common interests.
Using a cost-finding formula set by the Fed-
Many sickness funds are organized around eral Government, hospitals determine the per
occupational groups (e.g., agriculture, large diem rate to be charged for hospitalization. The
enterprises, small firms, seamen, miners), and hospitals are then paid by the insured patient’s
membership, except for persons with high in- sickness fund. Although in theory, per diem
comes, is obligatory. Those with high incomes payments are to cover the entire cost of the
may belong to Ersatzkasse, a voluntary sickness hospitalization, in practice, they do not. Until
fund that frequently offers higher benefits at 1972, the cost of hospital care was subsidized by
lower rates because of low loss experience. For community tax revenues and charitable contri-
For conversion of deutsche marks (DM ) to U.S. dollars the ex- butions, but the low level of reimbursement led
change rate used throughout this chapter was DM 1.90 = $1.00 to inadequate reserves for maintenance, mod-
(U.S.). The reader should bear in mind, however, that the actual ernization, and replacement of buildings and
exchange rate has not remained constant over the years. Accord-
ing to the International Monetary Fund, between 1963 and 1968, equipment. Concern about the rapidly deterio-
the rate was DM 4.00 = $1.00 (U.S.), in 1969, it dropped to DM rating capital stock of hospitals led to the enact-
3.9433; in 1970, to DM 3.6600; in 1971, to DM 3.4908; in 1972, to
DM 3.1886; in 1973, to DM 2.6726; in 1974, to DM 2.5878; in
ment by the Federal Parliament in 1972 of a law
1975, to DM 2.4603; in 1976, to DM 2.5180; in 1977, to DM on capital investments by hospitals, the hospital
2,3218; in 1978, to DM 2.0086; and in 1979, to DM 1.8329. financing law (Krankenhausfinanzierungsge-

68-095 0 - 80 - 9
setz) of 1972. (That law is discussed in a sepa- West German sickness funds, GNP, and expend-
rate section below. ) itures of sickness funds as a percentage of GNP
for the years 1970 through 1977 are shown in
Hospital physicians are generally salaried em-
table 1. These data cannot be compared directly
ployees whose services are included in the hos-
with the expenditures on health care in the
pital’s bill. Almost all physicians practicing out-
United States, however, because they do not in-
side of hospitals participate in the health insur-
clude the same costs. The major difference is
ance scheme. These physicians are reimbursed
that cash benefits for lost income during sick-
by fee-for-service based on the number of pa-
tients they have seen. Each patient gives the ness were included in the expenditures of sick-
ness funds until 1975 in West Germany.
physician a sickness fund form (Krankenschein)
each quarter. For reimbursement, physicians What may be more telling than these data is
forward these forms to the State Association of the rapid rise of expenditures by sickness funds.
Insurance Doctors. Fee schedules are negotiated As shown in table 2, between 1971 and 1977,
by a Federal commission representing the doc- total expenditures by sickness funds increased
tors, sickness insurance funds, government, and annually by the following percentages: 1971
other interested parties. The schedules include (23.7 percent), 1972 (16.9 percent), 1973 (19.1
more than 5,000 separate procedures for which percent), 1974 (19.5 percent), 1975 (17.7 per-
a physician may charge. cent), and 1976 (9.1 percent), and 1977 (4.9 per-
cent) (1). Only when cash payments were no
Review of physicians’ services is done for pur-
longer included, and when hospital capital ex-
poses of economic control. Only recently have
penditures were covered by the government
physicians been considering quality controls.
rather than by the sickness funds, did this yearly
Physicians who abuse the system are disciplined
increase drop to 9.1 percent in 1976, and to an
by their Association of Insurance Doctors.
estimated 4.9 percent in 1977 (1). (As a yard-
stick, the consumer price index increased by be-
tween 5 and 7 percent per year between 1971
According to the Federal Center for Statistics and 1975; between 1977 and 1978, it increased
(Statistisches Bundesamt), West Germany spent by a mere 2.6 percent per year. )
3.7 percent of its GNP on health care in 1970
and 5.8 percent in 1977 (18). 2 Expenditures of
There are other sources of data which estimate that the country United States in the proportion of GNP spent on health, spending
spends a far higher proportion of its GNP on health care than the 128 percent of GNP on health care in 1978. Data obtained from
data on sickness funds would indicate. Thus, a 1979 Time survey the U.S. Social Security Administration in Washington indicate
came to the conclusion that West Germany had overtaken the similar proportions (8, 16, 17).
Table 2.—Annual Percentage Increases in 1969 to be DMl billion ($526 million), and had
Total Expenditures by Sickness Funds also found that aging hospital plant and equip-
in West Germany (1971-77)
mentled to high personnel costs and inadequate
Percentage increase medical care for patients(5). Many proposals to
Year over previous year ensure adequate hospital facilities had been
1971 . . . . . . . . . . . . . . . . . . . . . + 23.7 % discussed, but two received the most attention.
1972. . . . . . . . . . . . . . . . . + 16.9
1973. . . . . . . . . . . . . . . . . . . . . . . +19.1
One was that the Federal Government require
1974. . . . . . . . . . . . . . . . . . . . . . . +19.5 that the per diem fees paid by sickness funds
1975. . . . . . . . . . . . . . . . . . . . . . . +17.7 cover both operational and capital costs. The
1976?. . . . . . . . . . . . . . . . . . . . . . +9.1 other was to have the sickness funds cover hos-
1977?. . . . . . . . . . . . . . . . . . . . . +4.9
pitals’ operational costs and Federal and local
Preliminary estimates governments finance capital improvements.
SOURCE Statistisches Bundesamt (Federal Center for StatisticsL 1979(18)
The Federal Parliament opted for the latter,
i.e., having the sickness funds cover hospitals’
Hospital expenditures increased faster than operational costs and the Federal Government
expenditures for ambulatory care. From 1970 to pay for capital improvements. The reasoning
1971, for example, hospital expenditures in- was that an optimal distribution of services
creased 27.3 percent, while ambulatory expend- could not be achieved with each sickness fund
itures increased 24.4 percent (1). For subsequent deciding on a per diem fee, without central coor-
years, the annual percentage increases forhospi- dination (at least on a statewide basis) of capital
tal and ambulatory expenditures were as fol- expenditures by hospitals. The legislators be-
lows: 1972, hospitals (22.3 percent), ambula- lieved that the widely divergent financial capac-
tory care (ll.4 percent); 1973, hospitals (25 per- ity of the different funds would have resulted in
cent), ambulatory care (13.4 percent); 1974, a system with services that were not geared to
hospitals (30.3 percent), ambulatory care (15,4 the needs of the population in a geographical
percent); 1975, hospitals (15.0 percent), ambu- area, but instead were dependent on the reve-
latory care (13.4 percent) (l). nues of each area’s sickness funds.
Federal Financing of Capital The 1972 hospital financing law provided for
the financial requirements of hospitals as
investments in Hospitals
By 1971, there was cause for concern that
Operating Expenditures.—Operating expend-
sickness fund expenditures were increasing at
itures and supplies and equipment with a life-
too rapid a rate to keep up with increased pro-
span of up to 3 years are financed through the
ductivity and salaries in the labor market, so
per diem payments from sickness funds. T h e
sickness fund members werecharged higherpre-
hospitals complete uniform cost reports (Selbst-
miums. Despite the additional funds, the per
kostenblatter) on a line-item basis. Eventually,
diem rates paid by sickness funds were too low
as reporting becomes more uniform, per diem
to permit hospitals to keep buildings and equip-
comparisons of cost centers will provide useful
ment up to date and to provide technically and
information about comparative efficiency. The
qualitatively superior care.
major deterrent to using this comparative in-
Deciding that hospital care was a public formation at present, apart from nonuniform
good, that there should be no underserved reporting, is the inadequate detail which can be
areas, and that the government had an obliga- obtained on patient mix. Although several asso-
tion to make high-quality hospital care accessi- ciations of sickness funds produce side-by-side
ble to all citizens, Parliament enacted the comparisons of hospitals within a State, there-
hospital financing law (Krankenhausfinanzier- fore, these data are not being used for planning
ungsgesetz) of 1972. Studies by the Federal or reimbursement purposes. Thus, the purchase
Government had estimated the annual oper- of supplies and equipment with a lifespan of up
ating deficits of hospitals between 1966 and to 3 years is not controlled.
124 ● Backround Paper #4: The Managementt of Health Care Technology in Ten Countries

Short-Term Capital Investment .—Short-term the Federal Government subsidize the purchase
capital investment in capital goods with a life- of land.
span of 3 to 15 years is financed with the so-
The amount of Federal funds made available
called Zehnerpauschale (or par. 10, regarding
under the hospital financing law for capital in-
lump sum payments, of the hospital financing
vestment in 1972 was DM 465 million ($245 mil-
law). The Federal Government contributes one- lion). This amount increased to DM 915 million
third of 8.33 percent of the basic replacement
($482 million) in 1977. Hospitals are not al-
value of each hospital bed. The replacement lowed to make capital investments outside of
value is lower for beds installed before January this system, except with funds obtained from
1, 1951. It also varies by institutional category philanthropic sources or public fundraising
as determined by numbers of hospital beds: 1, campaigns. Operating expenditures continue to
up to 250 beds; II, 250 to 349 beds; III, 350 to be funded by the insurance system, which paid
649 beds; IV, 650 or more beds. Thus, for exam-
about DM 20.5 million ($10.8 million) to hospi-
ple, the replacement value of a bed installed
tals in 1977.
prior to January 1, 1951, in a level I hospital is
DM 13,072 ($6,880); in a level II hospital, DM
15,351 ($8,079); III, DM 17,802 ($9,369); IV,
State Planning for Hospital Services
DM 22,704 ($11,949); whereas the replacement Two major objectives of the 1972 hospital fi-
value of a bed installed after this date in a level I nancing law, to ensure the financial viability Of
hospital is DM 15,200 ($8,000); II, DM 17,850 hospitals and to achieve acceptable levels of
($9,394); III, DM 20,700 ($10,895); IV, DM sickness fund premiums, had been achieved by
26,400 ($13,895). 1977. The third objective, to provide an equita-
ble distribution of hospital services, has still not
The Federal Government has no direct con- been achieved, but all States have been working
trol over how these funds are being spent. It is on plans of need (Bedarfsplane).
within this category of funding that equipment
that has a long lifespan will be replaced, and just The hospital financing law was based on the
as with the per diem funds, there is only an in- idea that the physical plant of hospitals needed
direct incentive to spend these funds so that to be improved, that costs in hospitals had to be
comparable services are available in all the controlled, and that a system of incentives that
regions. (That incentive is provided through the would stimulate hospitals to economize had to
State plans of need (Bedarfsplane), which are be created. Past experience with reimbursement
discussed in the next section of this chapter. ) to physicians had taught everyone concerned
that new funding without planning and evalua-
Medium-Term Capital Investment. — tion would simply lead to higher expenditures—
Medium-term capital investment required to not to more cost-effective services.
finance replacement or additions to existing
capital stock with a 15- to 30-year lifespan is Under the 1972 law, all States were required
completely financed by the Federal Government to produce plans for beds and services, and a
(par. 9 of the hospital financing law). Applica- Federal/State task force was established to
tions for these funds must contain proof that the discuss uniform terminologies and time frames
funds will be used to equalize access to care and for the State plans. The legislation emphasized
that they will contribute to the cost effectiveness the necessity of developing alternative modes of
of the system. care and of fostering cooperation between those
planning medical schools in the Federal Ministry
Long-Term Capital Investment.—Long-term of Education and Science (Bundesministerium
capital investment for buildings is completely fi- fur Bildung und Wissenschaft), and even mili-
nanced by the Federal Government if the build- tary establishments in the Ministry of Defense,
ings are expected to have a lifespan exceeding 30 and those planning hospitals in the Ministry of
years. New hospital construction falls into this Labor and Social Affairs (Bundesministerium
category of funding. In no case, however, will fur Arbeit und Sozialordnung).
Ch. 7–Technology Assessment and Diffusion in the Health Care Sector in West Germany ● 125

States must comply with the planning re- the age and sex distribution of the population,
quirements of the hospital financing law, and the incidence and prevalence of disease, traffic
hospitals have to be “needed,” according to the patterns, occupational and socioeconomic char-
State bed need plan, in order to qualify for Fed- acteristics, and the supply of hospital beds and
eral capital subsidies. The plans of individual medical services), they are difficult to quantify.
States vary greatly. The 1972 hospital financing Average length of stay and occupancy rates also
law requires only that each State have a region- differ greatly from one State to another. 3
alized hospital system, and that the levels of
Despite the difficulties, however, the States
care a hospital can provide correspond to crite-
ria established by the State and be consistent
are now at the point where they have some ex-
with the hospital financing law. The Federal law
perience with bed need methodology, and some
suggested four levels of care, which would de- States are now preparing their fifth-generation
pend on the size of hospitals: The least complex State hospital bed need plan. Furthermore, the
level of care, level I, would be provided by hos- sickness funds are starting to collect more ade-
quate data that will allow them and the State
pitals with up to 250 beds; level II, by hospitals
planners to become more sophisticated. Some of
with between 250 and 350 beds; level III, by hos-
the issues that are beginning to be discussed are
pitals with between 350 and 650 beds; and level.
IV, by those with more than 650 beds. Only one
adjusting for patient mix, comparing line-item
expenditures by type of patient and by type of
State used the suggested classification scheme
hospital, and planning for new medical technol-
alone; the other States established additional
ogy such as computed tomography (CT) scan-
criteria for planning, such as the services pro-
ners. If the plans become more sophisticated,
vided and the departments providing care.
and their present emphasis on beds and facilities
The need for beds is determined on the basis is shifted to the types of patients a hospital
of population growth, the rate of admissions, should admit or to the types of services it should
average length of stay, and occupancy rates. offer, State hospital plans will become the in-
Planners have experienced the usual difficulties struments through which the Federal and State
in determining appropriate bed need indicators. governments will be able to influence spending
The population data are imprecise because of on new technology.
the inadequate information on population
movement from one census period to another.
The use rate per 1,000 population differs greatly
‘Much research was carried out between 1972 and 1976 to ana-
by State, and although factors that contribute to lyze the variables that affect hospital admissions and stays. See,
regional differences have been identified (e.g., e.g., H. Ehlers, Krankenhaushauf igkeit, 1976 (7).


One effect of financing capital goods with tion and regionalization of highly sophisticated
Federal support was that between 1972 and 1979 technology, such as open-heart operations, be-
many hospitals were able to update their plant cause only a level IV per diem rate would give a
and equipment. Since hospitals with fewer than hospital the necessary funds to staff and equip
100 beds received no Federal support to acquire such a service. Teaching hospitals, which are
capital goods, between 1970 and 1977, the aver- financed concurrently with medical faculties of
age hospital size increased from 190 to 212 universities by the Federal and State govern-
beds. 4 A number of hospitals closed or consoli- ments, were exempt from the planning require-
dated, and there was a trend toward centraliza- ments. The need for integrating teaching hospi-
tals into the overall plan for hospital beck was
first expressed as a concern after the passage of
‘Unexplained is the increase in private beds during that time.
Private beds constituted 8.9 percent of all beds in 1970, but had In- the law designed to decelerate cost increases
creased their share to 12.2 percent in 1977 ( 10). (Kostendampfungsgesetz) in June 1977.
The 1972 hospital financing law’s initial em- The rapid increases in expenditures on health
phasis on financing increased the funds availa- care services after 1975 affected the Ministry’s
ble to hospitals for renovation, new buildings, policy. In 1978, the Ministry published its Pro-
and medical technology, but it also led to fears gram on Promoting Research and Development
that these investments would not lead to cost- in the Service of Health, which was to “increase
effective delivery of care. In addition to more the capacity and economic efficiency of medical
systematic efforts at planning, a uniform ac- care and also to facilitate making judicious deci-
counting system to permit evaluation of the cost sions on health policy” (4). The emphasis shifted
effectiveness of capital investments and of plan- from the development of new technology to im-
ning measures was proposed. Implementation prove the competitive edge of West German
of a new uniform accounting system was re- manufacturers of medical supplies and equip-
quired starting in the spring of 1978. This new ment toward research to improve the health of
information system eventually is expected to the population. In the Ministry’s 1978 report,
provide the basic data for government-spon- major sections are devoted to health prevention,
sored research into the levels of care required, as well as to improving the cost effectiveness of
personnel needs, optimal operations, duplicate the health delivery system through research into
tests, and shared and purchased services. the structure of the system and possible
Research and Development
Thus, West Germany is now establishing
Because the emphasis has been on upgrading structures and procedures to develop a health
the capital stock and equipment of hospitals, care services and research policy and to assess
until recently, very little thought has been given all new medical technology and manage its dis-
in West Germany to the effect of medical tech- semination. It has identified the following as
nology on the health of the population or the main areas for research (4):
health care system. The period immediately af-
ter enactment of the hospital financing law of ● Prevention
1972 in West Germany, therefore, is somewhat —identification of risk factors (cancer,
comparable to the period following the Hill- heart disease, rheumatism, mental
Burton legislation in the United States. health),
The medium-term program of the Ministry of —behavior modification, and
Research and Technology (Bundesministerium —development of health status indicators
fur Forschung und Technologies) provides over- and measures of cost effectiveness of in-
all direction for technological development by terventions.
establishing priority areas for subsidies. In ● Diagnosis, therapy, and rehabilitation

1974, the Ministry of Research and Technology —automatic laboratory testing of Pap
commissioned a baseline study of medical tech- smears and other specimens,
nology in West Germany, which could be used —surgery with laser beams,
to develop a strategy for future support of —improved optical instruments,
research activities and of new products (13). —reducing the exposure to X-rays,
The Ministry’s primary concern initially was to —development of artificial kidneys,
promote R&D of medical technology as one —development of instruments that permit
area where West German industry could com- the blind to read and paraplegics to func-
pete effectively on world markets. A secondary tion,
concern was to use this technology to improve —development of artificial limbs, bones,
the health of the West German labor forces etc., and
—applications of automated data process-
‘Maintaining the productivity of West German workers in the
face of labor shortages has been said to have been Bismarck’s pri- ing to diagnosis and therapy.
mary reason for advocating national health insurance in the ● Structure of the health care delivery system
1890’s. Fiscal and social policy makers have since continued to
view social welfare legislation as an investment in the productive —data base development on utilization,
capacity of the worker. costs, expenditures,
—effectiveness and efficiency of pro- research funds that the Federal Ministry of
cedures, Education and Science makes available to the
—development of a planning process, States. In recent years, quasi-autonomous re-
—evaluation of the health insurance search institutes have gained in importance,
system, partly because they have been able to attract
—development of strategies for payment of funding from foundations, and partly because
providers, they have received contracts for research from
—examining the demand for diagnostic and manufacturers of equipment and supplies.
other preventive measures, and
Since 1976, Federal funding of R&D has in-
—applications of data processing to the
creased. The four Federal Ministries that sup-
delivery system.
port R&D are the Ministry of Research and
Most medical research in the past was carried Technology, which has the largest budget, the
out in universities and teaching hospitals. Since Ministry of Labor and Social Affairs, the
the principle of academic freedom in West Ger- Ministry of Youth, Family Affairs, and Health
man universities guarantees the researcher vir- (Bundesministerium fur Jugend, Familie, und
tual autonomy both in selecting a subject for in- Gesundheit), and the Ministry of Education and
vestigation and in determining what type of re- Science. A Federal program for the years from
search to conduct, research at these publicly 1978 to 1981 was outlined by the Ministries of
financed institutions was not subject to any Labor and Social Affairs, of Research and Tech-
review. University research today continues to nology, and of Youth, Family Affairs, and
be funded primarily by the State governments, Health (4). Areas of emphasis and funding for
and no strings are attached to the moneys they biomedical and health services research are
provide. Similarly, no strings are attached to shown in table 3. Two major institutes were

Table 3.— Federal Grants and Contracts in the Areas of Biomedical

and Health Services Research in West Germany (1978-81)

Total expenditures
Annual expenditures (in millions of DM/dollars)a 1978-81

1978 1979 1980 1981 In — In millions
Us. Us. Us. U.S. millions of U.S.
Ministry and area of promotion DM dollars DM dollars DM dollars DM dollars of DM dollars
Federal Ministry of Labor and Social Affairs
Promotion of research and its application to areas
of structural improvement in public health,
preventive and early-detection schemes in stat-
utory health insurance, and medical rehabilitation 4.2 $2.3 6.0 $3.1 5.5 $2.9 4.2 $2.2 19.9 $10.5
Promotion of research on hospitals pursuant to
article 26 of law on hospital financing . . . . . . . 4.25 2.24 4.0 2.1 4.0 2.1 4.25 2.24 16.5 8.7
Federal Ministry of Research and Technology
Promotion of R&D projects in public health,
medical research, and medical techniques . . . . . . 55.0 28.9 62.0 32.6 69.0 36.3 78.0 41.1 264.0 138.9
Data-processing applications in public health . . . 28.0 14.7 29.5 15.5 32.0 16.8 34.0 17.9 123.5 65.0
Federal Ministry of Youth, Family Affairs,
and Health
Public health, safety in the use of medicaments. . 5.0 2.6 5.7 3.0 6.6 35 7.1 3.7 24.4 12.8
Cancer research, cancer registers . . . . . . . . . . . . . 0.2 0.1 0.3 0.15 0.3 0.15 0.4 0.2 1.2 0.6
Commissions . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 0.2 0.1 0.3 0.15 0.3 0.15 0.3 0.15 1.1 0.5
Statistical surveys on health questions. . . . . . . . . 0.2 0.1 0.2 0.1 0.2 0.1 0.2 0.1 0.8
128 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

singled out to receive funding for medical of Health, Education, and Welfare in the area of
research, the Max Planck Society (Max Planck biomedical research.
Gesellschaft) and the German Research Associa- The stated objective of the Ministry for Re-
tion (Deutsche Forschungsgesellschaf t). These
search and Technology is to develop technology
two institutes are routinely funded by up to 50- that will improve patient care, reduce side ef-
percent Federal moneys, and for special projects fects, and be more cost effective. As was sug-
may receive even larger Federal contributions.
gested earlier, the West German Government
Together, they carry out much of the important
also is interested in developing R&D programs
medical/biological research in West Germany.
that will help give West German manufacturers
Federal financing is also provided to several a technological advantage over manufacturers
centers that conduct research of societal im- in other exporting nations.
portance (Grossforschungsanlagen), for exam-
ple, in the areas of cancer, radiation, and en- Support for Evaluation Studies
vironmental issues. These centers receive up to Perhaps as a result of the lack of baseline in-
90 percent of their funding from the Federal
formation in many areas in the health care field
Government, and 10 percent from the States.
in West Germany, much of the research effort in
Other organizations that receive Federal fund-
health services is descriptive and enumerative.
ing for all or some of their activities are the This characterization is somewhat applicable
Federal Public Health Department (Bundesges-
even to medical research. Efficacy studies of
undheitsamt, BGA), the German Institute for therapies, such as clinical trials, and cost-effec-
Medical Documentation and Information (Deut- tiveness studies of new technologies are still
sches Institut fur Medizinische Dokumention rare.
und Information, DIMDI), and the Paul Ehrlich
Institute (Paul Ehrlich Institut). The Ministry of Research and Technology has
been very supportive of conferences for physi-
In recent years, the Federal Government has
cians to discuss methodological approaches to
increasingly let contracts to consulting firms, to
evaluating medical technology and practice.
the research arm of the German Hospital Asso-
One conference it supported resulted in a man-
ciation (Deutsche Krankenhausgesellschaft),
ual on methodology for evaluation; another
and to similar organizations. Letting contracts,
resulted in a summary of how to mount a study
however, is a rather new process, which is not
of new therapies for cancer, heart disease, and
yet at all standardized. Thus, as many or more arthritis. Such conferences are only one way in
unsolicited proposals submitted by research in- which the Ministry hopes to awaken interest in
stitutes and consulting firms to contracting the medical community in evaluating its work.
Federal agencies are funded as are proposals
solicited by Federal agencies through requests One major bottleneck the West German re-
for proposals. A comparison with the history of search community has to confront is a shortage
grants in the United States in the 1950’s and of analytically trained researchers, such as
1960’s comes to mind. statisticians, epidemiologists, and operations
researchers. The Ministry of Research and Tech-
The observer gets the impression that the
nology is aware of the problem and has set aside
Ministry of Research and Technology is not
substantial resources to develop analytical cap-
only the largest source of funds for R&D, but
abilities in universities and to train young re-
that it is also taking the lead in letting contracts searchers.
for research and in developing coordinated re-
search plans. As target areas for R&D of new A major critic of the system of developing
technology, this Ministry has identified new di- new therapies and new equipment without cost-
agnostic tests, laboratory equipment, and radio- effectiveness analyses is Professor Manfred
therapy. In September of 1976, it also concluded Pflanz, a sociologist at the University of Han-
a research agreement with the U.S. Department never. His major themes are that there is too
C/I 7— Technology Assessment and Diffusion in the Health Care Sector in West Germany ● 129

much surgery in West Germany compared to equipment should be checked on a regular basis
the United States and other countries and that once it is installed in a clinical setting. The
no one ever has discussed what types of medical following types of equipment, failures of which
care contribute to patient health (12). Professor have been identified as life-threatening, have
Pflanz has influenced the opinion of the edu- become prime candidates for regulation: anes-
cated public on the subject of the need for eval- thesia equipment, dialyzers, infusion pumps,
uations, and it is to be expected that not only and heart pacemakers.
professionals, but the general public as well,
The Technical Surveillance Service (Tech-
will demand more evaluation studies in the
nischer Ubernachungsdienst, TUV), a volun-
tary, quasi-governmental organization now pri-
marily checking the road-worthiness of pas-
Regulation for Safety and Efficacy
senger cars, has advocated in the Ministry of
Drugs have been regulated in West Germany Labor and Social Affairs that such equipment be
for some years, but the regulations, which fo- surveyed on a regular basis and that TUV be
cused on assuring safety, have not been very given responsibility for this function. The Pro-
rigorous. A new law to strengthen drug regula- fessional Association for Health and Social Wel-
tion was passed in 1976, to become active on fare Services (Berufsgenossenschaft fur Gesund-
January 1, 1978 (6). Reportedly modeled after heitsdienst und Wohlfahrtspflege), a profession-
U.S. requirements, the new law requires Federal al organization not unlike the American Public
Government approval of drugs to be sold in Health Association, has suggested examinations
West Germany. Prior to marketing a new drug, of all equipment and supplies that affect patients
the manufacturer is required to submit to the through energy (e. g., electricity, heat, pressure,
Federal Government the results of clinical trials ultrasound, radiation, and drugs).
testing the drug’s effectiveness, dosage, con-
Two basic approaches have been discussed.
traindications, and side effects. The 1976 law
One is to have an organization that develops
states that the Federal Government may decline
minimal criteria for new equipment. The other
to allow the drug to be sold if “, . . the thera-
is to have a second organization that checks to
peutic efficacy attributed to the drug by the ad-
see that these criteria are met, even when the
mission applicant is lacking or is insufficiently
equipment is installed. No review processes
substantiated by the scientific knowledge cur-
have been legislated yet, but government of-
rently recognized (or) there is reason to suspect
ficials and equipment manufacturers believe
that, under correct use, the drug has harmful ef-
that some regulation is imminent.
fects which exceed the bounds considered justifi-
able . . . .“ That law is now being implemented.
Health Planning
Since many West German firms do business
The health planning approach as far as hospi-
with the United States or other countries that
tal beds and investment are concerned has al-
have laws regulating drugs and medical devices,
ready been discussed. Suffice it to reiterate here
they already follow U.S. or similar regulations.
that present planning legislation is still in its in-
In addition, many of the drugs and devices used
fancy, and that a methodology that would give
in West Germany are produced in the United
direction to new investment in the development
States, and are therefore subject to U.S. regula-
of new medical procedures or technology sim-
ply does not exist.
There is a growing awareness in West Ger- One of the problems faced by health planners
many that some governmental review of the in West Germany is the absence of an ongoing
safety and efficacy of new equipment is in order, national data collection effort. There are na-
that the training of technical personnel by man- tional data on kidney dialysis because the man-
ufacturers should be discussed, and that all ufacturers of the equipment have commissioned
‘Appendectomies in particular. a survey, but these data are not publicly avail-
able. No data are available through the govern- 15-year lifespan to the State, and the States for-
ment on the number of CT scanners, on the ex- ward their plans to the Federal Government,
tent of coronary bypass surgery, on cobalt ther- perhaps eventually a national plan can be devel-
apy, on clinical laboratory testing, or any other oped for technology, and reinforced through fi-
new technology. nancial incentives.
It is clear, however, that the Ministry of
Labor feels compelled to obtain better informa- Reimbursement of Hospitals
tion, so that more rational decisions can be The reimbursement of hospitals has already
made about allocating funds for equipment. been described. Since there are virtually no
This Ministry seems to have singled out CT deductibles and coinsurance for medical care,
scanning as one of the first technologies which there are no disincentives for individual patients
needs to be examined, whose use needs to be to command the use of special services, ad-
surveyed, and whose benefits need to be docu- vanced technology, or ultraspecialized medical
mented. Likewise, the Ministry of Technology centers and personnel.
and Research is outlining a program for research
and evaluation which may produce some base- Use of Evaluation Results in
line data within the next few years. Managing Medical Technology
Utilization Review As discussed earlier, evaluation studies are
still in their infancy in West Germany. Many
The sickness funds have the capability of do- such studies have been commissioned by policy-
ing only rudimentary comparisons of utiliza- makers in the Federal or State governments to
tion. They code only three digits of the Interna- provide information for policy decisions. It
tional Classification of Disease (ICDA-8) code seems likely, therefore, that the results of re-
and have little capability to check for the ac- search will be used in developing policy in R&D
curacy in the coding of discharge abstracts. The of medical technology, in the delivery of serv-
major difficulty in carrying out utilization ices, and in the incentives and disincentives
review, apart from the lack of comparable data, provided by reimbursement, planning, and
stems from the lack of trained personnel and the regulation.
independence of physicians. Both at the micro-
and macro-levels, there exist shortages of per- Another important recent development is the
sonnel, such as record librarians, utilization so-called “Konzertierte Aktion im Gesundheit-
review coordinators, biostatisticians, epidemi- swesen” or “coordinated action in the health
ologists, and computer experts. care system” (8). Since its inception early in
1979, the Minister of Labor and Social Welfare
has attempted to develop medical and economic
Fee and Ratesetting baseline data in cooperation with representa-
Little thought has been given to ways of tives of all umbrella organizations, such as the
regulating the diffusion of medical technology German Hospital Association, associations of
through the fee structure and ratesetting, even sickness funds, and physicians. The objective of
though these mechanisms clearly do affect this this effort that the Minister of Labor is coordi-
diffusion. Since hospitals have to forward plans nating is to increase the effectiveness and effi-
for special services and equipment with a 3- to ciency of the health care delivery system,

Some of the information that is available con- nal dialysis, coronary bypass surgery, cobalt
cerning West Germany’s experience with five therapy, and clinical automation—is presented
specific medical technologies—CT scanners, re- below.
Of these five, only coronary bypass surgery is According to confidential information from one
directly affected by bed-planning parameters, executive of the association of physicians who
Teaching hospitals and level IV hospitals are the accept sickness fund patients (Kassenarztlichen
only hospitals that get high enough capital sub- Bundesvereinigung), guidelines will be devel-
sidies and per diems to be able to provide open- oped for reimbursement of head and body scan-
heart surgery. Since few hospitals can afford to ning services. These will include criteria estab-
become highly specialized centers, it is fairly lishing the need for equipment, a limited list of
noncontroversial when a State planning agency symptoms for which CT scanning will be con-
designates only those few as ultraspecialized sidered appropriate, proof of competence by the
centers that receive funding to carry out special- physician, a limit on who can refer a patient for
ized work. a scan, and a fee schedule for appropriate and
equitable reimbursement.
CT Scanners At the end of 1978, according to one source,
CT scanners are the most contested new 160 CT scanners were reportedly in operation or
equipment in the West German health care sys- on order in West Germany. Physicians’ offices
tem. As medium-term purchases with a 15- to had 48, or 30 percent of these, 82, or 51 percent,
30-year lifespan, CT scanners are regulated were in acute care hospitals, and 30, or 19 per-
under paragraph 9 of the 1972 hospital financ- cent were in long-term care and rehabilitation
ing law and are completely financed by the Fed- hospitals (14). (See table 4.) A survey in April
eral Government. Hospitals seeking to acquire a 1979 carried out by the Federal Public Health
CT scanner must submit an application to their Department (Bundesgesundheitsamt) counted
State ministry, and the State ministry then re- 120 scanners in operation at the end of 1978
quests funding from the Federal Ministry of (19). One issue that has been raised is the possi-
Labor and Social Welfare. ble maldistribution of CT scanners and the con-
centration of this equipment in urban areas of
In theory, therefore, CT scanners in hospitals
the country. The Ministry of Labor and Social
should be very closely regulated, and up-to-
Welfare is examining the problem, but still has
date information on their distribution and use
to gather data to see where scanners are located.
should exist. In practice, however, there is still
some room for “slippage,” because some hospi- A CT scanner “needs assessment” conducted
tals are able to obtain CT scanners by having a by one radiology facility, the Diagnostic Radiol-
fundraising campaign or by having a private ogy with Computer Tomography Institute (Di-
physician purchase the equipment. There are no agnostisches Rontgeninstitut Mit Computer-
restrictions on the purchase of a CT scanner for
Table 4.—Distribution of CT Scanners
a physician’s office, Private financing is obtain- in West Germany (1978)
able on the basis of the reimbursement rate paid
by the sickness funds. This rate is DM 480 to Total Number of Percentage
DM 500 ($252 to $263) for a body scan and DM number of CT of all CT
Type of facility facilities scanners a scanners
300 ($158) for a head scan, with an added DM
Acute care hospitals
115 ($61) for additional work. Up to 300 beds. . . . . . 1,900 2 1.070
300 to 600 beds . . . . . 410 20 12.5
There has been some discussion by sickness 600 to 800. . . . . . . . . . 65 10 6.5
funds and by physicians’ associations about Over 800 beds . . . . . . 75 50 31.0
restricting reimbursement for CT scanning serv- Long-term hospitals . 1,250 30 19.0
ices to physicians who are specialists in Offices of physicians
radiology and have special technical training. in private practiceb . 2,400 48 30.0
Total . . . . . . . . . . . . 6,100 160 1OO.OO/O
‘The information for this case was gathered in meetings with the
Federal Ministry for Labor and Social Welfare, with State minis-
tries, with sickness funds, and from proceedings of a symposium
on CT scanners on Jan. 11 -12, 1979, at the West German Clinic for
Diagnostics at Wiesbaden.
132 ● Background Paper #4: The Mangementt of Health Care Technology in Ten Countries

Tomographic) at Dietzenbach derives a “need” scanners constitute more than 1 percent of all
for West Germany of between 120 and 300 scan- capital expenditures in hospitals, however, and
ners, depending on the proportion of the popu- it is possible that CT is an atypical new
lation who will need a scan per year and on the technology.
number of scans that can be done on one CT
scanner (14). Almost accepted is a standard of Renal Dialysis
0.5 percent of the population needing a head Renal dialysis was introduced on a large scale
scan per year and another 0.5 percent needing a
in West Germany relatively late, in comparison
body scan. If an average 200 working days per to the United States, and when one considers
year and 15 scans per day per machine are that Dr. Willem Kolff built the first kidney
assumed, then a total of 200 CT scanners would dialysis machine in Holland in the early 1940’s.
be required. If the working day can be extended
The year 1960 was a landmark year in the his-
to more than 8 hours, or the number of working
tory of dialysis because it was then that the
days per year or the number of scans per day
“Scribner shunt” made long-term dialysis possi-
can be increased, then the 160 CT scanners West
ble. Although that year also seemed to mark a
Germany already has are enough for the coun- turning point in the accessibility of this new
try as a whole.
therapy, however, dialysis was still relatively
In applying any standards when awarding scarce in West Germany until the late 1960’s.
grants to States for the purchase of CT scanners
Manufacturers of dialysis equipment through
in hospitals, the Ministry of Labor and Social
the European Dialysis and Transplant Associa-
Welfare has to take into account the need for
tion jointly purchase a yearly survey being con-
CTS based in physicians’ offices (with lower
ducted in all of Europe by a London firm, which
utilization), because of the separation between
provides up-to-date information on patients,
private practice and hospital privileges, and the
centers, and types of equipment used. Accord-
geographic distribution of the equipment. Even-
ing to information from one of the largest man-
tually, therefore, the Ministry will not only
ufacturers of dialysis equipment in West Ger-
have to plan for the distribution of scanners in
many, end-stage renal disease (ESRD) dialysis
hospitals, but it will have to look at the avail-
treatment was not introduced on a large scale
ability of all CT equipment. until 1968. Up to 1970, waiting lists in West
When CT scanners were initially introduced Germany were long. By 1973, however, patients
in West Germany 3 to 4 years ago, they were could enter treatment without having to wait for
produced only by EMI, the British firm that first a treatment place.
developed the equipment. At present, many
At the end of 1975, West Germany treated
other firms are in the market, such as Siemens (a
5,421 patients in ESRD dialysis programs. (The
West German firm), General Electric, and CHF estimated population in ESRD dialysis pro-
Muller. The peak in sales seems to have been
grams in 1976 was 6,200 patients, and in 1978
reached, unless better and less expensive equip- was 7,000 patients; estimates for 1985 are be-
ment can be developed and new applications tween 12,500 and 13,500 patients. ) In 1975,
can be found. Because of the training require- compared to other European countries, West
ments, technical manpower may contribute to a
Germany was in the middle in terms of number
temporary bottleneck in terms of further expan- of patients on ESRD treatment per million popu-
sion of CT scanning. lation, with 87.7 patients per 1 million popula-
CT scanning is a new medical technology
which has been singularly well studied in West
Germany within 3 years of its first being used. “The data and information for this case were gathered with the
Such study is quite unusual and may signal a help and from the files of one of the largest manufacturers of dialy-
complete change in how West Germany will ex- sis equipment in West Germany. The data were collected in
surveys sponsored by a manufacturer. Additional information for
amine new medical technologies. The Ministry the case was provided by a consulting firm and a consortium pro-
of Labor and Social Welfare believes that CT viding dialysis services.
a hospital. Dialysis in limited-care centers lies
between home and hospital dialysis in terms of
reimbursement rates. These centers are expected
to become very successful in the more populated
areas of the country.
In 1975, ESRD patients in West Germany
were far less likely to receive a kidney trans-
plant (4.8 percent of all patients with ESRD)
than patients in the United States (31.7 percent),
Australia (64.5 percent), Switzerland (47.7 per-
cent), or Sweden (40.6 percent). At a one-time
cost of DM 30,000 ($15,789), and providing that
rejection rates are low, transplants are consid-
ered both by the government and by potential
kidney transplant patients as an attractive alter-
native to dialysis. One problem in West Ger-
many, however, is a serious shortage of donor
kidneys. Of 19,000 fatal accidents, only 100 per-
mit the donation of kidneys. Thus, in 1976, only
273 transplants in 24 centers were performed (an
increase from 228 transplants in 1975). Eight
hundred persons were on waiting lists for trans-
plants. Only 10 percent of the 2,000 patients
who could benefit from a kidney transplant get
a donor kidney each year. West Germany be-
longs to the Eurotransplant Center in Leiden
and also has been debating a law since 1977
which would facilitate donating kidneys.
States license dialysis centers. There is at pres-
ent no contiguous planning by the Federal Gov-
ernment to coordinate the planning decisions of
the States in this area. Furthermore, no certifi-
cate of need is required in order to establish a
dialysis center. The distribution of dialysis sta-
tions depends on the demand by physicians of
dialysis for their patients. Since each patient is
covered for this service, private physicians,
nonprofit kidney centers, public and religious
organizations, as well as hospitals, all have
established services. As in the United States, the
startup capital may be provided by a voluntary
organization, or may be borrowed from a bank.
An implicit belief in West Germany is that the
dialysis market will regulate itself and that an
optimal distribution of centers will result.
There is no State regulation of dialysis equip-
ment. New dialysis processes are quickly avail-
able, since equipment is either imported or pro-
duced within the country by a West German
firm under license. Although major changes in In summary, the diffusion of new ESRD tech-
the dialysis process are infrequently developed nology in West Germany is left to market mech-
within the country, West German manufactur- anisms. Funding for each dialysis session leaves
ers and physicians are very aware of research in room for independent organizations or entre-
other countries and will try a new process al- preneurs to enter the market and to determine
most as soon as it becomes available. New whether they can attract enough patients to
models are introduced by manufacturers, tested break even. If in the future the sickness funds
in a few centers, and then demonstrated at fairs should determine that controls are necessary,
and by salesmen. Equipment manufacturers the controls can be exercised through the reim-
often use the evaluations of “expert” users to sell bursement contracts the sickness funds develop
equipment to other centers. In addition, they with dialysis centers. The only other way in
often develop new equipment jointly with phy- which the government may affect this market in
sicians in a dialysis center or teaching hospital. the near future may be through a requirement to
Since there is no real financial restriction on the have periodic inspections of all equipment.
purchase of new equipment, nonprofit organiza-
tions have a strong incentive to get the latest
Coronary Bypass Surgery
equipment for their centers. The Federal or State
government does not approve the production Open-heart surgery has been performed on a
process and evaluate the safety and efficacy of large scale in West Germany for the past 5 to 6
equipment, as the U.S. Food and Drug Adminis- years. Coronary bypass surgery is performed
tration does under the 1976 medical devices leg- mostly at seven centers which are affiliated with
islation and the good manufacturing practices medical schools. Since there are virtually no
requirements. There is discussion, however, of restrictions on what operations can be per-
having periodic testing of equipment, analogous formed by surgeons, the only restrictions on
to the rigorous annual testing of automobiles. coronary surgery are those on the equipment a
hospital can acquire. The equipment for cor-
Dialyzers, monitors, pumps, and supplies onary bypass surgery has a short lifespan, so it
produced in West Germany and other countries has to be financed via the per diem rate paid to
are used. Three types of dialyzers are being hospitals by the sickness funds. Only the large
used: coil dialyzers, plate parallel flow, and hospitals with tertiary services are paid a high
hollow fiber parallel flow. The coil dialyzer is enough rate to finance this equipment.
being phased out; the hollow fiber one is the
newest. Much of the dialysis equipment, espe-
The sickness funds are comparing the costs of
cially the dialyzers, is imported from the United
open-heart surgery in various settings. In the
States. Plate dialyzers are also imported from State Nordrhein/Westfalen, a coronary bypass
Sweden (Gambro), Japan (Cobe), and France operation costs DM 50,000 ($26,316) in Dussel-
(Rhone-Poulenc). Cuprophan, the most com- dorf, but far less elsewhere. The sickness funds
mon membrane for dialyzers worldwide, is hope to negotiate the reimbursement for such
made by a West German firm (Bemberg, a sub- operations with hospitals in that State, If no
sidiary of Enka) in Wuppertal.
agreement can be reached, and if the State’s
As noted in the previous section of this chap- Minister of Finance cannot act as mediator, it is
ter, the Federal Government supports several in- anticipated that the funds may take court ac-
stitutions that carry out research that benefits tion. Similar developments can be expected in
society but may be too expensive to be under- other States.
taken by any one institution. In its 1978-81 pro-
gram to support R&D, the Federal Government There have been no evaluations of rates of
named as one objective the further development complications from this surgery or cost-benefit
of transplant and dialysis technology. This is analyses, such as have been seen in the United
the first instance in which a concerted effort is States, but the results of analyses carried out
being mounted to develop new technology in elsewhere are being publicized and used by phy-
this area under government sponsorship. sicians at their discretion. The 1,000 to 1,500 pa-
tients who are waiting for this operation con- ment used in the operation of businesses and
stitute an enormous political pressure group. other public institutions.

Cobalt Therapy Clinical Laboratory Testing

Cobalt therapy has become increasingly and Automation
available in the past 10 to 15 years. Operating In 1975, approximately 1.3 billion laboratory
and capital funds have come from the per diem tests were carried out in West Germany. Of
reimbursement provided to hospitals by the these, 500 million tests were done in acute gen-
sickness funds, or from the sponsors of in- eral hospitals, 105 million were done in special-
dividual hospitals (community, private, etc.). ty hospitals, and 530 million were done in phy-
At university teaching hospitals, which are well sician practices (4). Physicians own roughly 90
funded by the Federal Ministry of Education, percent of the country’s 45, OOO laboratories.
the funds have come out of the general budget. Only a very small proportion of these labora-
Little information about the distribution and tories are central, large-scale commercial labs or
utilization of radiation therapy equipment is diagnostic centers (13).
available. The Government of Bavaria, for ex- For the past 20 years, the volume of labora-
ample, knows where such equipment is located tory tests has increased by about 20 percent per
only if the equipment is in a newly constructed year. Similar trends are predicted for the future.
facility that has been federally financed. One of Since all diagnostic tests are fully covered by the
the largest cancer treatment services in the coun- sickness funds, there is no disincentive to use on
try is at the City Hospital for Women in Nurem- the part of the patient. In addition, the Federal
berg, which uses approximately 45 percent of its Government has actively promoted “preventive
capacity (or 115 beds) for cancer patients. Since screening programs” for cancer of the breast,
its establishment 12 years ago, it has treated uterus, cervix, prostrate, and colon. These pro-
5,OOO women, and this year is accepting approx- grams, based in physician offices, have also
imately 400 new patients. contributed to the high volume of tests.
As long-term capital investment, cobalt and One might expect that the large volume of
other radiation therapy equipment is paid for laboratory tests and a continued lack of quali-
completely by the Federal Government. The fied personnel in West Germany would precipi-
sickness funds and the Federal Government tate automation of laboratory testing. Since
have been encouraging hospitals to form con-
physicians provide the lion’s share of ambula-
sortia that share radiation equipment. Since the tory services, however, most laboratory tests
equipment is becoming more expensive and are still carried out in nonautomated, small-
complex, further efforts to encourage this are scale laboratories in physicians’ offices.
likely to be made.
In discussions with economists at consulting
“Needs” for the equipment have not been pro-
firms, with the Ministers of Labor and Technol-
jected. In one case, a State Ministry decided not
ogy, and with manufacturers of equipment, no
to approve an application for a cobalt therapy
clearcut process of the diffusion of automated
unit, so the community and the hospital decided
equipment emerged. Further complicating re-
to carry out a fundraising campaign, and
search into this topic was the almost complete
through this they were able to finance the pur-
lack of data on specific equipment, and the
chase. The local sickness funds felt that they had
fiercely competitive market in this area in West
no choice politically but to pay the higher per
Germany. The information that emerged from
diem that resulted.
the discussions was that multichannel analyzers
Cobalt therapy equipment is being checked were introduced on a large scale around 1973-74
for safety only by the Board of Trade Regula- and that analyzers produced by U.S. firms and
tion (Gewerbeaufsicht), a branch of the Depart- by Coulter (U. K.) dominate the market. The
ment of Commerce, which also checks equip- total number of automated analyzers in 1974,
136 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

according to one source, was 1,200. With 300 lize multichannel analyzers in a cost-effective
analyzers that year, Technicon seemed to domi- way.
nate the clinical chemistry market for auto- Although there is much discussion of auto-
mated enzyme analyzers and other similar auto-
mated laboratory testing in West Germany,
mated equipment. Lack of centralization of lab-
very little quantitative information seems to be
oratories was given as the major reason for the
available.11 This is one reason why cost-effec-
comparatively slow diffusion of automated
tiveness studies in this area are not very com-
mon. 12 In sum although the planning, utiliza-
Laboratory equipment in hospitals is financed tion, and financing of automated laboratory
via the per diem allowance which hospitals get equipment is an area that generates much dis-
from the sickness funds. In physicians’ offices, cussion in West Germanyf it is relatively unex-
laboratory tests are billed for separately from plored and unregulated.
physicians’ services. From a purely financial
point of view, therefore, there has been little in-
centive to consolidate laboratory services.
Many obstacles would have to be overcome in
order for hospital-based physicians and physi-
cians in private practice to agree in principle to
share laboratory services. Not surprisingly, one
central laboratory has been hailed as exemplary
(15). This, the so-called Lemgo model, is a coop-
erative laboratory that a general acute hospital
with 634 beds founded in 1972 to be able to uti-

Medical technology is easily obtained by equipment they had in the teaching hospital,
West German physicians’ offices and by teach- and some physicians acquire new technology
ing hospitals, because there are virtually no which they see at meetings or read about in the
financial constraints or planning guidelines to medical literature. Even where there are some
limit the acquisition of new equipment. As constraints on the diffusion of new medical tech-
much as 90 percent of all medical technology nology, for example, in community hospitals,
originates at West German medical schools, but political considerations still seem to outweigh
the diffusion from university hospitals to com- the planning criteria that have been discussed
munity hospitals and private offices is rapid. and are being established at the State and Fed-
Physicians who move from a university hospital eral levels.
to a community hospital often want the same

1. Bundesministerium fur Arbeit (Ministry of La- 3. Bundesministerium fur Forschung und Technol-
b o r ) , Strukturdaten des Gesundheitswesens, ogies (Ministry of Research an~ Technology),
(Bonn, Mar. 6, 1979). Faktenbericht z u m Bundesbericht Forschung
2. Tabellen zu den Orientierungsdaten f;r (Bonn, 1977).
Empfehlungen der Konzertierten Aktion im Ge-
sundheitswesen im ]ahre 1979 (Bonn, Mar. 6, 4. The Federal Government’s Program on
1979). Promo;ing Research and Development in the
Serz?ice of Healtlz, 1978-1981 (Bonn, English ver- 12. Pflanz, M., “Daten zur Epidemeologie der Ap-
sion undated, German version 1978). pendicitis, ” ML/tlclletIct’ Medizi~lisclle WoclIe?I-
5. Bundesministerium fur Jugend, Familie, und Ge- scljrift 119 (20-30):933, July 16, 1976.
sundheit, (Ministry of Youth, Family Affairs, 13. PROGNOS AG., Europaisches Zentrum fur
and Heal th ), Bcric/~t der Bz/tILfL~srt~~ie~-z{}~~ Uber angewandte Wirtschaftforschung, Mcdizi~~tecl~-
c~ie t! Llsulirh-li)lge!l dm Kratlh-etlll~z~[sfitlarlz icr- trik, unpublished report (Base], July 1975).
uHgsgcsetzes (Bonn: Bundestag, Dec. 12, 1975). 14. Rau, G., remarks at the CT Symposium at the
6. “Law on the Reform of Drug Legislation Deutsche Klinik tur Diagnostic (German Clinic
of the Federal Republic of Germany of 24 Au- for Diagnosis), Weisbaden, Jan. 11-12, 1979.
gust 1976, ” unofficial translation from the Feder- 15. Rausch-Stroman, I . , and Loring, G., “Das
al LauI Gtizettc 1. (Bonn, n .d. ). Model] Lemgo, Zusammenarbeit von Niederge-
7. Ehlers, H., K~-a/Ike}~lzfi~ /slza~/figkeit (Dusseldorf: Iassenen Arzten und Krankenh;usern auf dem
Ministerium fur Arbeit, Gesundheit, und Sozi- Laborsektor, ” Deutsclles Arzteblatt 75(5):252,
ales des Landes Nordrhein Westfalen, 1976). Feb. 2, 1978.
8. Gcsetz zl~r Dii))lpfl~)~~ ~ler Al~sgabet]c)]t~llich-lll i]g 16. Simanis, J. G., Office of Research and Statistics,
LirILl z lir Stttih-tli\ ’zl~~t’bcssc~\’[~ /lg irl der Gcsetzli- U.S. Social Security Administration, Washing-
cl~e}~ K)-a~~ke~~z~~~rsi~-l~ er-~/}~~ (Law Designed To ton, D. C., personal communication, May 1979.
Decelerate Cost Increases) (Krankenversiche- 17. , and Coleman, J. R., “Health Care Ex-
rungs-Kostendampf ungsgesetz —KVKG ) ver6f - penditures in Nine Industrialized Countries,
fentlicht in Bundesgesetzblatt, Nr. 39, v o m . 1960-1976, ” %c. Sec. 131/11. 43(1 ):3, January
26.6.77, S.1069 ff. 1980.
9. Hargrave, A., “German Technology Today, ” - 18. Statistisches Bundesamt (Federal Center for Sta-
Sriet!tific Attlericajl 241 :53, August 1979. tistics), 1979.
10, Dus Kra}Ike}I/IuzM, Heft 3, 1979. 19. Stieve, F. E., Bundesgesundheitsamt (Federal
11. Michael, H. A., et al., “Kosten und Investitions- Public Health Department), West Berlin, per-
planning im Medizinischen Labor, ” Biotecl~- sonal communication, April 1980.
~liscllc U~}IsrlIoIl 2:3, S.76, 1978.

68-095 I? - 83 - 1 C
Medical Technology in the
Health Care System of
the Netherlands

L. M. J. Groot
Faculty of Medicine, University of Limburg
Maastricht, Netherlands

The Netherlands: Country Description. . . . . . . . . . . . . . . . . . . . . . ............141
Form of Government. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............141
Nature of the Economy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........141
The Health Care System. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ............142
Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........143
Health Care Providers. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........143
Levels of Care. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................143
Administration of the System . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........144
Financing . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....................144
Reimbursement. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..145
Cost Containment. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............146
Policies Toward Medical Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 147
Research and Development Efforts . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...147
Evaluation of Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .148
Regulation of Medical Technology . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 148
Planning of Medical Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ....148
Reimbursement and Medical Technology . ...........................149
Utilization Review. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...150
Specific Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .150
CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 150
Renal Dialysis and Kidney Transplants . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 151
Cardiac Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................151
Megavolt Radiation Therapy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...151
Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............152
Chapter 8 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..................152


Table No. Page

1. Intramural Health Care Institutions in the Netherlands . ..................143
2. Number of Personnel Employed by Intramural Health Care Institutions
in the Netherlands . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......144
3. Number of Physicians and Other Health Care Personnel in the Netherlands. ...l44
4. Increase in Hospital Staffing in the Netherlands . ........................144
5. Overview of Health Care Costs in the Netherlands. . .....................146
Medical Technology in the Health Care
System of the Netherlands
L. M. J. Groot
Faculty of Medicine, University of Limburg
Maastricht, Netherlands


The Netherlands is a small country divided dinarily, the First Chamber does approve these
into II Provinces, a district called the IJssel- laws.
meerpolders, and 850 municipalities. With
Provincial councils are elected in each of the
about (400 inhabitants per square kilometer
11 Provinces and manage the policies of individ-
(1978), the Netherlands is one of the most dense-
ual Provinces. Each Province is headed by a
ly populated areas of the world. In 1976, there
Royal Commissioner (Commissaries der Konin-
were 13.9 million inhabitants. The percentage of
gin), who is appointed by the Queen after she is
the age group 65 and older was 11 percent, an
advised by the Cabinet. The main task of the
increase of 5 percent since 1889 (2).
Provinces is the supervision of the municipal-
ities. Each municipality has an elected council
Form of Government and a mayor appointed by the Queen advised
The Netherlands is a kingdom with a parlia- by the Cabinet (for larger cities) or by the
mentary democracy. The head of state is Queen Minister of Internal Affairs (for smaller towns).
Juliana of the House of Orange-Nassau. The
Parliament (Staten Generaal) consists of two Nature of the Economy
chambers. The Second Chamber (De Tweede The Netherlands’ location at the mouth of the
Kamer), which is the more important one, has great rivers Rijn and Maas has made the country
150 members. As there are no electoral districts a leader in international trade. Rotterdam has
in the Netherlands, members of this chamber the largest harbor in the world. The Dutch econ-
are chosen directly by the population under a omy is based on free enterprise, but the govern-
system of proportional representation. This ment’s influence is growing in response to the
method of election leads to the presence in Par- weak economic situation and the imminent fail-
liament of a number of political parties. Since ure of a number of private enterprises.
no one party has a majority, a coalition of sev-
eral parties is necessary to form a government. Overall, the working population is divided
In 1979, the government consisted of Ministers into the following sectors (2):
of the Christian Democratic and Liberal Parties. Agriculture and mining . . . . . . . . . . . . . . . . . . 1.9%
The major role of the Second Chamber of Par- Industry. . . . . . . . . . . . . . . . . . . . . . ........38.0
liament is to amend and approve drafts of laws Services (for-profit) . . . . . . . . . . . . . . . . . . . . .31.8
put forward by the government. Only rarely Government and nonprofit . ..............28.3
does this chamber exercise its authority to de- Wage costs have risen tremendously in recent
velop laws on its own. The First Chamber (De years, creating problems in selling the country’s
Eerste Kamer), which is elected from and by products internationally. Labor-intensive indus-
Provincial councils, can only approve or reject tries, in particular, have had a very difficult
laws that the Second Chamber has passed. Or- time. Because of the importance of the problem

of unemployment, the Government has sought nology produced in the Netherlands is exported,
to encourage the development of industries that which accounts for the importance of the med-
make use of sophisticated techniques and know- ical technology industry to the national
how. economy.
The production of medical technology is dis- Overall, the Netherlands is a pluralistic coun-
cussed in this context as a partial solution to the try. With people of different backgrounds and
nation’s economic problems. About 60 enter- different religions, tolerance is essential. Gov-
prises in the Netherlands are active in the manu- ernment is viewed not in a negative light, but as
facture and trading of medical instruments in- a solution to societal problems. Ordinarily, the
ternationally. These include large companies, public and the private sectors work hand-in-
such as Philips, which have a broad range of hand; but if the private sector is unable to deal
articles, and many small companies, which are with a problem, the Government will generally
more specialized. The Dutch industry in medical step in. The traditions of the Netherlands en-
technology takes care of 18 percent of the world courage the incorporation of the new, including
market ( I ). Ninety percent of medical tech- the adoption of new models of social action.


Fully describing the health care system of the Environmental Protection (Minis erie van
Netherlands is a difficult task. Because the Volksgezondheid en Milieuhygiene) Ultimate
system has emerged with no systematic plan responsibility for the entire Ministry rests with
from the Netherlands’ tradition of pluralism, in the Minister, but health care, specifically, is
fact, some people call it a “nonsystem. ” under the direction of a State Secretary. Both
these officials are politicians.
Immediately after World War II, the Govern-
ment of the Netherlands sought to restore the A number of important advisory councils and
country’s social and economic life through vari- boards at the national level seek to ensure the
ous formal policies. As wartime regulations full cooperation of doctors, hospitals, sick
were abolished and freedom restored, specific funds, private insurance organizations, and
laws regulating the health care system were others affected by national health care policies.
passed. The two most important were the hospi- These advisory boards include: 1) the Health
tal tariffs law (Wet Ziekenhuistarieven) of 1965, Council (Gezondheidsraad), which advises the
which regulates price setting for all intramural government about the state of the art in applied
institutions, and the Hospital Provisions Act medical sciences and plays a central role in the
(Wet Ziekenhuisvoorziening) of 1971, which application of new technologies; 2) the Central
regulates the building and renovation of intra- Council for Public Health (Centrale Raad voor
mural institutions. Notwithstanding this post- de Volksgezondheid), which fosters cooperation
war government intervention, however, the between the government and private organiza-
health care system of the Netherlands remains tions and institutions working in the health care
largely private. Proposals to strengthen the system and advises the government on all issues
government’s regulatory powers have recently in curative and preventive health (16); 3) the
been sent to Parliament. Central Board for Hospital Tariffs (Centraal Or-
gaan Ziekenhuistarieven), which plays an im-
The government’s role in health care is ad-
portant role in the pricing of services of in-
ministered through the Ministry of Health and
tramural institutions on the basis of the 1965
hospital tariffs law; and 4) the Central Board for
Hospital Provisions (College voor Ziekenhui-
senvoorzieningen), which advises the govern-
ment on the building of intramural institutions
in accordance with the 1971 Hopital Provisions an important role in conducting medical re-
Act . search, are gradually being transferred to the
health care system and are increasingly empha-
The government’s most important role in the
sizing patient care.
health care system is in the area of preventive
medicine. Preventive services, which amounted A breakdown of hospitals in the Netherlands
to 3 percent of total costs of health care in 1977, by type is presented in table 1.
are financed out of general revenues. Some pre-
ventive services are provided by the organiza-
tions for home care (Kruisorganisaties), private Table 1 .—Intramural Health Care Institutions
in the Netherlands (1976)’
organizations that receive government subsi-
dies. In addition, municipal health services pro-
vide preventive care and ambulance services. Number
of beds
Industry provides some preventive services as
required by law. 7,012
In general, the government’s role in curative 6,776 0.5
health care is very modest, involving only a few 25,940 1.9
government institutions. Basically, it is to guide
26.947 2.0
the curative system to help ensure the availabil-
ity y and accessibility of high-quality care at rea- 1,795 0.1
sonable costs. The government has a special re- 42,034 3.0
sponsibility for the quality of care, which is en- Total. ., . . . . . . . . . . 763 171.542 12.4
trusted to National Inspectorates (Staatstoezicht
op de Volksgezondheid ) and their Provincial of-
fices ( 16).

A number of hospitals in the Netherlands Health Care Providers
were founded and administered by Catholic or
Medical specialists and pharmacists in the
Protestant religious orders, but most of these
Netherlands work mostly on a fee-for-service
institutions have now been turned over to pri-
basis. They work either in private practice in the
vate foundations administered by lay people.
community or under an arrangement with hos-
Though most of the hospitals in the Netherlands
pitals to provide services. Generally, physicians
are private, there are also public institutions.
work independently. Only in psychiatric hospi-
Some large cities, for example, have their own
tals, university teaching hospitais, and large
municipal hospitals. Originally, these facilities
municipal hospitals are doctors on salary.
were established to treat poor patients, as re-
quired by the national poor laws. In addition to Data on the numbers and types of personnel
municipal hospitals, some psychiatric hospitals in the Dutch system are presented in tables 2
are public. With the exception of the Province of and 3. Table 4 shows the increases in specific
North Holland, however, most Provinces meet types of hospital staff that occurred between
their legal obligation to provide psychiatric 1973 and 1978.
services by making arrangements with private
hospitals. Levels of Care
There are seven university teaching hospitals The health care system of the Netherlands is
in the Netherlands, which are under the control generally considered to have three levels of care.
of the Ministry of Education and Sciences (Min- The first level, public health, includes the provi-
isterie van Onderwijs en Wetenschappen). sion of preventive services. Some preventive
These hospitals, which have traditionally had services are offered to the entire population, and
144 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

others are offered to specific groups (e. g., chil-

dren, diabetics, employees, and elderly people).
The second level of care, so-called “first-line
care, ” is immediately accessible to the patient.
This includes home care provided by nurses, as
well as care provided by general practitioners
working in solo practice, in group practice with
other general practitioners, or in health centers
with other professionals such as nurses, physio-
therapists, and social workers. Both the govern-
ment and sick funds want to encourage the de-
velopment of health centers.
“Second-line care, ” the third level in the sys-
tem, is generally, except for emergencies, pro-
vided on referral by the first-line practitioners.
Second-line care includes outpatient care by spe-
Table 3.—Number of Physicians and Other
Health Care Personnel in the Netherlands (1976) cialists (provided mostly through outpatient de-
-- partments of general hospitals) and inpatient
Number per care in acute care hospitals. It also includes care
100,000 in nursing homes and homes for the mentally
Types of personnel Number .—. inhabitants
- - - - -- retarded.
Physicians “‘-
General practitioners. . . . . . 4,937a 36
7,223 53 Administration of the System
1... 1,158 8.4
8,574 62 The Netherlands’ health system depends very
.... ‘21,892 ‘- - 159.4 -
– heavily on private institutions and independent
practitioners. Individual patients are free to
. . . 4,462 32 choose their own physician, whether generalist
.... 1,197 9
or specialist. Professionals are free to select
treatment for their patients. Physicians are also
free to settle and practice where they like, al-
though in order to practice in a particular hos-
pital, they are required to obtain a license from
the hospital board.
With the government taking the steps to be
described below, the openness of the health sys-
tem in the Netherlands is generally decreasing.
Table 4.—increase in Hospital Staffing The possibility of restraining cost rises by re-
in the Netherlands (1973-78) stricting the number of health care personnel is
now much discussed.

As mentioned previously, preventive care is
financed by the government out of general reve-
nue. Curative health care is financed by insur-
ance and out-of-pocket payments; only a small
part of it is subsidized by the government.
The following sections describe how the in-
surance system is divided.
Ch. 8—Medical Technology in the Health Care System of the Netherlat?ds ● 145

National Sick Fund Insurance Although private insurance policies vary,

generally the costs of more expensive items,
A compulsory insurance scheme dating to
such as hospital and specialist care, are com-
1941 was legalized in the Sick Fund Act (De
Ziekenfondswet ), social security legislation pletely covered. The costs of general practi-
tioner care and drugs, however, are usually not
passed in 1966. Sick fund insurance (Zeiken-
fondsverzekeving) covers about 70 percent of covered. Deductibles and coinsurance are
the population, Members of the scheme include
employees whose income falls below a certain In Government councils that play an impor-
level (36,200 florins in 1978—$19,053), 2 self- tant role in the system, private insurance com-
employed persons whose income falls below this panies are represented by their own society, the
same level, and those over the age of 65 with in- National Society of Private Insurers for Health
comes below a certain level (20,600 florins in C a r e C o s t s (Kontaktcommissie Landelijke
1978-$10,842). Each group is subsidized by the Organisaties van Ziektekostenverzekeraars,
government in a slightly different way. KLOZ).
National sick fund insurance finances all
acute health care, including that provided by National Catastrophic Illness Insurance
general practitioners, specialists, and hospitals. In 1968, Parliament passed a general law on
Generally, all costs, including drug costs, are costs of catastrophic illness (Algemene Wet Bi-
covered, and the patient pays only for inciden- jzondere Ziektekosten), establishing a new cata-
tals such as appliances and transportation. strophic insurance scheme under social security.
The national sick fund insurance scheme is ex- This scheme is known as “insurance for the pop-
ecuted by 65 independent sick funds. All of ulation” (Volksverzekering), because all citizens
these funds are members of the Society of Dutch are required to be members. The scheme is fi-
Sick Funds (Vereniging Nederlandse Zieken- nanced out of premiums, which are levied by
fondsen, VNZ), which plays an important role fiscal authorities. There is no income limit for
in shaping health care policy in the Netherlands. membership, but the premium (2.86 percent) is
The sick funds are supervised by the Sick Fund levied on those whose incomes exceed a speci-
Council (Ziekenfondsraad), representing gov- fied maximum (41,750 florins in 1978–$21,974;
ernment, employers, employees, sick funds, in- 43,950 florins in 1979–$23,131).
stitutions, and professionals working in the This insurance finances the most expensive
health system. The Sick Fund Council approves forms of care, including long-term care in gen-
arrangements between sick funds and providers eral hospitals, nursing homes, homes for the
of medical care. It also advises the Ministers of mentally retarded, and ambulatory care for
Social Affairs and Health Care concerning the mental health. Beginning in 1980, the cata-
premiums of the insurance schemes, which the strophic scheme will also finance home care,
Ministers have to fix. previously financed through general revenues
and patient contributions. This change is in-
Private Insurance tended to reinforce first-line health care.
Approximately 30 percent of the population
is not insured under the national sick fund in- Reimbursement
surance scheme described above. Individuals in Payment to Hospitals and Other Institutions
this group finance their own health care, usually
by buying private insurance. Private insurance Tariffs for hospitals and other institutions are
premiums and health care expenses are tax de- set by the Central Board for Hospital Tariffs,
ductible by the patient. the national advisory board mentioned earlier.
This body is made up of representatives of hos-
pitals, sick funds, private insurance systems,
and independent members. The Central Board
for Hospital Tariffs evaluates costs prospective-
146 ● Buckground Paper #4: The Management of Health Care Technology in Ten Countries

ly and sets rates following guidelines that it has sons. Recently, the government has set up a
developed and that the Sick Fund Council and Commission on the Structure of Medical Spe-
the Minister concerned have approved. The cialists’ Fees (Commissie Structuur Honorering
guidelines are very clearly defined and applied Medische) to revise fees. The government is also
with individual circumstances taken into con- developing an incomes policy to bring the in-
sideration. comes of specialists and other professionals into
line with incomes of comparable government
Payment to Physicians officials.
General practitioners are paid on a cavitation
basis for sick fund patients and on a fee-for- Cost Containment
service basis by private patients. Specialists are
Because the curative health care system is
paid exclusively on a fee-for-service basis for all
largely private and financed by insurance, the
patients. Fees from the sick funds are set in ne-
government’s influence on the system can only
gotiations between the organization of physi-
be indirect. Many items of the health care sys-
cians, the Royal Netherlands Medical Associa-
tem are open ended. More services generate
tion (De Koninklijke Maatschappij ter Bevor-
more money for the providers. Furthermore,
dering der Geneeskunst), and the sick funds.
since the health care costs are not part of the
General practitioners’ fees for private patients
government budget, health care expenditures do
are comparable to their fees for sick fund pa-
not compete with other social needs such as
tients. Specialists’ fees for private patients, how-
ever, are much higher. On the average, a spe-
cialist can earn 50 percent of his/her income
Figures demonstrating the rise in the costs of
from private patients, who make up only 30
care during the period from 1973 to 1977 are
percent of the population. Technical specialties
shown in table 5. As can be seen from these fig-
such as radiology are the best paid.
ures, overall cost rises have been in the range of
Fees for all physicians can be changed only between 11.2 and 18 percent each year for the
with the approval of the Minister of Economic past several years. There does, however, seem
Affairs, who is attempting to implement a gen- to be a decreasing trend in the rise of costs. The
eral incomes policy for social and political rea- percentage of gross national product consumed
Ch. 8—Medical Technology in the Health Care System of the Netherlands ● 147

by health care expenditures was 7,2 percent in tors’ practices. These proposals would broaden
1973 and 8.2 percent in 1977 (6). and replace existing laws.
Since 1976, the government has tried to bring Although these proposed laws could be en-
down collective spending, that is, spending on acted within 2 years, past experience with the
items financed by taxation and social security Hospital Provisions Act of 1971 suggests that
premiums. Since these items are financed out of the types of policies which they embody are dif-
wages, increased expenditures contribute to un- ficult to implement. Under the Hospital Provi-
employment. The government expects that im- sions Act of 1971 (which the pending legislation
plementation of its cost-containment policy will would strengthen), the government’s policy is to
save 2 billion florins ($1.052 billion) in 1981 decrease the number of general hospital beds to
(15). It has already submitted two important four beds per 1,080 inhabitants. Implementation
proposals to Parliament. One is the law on tar- of this policy has been difficult, because the
iffs in health care (Wet Tarieven Gezondheids- general population, patients, and hospital em-
zorg), which would give the government full au- ployees resist the closing of their hospitals. Fur-
thority to regulate all tariffs and fees. The sec- thermore, because of its policy of full employ-
ond proposal is the law on health care provi- ment, the government approved an increase in
sions (Wet Gezondheidszorgvoorzieningen), guidelines for nursing personnel in intramural
which would allow regulation of the develop- institutions this year, despite the predicted nega-
ment of all health care facilities, including doc- tive impact on costs.


The general impression in the Netherlands is insured patients to 45.75 per 1,000 (13). The
that medical technology is a significant con- number of therapeutic procedures performed
tributor to rising health care costs, but little rose during the same period from 50.5 per 1,000
specific information is available. Econometric in 1960 to 94.09 per 1,000 in 1974 (13). Increases
analyses by the author give indirect indications within the area of diagnosis can also be docu-
that technological innovation is an important mented. For example, laboratory production
contributor to costs (10,12). In an analysis of per 100 admissions increased about 11 percent
price rises in institutional health care, Van per year from 1973 to 1975 (13). The incidence
Montfort reported that costs for medical and of X-ray use also rose slightly, from 401.8 per
nursing materials rose from 323 million florins 1,000 admissions in 1973 to 413.7 in 1975, an in-
($170 million) in 1972 to 497 million florins crease of 3 percent (13). Therapies increased 31
($262 million) in 1975, an increase of 53.9 per- percent over the same interval (13).
cent (17). Of the 53.9-percent increase, 16.9 per-
cent was due to price increases and 37 percent to Research and Development Efforts
real changes in services. Technical innovation
also increases costs by increasing staff size in Research related to medical technology is
hospitals (5). Further, technology requires conducted by industry, by research organiza-
space. About 20 percent of total space in hospi- tions, and by universities. University research is
tals is taken up by selected departments with generally funded by government.
technology, such as X-ray equipment, labora-
The two important government organizations
tories, and operating rooms (9).
that fund research are: 1) the Dutch Organi-
From the standpoint of outputs, technical in- zation for Fundamental Scientific Research
novation appears to be a stronger influence in (Nederlandse Organisatie Zuiver Wetenschap-
the diagnostic area than in the therapeutic. Be- pelik Ondezock, ZWO), and 2) the Dutch Orga-
tween 1960 and 1974, the number of diagnostic nization of Applied Scientific Research (Neder-
procedures performed rose from 9.84 per 1,000 landse Organisatie voor Toegepaste Natuur-
148 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

wetenschappelijk Onderzoek, TNO). The re- The Health Council’s evaluations are mostly
search of ZWO is basic research that has little to of a technical nature. Only recently has the
do directly with medical technology. TNO, council considered costs and benefits in making
however, has a special department for health its recommendations. Before it made its recent
care, the Health Organization TNO (Gezond- recommendation about the number of kidney
heidsorganisatie TNO), which spends about 50 transplants, for example, it considered the eco-
million florins ($26.3 miIlion) a year on research nomic benefits of transplantation versus dialysis
related to patient care. Some of this research is (4), Similarly, it considered some cost issues
conducted in a few prominent general hospitals, prior to advising on renal dialysis.
but most of it is conducted in university
A working party on the evaluation of medical
teaching hospitals.
instruments with regard to safety and efficacy
R&D in the health area is primarily the task of has been founded in cooperation with the
the university teaching hospitals, which are Health Organization TNO and the National
reimbursed by the social security system and pa- Hospital Institute (Nationaal Ziekenhuisinsti-
tients on the basis of a uniform tariff. This tariff tuut), a research institute founded by the Na-
is based on the output of the average university tional Hospital Council (Nationale Ziekenhuis-
teaching hospital, with the guidelines applied to raad). So far, the working party has published
the bigger general hospitals taken into consid- eight papers on items including heart monitor-
eration. Reimbursement is not sufficient to cov- ing systems, EKG apparatus, defibrilators, elec-
er university teaching hospitals’ costs, however, trical thermometers, electrical beds, external
and the government covers their deficits. The pacemakers, and blood pressure monitors. Re-
deficits amount to about 30 percent of the hospi- ports in preparation concern EEG instruments,
tals’ budgets, and some of the deficits are attrib- fetal monitoring instruments, and heart moni-
utable to research and teaching. According to toring instruments.
the Ministry of Education and Sciences, the total
deficit in 1977 was 496 million florins ($261 Regulation of Medical Technology
The only medical technology that is directly
At this time, there is a special commission on regulated in the Netherlands, based on legisla-
the tariffs for these university teaching hospitals tion of 1958, is drugs. Drugs can be prepared
which is to solve the problem of reimbursement. only by pharmacists, general practitioners with
As a method of furnishing the resources needed their own pharmacy, or assistants working un-
for new developments in patient care, the policy der the supervision of pharmacists or general
will be to fund new techniques at the marginal practitioners with their own pharmacy.
cost of the technique. The guidelines for reim-
bursement, however, do not contain space for Industrial production and distribution of
research. Research is to be directly funded by drugs by drug companies must be approved by
special funds. the government. The Commission on Drugs
(Geneesmiddelencommissie) advises the Minis-
Evaluation of Medical Technology ter of Health on drugs, and only those drugs
which have been registered can be distributed to
Few evaluation studies of medical technology the public. Prior to registration, a special board
have been conducted in the Netherlands. New evaluates the drug’s composition, efficacy, and
technologies in heaIth care, including new diag- side effects. This board critically examines the
nostic and therapeutic devices, however, are producer’s claim regarding the drug’s efficacy.
evaluated by the Health Council, before they
are accepted into medical care. The advice of
Planning of Medical Technology
this group guides the decisions of other bodies,
such as the Sick Fund Council and the Central The Hospital Provisions Act of 1971, which
Board for Hospital Provisions, which are regulates the building and renovation of institu-
responsible for planning heaIth services. tions such as hospitals, is the only law that can
Ch. 8–Medical Technology in the Health Care System of the Netherlands ● 149

contain the expansion of technology in the personnel by a limited amount each year. It is
Netherlands. Under this law, a hospital that hoped that a policy of restricting this infrastruc-
wants to make a capital investment for renova- ture will make doctors more critical with respect
tion exceeding a certain amount of money must to their utilization of facilities.
apply for a license with the Central Board for
There are technological innovations that the
Hospital Provisions. The Board can also limit
government has not dealt with and over which it
the size of, for example, the hospital’s X-ray de-
has no authority. The government is consider-
partment. Recently introduced legislation
ing a system of restraining expansions by a new
would give the government the authority to
law to limit tariffs in the health care sector. This
close down hospitals or part of them.
law, the law on tariffs in health care, may avoid
Article 18 of the Hospital Provisions Act of a proliferation of bureaucracy and allow for a
1971 gives the government the authority to reg- flexible policy. Recently, the government has
ulate very “advanced” technologies on the basis stressed the importance of negotiations between
of a national plan. This national plan contains hospitals and reimbursers of care. These region-
an inventory of existing facilities and gives indi- al contacts could provide an important forum
cations as to where these facilities should be for discussion, out of which a sensible policy
changed. The planning process has not been toward the deployment of medical technology
fully applied to all facilities, because there is may evolve.
some fear that a national plan may favor the ex-
pansion of existing facilities and thereby in- Reimbursement and Medical
crease costs. Technology
So far, regulations have been issued for both The reimbursement system, as described pre-
renal dialysis for chronic kidney failure and viously, favors the expansion of medical tech-
megavolt therapy. Preparations are currently nology, The structure of tariffs varies between
under way to issue regulations to cover cytoge- hospitals, and such services as drugs and labora-
netic laboratories, nuclear medicine (both diag- tory tests can be included or not in the charge
nostic and therapeutic), and diagnostic facilities per day. Pharmacists and clinical chemists, who
for angiocardiography and heart catheteriza- are responsible for the chemical analyses done
tion. Guidelines for open-heart surgery and in the hospital, are on the hospital’s payroll, and
computed tomograpy (CT) scanners are in their salaries are included in the hospital tariff.
operation, also. A few physicians also perform these tests, how-
Many technologies, however, do not need ever, and they can be paid on a fee-for-service
building arrangements and can be expanded basis. Most specialists work on the basis of fee
without government regulation. In some in- for service, which encourages giving service.
stances, the government has asked hospitals not The surgeon and the anesthetist bill the patient
to invest in new instruments without the ap- for their services, for example. The radiologist
proval of the Ministry of Health. It has done bills for a fee.
this, for example, in the case of diagnostic The hospital bills separately for its services
devices that use radioactive isotopes, such a s and is reimbursed at cost. Costs for the use of an
gamma cameras. (The automation of laboratory operating room (including the cost of personnel,
equipment is a special case described in the next instruments, and appliances), for example, are
major section of this chapter. ) not included in the hospital tariff. X-rays are not
The Central Board for Hospital Tariffs is con- included either. These services are billed for sep-
sidering the development of special guidelines arately and are reimbursed at cost. The tariffs
with respect to investments in medical instru- for medical ancillary services such as laboratory
ments and the number of paramedical person- and X-ray are set uniformly for the whole coun-
nel. General hospitals following the guidelines try by the Central Board for Hospital Tariffs.
would be able to expand these investments and These tariffs, which are based on costs for per-
150 ● Background Paper #4: The Management of Health Care Technoloy in Ten Countries

sonnel, materials, and costs of other invest- dation of Medical Registration (Stichting Med-
ments and include a small addition for overhead ische Registratie) assembles data about patients
costs, are revised every 3 years. admitted to hospitals, diagnoses, average length
of stay, operations performed, and so forth.
Under this hospital reimbursement system,
This foundation covers almost 90 percent of
the more services that are performed, the more
hospital beds in the Netherlands and is financed
money that is generated. In technical depart-
by member hospitals, i.e., voluntary members,
ments, the costs are more or less constant, so an
The data the foundation generates are very im-
increase of services above the budgeted level
portant, because they are used by medical staff
generates surpluses of revenue above costs.
to evaluate their work and are also used for hos-
These surpluses allow expansion. They also lead
pital planning.
to lower rates for patient days when the Central
Board for Hospital Tariffs has to revise the hos-
pital budget. Hospital budget revisions are A separate data bank has been established by
made whenever the hospital applies for a tariff the sick fund organizations to collect data on
increase, otherwise at the end of 4 years. their patients admitted to hospitals. The data
collected concern such things as the referral
The direct relation of services and income for
policies of general practitioners and acts per-
physicians is criticized by government, the sick
formed by specialists, they also include data on
funds, and patients. Because of these criticisms,
hospitalizations (e.g., average length of hospital
radiologists recently made a new agreement
stay). Some individual private insurance com-
with the sick funds, under which radiologists’
panies have also begun to collect important data
fees for tests in excess of 15,000 are lowered by a
about their patients admitted to hospitals.
percentage. The government is also urging
hospitals to include more items in the day rate
to mitigate expansion in certain services. Recently, a new foundation called the Na-
tional Organization for Quality Assurance in
Several health economists are studying the
Hospitals (Centraal BegeIeidingsorgaan voor In-
possibilities of stricter budgeting in hospitals, or
tercollegiate Toetsing in Ziekenhuizen) was
perhaps replacing hospital rates by a system of
established. This new organization is financed
budget financing under which there would be a
by hospitals, which are licensed by the Central
more direct relationship between output and
Board for Hospital Tariffs to include their con-
costs (lo, 12).
tribution as part of their reimbursement costs.
The new organization is expected to foster med-
Utilization Review ical audit and utilization review in hospitals,
There has not been much utilization review in particularly in cooperation with the medical
the Netherlands. In Utrecht, however, the Foun- societies.

As noted previously, article 18 of the hospital itive regulation of CT scanners by article 18, but
provisions law allows the government to issue the Secretary of State and the hospitals have
guidelines and regulate advanced medical tech- agreed not to install additional facilities without
nologies on the basis of a national plan. Only allowances from the government.
some medical technologies have been brought
In existing CT scanner guidelines, a distinc-
under this article to date.
tion is made between brain scanners and total
body scanners. For brain scanners, the guideline
CT Scanners is one scanner per 500,000 inhabitants. Brain
At the present time, there are 32 CT scanners scanners are to be installed in hospitals that
installed in the Netherlands. There is no defin- have teaching facilities in neurology and a
department of neurosurgery, and hospitals with mand for coronary bypass surgery. Notably,
scanners are to work in regional cooperation the Society of Heart Patients (Nederlandse Hart-
with other hospitals, On the basis of the existing patientenvereniging) deployed lobbying activi-
guideline and population, about 30 brain scan- ties in government and Parliament to increase
ners can be installed. These scanners will be the facilities and get permission for patients to
placed in the near future. have operations in other countries such as the
United States, Switzerland, and England (8). As
Total body scanners are to be placed in those
a result, patients may now be reimbursed by
university teaching hospitals which have a cen- sick funds and other private insurance for by-
ter for cancer patients, teaching facilities for X-
pass operations performed in foreign countries.
ray diagnostic and therapeutic procedures, ex-
pertise in radiation physics, a radiation therapy According to the Sick Fund Council, in 1978
simulator and treatment planning system, and there were 1,079 operations for open cardiac
the capacity for evaluating the results of CT surgery performed abroad as follows (18):
body scanning with those of other radiological
Houston, Tex., United States. . . . . . . . . . . . . . . 268
diagnostic methods, nuclear medicine, echogra- Genolier Swiss, Switzerland. . . . . . . . . . . . . . . . 501
phy, and clinical neurophysiology. Since a pre- London-St. Anthony’s Hospital, England. . . . . . 218
ponderant motivation is research, spreading CT London Middlesex Princess Grace
body scanners throughout the country is not Hospital, England . . . . . . . . . . . . . . . . . . . . . 92
deemed necessary. About eight total body scan- Total . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1 ,079
ners are to be installed. In 1977, the total number of operations per-
formed abroad was 965.
Renal Dialysis and Kidney Transplants
Planning for cardiac surgery is based on the
There has been a “gliding standard” of an ab- following guidelines: 300 operations for open
solute limit of a minimum of 71 and a maximum coronary surgery per 1 million inhabitants (i.e.,
of 111 dialysis units per 1 million inhabitants. 4,200 operations per year), 50 operations for
This gliding standard was made dependent on closed cardiac surgery (i. e., 720 operations per
the number of kidney transplants performed. year). The total capacity in 1976 was 2,095
The guideline for kidney transplants has been 32 open- and 388 closed-heart surgery operations.
transplants per 1 million inhabitants, and the The target at the moment is set at 6,000 opera-
Health Council urged the government to aim at tions a year. The specified guidelines are to be
400 kidney transplants per year. This goal has realized after 1980.
not been reached, however, because there have
The government has designated six teaching
not been enough kidneys available.
university hospitals and three general hospitals
The existing renal dialysis guideline applies as cardiac centers where these cardiac surgery
for patients older than 15 years. As dialysis is operations can be performed. Each center is to
being used for people over 60 years old, and aim towards a production of 400 operations a
more people are applying for treatment, how- year. Currently, the Antonius Hospital at
ever, the need for dialysis equipment is grow- Utrecht is performing 700 operations a year. In
ing. The government has recently increased the addition, very recently, the government desig-
guideline to 100 dialysis units per 1 million in- nated a sanatorium for tuberculosis to function,
habitants. This would bring the number of dial- in cooperation with a nearby general hospital,
ysis units, not including home dialysis units, to as a center for 1,000 operations per year.
1,407 in 1980.
Megavolt Radiation Therapy
Cardiac Surgery For planning these facilities on the basis of ar-
Cardiac surgery is a very hot political issue in ticle 18, the concept of a “radiation unit” is
the Netherlands. The supply of existing facilities used. A radiation unit is a megavolt apparatus,
is not sufficient to meet the ever growing de- with supplementary provisions, which has suffi-
152 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

cient capacity to treat 250 new patients a year. ation therapy. Given its population of 13.9 mil-
The capacity of telecobalt apparatus with a lion inhabitants, the country needs radiation
range of 2, OOO to 3,OOO curies is one radiation capacity for 20,155 new patients, i.e., 80 units.
unit. The capacity of telecobalt apparatus with The existing 49 units, therefore, may have to be
6,000 to 9,000 curies is two radiation units. A enlarged in the near future. Since 20 of the 1,450
linear accelerator can be counted as two radia- patients are treated by orthovolt units, how-
tion units. ever, the need for megavolt apparatus may be
less. For this reason, the government intends to
Currently, there are 49 radiation units in 20 follow a prudent policy in enlarging the existing
general, university teaching, and categorical facilities. Very recently, there have been indica-
(special purpose) hospitals in the Netherlands. tions that the need for radiation therapy may in-
The number of cancer patients in the Nether- crease. The government will ask the Health
lands is estimated at 3,250 patients per 1 million Council to advise on this matter. The guidelines
inhabitants, about 1,450 of whom need radi- may have to revised.

The proliferation of medical technology is of In light of these conflicting interests, the
great concern to the government of the Nether- evaluation of medical technolog y could play an
lands, which is confronted with ever increasing important role in the effort to find solutions to
costs of medical care. In an effort to restrain the difficult and delicate problems which sur-
costs, the government is seeking to control spe- round the diffusion of medical technology. In
cific elements of the health care system, espe- the area of technology assessment, the Nether-
cially hospital beds. There are many conflicting lands has as yet made very few contributions.
interests to be considered. Patients and doctors The need for technology assessment, however,
want the most modern technology. The medical is likely to be increasingly felt in the future. The
technology industry, with its importance in problems are international, so perhaps technol-
R&D and the general economy, is another im- ogy assessments could be performed on a Euro-
portant force. Although a full employment pol- pean basis. I would hope that the European
icy favors the expansion of health care person- community will be able to make a contribution
nel, the rising costs of the health care system in this area.
may jeopardize the general economic system.

1. Algemene Bank Nederland, E/ektrisch-Medische zorg, ” in Verslag Symposium, KHSV Nijmegen,
Apparatuur (Amsterdam, April 1978). Oct. 13,1977.
2. Centraal Bureau voor de Statistiek (Central Bu- 6, Ministerie van Volksgezondheid en Milieuhy -
reau of Statistics), Statistisch Zakboek 1 9 7 8 giene (Ministry of Health and Environmental
(The Hague, 1978). Protection), Financieel Overzicht van de Ge-
3. Vademecum Gezondheidsstatistiek zondheidszorg, Waarin Opgenomen een Raining
Nederland 1977 (The Hague, 1977). van de Kosten tot 1984 (The Hague, September
4. Gezondheidsraad (Health Council), Advies in- 1979).
z a k e Faciliteiten en Kosten Niertransplantaties 7. , Financieel Overzicht van de Gezond-
LJitgebracht door een Commissie uit de Gezond- heidszorg, Waarin Opgenomen een Raining van
heidsraad (The Hague, May 5, 1977). de Kosten tot 1984 (The Hague, September
5. Groot, L. M. J., “Economische Problematiek 1979).
rend Technische Innovatie in de Gezondheids- 8. Naaborg, R., “Beleidsvorming in de Gezond-
heidszorg, Zoeklicht op de Hartchirurgie, ” dis- 14. , Statistiek Perso/zee/ssterkte 1978 itl de
sertation, Rotterdam, 1979. l~~stc!litzgetl L’~tI liltran~urule Gezotld/leidszorg,
9. Nationaal Ziekenhuisinstituut (National Hospi- 79.165 (Utrecht, 1979).
tal institute), Bo~lz~]~?o/t/t~ ~e-B~/dgette~’i~~g Alg=e- 15. Nota van de Stattssecretaris van Volksgezond-
~~~e~~e Zieke~z)~~/izen, 76.96 (Utrecht, 1976). heid en Milieuhygiene aan de Voorzitter van de
10. , Erc>/zc~/}~ett-iscl~e A}~alyses itz )Jet Kader Tweede Kamer der Staten Generaal Betreffende,
~~atl )let Basis o}lderzoek- Kos te~zs tructuzi r Zieke?z - Het Beleid terzake va}l de Gezo~ld}leidszorg i?let
l~zfizc~~, 76.90A, 76.90B, 76.90C (Utrecht, 1976). /let oog op de Koste~~orltu~ikke/i/~g, G e d r u k t
11. , Fitzarlcie[e Statistiek 1976 itl de Imtell- stuk 15-540, nrs. 1-2 (The Hague, 1979).
illgc}l zla~z lfltra)~ll[rflle Gezorzdlzeidszorg 16. Roscam Abbing, E. W. (cd.), Boz~uI e~z Werki~~g
(LJtrecht, 1977). l~atl de Gezo)ld)leidszorg ill Nederla~zd (Utrecht:
12. Ftl)zctieclassificatie zlatl Alge}~le/le Ziek- Bohn, Scheltema & Holkema, 1979).
enhliiz;}l i~l /let Kader ~~at~ het Basisonderzoek 17. Van Montfort, A. P. W. P., “Analyse van de
Kostpilstrlict[l[lr Ziekerl/lt~izetl, Dcel 3 , 7 5 . 7 6 Kostenstijging in de lntrarnurale Gezondheids-
(LJtrecht, 1976). zorg, ” Het Zieke/llzl/is 7: ]5, AugLIst 1977.
13. Otltu~ikkelitlgc)l iil d e Vraa,g ~zaar Spe- 18. Ziekenfondsraad (Sick Fund Council), Jaarz~er-
ciulistis’c~ze Elzllp, V. IOT (Utrecht, 1977). slag 1978 (Amsterdam, 1978).
9 ■

Medical Technology in
the Health System of Iceland

David Gunnarsson
National Hospital
Reykjafik, Iceland
David vB. Neuhauser
School of Medicine
Case Western Reserve University
Cleveland, Ohio

Iceland: Country Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 157
Health Services. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..........160
Medical Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....161
Specific Technologies. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...............162
CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .162
Renal Dialysis.. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................163
Coronary Bypass Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ......163
Cobalt Therapy. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...164
Automated Laboratory Testing Equipment . . . . . . . . . . . . . . . . . . . . . . . . . ..164
Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ................164
Chapter preferences . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....164


Table No. Page

1. Distribution and Growth of Iceland’s Population. . . . . . . . . . . . . . . . . . . . . . . .159
2. Distribution and Growth of Iceland’s Population Over Age 67..............160


Figure No. Page

1. Demographic Trends in Iceland . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ........158
2. Proportion of Iceland’s Total Population of Males and Females in
5-Year Age Groups. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .159
Medical Technology in
the Health System of Iceland
David Gunnarsson
National Hospital
Reykjavik, Iceland
David vB. Neuhauser
School of Medicine
Case Western Reserve University
Cleveland, Ohio


Iceland is a Scandinavian republic of 224,000 fore, although population growth is not great,
population (1978) located in the North Atlantic Reykjavik is a city in which there is a great deal
near the Arctic Circle. It is a country of almost of construction.
no trees and has a rugged volcanic landscape.
Iceland’s economy is mixed—public and pri-
Iceland has one of the world’s lowest popula- vate. Except for an aluminum refinery (Icelandic
tion growth rates, lowest infant mortality rates Alloys, Ltd.), cement plant, fertilizer plant, and
(11.3 per 1,000 live births, 1978; 9.5 per 1,000 diatomite industry, there is little heavy in-
live births, 1977), and longest life expectancy dustry. Fishing occupies 11 percent of the labor
(male 73.0 years, female 79.0 years, 1975-76). force, and more than 75 percent of Iceland’s ex-
Demographic trends between 1850 and 1975 are ports are fishing products. The country’s fishing
shown in figure 1. The proportion of the total industry is technologically very advanced.
population of males and females in 5-year age
groups is shown in figure 2. Only 9.5 percent of Iceland’s hydroelectric
The population is spread along the coast, energy potential is in use. If calculated with cur-
with 100,000 people living in the capital city of rent technology, 12 percent of the profitable po-
Reykjavik and surroundings. (See table 1.) tential is being realized. Geothermal energy is
Reykjavik has the same growth of population as used to heat all of Reykjavik and many other
other Scandinavian capitals do. The proportion places.
of persons over the age of 67 is growing faster in
Iceland is a republic. It has the oldest parlia-
Reykjavik than in other parts of the country.
ment in continuous existence and no fewer than
(See table 2.)
224 elected municipal councils. Parliament
Iceland has a high per capita gross national (Al thing) is divided into an Upper Chamber and
product (GNP) and a per capita income of a Lower Chamber. The chief of state is an
$9,470 (1978). There are no very rich and no elected President without political power. The
very poor. Inflation, which in past years has political parties are the Independence Party, the
averaged 30 percent, was up to 69 percent in Progressive Party, the Peoples Alliance, and the
November 1979. Because of this high inflation, Social Democratic Party. In foreign policy, the
people tend not to save money but to invest im- major issue on which these parties disagree is
mediately in houses and automobiles. There- that regarding the continued presence of an
158 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Figure 1 .–Demographic Trends in Iceland (1850.1975)

Infant KR



5O 200






Female --- _ Male

400 Icelandic kronur = $1.00 (U. S.)

American air base an hour’s drive from Reykja-

Family ties in Iceland are still very strong, and
vik. Iceland has no army.
as a rule, primary social assistance is rendered
National funds come from a 22-percent sales
by the family. Iceland’s few inhabitants, the
tax, export/import duties, and from income tax.
country’s distance from other countries, and the
The highest income tax rate is 50 percent.
homogeneity of its population result in close
Municipal funds come from a 10- to 12-percent
income tax and real estate taxes. personal contacts across occupations and work
Ch. 9–Medical Technology in the Health System of Iceland . 159

Figure 2. —Proportion of Iceland’s Total Population

of Males and Females in 5-Year Age Groups (1977)

Years Male Female

85 years and older

80-84 years
70-74 I
80-84 1

Proportion 12 10 8 6 4 2 0 2 4 6 8 10 12 “/o

Table l.— Distribution and Growth of Iceland’s Population (1970-78)

— — —. — — —
- -
Reykjavik Reykjavik area “ “ ‘
Iceland N u m b e o f
- -
‘ - Percent of
Number of Percent of
Year Total population inhabitants total population inhabitants total population

1 9 7 8 . . . . , 224,384 83;092 -
- 37.2% 119,054 53.00/0
1977 . . . . . . 222,470 83,387 37.7 118,422 53.2
1976. , , . . . . . . 220,918 84.493 38.3 118.241 5 3 5
1975. . . . . 219,033 84,856 38.7 117,736 53.8
1 9 7 4 . , 216,628 84,772 39.1 116.410 53.7
1973. , : : 213.499 84,333 39.5 114,453 53.7
1 9 7 2 , . . . 210,775 83,977 39.8 113,276 53.7
1971 . . . . . . . . . . . . 207,174 82,892 40.0 108.770 53.5
204.344 81,561 39.9 — —
1970. . . . . . . .
160 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Table 2.—Distribution and Growth of Iceland’s

Population Over Age 67(1970.78)

Percent of population
— — —over
— —age 67
Year Iceland Reykjavik
1978 . . . . . . . . . . . . . . 8.5% 10.7%
1977 . . . . . . . . . . . . . . 8.3 10.3
1976 . . . . . . . . . . . . . . 8.0 10.0
1975 . . . . . . . . . . . . . . 7.9 9.5
1974 . . . . . . . . . . . . . . 7.9 9.3
1973 . . . . . . . . . . . . . . 7.9 9.1
1972 . . . . . . . . . . . . . . 7.8 8.8
1971 . . . . . . . . . . . . . . — 8.5
1970 . . . . . . . . . . . . . . 7.6 8.3

In 1978, Iceland spent about 7 percent of its including physicians, are unionized. The
GNP on health—a little less than the percent of unions, which are organized by occupation,
GNP spent by Sweden or the United States negotiate with the Ministry of Finance for pay
(8,9). Iceland’s health service is almost entirely scales. z The National Government pays the
funded within the government sector. In 1974, a municipality for hospital care on the basis of
new health law was issued in Iceland. The law’s (0.92) times (patient days) times (agreed upon
main emphasis is on advancing outpatient and patient day charge). When a patient from one
community services. municipality is hospitalized in another, there is
a transfer payment to the second municipality.
The Minister of Health is a member of the
If the patient is hospitalized at the National
government and is usually a Member of Parlia-
Hospital (discussed below), however, no trans-
ment. The Secretary General is the senior civil
fer payment is made.
servant for health. The Chief Medical Officer is
the next most senior post. The country is di- The municipal council, among other things,
vided into eight local health government areas, appoints the administrator of the local hospital
and local health governments are appointed by and approves the hospital’s budget. If major
the municipal councils and boards of institu- capital expenditures are being considered, Na-
tions in each area. tional Government approval is sought to ensure
that 85 percent of the investment funding is ob-
Key decisions in the Ministry of Health are:
tained this way. If the National Government re-
1) hospitals’ per diem rate, 2) physicians’ cavi-
fuses to approve a project and provide funding,
tation and fee rates, and 3) patient payments.
however, the municipality can, if it chooses, fi-
Patient payments for outpatient visits do not
nance the project itself.
change often and are not a major issue. The per
diem funding rate for municipal hospitals is Perhaps because of rising health care costs,
decided by a joint committee composed of both the municipalities’ central organization has
national and municipal authorities. asked for municipalities to be relieved from pay-
ing for their hospitals. There is now a political
Since the patient day charge is based on the
debate over whether the National Government
costs of salaries, positions, and supplies for the
previous 3-month period, a snowball effect
tends to increase costs. 1 All hospital workers,
‘inflation, however, tends to keep spending down.
Ch. 9–Medical Technology in the Health System of Iceland ● 161

should take over the funding and management local funding. These clinics are operated with
of all the hospitals. both national and local funds.
Iceland has 21 general hospitals. The largest Ambulatory care is largely provided outside
three are in Reykjavik. The National or Univer- of hospitals by private practitioners. Private
sity Hospital (Rikisspitalar) has a total of 1,082 practitioners receive most of their income from
beds and is the largest hospital in the country. the National Government, partly by cavitation
The Rikisspitalar organization includes, for ad- and partly per visit. The patient pays 2,000
ministrative purposes, a 238-bed psychiatric Icelandic kronur ($4.30)’ per visit. Pharmacy
hospital (including beds for alcoholism), a 184- services are paid for by the National Govern-
bed hospital for the mentally handicapped, a 76- ment, and the patient pays about 2,000 Icelan-
bed hospital for chest disease, and a 76-bed dic kronur ($4.30) per prescription. There are
nursing home (in the north of Iceland). The some small fees paid by ambulatory patients go-
main hospital, Landspltal inn, has 508 acute care ing to hospitals for X-rays or other procedures
beds, including beds in maternity, gynecology, unavailable in physicians’ offices, but there is no
psychiatry, neurology, and pediatric depart- charge to patients for inpatient care.
ments. The National Hospital is the primary
Iceland is probably educating more doctors
teaching hospital of the University Medical
per capita than any other country in the world.
School. Unlike other hospitals, the National
For the years 1975 to 1979, Iceland graduated an
Hospital has a fixed budget and receives almost
average of 21.6 doctors per 100,000 inhabitants
100 percent of its funding from the National
each year (6), As of January 1, 1979, Iceland
had 651 licensed medical doctors, or 290 doctors
The second largest hospital in Iceland is the per 100,000 inhabitants (1,6).
Reykjavik City Hospital. This institution, like
Physicians who work 75 percent or less of
all other local hospitals in Iceland, receives 9 2
their time in a hospital may pursue private prac-
percent of its operational funds from the Na-
tice as much as they wish. Physicians who spend
tional Government and 8 percent from the local
more time in the hospital are limited to 6 hours
government. The third largest hospital, Land-
of work per week outside the hospital. Nearly
akotsspitali, was founded by a Catholic Order
all Icelandic physicians do some private prac-
of Sisters from East Germany. In 1976, the Na-
tice, so a sharp separation between hospital and
tional Government bought the hospital and
nonhospital doctors does not really exist.
handed it over to an independent board of
trustees. Both these hospitals are funded by a
per diem rate.
A number of health clinics are being built
with 85-percent national funding and 15-percent

Being a small country, Iceland has no medical Because of Iceland’s excellent population
technology industry of its own. The country’s records, which go back 150 years, medical re-
close contacts with other Scandinavian coun- search often relies more on those and clinical
tries, the United States, and England, however, population studies than on elaborate labora-
guarantee that medical technology know-how tories with expensive technology. Research out-
gets to Iceland fast. At any one time, about one- side the University is funded by the Cancer and
third of Icelandic physicians are abroad, some Heart Societies, which obtain some money for
of whom are obtaining medical specialization in research from the National Government and
specialties unavailable in Iceland. some from yearly lotteries and donations. The
162 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

University Medical School does not provide approved drugs in Iceland is maintained by a
research funds, but faculty may use spare time committee of the Ministry of Health.
in the National Hospital for clinical research.
Most of the teaching facilities and equipment for Health planning at the national level is the
medical research are provided by the National responsibility of the Ministry of Health. For ma-
Hospital. The major source of funds for con- jor decisions, however, local involvement re-
struction of the University Medical School is the sults in formal negotiation. Such decisions in-
University lottery. clude capital expenditures and the addition of
hospital beds. If a technology requires special
Studies in health economics are becoming in- expenditures, the matter will be debated and
creasingly common and are gaining interest decided upon through the budgetary process—
among Iceland’s decisionmakers. A number of first with approval at the hospital level, then at
senior doctors in Iceland are interested in cost- the level of the Ministry of Health, and then by
effectiveness studies of health care programs. review of the Ministry of Finance and approval
Excellent evaluations of some programs have by Parliament. It would not be unusual for a
already been conducted. A program to reduce local hospital administrator or doctor to discuss
smoking by high school youths, for example, re- the subject with the local parliamentar y m e m -
ceived a careful evaluation (7). An evaluation of ber, who might be a neighbor, former school-
the cost of automobile accidents and their mate, second cousin, or all three.
prevention has also been done (3). Decisions
about programs and new technology that are During the years, it seems, the National Gov-
based on analysis of costs and effectiveness are ernment has had difficulties” in controlling both
well received. As in other countries, however, capital and operational expenditures. The build-
decisions in these areas are generally influenced ing of health centers in the south of Iceland is an
by political forces. example. Initially, there were plans to build
only four centers. When the politicians in Par-
Consistent with the informality of a small liament had had their say, however, there were
country, there are no detailed regulations per- seven, three of which had no permanent
taining to the safety and efficacy of medical doctors.
technology, quality of medical care, etc. There
are strict regulations for electrical equipment in There is no utilization review. Hospitals em-
general, however, and medical equipment must ploy chiefs of service who are responsible to the
adhere to these. At the National Hospital there Chief Medical Officer. These individuals are re-
is a physical technical department, which most sponsible for assuring efficient utilization and
of the other hospitals consult when choosing or quality of care in their service as are chiefs of
approving apparatus. There is a national drug service in Sweden or England. This control
formulary, but a hospital may obtain other mechanism is better developed in the larger
drugs and special drugs for research. The list of hospitals.

Given Iceland’s small population, the coun- at both the National Hospital and at the Reyk-
try’s medical care technology is modern and ex- javik City Hospital, however, believe there is an
tensive. Most specific technologies have been es- urgent need for one.
tablished as soon as technological knowledge
has become available in the country.
The two matters at issue are the location and
type of scanner. Doctors at each of these institu-
CT Scanners tions have been developing their justification for
As of September 1979, Iceland does not have having a scanner at their own hospital. Part of
a computed tomography (CT) scanner. Doctors the problem is that neurology is at the City
Hospital and neurosurger-y is at the National Renal Dialysis
At any given time, there are three or four pa-
Reykjavik City Hospital doctors argue that tients needing dialysis. This number has reached
they need a scanner there because they run the a high of eight patients. There are four dialysis
major emergency service for the city, and some machines at the National Hospital in Reykjavik,
trauma cases need a head scan as soon as possi- and these have been available for several years.
ble. Doctors at the National Hospital argue that
they need a body scanner there because they Coronary Bypass Surgery
have neurology, oncology, and radiation ther- As of September 1979, coronary bypass sur-
apy departments, and doctors in these depart- gery is not being performed in Iceland. Patients
ments do 200 tests per year (such as pneumo- needing this procedure, about 35 a year, are sent
encephalography) which a body scanner would abroad at the expense of the National Govern-
replace. Further, they suggest, an additional ZOO ment. They generally go to Hammersmith or
to 400 tests that are not done now because doc- Bromton Hospital in London, institutions cho-
tor-s prefer to avoid the risky, unpleasant proce- sen because of personal contacts between Ice-
dures available probably would be done if a CT landic surgeons and the surgeons at these
scanner were available. hospitals.

The National Hospital doctors worked Whether bypass surgery should be performed
through an analysis of the value of the body in Iceland has been debated at some length over
scanner. They argue that there are certain several years. A committee of doctors was ap-
cancers which are detectable by body scanner pointed by the Ministry of Health to make a de-
only, retroperitoneal cancer being the primary cision about it. It is recognized that the volume
example. They also argue that the body scan- of patients would not be very large—perhaps
ner, by more accurately locating a tumor, will double the current number. This volume might
increase the chances of radiating all the cancer not be enough to maintain a high-quality serv-
and lower the chances of radiating noncancer- ice. One senior government official in the Min-
ous tissue. istry of Health, however, said the Ministry
would be willing to accept a slightly higher
The doctors at the National Hospital feel operative mortality rate in order to achieve
somewhat discouraged in pursuing their analy- “medical independence. ” Having bypass surgery
sis, however, because they believe that political in Iceland, it was argued, would eliminate the
lobbying will determine which hospital gets a need for having Icelandic patients go for the
scanner. If the Reykjavik City Hospital gets a procedure to a foreign country, where they
scanner, the city must pay 15 percent of the pur- would not feel as comfortable as they would at
chase cost; if the National Hospital gets it, all home. It was also argued that existence of ca-
the costs will be paid through the National pacity for this surgery would improve other as-
Government. pects of the country’s surgical and medical care.

The final decision concerning the purchase of The committee of doctors appointed by the
a CT scanner will be made by the Parliament Ministry produced a report with some analysis
during the budgeting process. Because of the and decided that coronary bypass surgery
high cost of buying a scanner, Parliament is in- should be started at the National Hospital. An
terested in buying only one, and it is relying on Icelandic physician in Sweden is becoming pro-
the doctors and administrators in the two hospi- ficient in this procedure and will return to
tals to cooperate. Iceland to start it. An existing operating room is
to be set aside for specific periods in the year for
In the meantime, the Icelandic Government coronary bypass surgery. Experienced nurses
does pay for some CT scanner examinations and a surgeon are to come from abroad during
abroad. Some Icelanders go abroad and pay for these periods, at least during a transition period
this test themselves. until proficiency is achieved locally.
164 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

The committee’s analysis reflects careful Cobalt Therapy

thought given to fixed costs, capital expendi-
This procedure has been available since 1969
tures, proficiency of the surgical team, and
at the National Hospital. It was provided as a
other effects of the committee’s decision. Some
gift from the International Order of Odd Fel-
Icelandic physicians, though, are still unsatis-
lows, a men’s benevolent organization, the Can-
fied with the decision. They maintain that they
cer Society, and several individual gifts.
themselves would prefer to go abroad for this
procedure, If coronary bypass surgery is per-
formed in Iceland, the National Government
Automated Laboratory Testing
will no longer pay for this procedure abroad. Equipment
High-volume testing machinery such as the
In February 1980, the Minister of Health SMA12 or SMA16 is not currently in use. The
decided that coronary bypass surgery will be volume of tests seems sufficiently small at any
started at the National Hospital in the beginning one location, however, that there appears to be
of 1981. no pressing need for it.

Perhaps the most striking feature of Icelandic doctors. A second notable feature is the implicit
health policy decisionmaking, the result of the balancing, as in the case of coronary bypass
small size of the country, is the frequency of surgery, of medical quality and medical
contact between politicians, administrators, and independence.

1. Bjarnason, O., Sk61ayfirlaeknir (Chief Medical 6. H5sk61i ~slands (University of Iceland), internal
Officer of the School Health and Community document (Reykjav~k, n,d. ).
Medicine), internal document (Reykjav~k, Feb- 7. Magnusson, G., Professor, University of Ice-
ruary 1980). land, lecture at the Cancer Society, Reykjav;k,
2. Framkvaemdastofnun Rik~sins (Economic De- 1977.
velopment Institute), Ma~~}zfjoldi, mutltzafli og 8. Olafsson, O., Landlaeknir (Dire;tor General of
telq’ur (Reykjav{k, 1979). Public Health, Iceland), internal document
3. Gunnarsson, D. A., R~issp;talar (National Hos- (Reykjafik, February 1980).
pital), lecture at the Icelandic Automobile 9. Pj6?$hagsstofnun (Economic Institute of Ice-
Association, Reykjav;k, 1978. land), internal document (Reykjafik, n.d. ).
4. Hagfrae~ideild Reykjavlkur (Eco~omic Depart- 10. Selllabanki Islands (Central Bank of Iceland),
ment of the City of Reykjav;k), Arbok Reykja- Hagttilur tttZna3aritw 74-79 (Reykjav~k, 1979).
z?~kurborgar 1979 (Reykjav7k, 1979).
5. Hagstofa~slands (Statistical Bureau of Iceland),
Ha,gti5it~di 71-79 (Reykjafik, 1979).
Controlling Medical Technology
in Sweden

Erik H. L. Gaensler
Lewin and Associates, Inc.
Washington, D.C.
Egon Jonsson
Swedish Planning and Rationalization Institute
Stockholm, Sweden
Duncan vB. Neuhauser
Case Western Reserve University
Cleveland, Ohio

Sweden: Country Description . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 167
Historical Origins and Development of the Medical System . .................169
The Swedish Bureaucracy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........169
The Parish System of Decentralized Administration . ...................170
State Secular Hospitals . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ...........170
Counties and County Councils . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......171
National Health Insurance, Employment of Doctors by the State, and
Medical Regions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .171
Mechanisms for Controlling Medical Technology . ........................172
Swedish Patients and Constraints on Consumer Demand . ...............172
The Regionalized Hierarchy of Hospitals. . . . . . .......................174
State Education and Employment of Medical Personnel. . ................176
Governmental Evaluation and Control of Medical Technology . ...........176
Summary of Mechanisms for Controlling Medical Technology . ...........177
Specific Technologies . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...178
CT Scanners . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........178
Coronary Bypass Surgery . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........181
Renal Dialysis. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .......184
Cobalt Therapy. . . . . . . . . . . . . . . . . . . . . . . . ........................184
Automated Clinical Laboratories . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ....185
Concluding Remarks . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . ..............185
Chapter l0 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .........185


Table No. Page

1. Demographic Characteristics of the United States and Sweden . ............167
2. Data on Health in the United States and Sweden. . . . . . . . . . . . . . . . . ........168
3. Data on Medical Care Providers and Facilities in the United States and Sweden .168
4. Estimated Number of Coronary Artery Bypass Operations Performed
in Sweden. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . , . . 183
5. Number of Renal Dialysis and Renal Transplant Patients in SwedenbyRegion .185


Figure No. Page

1. Relative Proportions of Different Cost Items in the Total Costs
of Pneumoencephalographic, Cerebral Angiographic, and CT Examinations. . .179
2. Projected Annual Cost Increase or Decrease Resulting From the
Introduction of a CT Scanner. . . . . . . . . . . . . . . . . . . . . . .................180
10 ●

Controlling Medical Technology

in Sweden
Erik H. L. Gaensler Egon Jonsson
Lewin and Associates Inc. Swedish Planning and Rationalization Institute
Washington, D.C. Stockholm, Sweden
Duncan vB. Neuhauser
Case Western Reserve University
Cleveland, Ohio


Sweden is a Scandinavian country of 8 mil- Like England, Sweden is a constitutional
lion people. It is 1,500 miles in length and its monarchy in which all Federal political power
northern part is above the Arctic Circle. Largely rests in an elected Parliament. Local units of
urban and highly industrialized, Sweden has government are the lans (counties), of which
one of the world’s highest per capita incomes. there are 25. Although Sweden has not fought in
The country’s economy is mixed capitalist and a war since 1812, it maintains a modern army
socialist. Basic demographic data for Sweden with compulsory military service.
and the United States are presented in table 1.
Sweden provides extensive health and welfare
Sweden’s internal development has occurred benefits for its citizens. Demographic data and
in an atmosphere of tranquility unknown to information on health and medical care in Swe-
most Western nations. Except for an ultimately den and the United States are presented in tables
unsuccessful expansionary period during the 2 and 3, respectively. All 8,236,179 Swedes1 are
17th and 18th centuries, Sweden’s history has covered by compulsory health insurance. This
largely been one of relative isolation, distin- pays for all physician care and hospital services,
guished by neutrality since the Napoleonic except for a modest copayment fee of about
Wars. The stability of this country is reflected in $4.50. Care for the chronically ill is provided in
the continuity of Swedish politics. During this nursing homes or at the patient’s residence at no
century, one party, the Social Democrats, ruled extra charge. Drugs are free except for a modest
for 44 years with only a 3-month hiatus prior to
their defeat in 1976 (65). ‘By census as of Dec. 31, 1976 (56).

168 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

Table 2.—Data on Health in the United States and Sweden

Table 3.—Dataon Medical Care Providers and Facilities

in the United States and Sweden

United States Sweden

Health expenditures
Percent of GNP spent on health services(1969) . . . . . . . . . . . . . 6.7%. 6.4%
Annual health expenditures per person (U.S. dollars)(1969) . . . $298 $234
Physicians and nurses
Dentists per l0,000 population (1970). . . . . . . . . . . . . . . . . . . . . . 5.0 8.4
Doctors per l0,000 population (1970) . . . . . . . . . . . . . . . . . . . . . . 15.8 13.6
Nurses per 10,000 population(1969) . . . . . . . . . . . . . . . . . . . . . . . 33.5 38.2
Percent of general medical practitioners in
group practice(1971). . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12.O% 20.0%
All hospital beds per 1,000 population (1969). . . . . . . . . . . . . . . . 81.0 164.0
Average number of beds in general hospitals(1969) . . . . . . . . . . 155.0 540.0
Average number of beds in psychiatric hospitals(1969) . . . . . . . 1,174.0 146.0
Psychiatric beds per 1,000 population (1969) . . . . . . . . . . . . . . . . 30.3 62.8
Admissions to general hospitals per l,000 population(1969) . . 144.6 147.0
Average length of stay(days) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9.3 12.6

basic charge, and prescriptions for such long- Largely because of the cost of Sweden’scom-
term conditions as diabetes or epilepsy require prehensive health and social welfare benefits,
no copayment. Also provided in Sweden are which absorb almost three times as much of the
maternity benefits, compensation for 90 percent budget as defense, Swedes pay among the high-
of lost income during illness, and various types est taxes in the world (44). The magnitude of
of pensions. All of these benefits, which main- these taxes is a commentary on the Swedes’ high
tain the citizen’s health indirectly by providing priority for good health. In fact, in a 1975
for economic well-being, are part of the Swedish survey, a representative sample of the popula-
matrix that blends health and social welfare tion ages 18 to 70 years listed medical and dental
functions.2 care first among 29 potential uses of an increase
in the nation’s total revenues (11).
As a country that not only is actively trying
to control the use of medical technology but has
C/I. 10—Controlling Medical Technology in Sweden ● 169

had some success in doing so, Sweden is a fasci- section of this chapter. In the following section,
nating case. The efforts of Swedish planners are the general mechanisms that Swedish planners
aided by the Swedish bureaucracy’s favorable use to control the diffusion of medical technol-
relationship with the citizenry. They are greatly ogies—the rationing of medical care, the educa-
facilitated, as well, by the regionalized hierar- tion and employment of doctors by the state,
chical structure of Sweden’s health care system. and the evaluation of specific technologies and
issuing of voluntary guidelines by the Swedish
To understand the regionalized structure of Planning and Rationalization Institute of the
Sweden’s present health care system, it is neces- Health Services (SPRI)—are described. The sec-
sary to gain some appreciation of the major tion after that contains case studies of specific
forces in Swedish history that have affected its technologies to illustrate how Sweden’s system
development. These are discussed in the next operates in practice.


Two aspects of the Swedish health care sys- First, friction between nobles and serfs in Swe-
tem, regionalization and socialization, are criti- den was inarguably less than it was on the con-
cal in understanding the manner in which Swe- tinent, and Sweden’s aristocratic civil servants
den controls medical technology. The origins of did not have to bear the burden of citizen antag-
these features of this country’s medical care onism. Second, comprising an elite, selected
structure are rooted in Sweden’s political, eco- from the well educated and capable, the Swed-
nomic, and cultural history. ish civil service usually acquitted itself in a style
worthy of the respect accorded it.
The fiscal “socialization” of Swedish medicine
did not occur until national health insurance The result has been described by British his-
was implemented in 1955, the regional system of torian Roland Huntford (24):
medical services was not established until 1958,
The identification of aristocracy and civil
and the employment of doctors by the Swedish
service has conferred on the Swedish bureaucrat
Government did not come about until the estab- a unique supremacy and esteem. For centuries,
lishment of a national health service in 1969. As he has been honored with deference and respect.
described below, however, events as early as the He has never had to bear the scorn, dislike, and
16th century predisposed Sweden to develop the suspicion poured on the state functionary in so
regionally organized and tractable medical sys- many other countries. He is considered greater
tem that facilitates controlling the diffusion of than the politician, the lawyer, and the industri-
modern medical technologies. alist, The senior official remains, true to the
figure of a mandarin, at the top of Swedish soci-
The Swedish Bureaucracy ety . . . . The chief civil servant has more pres-
tige than his minister.
The effectiveness of the Swedish bureaucracy
State office was monopolized by the Swedish
is partially rooted in the bureaucracy’s histori-
nobility until the late 19th century; at that time,
cally favorable relations with the citizenry. The
highly competitive examinations were intro-
origins of the Swedish civil service date to medi-
duced to determine entrance to the “executive”
eval times. Unlike many other countries, Swe-
guild, so the Swedish bureaucracy has remained
den failed to develop a feudal system, so rather
a recognized elite (20).
than becoming feudal lords, Swedish nobles
entered into the service of the king. The conse- Good bureaucrat-citizen relations are
quences of the nobles’ playing the role of civil guarded in Sweden by special officials called
servants rather than feudal lords were twofold. “ombudsmen, ” who have been active since
170 ● Background Paper #4: The Management of Health Cure Technology in Ten Countries

1809. It is their duty to investigate complaints The parish system also provided a geograph-
against the government and its agencies on be- ic blueprint for administrative regions. This
half of the electorate. The diffusion of the Swed- framework was exploited by the government as
ish word “ombudsman” into other languages is a basis for decentralized medical care responsi-
testimony to the longstanding responsiveness of bility when it ordered the church to provide ru-
the Swedish civil service, a responsiveness that dimentary care for its parishioners in the 17th
is only beginning to be duplicated elsewhere.3 century.
The effectiveness of the Swedish bureaucracy
State Secular Hospitals
also stems from the bureaucracy’s insulation
from political tides. Even when governments Before the Reformation, the Catholic Church
turn over, as happened in 1976, the medical ad- had established helgeandshuser (lit: holy ghost
ministration remains intact. This is because the houses) for the care of the sick and the poor.
chief health officer, the Director-General of the When King Gustav Vasa de facto nationalized
National Board of Health and Welfare (Social- the church in 1527, he took pains to see that
styrelsen), is not a Cabinet Minister, but a civil these salutary functions were continued. In a
servant who works on a theoretically apolitical series of letters4 to priests and taxmasters, King
plane above the elective government. The con- Gustav ordered that parish services to the indi-
tinuity of the Swedish medical civil service gent and ill be maintained, and authorized tax-
has enormously facilitated health planning, be- masters to finance them (64). This royal ini-
cause in some cases, as many as 20 years have tiative marks the beginning of the government
elapsed between the issuing of a report and its takeover, or socialization, of medicine i n
implementation. Sweden.
The development of state hospitals was fur-
The Parish System of Decentralized ther spurred by the needs of the 17th century.
Administration Swedish troops, particularly during the Napole-
The subjugation of the nobles to the state was onic Wars, were devasted by syphillis (50). For
not the only important source of qualified treating the soldiers, venereal disease hospitals
administrators for Swedish development. The called kurhus (lit: cure-house) were established,
Reformation, embraced by King Gustav Vasa in and government district doctors were appointed
the 1530’s, resulted in the establishment of a to staff them (22). These secular hospitals estab-
Lutheran State Church which exists to this lished a second channel for medical services,
d ay (45). Following the union of state and alongside the parish system, that eventually
church, the clergy continued its task of keeping came to dominate.
parish records of births, deaths, and population When the last soldiers returned from the Na-
movements, but now this activity amounted to poleonic Wars to henceforth neutral Sweden, a
census taking on behalf of the state. This source third course of medical development, a civil
of demographic information has proved to be one, was already being pursued. Military spend-
invaluable to medical planners on many ing was being reduced, so to preserve the kurhus
occasions. system, a head tax was levied. A number of hos-
pitals independent of the original “holy ghost
Today, a special medical ombudsman plays a crucial role in ar-
houses” had already been established in the ma-
bitrating consumer complaints against the health care system. This jor cities. These were more reassuringly named
ombudsman and the Medical Responsibility Board of the National lasaretts, s after the biblical figure Lazarus who
Board of Health and Welfare usually settle what would be mal- was raised from the dead. In the century preced-
practice claims in the United States with far less litigation and
lower awards (70). A frequent complaint in the United States is ing 1864, the landmark year when the lans
that the defensive medicine produced by malpractice claims leads
to overuse of diagnostic procedures. It is interesting to note, there-
fore, that the volume of laboratory and X-ray tests ordered in
Swedish hospitals is only one-half of that performed in American
hospitals on similar patients (12,30).
Ch. 10—Controlling Medical Technology in Sweden ● 171

(counties) and landstinget (county councils) istration of health care to the county councils in
took over the hospitals, nearly 50 lasaretts were 1864.
built, and the number of beds went from 200 to
nearly 3,000 (67). National Health Insurance,
Employment of Doctors by the State,
Counties and County Councils and Medical Regions
Sweden was not politically organized in a The Social Democrats came to power in 1932,
highly centralized fashion until quite recently. and it was during their 44-year tenure (1932-76)
In the 19th century Sweden’s economy was that Sweden’s health care system evolved most
based on loosely connected and geographically of the features that facilitate its control of tech-
disparate clusters of industry, mining, and nology: 1) national health insurance, 2) the em-
agriculture called bruks (46). The parishes and ployment of doctors by the state, and 3) a re-
bruks were too small to deal directly with the gionalized, hierarchical system for the provision
Swedish Government, so for their dealings with of medical services.
the state, they had formed small clusters called
lans, or counties. These lans eventually came to During the period 1862-1955, numerous vol-
be used as the new administrative base for medi- untary insurance plans had evolved to replace
cal care delivery. patients’ income, but the financing of outpatient
care remained largely in private hands. Inpa-
In the reforms of 1862, 25 counties (mostly tient care was financed through a system of
rural areas with a central market town) and four employer-financed sickness funds (sjukkassor)
self-standing cities were officially designated (35). In 1910, only 10.7 percent of Swedes were
lans (40). A mere 2 years later, in 1864, the active members of the over 2, O O O sickness
responsibility for health of citizens in each of funds; by 1930, this figure had grown only to
these lans was invested in the landstinget (lit: 16.6 percent (57).
county council) which had been formed to ad-
minister the Ian (58). At first exclusively de- National health insurance covering outpatient
voted to providing for the hospitals, the county care was not seriously debated until the 1920’s
councils subsequently took on other responsibil- (60). The National Health Insurance Act (All-
ities. Nevertheless, they continued to devote man Sjukforsakring), covering physicians, out-
over two-thirds of their budget to medical care patient services, and drugs, was finally passed
(33). by Parliament in 1947. Laws in Sweden, how-
ever, are implemented at the government’s dis-
The state retained both fiscal and administra- cretion, so a grace period is left during which
tive control of the medical schools, and in 1878, the administrative framework can be ironed out
it created a body to supervise them as well as the to ensure their smooth implementation. In the
county councils. This organization was known case of the health insurance law, the major issue
as Medicinalstyrelsen (lit: Medical Steering) complicating implementation was whether phy-
(59), and was a descendant of the Collegium sicians would remain independent under the
Medicum, a principally academic and profes- new insurance scheme or instead would become
sional organization that had been founded in civil servants (32).
In a 1948 report, Dr. Alex Hojer, a prominent
The remaining events in the history of Swed- socialist who served as Director-General of the
ish health care involved resolving the problems National Board of Health from 1935 to 1952,
of financing and providing personnel for the recommended a reform of primary health care,
costly and complex enterprise of state-operated based on salaried positions for all physicians
hospitals. With the exception of the develop- (51). Hojer also suggested that Sweden should
ment of medical regions in 1958, few major aim to improve its health system by coupling
structural changes have been made in Sweden’s the development of decentralized ambulatory
health system since the transfer of the admin- and preventive care services with that of more
172 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

centralized specialized services (51). The county With the publication of the Engel report of
appeared to be too small a unit to benefit from 1958, the basis of Sweden’s hierarchical hospital
full efficiencies of scale in providing specialized plan was laid (52). Under this plan, Swedish
services that required major investments of cap- counties were organized into seven medical re-
ital and training of personnel, Hojer said, so in- gions, creating the intercounty cooperative
tercounty cooperation would be essential (51). clusters that Hojer had envisioned as necessary
To facilitate such cooperation, he suggested, for efficient delivery of specialized services. In
large regional hospitals should be developed. 1961, a comprehensive plan was introduced to
Primary care services, however, should be de- increase medical manpower by expanding medi-
centralized to bring them as close to the people cal education (53). Vast numbers of new hospi-
as possible. Small health centers, Hojer be- tal positions were created for medical school
lieved, were the ideal unit for blending both graduates, and by 1970, the center of gravity of
social welfare and medical services into “total- the medical profession had shifted sufficiently
vard, ” or total care on an ambulatory basis (51). toward salaried service that a reform making
virtually all doctors employees of the state, un-
In 1955, 8 years after the National Insurance
thinkable in 1948, was effected with fairly little
Act was passed, national health insurance was
ado (69).
implemented. The history of the Swedish health
system since then, with some minor exceptions,
can be described as the development and sys- The unification of medical and social welfare
tematic implementation of Director-General services became a reality when the two were
Hojer’s principles by his successors Arthur Engel combined into the Nation-al Board of Health and
and Bror Rexed. Their systematic implementa- Welfare (Socialstyrelsen) in 1968. The decen-
tion of Hojer’s ideas during the three decades tralization of ambulatory health services, in-
following the publication of his 1948 report is tended to foster small facilities for “total care, ”
compelling evidence of the importance of the was prompted when the government transferred
continuity and power of the civil service as a responsibility for the district doctors and mental
factor in the development of Sweden’s medical hospitals to the counties in 1961 and 1963,
structure. respectively.


Swedish planners, have at their disposal three From the patient’s viewpoint, there is hardly
organizational levers for controlling medical any reason to stop the individual demand at a
technologies—patients, hospitals, and medical point at which further costs for treatment will
not be outweighed by benefits. Probably the pa-
personnel. These levers and how Swedish health
tients will demand treatments up to a point
planners manipulate them in order to control
where further treatment will be rather a nuisance
the influx of medical technologies are described and completely disregard the costs involved
. . . . With zero user charges, rationing of health
Swedish Patients and Constraints on care becomes a necessity. Clinical freedom in its
Consumer Demand usual sense can no longer be accepted and differ-
ent types of cost control and economic surveil-
Sweden has a government-owned and oper- lance have to be introduced . . . . One and the
ated medical care system. Except for a nominal same illness can often be treated in different
charge for ambulatory care, the patient pays ways and there will be no incentives for patients
nothing for medical services. Price, therefore, is to select or prefer the most cost-effective treat-
not a mechanism used to limit demand. As ment . . . . It is not at all clear that the basic in-
Swedish health economist Ingemar Stahl has centives of the medical profession will act as a
pointed out (49): countervailing power.
Ch. 10—Controlling Medical Technology in Sweden ● 173

Restraining consumer demand, therefore, is for a routine X-ray (43). Although they are not
one method that—deliberately or otherwise— pleased by the long waits, Swedish patients are
Swedish planners have used to limit the use of surprisingly phlegmatic about them.
medical services and restrain the influx of
medical technologies. What makes these re- The difference between the values of Amer-
straints on supply of services successful i n icans and Swedes was noted by American politi-
Sweden is not the brilliance of its planners but cal scientist Steven Kelman in his comparison of
the compliance of Swedish consumers. This worker safety regulation (31):
compliance appears to be rooted in the collec-
In Sweden, deferent values were dominant,
tivist orientation of Swedish society. which encourage people to accept the wishes of
The Swedish medical care system depends to the state. In America, dominant self-assertive
an extent on consumers who not only place a values encouraged people to have it their way.
high enough value on medical services to will- The deferent values that Swedes hold are re-
ingly pay the price, but who also have a “collec- flected in their confidence in the civil service and
tivism” rather than “individualistic” attitude respect for government policies. For example,
toward the use of resources. Without Swedes’ Sweden has been able to pass and successfully
collectivism orientation, which in large measure enforce legislation mandating the use of vehicle
accounts for their acceptance of the rationing of seatbelts, a law that has proved unacceptable or
medical care, the efforts of Swedish planners unworkable in other countries. While it is dif-
could not succeed. ficult to argue against the benefits of seatbelt
Before investigating collectivism further, cer- use, Swedish citizens have also complied with
tain constraints on consumer demand in Sweden rules requiring daytime use of special head-
must be described to show why they might be lights, which are at times expensive to install, a
objectionable to those with individualistic val- slight nuisance, and are only of debatable value.
ues. An intentional mechanism for limiting de- Other examples of how Kelman’s so-called “de-
mand for medical services in Sweden are modest ferent values” have facilitated social policy deci-
copayments for consultations and prescriptions. sions abound. Extraordinarily high taxes on
These copayments, set at 7 Swedish crowns in cigarettes and alcohol have not spawned wide-
1970, rose to 20 crowns ($4.50 U. S.) by 1977. spread contempt of government monopolies and
The copayments are loosely indexed to infla- rampant smuggling as in other countries. In the
tion, by being kept roughly equal to “the cost of medical sphere, studies requiring mass screening
a first run movie at a commercial theatre” (68). of mass populations—even entire counties—for
The parallel is deliberate. Not a significant asymptomatic disease have been successful
source of revenue, these copayments are meant largely because of citizen compliance. Planners’
to discourage frivolous waste without inhibiting efforts to control the dissemination of medical
reasonable use of medical services. technology are greatly assisted by this tendency
of Swedish citizens to cooperate with their
A second, though unintended, constraint on government.
the demand for medical services in Sweden is
that patients are often forced to wait for services Why Swedish citizens are so accommodating
simply because the supply of services is insuffi- is difficult to determine. In addition to the sup-
cient. Since there are no appointments for pre- ply of medical services, the Swedish Govern-
liminary consultations, patients have to form ment controls the supply of housing, capital on
physical queues in reception areas. Patients also both the reserve and retail levels, education,
have to be put on waiting lists for specialist and many other citizens’ services. In a country
services after referrals have been made. The where one must wait in line for an apartment, a
Swedish Medical Association has acknowledged loan, or a position in a university, waiting in
that patients have average waits of over 60 days line for health services is not so strange an
to see an internist, 82 days for a gynecologist, experience. Swedish internist Lars Werko re-
146 days for an ophthalmologist, and 16 days marked on the phlegmatic nature of the Swedish
174 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

patient shortly after the “Seven Crowns reform” Outpatient services within each county are
(69): organized by primary care districts containing
10,000 to 20,000 inhabitants, and each of these
The relative indifference demonstrated by districts usually has one or more health centers.
most people toward the recent changes in medi-
Health centers in primary care districts, which
cal practice, as judged from what is written in
the newspapers or discussed on television, has form the lowest tier of the hierarchy, are usually
always astonished me. The explanation I have staffed by general practitioners in charge of am-
arrived at is that the people rely upon the gov- bulatory and preventive practice. District
ernment and are confident that all is going to nurses are active in home care and sometimes
function as well tomorrow as it did yesterday. specialize as midwives or child care nurses.
Copayments and queues apparently do re- At the second tier of the hospital hierarchy,
duce the demand for services. In 1963, the aver- above the health center, are district hospitals.
age number of physician visits per person per These hospitals, which usually serve several
year in Sweden was 2.5 (7). By 1974, 4 years primary care districts with a total population of
after the “Seven Crowns Reform” significantly 60,000 to 90,000, ordinarily provide four spe-
reduced costs to the patient, annual visits had cialized services—medicine, surgery, radiology,
risen only to 2.7 per capita (33). More visits per and anesthesiology.
capita would have led to increased referrals and At the third tier of the hospital hierarchy are
to greater demand for specialists and their the central general hospitals. There is usually at
technologies. least one such hospital per county, and each
hospital serves a population of 250,000 to
The Regionalized Hierarchy 300,000, Each central general hospital offers 15
of Hospitals to 20 specialized services.
In terms of expenditures, 87 percent of medi- At the fourth and top tier of the Swedish
cal care in Sweden is delivered at hospitals, 88 hospital hierarchy are the regional hospitals.
percent of which are operated by the 26 county There are seven regional hospitals throughout
councils in the decentralized fashion set out by the country, each of which has an average popu-
the reforms of 1864 (33). Thus, it is the counties lation base of slightly over a million. All but one
who are the actual purchasers of medical equip- of these institutions are affiliated with medical
ment, and in a sense, it is the counties who schools and serve as centers for research and
decide whether a new technology is adopted. teaching. Among the specialized services that
these institutions provide are neurology, radia-
The policymaking of the counties, however, tion therapy, thoracic surgery, neurosurgery,
is constrained by the” state, as is discussed be- pediatric surgery, and certain types of cardiac
low. The counties’ freedom of choice is also lim- care. b
ited by cooperative agreements with other coun-
ties to provide specialized services on a regional Sweden’s four hospital tiers provide a clear
basis. The objective of the regional system of “pecking order” for who receives sophisticated
medical services introduced by Director-Gener- new technologies. The regional hospitals are the
al Arthur Engel in 1958 (52) was to ensure that first in line, and the central general hospitals,
specific types of services were delivered at the district hospitals, and health centers follow. At
level—local, county, or regional—on which each tier, a service is provided only if there is a
they could be provided most efficiently. sufficient population base for it to be as cost ef-
fective at that level as at a higher one.7
This regionalized system of Swedish medical
‘Some of these services are actually provided on an interregional
services is mirrored by Sweden’s hospital sys- basis. Thoracic surgery departments, for example, are located only
tem. There are four levels or categories in the at the four largest regional hospitals.
hospital hierarchy: 1) health centers, 2) district ‘As an aside, it might be said that such a system is not only more
economical but also tends to provide better care. The very rarely
hospitals, 3) central general hospitals, and 4) re- needed procedures are concentrated, and more experience with
gional hospitals. such procedures by medical practitioners brings better results.
Ch. 10—Controlling Medical Technoloxy in Sweden ● 175

County council members need not feel re- inventions can be dispersed to the health cen-
sponsible for bringing a sophisticated new ters. Often, the most cost-effective level for the
technology to their own county’s central general provision of a service is that of the health
hospital, because county residents may be re- center, because care at health centers is less ex-
ferred from that hospital to the regional hospital pensive per patient than care at outpatient clin-
that they subsidize. If a new technology is cost ics at major hospitals (14). As Director-General
effective on the central hospital level, however, Arthur Engel explained (14):
the county’s council and taxpayers both have a
For financial and manpower reasons, we have
role in deciding whether or not to acquire it. As formulated the guiding principle that care
Egon Jonsson, the SPRI planner responsible for should be provided on the lowest acceptable lev-
the CT rationalization report, put it, “There is a el of the organizational system.
clear link between the politician a Swedish
citizen elects, the size of his taxes, and the Swedish planners foresee the health center as
medical services he has access to” (28). Because being the new basic unit for the decentralized
of the policy that, except under special circum- provision of total care (totalvard), the combina-
stances, Swedish patients cannot use hospitals tion of sick care (sjukvard) and preventive care
outside the county or region in which they re- (halsovard), and also the counseling and finan-
side, citizens as well as planners have a direct in- cial services of the social welfare system (34).
terest in seeing that necessary—but not exces- Referrals to specialists at the central and re-
sive—equipment outlays are made in the central gional hospitals will be made from the health
hospitals. centers, so that economies of scale for complex
and unusual care will be preserved.
It should not be inferred, however, that cost-
effective choices are always made. County pride The American political scientist Arnold Hei-
occasionally dominates over pragmatism. Sev- denheimer concluded that the hierarchical struc-
eral central hospitals, for example, have begun ture of Swedish hospitals is deliberately being
to insert pacemakers, even though ideally this polarized (21):
procedure should be performed at the regional Centripetal forces here respond mainly to the
level (68). Similarly, when technology-intensive location of highly specialized equipment and
advances in obstetrics and a decline in the birth skills, while centrifugal forces are strengthened
rate recently mandated closing the lying-in ward by political demands for care which is proximate
of the Enkoping central hospital in favor of the both in terms of physical distance and in terms
regional department in Uppsala, local citizens of its concerns with primary care.
filed a petition to block the closing. A senior This process of polarization leaves the district
planning official of the National Board of hospitals caught in the middle between the poles
Health and Welfare, attributed the uproar solely of specialization and decentralization. Swedish
to local fear that the city was becoming a back- planners doubt that district hospitals are large
water (68). 8 enough to benefit fully from efficiencies of scale
This regionalized hierarchy of hospitals pro- for many services, and aim to convert them to
vides Swedish health planners with two separate chronic care and old-age homes (15). The four
strategies for optimizing the use of medical specialties that these hospitals now house will
technologies. Highly sophisticated equipment then move up to the level of the central general
and technology-intensive specialties can be con- hospitals. Currently, too much geriatric care is
centrated at the regional hospitals and simpler being delivered on an inappropriate technology-
intensive level at the central and regional hospi-
‘Citizens’ opposition to the closing of the central hospital ward
was certainly not based on medical grounds because the quality of tals. The conversion of the district hospitals to
care to be received by the mothers at the regional hospital was to long-term care facilities, therefore, should
improve significantly. Less than 10 percent of the Enkoping peti- reduce the influx of technology not only at the
tioners were women of childbearing age. When polled separately,
the women who were potential mothers and likely to be the most district level, but at the county and regional
affected by the change, were in favor of the move. levels as well.
176 . Background Paper #4: The Management of Health Care Technology in Ten Countries

State Education and Employment of

Medical Personnel
The external organization of Swedish hospi-
tals provides only a partial picture of the mech-
anisms at the disposal of Swedish planners to re-
strain the influx of technologies. In addition, the
internal mix of medical personnel and facilities
must be analyzed. For the sake of brevity, the
discussion of medical manpower here is limited
to physicians and nurses.
As of 1977, Sweden had roughly 15,000 doc-
tors, or a ratio of 1 physician per 515 popula-
tion, quite similar to the ratio of 1 per 571 popu-
lation in the United States (25,61). Most Swed-
ish physicians are employed by the state. In
1977, only 6 percent of Swedish physicians were
in private practice, and the average age of these
physicians was considerably over the mean for
their profession. The gradual disappearance of
the private sector in Sweden has facilitated plan-
ning. In other countries, noninstitutional set-
tings have been used to circumvent constraints
on technology purchases (47).
The state not only employs but also educates
virtually all medical personnel in Sweden. Thus,
it is able to match training programs to antici-
pated and present needs. As Director-General
Rexed succinctly put it, “Training policy (is) the
most important contribution to future plan-
ning” (44). By 1985, the numbers of Swedish
doctors specializing in long-term care and psy-
chiatry are projected to increase by 130 percent
and 60 percent, respectively. The ranks of phy-
sicians who use technology-intensive tech-
niques, however, will be increased by only 28
percent (44). (Swedish policy toward the train-
ing of the latter is discussed in conjunction with
specific technologies in the next major section of
this chapter. )
Once doctors are educated in a predetermined
fashion, the National Board of Health and Wel-
fare also can decide to a large extent where these
physicians will work, through its allocation of
medical posts. This power facilitates planned
assignment of doctors at various levels within
the hospital hierarchy (from the regional hospi-
tal to the health center) and is also the basis for
ensuring their proper geographical distribution.
Board of Health and Welfare, and the county

The relationship of the state to the counties is

like that of a rider to a horse—the rider can ap-
ply persuasive tactics, but in the final analysis,
it is up to the animal to decide on its movements
(48). The steering role of the rider is played by
the National Board of Health and Welfare,
which sets standards for quality, conducts in-
spections, and allocates physicians (44). In addi-
tion, the Swedish Government uses its fiscal lev-
erage by subsidizing hospital construction.
Since 1884, however, counties have had consti-
tutional power to tax their citizens and to decide
whether or not to build hospitals, so they con-
trol the amount of care available. In summary,
the state tries to compel the counties to follow
the desired path through regulation and

The question persists, however, of how the

state decides which course to adopt when a new
technology becomes available. To answer this,
it is useful to examine the information on which
the “rider” depends. The National Board has
three principal sources of information for eval-
uating new methods and instrumentation: 1) the
National Bureau of Statistics (Statistiska Cen-
tralbyran), 2) physicians who serve as consult-
ants to the National Board of Health and Wel-
fare, and 3) the Swedish Planning and Rationali-
zation Institution (SPRI).

The National Bureau of Statistics assembles

data concerning all Swedish patients using their
“social security” numbers. Since social security
numbers are used for medical record identifica-
tion, all medical services rendered to a given in-
dividual can be accounted for and used in tabu-
lating national health statistics.

Once health needs and budgetary constraints

are known, the strictly medical likelihood of a
new technology’s satisfying unmet needs must
be evaluated. This general evaluation of bio-
medical innovations in Sweden is performed by
selected physicians, prominent in their special-
ties, who serve as consultants to the National
Board. Their task is to assess whether the tech-
nology “is consistent with proven scientific
178 . Background Paper #4: The Management of Health Care Technology in Ten Countries

funded research chairs in important areas. ical structure. As previously noted, the counties
There are no special procedures for planning in this context are free to make their own deci-
this R&D investment. Not only is it considered sions concerning the purchase of medical tech-
counterproductive to supervise basic science in nologies.
Sweden, but it also would be impossible to ex-
tend control abroad, where innovations such as In light of Sweden’s medical structure, issuing
CT scanners and coronary artery bypass oper- voluntary guidelines through a national infor-
ations originated. mation agency, the fifth strategy, is clearly pre-
A second strategy Swedish planners could ferred. It is therefore not surprising that SPRI
employ, adjusting manpower policy so as to re- has undertaken to fill this advisory role. The
duce the number of technology-intensive spe- success of this purely advisory institute in plan-
cialists, is used. Favored by Sweden’s man- ning technology in Sweden goes hand in hand
power policy at present are doctors and nurses with the regional organization of Sweden’s hos-
trained for chronic, geriatric, and primary care. pital system, because planning the rational dif-
fusion of a technology requires a clear hierarchy
The third mechanism that could play a role in in order to prevent duplication.
Sweden’s socialized system is funding incen-
tives. Financial pressure might be used to in-
directly punish counties that acquired technol- In theory, therefore, Sweden is predisposed
ogies that were uncalled for in the eyes of SPRI towards the second and fifth of the aforemen-
and the National Board. Swedish planning di- tioned containment strategies, i.e., the man-
rector Dr. Gunnar Wennstrom, however, al- power and informational approaches. Only em-
though fully cognizant of this channel for tech- pirical evidence about the influx of specific
technologies, however, can demonstrate wheth-
nology control, insists that it is rarely used (68).
er these methods work. Presented in the next
The fourth strategy, regulating technologies section of this chapter, therefore, is an analysis
as rigidly as pharmaceuticals, is not appropriate of the Swedish experience with CT scanners,
for use in Sweden, because it goes against the coronary artery bypass operations, and other
“rider and horse” mentality of the Swedish med- innovations.


CT Scanners Swedish doctors (compared to 2.81 percent of

The first CT scanners became available in American physicians) are specialists in radiol-
England in 1972 and were introduced in Sweden ogy (23).13 Thus, Sweden has sufficient radiolo-
and the United States in 1973. As of May 1978, gists to equal if not exceed the U.S. level of CT
the United States had 4.8 scanners per million
use per capita.
inhabitants (8). Sweden, however, had only 1.6 It appears that what was responsible for
scanners per million population (54). restraining the influx of scanners in Sweden
How did Sweden manage to stem CT’s influx? were timely coordinated planning and the re-
In the case of CT scanners, manpower strategies gional hierarchy of services. SPRI began with
did not play a role for two reasons. First, in the the groundwork for plans to rationalize CT
short period between the introduction of CT scanners in 1973, when the first head scanner
scanners in 1972 and 1978, no significant adjust-
ment in the numbers of radiologists could have
been made. Second, although the concentration
of physicians per capita is about the same in
Sweden as in the United States, 5.23 percent of
Ch. 1O– Controlling Medical Technology in Sweden ● 179

Figure 1 .—Relative Proportions of

Different Cost Items in the Total Costs of
Pneumoencephalographic, Cerebral Angiographic,
and CT Examinations
Cost per

❑ Cost per ward

including personnel cost

Capital cost including

service and maintenance

❑ Material cost

Personnel cost
of the radiology department

Cerebral CT
I angiography

As is evident from this figure, cerebral angiographic and

pneumoencephalographic examinations are much more
personnel demanding than CT examinations.

CT? The answer lies partly in the timeliness of

SPRI’S report. As the experience with the En-
koping hospital obstetrics unit showed, it is
easier not to add a service than to eliminate it
later on. Swedish health economist Edgar
Borgenhammer stated (11):
My experience is that it means a lot for the
possibilities of cost containment that the admin-
Figure 2.—Projected Annual Cost Increase or Decrease Resulting From the Introduction of a CT Scanner
(in thousands of Swedish kroners)

Number of Number of
cerebral pneumoencephalographic
angiographic examinations
examinations eliminated

5 10 15 20 25 30 35 40 45 50 60 70 costs
(4.5 SW, Kr. = $lU.S.)
5 487 471 453 437 420 403 386 368 362 335 301 267 .
10 476 469 442 426 403 392 374 357 341 323 289 256
15 465 443 432 415 398 381 364 347 330 313 279 246
20 465 439 421 405 367 371 354 336 320 302 269 235
25 444 427 410 393 376 360 342 326 306 291 257 223
30 433 417 417 383 366 349 332 314 298 281 247 213
35 423 406 369 373 335 339 321 304 288 270 236 203
40 411 376 361 344 327 310 283 278 282 225 191
45 401 385 387 351 333 317 300 262 266 246 215 181
50 390 373 366 339 322 306 288 271 254 237 203 169
60 369 352 335 319 301 285 267 250 234 216 182 149
70 346 331 313 267 279 263 246 226 212 194 161 127
80 325 308 201 275 287 241 224 206 190 173 139 105
90 304 286 270 263 237 220 203 186 169 152 118 84
100 282 266 249 232 215 183 181 184 147 130 96 62
110 261 244 227 211 I93 177 168 142 126 106 74 41
120 —
240 224 206 190 172 156 138 121 105 87 54 20
130 218 202 181 168 151 134 1171~7 99 63 66 32
140 196 180 163 146 129 112 112 95 76 61 44 10
150 175 158 107 *1
141 124 73 66
175 122 105 +
225 14

istrator can catch problems before they grow Although it is far from perfect in practice,
big. . . , Once resources have been allocated to Sweden’s hierarchical hospital system did serve
an area it is very difficult to diminish or remove to arrest the diffusion of scanners. As of Febru-
them, ary 1979, Sweden had eight head scanners, all
The Swedish experience with CT is a case but one at regional hospitals, and six total body
where planning was done before the situation scanners, two of which were located at the larg-
grew too big. Most Swedish hospitals waited for est central hospital (54). As of late 1979, Sweden
the report and seemed to follow its recommen- had 17 scanners (27). They were installed on the
dations. Only two scanners had been installed following dates: October 1973 (1), November
in Sweden at the time the SPRI report was re- 1975 (1), November 1976 (l), January 1977 (l),
leased. By that date, 320 scanners were already February 1977 (l), March 1977 (I), July 1977
in operation in the United States (8). (1), September 1977 (l), November 1977 (1),
Ch. 10-Controlling Medical Technology in Sweden ● 181

December 1977 (l), January 1978 (l), February The report addressed the concerns of the
1978 (l), May 1978 (l), February 1979 (l), June decisionmakers. The lay county council
1979 (2), August 1979 (1). members needed to understand the central
How successful was the SPRI model in pre-
issues. They needed this kind of informa-
tion to respond to the perhaps overenthu-
dicting the effect of the introduction of CT? The
assumption that the usage of alternate modali- siastic requests for scanners from their
ties would drop off proved correct. A subse- medical staff.
The report did not give a simple yes or no
quent turn that has altered the results of CT im-
answer with regard to CT scanners, but de-
plementation, however, is that scanners are
fined a set of tradeoffs related to the
used more frequently than was projected on the
basis of the assumption that scans would replace avoidance of other more risky procedures,
volume of tests, and costs. It allowed play
angiographs and pneumoencephalographs (4).
As a consequence, the introduction of CT may
for local preferences in coming to a
have lowered costs for given numbers of cere-
bral examinations, but raised total costs. The SPRI performed a new analysis for body
scanners when the matter of their possible
structure of the Swedish hospital, however,
purchase arose.
keeps these marginal costs at a minimum, an ad-
SPRI organized a national conference on
vantage Swedish planners Jonsson and Marke
this topic drawing together physicians and
pointed out (28):
administrators and lay county council
It is conceivable that in the United States, 50 members to present its analysis and allow
angiographs per year could be replaced by 800 for discussion. Swedish authorities pre-
CAT exams. This would result in a major net in- sented their views on CT, and an American
crease in third party expenses. The Swedish expert, Barbara McNeil, came to explain
counties have less of a problem in this area. that the benefits of CT scanners were not
Once they decide on equipment purchase and
yet at all well defined.
staffing changes, that decision defines most of
the difference in total costs. A much higher than SPRI staff continued contacts with medical
expected volume of CAT scans will not create a decisionmakers to offer advice.
financial crisis, perhaps until another budget To improve future medical technology as-
year when a second CAT scanner is asked for. sessments, SPRI is now conducting a fol-
lowup interview study to see how, if at all,
In September 1979, SPRI organized an inter- Swedish decisionmakers were influenced
national conference to alert other countries to
by the SPRI analysis.
the need for evaluations similar to its evaluation
of CT. The following features of SPRI’S ap- The approach that SPRI used in its evaluation of
proach are especially deserving of note: CT scanners might well be used as a model for
other countries.
● SPRI developed good working relation-
ships with a number of senior physicians
Coronary Bypass Surgery
who provided medical expertise.
● The report SRRI issued was timely, Pro- Although there were precedents for the treat-
duced when the decisions were being made, ment of coronary artery disease by surgery in
the report synthesized existing knowledge Sweden, no procedure had been very successful
and original information SPRI collected in or was in wide use when coronary bypass sur-
areas such as costs and staffing. It was not gery was introduced. Beginning with Lindgren’s
the definitive study that might have con- stellate ganglion resection experiments in the
sisted of a randomized trial with long-term late 1940’s, Sweden had been on the forefront of
followup. Such a study, however useful, experimental surgical techniques to relieve
would not have provided information until angina pectoris (36). Various techniques were
many years after the critical decisions had developed and tested, but although in some
already been made. cases the techniques did yield some relief from
— --

182 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

pain, they did not appreciably change mortality sites, the sites at which coronary bypass surgery
statistics. As a result, there developed in could be performed in Sweden were predeter-
Sweden skepticism toward each new “miracle” mined—by the location of departments of tho-
operation that emerged in that country or racic surgery, which had already assembled all
elsewhere. these resources and equipment for other types of
heart operations. These departments, as a result
A cording to Uppsala thoracic surgeon Tor-
of a consolidation that took place in 1963, were
kel A berg, skepticism toward innovations in
located only at Sweden’s four largest regional
heart surgery influenced Swedish decisionmak-
ing on the bypass operation (1). Lending cre-
dence to iberg’s argument is Sweden’s decision In designing the framework for the Swedish
not to use heart transplantation. Subsequent to regional hospital network, Director-General Ar-
its introduction in South Africa in 1967, heart thur Engel saw thoracic surgery departments as
transplantation was attempted in almost every a special case, noting in his 1958 report that
developed nation except Sweden. The consensus these departments required a “block” of sup-
in Sweden, despite some heated dissent, was porting departments: pulmonary medicine, spe-
that heart transplantation was too experimental cially equipped cardiology and radiology clin-
in nature to justify its use (9,10). In the case of ics, and a physiology laboratory for respiratory
coronary bypass surgery, Sweden exercised and circulatory testing (52). At the time of that
considerable restraint, but did not decide to report, eight hospitals and two sanitoria were
avoid the procedure altogether. The experts on equipped for thoracic surgery. Referrals to these
the medical evaluation board agreed that, un- institutions from smaller hospitals were erratic.
like heart transplantation, the bypass procedure Furthermore, two of the departments had far
was consistent with proven scientific knowledge greater operating loads than the others, some of
and good practice. Since the bypass surgery was which had only 10 beds. Engel felt that these in-
felt to be potentially valuable, in 1973-74, it was efficient units were best closed, as the minimum
instituted in Sweden on a small and experi- effective size for a thoracic surgery department
mental scale (68). was 25 beds, and the ideal unit was 50 beds (52).
This judgment implied that a fifth, interregional
The Swedish experience with coronary by- tier of the hospital hierarchy would be necessary
pass surgery differed from that with CT scan-
for thoracic surgery; otherwise if all seven
ners because of the doubts concerning not only
regions were to outfit effective size units, there
the economics of the surgery, but also its strictly
would be overcapacity. No immediate modifi-
medical worth. Once the decision to implement
cations were made to the newly created regional
bypass surgery was made, however, its diffu-
system, however, so as to ease the passage of
sion process paralleled that of CT. Once again the 1958 report.
the central question for Swedish planners was:
How can this technology be implemented in the As explained by Engel, the interregional sys-
most cost-effective fashion? In other words, tem for advanced cardiac surgery departments
which tier of the hospital hierarchy is appro- was developed in 1963 (14):
priate for coronary bypass surgery? In the case
One amendment to the original plan was
of CT, there was some dispute, since a scanner made in 1963. It was found inadvisable to carry
can be placed virtually anywhere, even in a doc- out advanced cardiac surgery needing extracor-
tor’s office. Bypass surgery is fundamentally dif- poreal circulation and respiration by means of a
ferent from CT, however, in that it requires heart-lung machine at all regional hospitals.
enormous ancillary support. This activity is therefore now located in the four
largest regions only.
In order to perform this surgery, all the pre-
requisites for major cardiac surgery—intensive As a result of the 1963 consolidation of thoracic
care units, heart-lung machines, blood gas mon- surgery departments, Swedish planners had
itoring—are necessary. Given these prerequi- only four possible sites to choose from for cor-
Ch. 10—Controlling Medical Technology in Sweden 183

onary bypass surgery. 15 Thus, in the case of cor- ations would have had to cut into resources for
onary artery surgery, an earlier consolidation of other types of thoracic surgery (l). Swedish tho-
services played a dividend in restraining the dif- racic surgeons’ response to the Veterans Ad-
fusion of a then unforeseen innovation—the ministration (VA) trial (38), given the limited
maxim being “past planning begets the success resources they had, was to try to treat only the
of future planning. ” most promising candidates with coronary by-
pass surgery and handle the remainder of angina
The decision that coronary bypass surgery
patients with drugs (26). Surgeons at Uppsala
was worthwhile and would be done only at se-
Academic Hospital, who handled roughly one-
lect hospitals did not answer the question of
third of the bypass referrals in 1977, allotted
how many operations should be performed. For resources for 72 operations. In deciding who
the year 1977, only about 220 coronary bypass
received the operation, surgeons considered pa-
operations, or about 27 per million Swedes,
tients’ medical conditions and ages (1).
were performed. (See table 4.) What limited
The level of 27 coronary bypass operations
Table 4.—Estimated Number of Coronary Artery per million population per year, achieved by
Bypass Operations Performed in Sweden (1977-79) 1977, was found to be insufficient to treat all the
patients that had been selected for surgery.
Number of Number of operations Plans were proposed to incrementally raise the
Year operations per million population
number of bypass operations in Sweden closer
1977 . . . . . . . . . . . . . . 220 27
1978 . . . . . . . . . . . . . . 300 37 to the optimal level of 150 per million per year
1979 . . . . . . . . . . . . . . 400 50 suggested by WHO, if not beyond (3). At the
SOURCE. T. Aberg, Professor of Thoraclc Surgery, The Academ!c Hospital,
same time, there was a call in the United States
Uppsala, Sweden, personal communication, December 1979 (2) to reduce the amount of bypass surgery.
Viewing the discrepancy in coronary bypass
Sweden to the relatively low figure of 27 opera- surgery levels in the United States and Europe,
tions per million citizens? Surgical candidates Swedish internist Ed Varnauskas arrived at the
were plentiful. According to the World Health following conclusion (66):
Organization (WHO), the theoretical need for
bypass surgery is estimated to be 150 patients With the given indications, the number of
per million population (71). Medical manpower operations now performed is probably too high
in the USA and too low in Europe. The truth lies
was not a limiting factor in Sweden, either.
somewhere in between.
Swedish thoracic surgeons were doing far fewer
coronary bypass procedures than the 50 proce- There are two separate routes for reaching the
dures that WHO stated “are required per year “golden mean” between underutilization and
per surgeon for adequate professional skill to be overutilization of technology. The pattern in the
maintained” (71). United States seems to be overexpansion fol-
lowed by contraction. The disadvantage of this
The immediate limiting factor was the num- path is that resources are wasted. Furthermore,
ber of intensive care beds available to the tho- reducing the share of resources allocated to an
racic surgery clinics. A certain number of bed- entrenched medical technology is more difficult
days are allotted to each clinic, which can use than increasing the share allocated to an under-
them as it sees fit. This allowance was expanded utilized one.
to accommodate what planners saw as suitable
numbers of bypass operations. Additional oper- Rather than following the pattern in United
States, Sweden tends to adopt a “wait and see”
approach. l6 In the case of coronary bypass sur-
gery, Sweden’s “wait and see” approach was

“The phrase used to describe this policy is “avvaktande hall-

ning” (54), which translates idiomatically as “wait and see. ”
184 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

cost effective but had one major drawback. Dialysis machines function as kidney substi-
During the “trial” period, triage was instituted, tutes in cases of chronic renal failure. This
so many deserving candidates for coronary by- disorder, when untreated, quite predictably
pass surgery were not given treatment or put on leads to death from uremic poisoning. Demand
waiting lists. The success of Sweden’s limited for dialysis is therefore linked more closely to
approach to coronary bypass surgery, there- urgent need and less to subjective medical refer-
fore, was very dependent on Swedish citizens’ rals than are CT and coronary bypass surgery.
acceptance of rationalization. The “collectivism” As a lifesaving technology for which demand
orientation that underlies Swedes’ willingness to originates largely from objectively rather than
wait their turn has already been noted previous- subjectively determined need, renal dialysis is a
ly in this chapter. The experience with coronary valuable reference point.
bypass surgery does not shed additional light on Swedish planners made this technology readi-
the roots of Swedes’ “collectivism” orientation, ly available to individuals that needed it (5).
but does demonstrate how it facilitates the ef- The planners’ policy of meeting the demand for
forts of Swedish planners. Had patients felt they this clearly lifesaving technology contributes to
were being denied a lifesaving service and the confidence citizens have in their judgment.
rebelled, the “wait and see” approach might This faith in turn allows rationalization of more
have failed. questionable technologies without major objec-
Swedish citizens did not feel that a vital serv- tions by Swedish patients.
ice was being denied to them for two reasons. Table 5 shows the number of Swedish pa-
First, the Swedish medical system previously tients receiving renal dialysis and kidney trans-
had avoided implementing an innovation— plants by region in 1978. Reliable statistics on
namely, heart transplantation 17—without disas- renal dialysis for identical years in the United
trous results, perhaps establishing a precedent States and Sweden are difficult to obtain, but
of good judgment in controlling the diffusion of during the year 1977, both countries had rough-
new operations. Second, definitively lifesaving ly 100 persons per 1 million population on di-
technologies have not been withheld from alysis (39,55). The fact that the rates for dialysis
Swedish patients—only questionable ones have. in the countries are comparable suggests that
A good example of a clearly vital innovation when Sweden does not make attempts to re-
that was not restrained by Swedish planners is
strain technologies, dialysis being a case in
that of kidney dialysis. point, they proliferate to a similar extent as in
the United States. Using the dialysis baseline, it
Renal Dialysis is justifiable to attribute at least some cross-
For examining the diffusion of an innovation, national discrepancy in the levels of CT and cor-
renal dialysis is not as good a specific case study onary bypass surgery in Sweden and the United
as CT scanners and coronary bypass surgery. States to Swedish planners’ success in actively
CT of the head and the coronary bypass surgery seeking to restrain the influx of these two
arrived as state-of-the-art technologies at defi- technologies.
nite times, and few fundamental theoretical im-
provements on these technologies have been Cobalt Therapy
made since. Renal dialysis evolved more slowly,
Cobalt therapy units are rationalized in Swe-
and its gradual diffusion since the late 1940’s has
den through the hospitaI regionalization plan-
been controlled as much by advances in equip-
ning mechanism. The decision to have such a
ment as by specific policies and their effects
unit requires national approval of the physician
staffing at the hospital and local approval for
construction and operating costs. This mech-
anism for rationalizing cobalt therapy fits well
It must be added that the decision against beginning with heart into the regionalized structure of hospital care in
transplantation hinged on Sweden’s definition of brain death
(which is uniquely stringent), not on a socioeconomic opinion that
Sweden. There are 28 cobalt machines in Swe-
the operation would be unrewarding. den, about 3 per 1 million population.
Ch. 10—Controlling Medical Technology in Sweden ● 185

communicatlon, January 1979 (6)

Automated Clinical Laboratories county councils as part of the capital equipment

budgeting process. There are no specific nation-
Decisions regarding automated laboratory al guidelines.
testing in Sweden have been left up to local

Unique features of Swedish culture, history, level. The control of cobalt therapy and cor-
and the organization of medical care have set onary bypass surgery was achieved through the
the stage for careful and systematic evaluation regionalized hierarchy of hospitals. A new
of new medical technology. The regionalization departure from the control of medical technol-
of hospital services, the respect for government ogies through the budgetary, staffing, and re-
planners, the county and national control of gionalization processes was SPRI’S systematic
medical care costs, the homogeneity of Swedish and timely analysis of costs and benefits of the
culture, and the existence of SPRI, a central ad- CT scanner. SPRI’S evaluation of that new med-
visory group, make possible in Sweden the ical technology provides an example worthy of
timely review of new medical technology. emulation.
Decisions concerning automated laboratory
testing have been made at the local (county)

1. Aberg, T., Professor of Thoracic Surgery, The tions of Computed Tomography, ” N. Eng. ].
Academic Hospital, Uppsala, Sweden, personal Med. 298:255, 1978.
communication, Feb. 1, 1978.
5. Allm@n, J., Professor of Nephrology, University
2. personal communication, December
of Gothenberg, Sweden, personal communica-
1979. ‘
tion, Jan. 12, 1979.
3. “Aorto-Coronar Bypass, ” Lakartidnin-
gen 75:3770, 1978. 6. Allm~n, J., Section of Nephrology, M e d i c a l
4. Abrams, H., and McNeil, B., “Medical Implica- Clinic I, Sahlgren’s Hospital, University of

68-095 0 - 80 - 13
186 . Background Paper #4: The Management of Health Care Technology in Ten Countries

Goteberg, Sweden, personal communication, ice System (Chicago, Ill.: American College of
January 1979. Hospital Administrators, 1971).
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ty? (New York, N. Y.: John Wiley and Sons, Penguin Books, 1971).
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lnt. }. H/th, Serv, 10(2):251, 1980. Journal, 1978).
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kartidningen 66:1745, 1969. arskleros—synpunkter p~ resursbehovet, ” Lii-
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dlingsmetod,” Ltikartidningen 66:5487, 1969. 27. Jonsson, E., Swedish Planning and Rationaliza-
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Swedish Medical Care, ” paper presented at the munication, February 19 0.
Arthur D. Little Executive Forum, “The Health 28. , and Mark@, L. f ., “CAT Scanners: The
Care Industry: The Impact of Voluntary Cost Swedish Experience, ” Health Care Mgt. Review
Containment,” L’Enfant Plaza, Washington, 2:37, 197.
D, C., Nov. 5-7, 1978. 19, , and Neuhauser, D., “Hospital Staffing
12. Cooper, J. K., “Sweden’s No-Fault Patient-In- Ratios in the United States and Sweden, ” Zn-
jury Insurance, ” N. Eng, ]. Med. 294:1268, 1976. quiry 12 (%ppl. ):128, 1975.
13. Dreborg, S., “Ett Boden-forsok att bka patient- 30. , and Neuhauser, D., “Medical Malprac-
Lakarkontinuiteten, ” Lukartidningen 75:9oI, tice in Sweden, ” N. Eng, J, Med. 294:1276, 1976.
1978. 31. Kelman, S . J . , “Regulating Job Safety and
14. Engel, A., Perspectives in Health Planning, Uni- Health: A Comparison of the U.S. Occupational
versity of London Heath Clark Lectures, 1967 Safety and Health Administration and the Swed-
(London: AIthone Press, 1968). ish Workers Protection Board, ” Ph. D. disserta-
15. “Planning and Spontaneity in the Devel- tion, Harvard University, Cambridge, Mass.,
opmen~ of the Swedish Health System, ” 6th Mi- 1978.
chael M, David Lecture (Chicago, 111.: Univer- 32. Knutson, D,,. “Lakark~rens fackliga organiza-
sity of Chicago, 1968. tion, ” Lakartidningen 39: 2786, 1942.
16. Enthovenf A. C., “The Consumer Choice Health 33. Landstingsforbundet (Federation of County
Plan: An Alternative Approach to NHI,” in The Councils), County Council Plans 1975-1981
Carter Administration and Health Policy (Stockholm, 1975).
(Washington, D. C.: National Journal, 1978). 34. Fr% Sjukz%dspolitik till Hffkopolitik
17. Folksams Sociala R$!d, V% Trygghet (Stock- (Stockholm, 1977).
holm: Tiden-Barnangen Tryckerier, 1978). 35. Lindberg, G., Den Svenska Sjukkasserorelsens
18. Forsarkringskasseforbundet, Zrzforrnation for Historia (Lund, Sweden: Carl Bloms Boktry-
Immigrants: Social Insurance in Sweden (Stock- ckeri, 1949).
holm, 1973).
36. Lindgren, I., “Angina Pectoris: A Clinical Study
19. Gelin, L. E., “Renal Transplantation as the
With Special Reference to Neurosurgical Treat-
Treatment of Choice for Terminal Renal Fail- merit, ” Acta Medica Scand, (Suppl. ), 1950.
ure, ” Scand. ). Urol. Nephrol. 38 (Suppl. ):7,
1976. 37. Maxwell, R., Health Care: The Growing Dilenz-
ma (New York, N. Y.: McKinsey & Co., 197s).
20. Hancock, M. D., Sweden: The Politics of Post-
Zndustrial Change (Hinsdale, 111.: Dryden Press, 38. Murphy, M. L., et al., “Treatment of Chronic
1972). Stable Angina, ” N, Eng. ]. Med. 297:621, 1977.
21. Heidenheimer, A,, “An Exploratory Analysis of 39. National Kidney Foundation, New York, N. Y.,
Patterns in Swedish Health Politics, 1947-1952, ” personal communication, Mar. 9, 1979.
paper presented at Sigtuna Health Policy Con- 40. Nillson, G. B., 100 ~rs landstingspolitik: Vust-
ference, Sigtuna, Sweden, August 1978. manlands Lanslansting 1 8 6 3 - 1 9 6 3 (Uppsala,
22. Hjelt, O., Svenska och ~inska medicinalverkets Sweden: Almquist & Wiksell, 1966),
Historia 2663-2822 (vol. II, Helsingfors, Swe- 41. Nordenstrom, B., Professor and Chairman, De-
den: Central Tryckeri, 1891-1893). partment of Radiology, Karolinska Hospital,
23. Holmdahl, M., “Medicine Views the Swedish Stockholm, personal communication, Dec. 5,
Hospital System, “ in The Swedish Health Serv- 1977.
Ch. 10–Controlling Medical Technology in Sweden ● 187

42. “Nytt ‘sabotage’ mot rontgendiagnosti- 58. Svensk Forfattningssamling, SFS ( S w e d i s h

ken,” Lakartidningen 74:627, 1977. Statutory Codes), Law No. 77, 1864.
43. Posner, J., “The Other Side of Swedish Medi- 59. , Law No. 24, 1897.
cine, Part II: There’s a Long Wait Ahead for As- 60. , Law No. 1, 1947,
trid . . .“ Prism, September/October 1974, 61. Sveriges Lakarforbund (Swedish Medical Asso-
44. Rexed, B., “Public Policy and Medicine, ” in The ciation), Liikar fakta ’77 (Stockholm, 1977),
Swedish Health Services System (Chicago, Ill.: 62. The Swedish Institute, “The Organization of
American College of Hospital Administrators, Medical Care in Sweden, ” Fact Sheets on Swe-
1971). den (Stockholm, 1976).
45, Rest%, J., %ensk Historia Z: tiden fore 1718 63. Swedish Planning and RationaIization Institute
(Stockholm: Svenska BOkforlaget, 1963). (SPRI), SPRI 1978-80: Viktiga utg$ngspunkter
46. Ryden, B., “The Swedish Economy, ” in Sweden (Stockholm, 1977).
in the Sixties, edited by 1, Wizelius (Uppsala, 64. Thyselius, P. E. I., Handiingar till Sveriges ref-
Sweden: Almquist & Wiksell, 1967). ormation och Kyrko historia, Bd. I. (Stockholm,
47. Shapiro, S. and Wyman, W. M., “CAT Fever, ” 1841-45).
N. Eng. ]. Med. 294:955, 1976. 65. Tomasson, R. F., “The Extraordinary Success of
48. Spek, J. E., “Swedish Medical Care in Economic the Swedish Social Democrats, ” ]. Polit. 31:772,
Crisis, ” paper presented at the Sigtuna Health 1969.
Policy Conference, Sigtunar Sweden, August 66. Varnauskas, E., “WHO’s arbetsgrupp om koro-
1978. nar-bypass kirurgi, ” Lakartidningen 75:1917,
49. St~hl, I., Department of Economics, Lund Uni- 1978.
versity, Sweden, “Can We Control Health Care 67. Wawrinsky, R., Sveriges Lasarettsvasande forr
Costs, ” mimeographed report, 1978. och nu (Stockholm: Forfattarens Forlag, 1906).
50. Statens Offentliga Utredninga, SOU (Reports of 68. Wennstrom, G., Director of Planning, Social-
Swedish Royal Co missions), Forslag till all- styrelsen (National Board of Health and Wel-
man sjukhusstadga Yr, 43, 1922. fare), Stockholm, personal communication,
51. D e n ;ppna lakarvarden I Riket, 14, Oct. 24, 1977.
1948. ‘ 69. Werk6, L.; “Swedish Medical Care in Transi-
52. Riksplan f o r samarbete i n o m spe- tion, ” N. Eng. ). Med. 284: 360, 1971.
cialiser;d sjukhusv;rd av s&skilt tillkallad 70. Wistrand, B., The Medical Responsibility Board
utredningsman, 26, 1958. and the Patient Ombudsmen in Sweden (Stock-
53. Om lakarbehov och Iakartillg%g, holm: Socialstyrelsen (National Board of Health
betank;nde a u lakarprognos utredningen, 8 , and Welfare), 1975).
1961. 71. World Health Organization (WHO), Long-Term
54. Regionsjukv;rden, 70, 1978. Effects of Coronary Bypass Surgery, report of a
55. ; Regionsjukv;rden, 71, 1978. working group, The Hague, Nov. 1-4, 1977 (Co-
56, Statistiska Centralbyr~n (National Bureau of penhagen: WHO Regional Office for Europe,
Statistics), Sweden 78, (Stockholm, 1978). 1978).
57, Historisk Statistik fbr Sverige
(Stockholm, 1960).

Summary and Analysis


Introduction. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 191
Research and Development . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 192
Evaluation of Medical Technology. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 194
Regulation of Drugs and Devices for Safety and Efficacy . . . . . . . . . . . . . . . . . . . . 196
Controls on Investment and Use. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 199
Controls on Five Specific Technologies. . . . . .. ........................... 204
CT Scanners . . . . . . . . . . . . . . . . . . . . . .. ........................... 204
Renal Dialysis . . . . . . . . . . . . . . . . . . . . .. ........................... 208
Coronary Bypass Surgery . . . . . . . . . . . .. ........................... 211
Cobalt Therapy. . . . . . . . . . . . . . . . . . . .. ........................... 213
Automated Clinical Laboratory Testing .. ........................... 214
Summary and Conclusions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 215
Chapter 1 References . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 217


Table No. Page

1. Technology Development and Use in the United States: Formal
Programs of the U.S. Department of Health and Human Services. . ..........191
2. Distribution of Randomized Clinical Trials of Gastrointestinal Therapies by
Country. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .............195
3. Distribution of Installed CT Scanners by Country . . . . . . . . . . . . . . . . . .. ....207
4. Treatment of Patients With End-Stage Renal Disease by Country and Year .. ..209
5. Percent of Dialysis Patients Receiving Treatment at Home by Country . . . . . . . 210
6. Coronary Artery Surgery per Million Population by Country and Year . . . . . . . 212


Figure No. Page

1. Diffusion of CT Scanners in the United States, Japan, Sweden, and
the United Kingdom. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. ...206
2. Patients Treated for Chronic Renal Failure in Great Britain and Europe . ......211

Summary and Analysis

The preceding chapters of this volume have describes the policies and mechanisms used in
described the po licies and mechanisms used to the United States and then compares these with
manage medical technology in nine industri- those of the other countries. (An overview of
alized countries: the United Kingdom, Canada, medical technology development and use in the
Australia, Japan France, West Germany, the United States appears in table 1.) The purpose
Netherlands, celand, and Sweden. This chapter of the analysis- is twofold: first, to draw- out

Table 1 .—Medical Technology Development and Use in the United States:

Formal Programs of the U.S. Department of Health and Human Servicesa
Technology’s stage
of development Policy area and Government activityb Responsible agency or program
Research and Support, conduct, and pIan basic research National Institutes of Health,
development others c
Support, conduct, and plan applied research National Institutes of Health, other
agencies and programs

Demonstrate ion of Support or conduct clinical trials National Institutes of Health,

safety, efficacy, . test safety others c
and cost ● test efficacy

effectiveness ● protect human subjects

Ensure efficacy and safety of drugs and devices Food and Drug Administration
● control of testing procedures

. postmarketing surveillance

Provide economic analyses National Center for Health Care

● cost-benefit analysis Technology
● cost-effectiveness analysis National Institutes of Healthd

Evaluate social, ethical, political impacts National Center for Health Services
. technology assessment Research

Diffusion Regulate market approval of drugs and devices Food and Drug Administration

Encourage distribution by information dissemination National Institutes of Healthd

Control distribution through certificate of need, review of Health Resources Administration


Widespread use Ensure appropriate use Professional Standards Review

Organization certification programs

Monitor practice Professional Standards Review


Reimbursement for health services Medicare f

● define benefits package Medicaid g
● set reimbursement levels

192 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

common patterns in the various countries’ ap- fifth section examines the U.S. and other coun-
preaches to managing medical technology tries’ policies toward five specific medical tech-
where such patterns exist; and second, to deline- nologies: computed tomography (CT) scanners,
ate differences in approach where there are in- renal dialysis, coronary bypass surgery, cobalt
teresting and important exceptions to the therapy, and automated clinical laboratory test-
patterns. ing. Data concerning these technologies have
been drawn from the chapters in this volume
The discussion is organized in five sections.
and from other sources. 1
The first four sections discuss, in turn, govern-
ment policies toward 1) R&D, 2) evaluation, 3)
IThe chapters on individual countries in this volume are not ref-
safety and efficacy regulation, and 4) invest- erenced in this chapter. Unless otherwise noted, material is taken
ment in and use of medical technologies. The from these chapters.


In 1979, the world’s total public and private has been going through a difficult period (36).
R&D budget was estimated to be about $150 bil- During the 1950’s and 1960’s, a preoccupation
lion (31). About one-third of that amount was with economic growth led to an attitude on the
invested by the United States, and another third part of the general public that almost all R&D
by Western Europe and Japan combined. Over- should be encouraged. By the end of the 1960’s,
all, from 7 to 10 percent of the total was spent however, with heightening interest in the proper
on R&D related to health (2,31). utilization of human and environmental re-
sources, there emerged a desire on the part of
Since World War II, governments over the en-
the public for science to attack problems more
tire industrialized world have become deeply in-
directly related to the achievement of these
volved in supporting R&D of all kinds. In 1979,
goals. Since that time, governments of industri-
the U.S. Government spent almost $30 billion
alized countries have attempted to exercise
on R&D, making up about two-thirds of the
greater selectivity in making R&D investments
country’s total investment. Governments of
and to bring about relative or absolute reduc-
other industrialized countries spend propor-
tions in the amounts that they devote to R&D
tionately comparable amounts. In Britain and
France, for example, more than half of the R&D
effort is supported by public funds (31). Al- The increasing emphasis on social goals for
though government funds in Japan amount to R&D has helped to foster increasing support for
less than 25 percent of the country’s total invest- health R&D (36). Numerous countries have de-
ment in R&D (31), the special relationship be- clared health R&D to be one of their top prior-
tween government and industry there gives gov- ities in coming years. In 1975, OECD found that
ernment planners more power over R&D than among 12 OECD countries, including the
that figure suggests. The actual amounts in- United States and Japan,2 health ranked number
vested by different countries in R&D vary. In seven overall among priorities for R&D invest-
1970, for example, the percentage of gross na- ment (36). Furthermore, among the new social
tional product (GNP) invested in R&D ranged objectives that became prominent during the
from 0.5 percent in Canada to 1.6 percent in the 1970’s— including public welfare, community
United States (36). The per capita expenditure services, and pollution abatement—health
on health R&D in 1969 ranged from more than ranked number one. With health services taking
$6 in the United States to less than $1 in the a growing share of GNP, some countries are in-
United Kingdom (36). terested in the contribution that health R&D can
According to the Organization for Economic
‘The 12 OECD countries are Belgium, Canada, France, West
Cooperation and Development (OECD), despite Germany, Italy, Japan, the Netherlands, Norway, Spain, Sweden,
substantial government support, R&D generally the United Kingdom, and the United States.
Ch. 11—Summary and Analysis . 193

make to strengthening the general economy. central mechanism, usually through the Min-
This is particularly true in the Netherlands, istry of Health or its equivalent. Most publicly
which exports 90 percent of its medical funded biomedical research is done either in in-
technology. tramural institutions (i. e., government agencies
or institutes) or in the higher education sector.
In the United States, health R&D represents
about 11 percent of the total Federal R&D ex- In the United Kingdom, Canada, and Swe-
penditure, a higher percentage than in most in- den, independent medical research councils play
dustrialized countries.3 A number of U.S. Fed- an important role in funding biomedical re-
eral agencies fund R&D related to health, with a search and insulate such research from direct
total budget of about $3.8 billion in 1978 (27). government controls. West Germany has a par-
Of these, the National Institutes of Health (NIH) ticularly decentralized system, in which the
is predominant. With a 1978 budget of $2.6 bil- State governments play an important role. Most
lion, NIH supports about two-thirds of the en- federally funded research is carried out in quasi-
tire Federal effort. Private industry in the United autonomous research institutes. In all countries,
States also supports R&D related to health. In much research is carried out by academicians in
1978, U.S. industry invested an estimated $1.8 university hospitals who are funded by service
billion in health-related R&D. Of this amount, moneys through health insurance. As in the
$1.3 billion came from pharmaceutical compa- Netherlands, university hospitals have higher
nies, and the remainder from instrument and tariffs than others, and this money subsidizes
supply companies. Industry is also important research.
internationally. How priorities are set in the government bio-
The allocation of moneys in Government re- medical research programs of various countries
search programs in the United States is essen- has not been well described (40). Given the de-
tially a political process, with Congress playing centralized nature of the R&D system, the large
an active role in setting overall priorities. private involvement, and the autonomy of aca-
Biomedical research policies in the United States demic teaching hospitals, the possibilities for
have been well described by Strickland (47), and control are limited. Furthermore, the scientists
more recently, by Rettig (40) and Springarn themselves play a large role in setting priorities
(46). During the second half of the 1970’s, NIH through research councils or, as in France, by
came under pressure from many sources to fund giving advice to the government. According to
nontraditional research more related to societal Klein, biomedical research priorities in Britain
goals, such as epidemiological research, social have tended to be shaped by the interests of the
science research, and nutritional research research community rather than by an appraisal
(49,50). Research to evaluate medical technol- of what type of research would yield the greatest
ogy, described in the next section of this dividend to the community at large (20).
chapter, also falls into this category. In some countries, however, there are indica-
In countries other than the United States, cen- tions that the interests of the public are increas-
tral government agencies that support and carry ingly being considered in determining biomedi-
out biomedical research do exist, but probably cal research priorities. France has perhaps gone
none of these agencies is as dominant and au- the furthest in setting explicit priorities. In addi-
tonomous as NIH. Among the 12 OECD coun- tion, the “war on cancer” in the United States
tries cited earlier, only half have a central gov- resulted from public demands that research be
ernment budgetary mechanism for biomedical addressed to specific needs (39). In Belgium, the
research (36). Australia, Japan, France, and the government has been concerned with the effect
Netherlands invest their public funds through a of drugs (36). The stated objective of the Min-
istry of Research and Technology in West Ger-
‘Some industrialized countries spend considerably less. In 1972,
for example, Japan spent only 1.8 percent of its public R&D funds many is to develop medical technology that will
on health; the comparable figure in the United Kingdom was 1.9 improve patient care, reduce side effects, and be
percent (36). more cost effective. Finally, the development of

68-095 0I - 80 - 14
194 ● Background Paper #4: The Management of Health Care Technology in Ten Countries

the CT scanner was funded by the Department tional impact of the CT scanner developed in
of Health and Social Security in the United Britain and of renal dialysis developed in the
Kingdom because of its promise for improving Netherlands clearly shows this. In many cases,
quality of care through better diagnosis. therefore, the critical decision for policymakers
will be how to react to a new medical technol-
Biomedical R&D, wherever it is carried out, ogy developed elsewhere—not whether and
has implications for all countries. The interna- when to develop it.


One type of health-related research that has medicare and medicaid programs, the major
been gaining visibility is the evaluation of the public health insurance programs that pay for
benefits, risks, and costs of medical technolo- medical care for the elderly and the poor. Since
gies. In the United States, no Government agen- its inception, NCHCT has devoted a great deal
cy has had a clear mandate to perform such of effort to performing this function, although
evaluation until recently. Examining the situa- its effect on the development, diffusion, and use
tion in 1977, OTA found that there had been lit- of medical technology is unknown.
tle research done on the efficacy and safety of
medical technologies (33). In many cases, avail- The issue of the need for more evaluation of
able evaluation methods had not been applied.
medical technology is also becoming more visi-
ble in a number of countries other than the
By far the largest of the U.S. Federal Govern- United States, but investments in this’ type of
ment agencies that were performing some evalu- research appear to be small. The highest priority
ative work, OTA found, was NIH, which sup- for evaluation in other countries also seems to
ports such work as part of its general research be drugs (33). A number of voluntary institutes
mandate. In 1975, NIH supported about 755 evaluate medical devices in other countries, but
clinical trials at a cost that year of about $100 the evaluations tend to be technical (i.e., they
million (33). In 1976, it spent $147 million on deal with such matters as safe design to prevent
926 clinical trials (29). The priorities of these electrical shock, but not the question of health
NIH-sponsored studies, in terms of the types of benefit from use of the device).
technologies being evaluated, were heavily
skewed toward cancer therapies, especially OTA was unable to identify data on the
drugs. Few surgical procedures, diagnostic tech- amounts various countries spend on evaluation
nologies, or preventive interventions were being studies in health care. Furthermore, such studies
evaluated. Noting the lack of knowledge about are not specifically budgeted and must compete
the efficacy and safety of many medical technol- with other types of health R&D. With respect to
ogies, OTA suggested a mandated program to the performance of randomized clinical trials
evaluate medical technology. (RCTS) in various countries, Cochrane has com-
mented (8):
In October 1978, Congress passed legislation
establishing the National Center for Health Care If some such index as the number of RCTS per
Technology (NCHCT). Besides carrying out 1,000 doctors per year for all countries were
and supporting evaluation studies, NCHCT has worked out and a map of the world shaded ac-
responsibility for coordinating research on med- cording to the level of the index (black being the
ical technologies to ensure that important highest), one would see the U.K. in black, and
scattered black patches in Scandinavia, the
studies are funded. In particular, it is supposed
U. S. A., and a few other countries; the rest
to see that the information needs of programs would be nearly white.
such as the health planning program are met.
NCHCT also has a statutory mandate to pro- As shown in table 2, Cochrane’s observations
vide advice on the coverage of benefits to the concerning the unequal distribution of RCTS
Ch. n-Summary and Analysis 195

Table 2.—Distribution of Randomized Clinical Trials of Gastrointestinal Therapies

by Country (1964-74)

Country rank
Number of by number
trials per of trials
Number Percentage million per million
Country a of trials of total population population
United Kingdom. . . . . . . . . . . . . 83 27.1 % 1.48 2
United States. . . . . . . . . . . . . . . 75 24.5 0.34 6
Italy. . . . . . . . . . . . . . . . . . . . . . . 16 5.2 0.28
West Germany. . . . . . . . . . . . . . 15 4.9 0.24 8
Japan . . . . . . . . . . . . . . . . . . . . . 13 4.2 0.11 10
Denmark. . . . . . . . . . . . . . . . . . . 11 3.6 0.46 4
South Africa. . . . . . . . . . . . . . . . 10 3.3 0.38 5
Australia. . . . . . . . . . . . . . . . . . . 9 2.9 0.64
France . . . . . . . . . . . . . . . . . . . . 7 2.3 0.13 9
Norway . . . . . . . . . . . . . . . . . . . . 7 2.3 1.75 1
Other countries . . . . . . . . . . . . . 52 16.9 — —
International trials. . . . . . . . . . . 8 2.6 — —
Total . . . . . . . . . . . . . . . . . . . . 306 100.O% — —


among nations have been generally confirmed data from trials conducted in the United States.
with independent data on trials of gastrointes- Although the international importance of U.S.
tinal therapies. Although one should not over- clinical trials may be an argument for expanding
emphasize their generalizability,4 the findings their funding, it also points to the need for other
presented in this table are in accord with the countries to begin sharing more of the burden of
reputation of different countries. In particular, evaluating medical technologies. Smaller coun-
the high ranking of the United Kingdom, both in tries that might have problems producing a
numbers of trials and in trials by population, is large enough sample for a study could make fi-
consistent with Cochrane’s statement. The low nancial contributions to help ensure that impor-
ranking of France and Japan, and the inter- tant technologies are studied.
mediate ranking of West Germany and the
United States, are similarly in accord with anec- The small number of international trials in
dotal evidence. table 2 is also of interest. Currently, there is
considerable discussion of expanding interna-
Because their results are often used in coun- tional studies (48). An international European
tries other than the country of origin, controlled study of coronary bypass surgery was carried
clinical trials obviously have international im- out in the mid-1970’s. In 1979, there were dis-
plications. It might be noted that, in terms of cussions about initiating a trial of electronic
conducting clinical trials of gastrointestinal fetal monitoring coordinated by the European
therapies, the United Kingdom is carrying a bur- Common Market Commission.
den disproportionate to its size. The number of
trials conducted in the United States is relatively On the basis of the information presented in
large, although the number of U.S. trials per the other chapters of this volume, it appears
million population is small. The lack of Cana- that few evaluative studies other than ran-
dian trials of gastrointestinal therapies in table 2 domized controlled clinical trials are done in
may be attributable to Canada’s dependence on either the United States or other countries.
Deserving of note, however, is that the French
Since the literature review that yielded the data in table 2 was and Australian Governments have begun to
done from the U.S. Medlars System, it may not have represented
journals from all countries equally, but instead emphasized Eng- fund cost-effectiveness studies for the purpose of
lish-language journals. influencing policymaking. A number of coun-
196 Background Paper #4: The Management of Health Care Technology in Ten Countries

tries have analyzed the role of CT scanning. An and mammography). These consensus exercises,
independent cost analysis by the Swedish Plan- however, are still in an experimental stage.
ning and Rationalization Institute apparently
In all the countries discussed in this volume,
led county governments to approach the pur-
activities to synthesize existing knowledge
chase of CT scanners with considerable caution.
about medical technologies, unlike formal ex-
Some scanners in France have been approved
perimental evaluations, are common. In Eng-
only for institutions that have the capability to
land, physician consensus often substitutes for
do evaluative studies.
either scientific evaluation or public involve-
ment in decisionmaking (20). In Canada, guide-
Another important activity related to the
lines for new and expanded facilities in hospitals
evaluation of medical technology is synthesizing
are frequently developed by special task forces
and drawing conclusions from existing knowl-
comprised of Federal and Provincial officials
edge. In the United States, where organizations
and outside medical consultants. More or less
such as insurance companies are increasingly in-
the same situation has been noted in West Ger-
volved in the delivery of health care, clear-cut
many, France, Australia, and Sweden.
conclusions about the benefits and risks of tech-
nologies are essential. Traditionally, syntheses Although the countries in this volume have
of existing knowledge in the United States have done little to assure the timely evaluation of
been done in a very informal manner. Many dif- medical technologies, the issue of the need for
ferent Federal Government programs do such such evaluation has become visible in all of
syntheses. In an effort to make the synthesizing them. Furthermore, a number of countries, in-
processes more formal and more open to public cluding France, West Germany, and the Nether-
view, NIH has been experimenting for several lands, are considering expanding their evalua-
years with a process that it calls “consensus ex- tion activities. In Australia, a new system has
ercises. ” NIH brings together various experts been proposed that would include a national ex-
and gives them the best scientific information pert committee to give advice on medical tech-
that can be found; these experts then arrive at nology and a central repository of information
consensus recommendations concerning such on medical technology. It seems certain that ac-
matters as the appropriate use of specific tivities to evaluate medical technologies will
technologies (e.g., electronic fetal monitoring continue to expand.


Virtually every country discussed in this vol- drug (“elixir of sulfanilimide”) that was sold in a
ume has mechanisms to regulate the safety and solvent of diethylene glycol, which caused kidn-
efficacy of drugs. These regulatory mechanisms ey damage. The law initiating the regulation of
have evolved because the production and sale of drugs for efficacy in the United States, the U.S.
drugs in capitalist countries is primarily the Food and Drug Amendments of 1962, also fol-
responsibility of private enterprise (41), and lowed a disaster, this time involving serious
although the private enterprise system has led to birth defects caused by the drug thalidomide.
many advances in modern medicine and has The historic pattern of first regulating drugs for
made high-quality drugs accessible to the gen- safety, and later for efficacy, has also apparent-
eral population, it has also resulted in harm. A ly been followed by other countries.
law to regulate safety of drugs sold in the United
States, the U.S. Food, Drug, and Cosmetic Act The U.S. Government agency with responsi-
of 1938, was enacted in response to a 1937 dis- bility for the regulation of drugs for safety and
aster in which 358 people died from ingesting a efficacy, along with the regulation of their man-
Ch. 11—Slimlnary and Analysis ● 197

ufacture, is the Food and Drug Administration tion on adverse reactions to drugs on the market
(FDA). When a drug company has a drug that it has been set up in Japan, where there is great
wishes to test in humans, it must submit data concern about safety. Canada also relies pri-
from preclinical testing in animals to FDA. If marily on a postmarketing surveillance system
FDA agrees that the drug looks promising, it ap- to regulate drugs. Postmarketing surveillance,
proves the sponsoring company’s “investiga- either in combination with premarketing con-
tional new drug” application to permit the drug trols or as a specific approach, has a number of
to be tested in humans. When sufficient data advantages, One is that it allows the collection
have been accumulated from controlled clinical of data from the real-world setting where drugs
trials and other tests in humans to show that the are used. Another is that it enhances flexibility.
drug is efficacious and safe, or that the benefit/
risk ratio is favorable, the company submits a In recent years, there has been increasing dis-
“new drug application” to FDA. If FDA finds cussion in the United States about relying more
the data convincing, it allows a drug to be on postmarketing controls on drugs and relax-
marketed. ing the premarketing controls a bit. The drug
approval process used in the United States since
Once a drug is on the U.S. market, FDA has passage of the 1962 Food and Drug Amend-
little control over its use or evaluation. Proc- ments has demonstrably lengthened the time re-
esses for collecting information on the safety quired for approval of a new drug. DeHaen
(rare adverse reactions, long-term effects) and studied the time required for a drug to move
on the indications for use of drugs on the market through the “pharmacology, clinical study, gov-
are very limited and for the most part volun- ernment review to marketing” pipeline in four
tary. It also should be noted that although drugs European countries and the United States
are usually tested for specific clinical indica- (11,12). Looking at 42 drugs, he found that the
tions, and their use is often approved only for 12 drugs that became available before 1962 were
those indications, such products are frequently marketed about as rapidly in the United States
used for other indications. Anesthetics used in as they were in Britain, France, Italy, and West
childbirth, for example, have not been tested for Germany. For the 30 drugs introduced since
that indication and are not explicitly approved 1962, however, the story was quite different.
by FDA for that use. The number of years required between introduc-
In countries other than the United States, con- tion and marketing of these products was lowest
trols of the marketing of drugs based on efficacy in Britain, next lowest in France, third lowest in
and safety are similar to controls in the United West Germany, higher in Italy, and highest in
States, but are generally not as rigorous. Indi- the United States. A1l post-1962 applications in
rect controls are often more restrictive than Britain, France, and West Germany were ap-
direct ones. In France, for example, a decision proved within 2 years, but in the United States,
must be made to place a specific drug on the re- only 17 of 23 drugs were approved in that span,
imbursable formulary of the Social Security and 4 of the 23 drugs took 4 years or longer to
System. To be placed on this list, a new drug gain approval.
must either be more efficacious, have fewer side
The basic findings that the United States tends
effects, and/or cost less than another drug on
to lag behind other countries in licensing of
the formulary. In Japan, fees to cover the pre-
drugs and that the U.S. drug lag is in part at-
scribing of drugs are set yearly. In recent years,
tributable to FDA’s regulatory program has
the fees have been reduced each year, perhaps in
been confirmed by a considerable body of liter-
part in an attempt to lower the incentive for
ature (16,37,45,52,53), which has been summa-
drug prescribing. In Australia, the pharmaceuti-
rized by Schifrin and Tayan (44). The following
cal benefits scheme does not cover all drugs on
conclusions can be drawn. First, drug lag exists
the market.
to some extent in every country. Second, drug
Some countries do have postmarketing regu- innovation, as me