New Health Organization in Norway. Government Run Hospitals. Consequences for research and health services.

Mr. Chairman, Ladies and Gentlemen. The past year in Norway has been one characterised by health reforms. Three major reforms have been adopted that have considerable consequences for the organisation of the health service. These reforms are: First, the regular general practitioner scheme, which was introduced on the first of June this year; secondly, a complete restructuring of the central health organisation, which involved the establishment of a Directorate for Health and Social Affairs, an Institute for Public Health and reorganisation of the Norwegian Board of Health. The third reform, and the subject of this paper, is the takeover of responsibility for all Norwegian hospitals by central government from the first of January 2002.

Historical review

The takeover of responsibility for all hospitals by central government breaks with a more than 30-year tradition of hospitals being owned and run by the counties. Norway is divided into nineteen counties, each with an average of 240,000 inhabitants. The counties were assigned responsibility for institutional health services in connection with the introduction of the Hospital Act on the first of January 1970.

It wasn’t until 1987, however, that one began to question the justification for county ownership, when a public committee evaluated the issue of the takeover of responsibility for hospitals by central government. In this instance, a majority of the committee, and later the Norwegian parliament, voted for county ownership. In connection with the debate in the Norwegian parliament on the so-called White Paper on Health in the spring of 1994, the government was once again asked to evaluate hospital ownership by central government. A special committee was appointed which submitted its recommendations in the spring of 1996. The committee’s recommendations were unanimous in respect of every point it had been asked to consider, except for the question of ownership. A minority voted in favour of the central government assuming responsibility for Norway’s hospitals combined with increased freedom and overall state control. In essence, this proposal was identical to the proposal put forward by the present government. The committee was unanimous in its recommendation that the scheme of voluntary regional cooperation between counties, which was introduced as early as 1974, should now be enshrined in law and made mandatory for all counties.

Already in 1974 Norway was divided into five health regions, to reflect the fact that as far as specialist medicine was concerned one needed a large catchment area in order to secure high-quality services at an acceptable cost. Regional cooperation has, however, been based on the voluntary participation of the counties.

In other words, the takeover of responsibility for all Norwegian hospitals by central government marks the end of 30 years of ownership by the county municipalities. There is good reason to stop for a moment and ask ourselves which considerations have now brought about such a drastic change.

In the preparatory works of the 1970 Hospitals Act, two matters were given particular emphasis. First, the need for political control or the desire for democratisation. Secondly, the desire for coordinated control of all institutional health services in each county and, in particular, coordination between hospitals and nursing homes. At that time, the counties represented a rather natural administrative unit in terms of these goals. That this reform was a correct reform is nevertheless documented by its stability. For those of us who have been keen to see a change and have regarded central government as a more natural owner of the country’s hospital service, it is tempting to return to the two main premises. Firstly, the desire for democratisation. The very fast pace of development in and the specialisation of medical health care since 1970 and the subsequent complexity of managing hospitals makes political involvement on hospital boards, committees and councils an unsuitable means of exercising close control. Many hospitals have taken the consequences of this and have chosen to dismantle their executive boards. The importance of central government as a financier of hospitals is also of such a magnitude that politicians at the county level feel increasingly powerless in respect of their own opportunities of influencing the hospital’s financing and prioritisation. Nor do the counties themselves any longer seem to be the natural choice as coordinating unit for the entire institutional health service. The Norwegian municipal health reforms of 1984 and 1988 and the 1991 mental health reform have all brought with them a shift of responsibility from counties to municipalities. In addition, growing specialisation in medicine has led to a greater need for larger units of population than those found in most Norwegian counties, in order to provide the specialised units with both a professional and economical justification. Taking things to extremes, one could claim that the county municipalities in this context were "leaking at both ends" – downwards to the primary health service and upwards to an increasing need for regionalization.

Democratic control and coordination of health care services are still key premises for selecting and managing the ownership model. The counties no longer appear to be the natural choice of administrative level in order to achieve these goals – not due to any experienced incompetence, but because of the developments mentioned above.

As the leader of the committee that presented Norwegian Public Report no. 5 in 1996 (NOU 1996 no. 5) "Who should own the hospitals?" and as one of the minority that proposed central government ownership, it will come as no surprise when I say that I still make myself a spokesman for this reform. Even more strongly than in 1996, however, I see that when choosing the type of ownership and operating model one needs to seek an explanation more in the challenges of the future than in the experiences of the past. There is reason to point out that the central government model recommended by a minority of the committee contained three main elements:

1. Central government ownership
2. Freeing up of ties between hospitals and the apparatus of government
3. Overall government control

An increasingly aware and more demanding patient group, free choice of hospital and activity-based financing have gone some way towards turning patients into genuine customers. It is essential that hospitals have greater freedom if they are to meet these challenges. And it is equally important that central government, through its overall control, takes into consideration key values in our health service such as the equal and just right of the individual to receive medical care regardless of his or her income, place of residence and social status. To quote professor Ole Berg from the Norwegian Centre for Health Administration, an increasing degree of standardisation of medical processes and the electronic registration and reporting of all medical activities have "changed the clinic from a private chamber to an open stage". It gives the term ‘medical monitoring’ a completely new meaning. From close political control through political presence in the county municipal model, this development has given central government genuine opportunities to gain insight into most aspects of the production of medical services. Thus, it is possible for an essentially peripheral central government owner to exercise shrewd overall control. The most important challenge facing the public health administration in Norway is precisely how to organise the central government level in order to take into account the desire for a more market-based health service on the one hand and the need for continued political control on the other. Experiences from both England and New Zealand show that it is not always easy to find an ideal balance between overall political control and institutional freedom. The aim of the Norwegian reform is to find a good balance between these principal objectives.

The content and intentions of the reform

First some developmental aspects. Norway’s health budgets have grown very rapidly, particularly in the period 1995–1999, and have grown twice as fast in the health sector as they have done in the rest of the public administration. We currently rank as one of the highest countries the OECD area as regards expenditure on health care resources expressed as a ratio of gross domestic product (GDP). We have seen considerable growth in patient treatment, but stable and even growing waiting lists. In the period 1990–1999, we have seen the number of physicians rise by 50 per cent in terms of man-years, while nursing man-years have risen by 45 per cent in the institutional health service. Yet we still lack health care professionals. In addition, there is great variation in the services offered, depending on place of residence.

Not unnaturally, the question has been raised as to whether the fault lies not in the organisation and structure, but rather in access to resources, since we have been unable to reap the benefits of such considerable investments.

The hospital reform involves two principal changes : 1) The Norwegian state takes over ownership, and 2) Hospitals are organised as enterprises. What then is a health enterprise? . First – the hospitals will no longer be part of the public administration. They will be organised as separate areas of responsibility with five regional health enterprises based on the previous division of the five Norwegian health regions. Under these regional health enterprises, there may be varying degrees of hospitals that either alone or together with others act as independent health enterprises within the regional model. The health enterprises will be independent legal subjects with their own responsibilities as employers. They will have an executive board and a general management with clear powers of authority and will be wholly-owned by the state. The Ministry of Health and Social Affairs, represented by the minister, will be responsible for overall general management but there will be extensive delegation to the underlying enterprises.

In the light of the debate we have had in Norway, there is every reason to point out what the reform does not mean. It does not mean privatisation – the hospitals will continue to be wholly-owned by central government. Management of hospitals may not be transferred to private ownership unless a decision to do so has been reached by the Norwegian parliament. The Norwegian state is responsible for the health enterprises’ commitments – this means that the health enterprises cannot go bankrupt. The new organisation model looks like this.

For the population, the objectives of the reform may be summarised as follows (Overhead #12):

1. Equal health services
2. Improved management – unambiguous management
3. Clear division of responsibility
4. A new organisation – better suited to meet the challenges of the medical technology of tomorrow.

One criticism of the reform is that it has been implemented at a rapid pace. The Labour Party, which is currently in government in Norway, voted at its national congress in November 2000 to support the takeover of hospitals by central government. Subsequently, public hearings have been held and parliamentary decisions reached at a record-breaking pace – and this reform will come into effect from January 2002. Naturally, this does not mean that everything is already in place. Among other things, the financing schemes will not be changed during the first year; instead these will be subject to a comprehensive review from 2003. Criticism has also been raised as to whether the reform has not been especially technical in nature and chiefly concerned with the legal, administrative and financial aspects of responsibility. The minister has therefore decided that a document should be published outlining in ten points the new professional content of the reform. Of special interest to this meeting may be the fact that in this document the reform will be used to initiate a very welcome new initiative for clinical medical research. It has been recommended that in managing the regional health enterprises units shall be developed for coordinating clinical research in the underlying hospitals as part of the enterprises’ quality assurance routines. In connection with the review of financing, the transfer of earmarked grants for clinical research to the regional enterprises will also be evaluated. It is assumed, of course, that the allocation and use of these funds will be made in close collaboration with the university environments. The Minister of Health has also made sure that highly-reputed professors of medicine are represented in all the regional hospital executive boards. By way of example, I can mention that the Dean of the Medical Faculty at the University of Trondheim, who is present here today, is on the board of the Health Region for Central Norway. I have no doubt that he will do his utmost to ensure that the place of medical research is not forgotten in our health region. Nor should we conceal the fact that there has been a certain amount of dissatisfaction in university environments over the fact that in a time of ailing hospital budgets and difficult political priorities, research has suffered. The politicians at county level have probably given priority to treatment needs rather than research. There is reason to expect that the state’s collective responsibility for treatment and research will mean that research will be considered more as an integral part of medical treatment and priority processes than was the case earlier. The reform also comes at a time when giving increased focus to research is considered an important initiative in order to secure our welfare when our oil resources run out.

Everyone here is aware, however, that there is no ideal form of hospital organization that can be copied from country to country. Those of us who have been the strongest proponents of the Norwegian reform should also be humble enough to acknowledge that this reform essentially has the mark of an experiment that will require constant corrections. Nevertheless, I do feel that for a small and very rich country with a homogenous health service and a widely-shared set of values, this reform is a step in the right direction. It offers us new opportunities to steer our hospitals into a future that will be characterised by particularly large challenges for those who wish to produce high-value medical services that can be offered on an equal basis to all regardless of social status and solvency.

Thank you for your attention!