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Performance measurement - productivity

Partner Institute: 
University of Southern Denmark, Odense
Survey no: 
Michael O. Appel
Health Policy Issues: 
Political Context, Quality Improvement, Others, Remuneration / Payment, Responsiveness
Transparency re. performance; Information; Market-oriented tools (benchmarking, yardstick competition).
Current Process Stages
Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? yes no yes no no no no


The Danish Ministry of Health has announced a new policy-goal: the stated intention is to publish data on the productivity performance of individual hospitals and providers in general. An additional goal is to make the Danish health care system "the best in the world" to develop productivity data regarding health care services.

Purpose of health policy or idea

The main objectives are:

  1. To inform the public on provider performance. Transparency is seen as a goal in it-self but it is also expected to be instrumental in rising the performance level of the delivery of health care services. The expectation is that the public, e.g. as voters, will use this information when assessing the performance of politicians.
  2. To inform purchasers on provider performance. The assumption appears to be that this will improve the bargaining power of purchasers. It is not entirely clear how this is perceived to have an effect (whether it will require additional possiblity for purchasers to enter into selective contracting or by way of being better able to put shame on those providers considered low-performers).  
  3. To inform providers on the relative performance of other providers. Inferior performers are thought to become better if learnt form superiour performers.

The understanding appears to be that regional purchasers (partly the regions that will replace the existing counties, partly the municipalities) will have a financial incentive to put pressure on producers (as they can use freed resources to alternative initiatives), and that the additional information will strengthen this incentive. Though not put in those words, the underlying rationale could be that by lowering the cost of information various groups (voters, purchasers etc.) will make more use of it. 

Main points

Main objectives

  1. Rising the performance level of the delivery of health care services.
  2. Transparency.

Type of incentives

  1. Freed resources obtained as a result of better bargaining by purchaser may be used for other purposes (including other or more health care services) 
  2. The expectation is that the effect of these wil increase as more information (on productivity) is made freely available.

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Characteristics of this policy

Degree of Innovation traditional traditional innovative
Degree of Controversy consensual neutral highly controversial
Structural or Systemic Impact marginal marginal fundamental
Public Visibility very low very low very high
Transferability strongly system-dependent system-neutral system-neutral

The initiative is traditional in the sense that productivity studies have been pursued sporadically for a number of years. It is, however, a novelty in a Danish context that the Minister of Health explicitly puts so much emphasis on the monitoring of productivity.  

Political and economic background

The idea can be viewed in the context of the present ministers goal to improve transparency of the system. The basic goal is to improve productivity performance by putting pressure on providers. There has been no pressure from the out-side: not from opposition parties, not from media, not from academia, not from producers, not from consumers or voters and not from abroad.

Purpose and process analysis

Current Process Stages

Idea Pilot Policy Paper Legislation Implementation Evaluation Change
Implemented in this survey? yes no yes no no no no

Origins of health policy idea

The origin of the idea is to be found mainly in the Ministry of Health and the Ministry of Finance. The use of DRG's for productivity comparisons started in the 1990'es and a circle of civil servants have persistently sought to develop this kind of information. It would be incorrect to view this effort as a part of any Libertarian conspiracy to transform the sector into a market-like process (the civil servants in the both the Ministry of Health and the Ministry of Finance have traditionally been strongly opposed to any market-oriented reform of the sector and have instead been exponents of the view that the mere observation of a formal market-imperfection justifies government intervention). Rather, the motivating force has probably been primarily a sort of  technocratic or managerial common-sence ('it might be helpful to be able to compare the production of hospitals') and an ambition to put pressure on providers.  

The additional step to not only make comparisons of productivity but to make them public probably reflects the advent of a particular pro-active minister of health. That is: it is not an idea which has been embedded in the core community of civil servants. In this sense the development of the idea has been politician-driven and crucial depends on who holds the office.    

It is perhaps noteworthy that the idea did not originate with the Association of Counties (the regional body which owns and runs hospital in the Danish system), nor within the community of health care experts within social-science departments. The Association of Counties has rationally found that imperfect information on performance, rather than constituting a nuisance, can be very helpful to its particular interest. The community of experts is generally very concerned with the implications of the emergence of additional information - the concern is based on the risk that additional information in particular areas might distort incentives and thereby fail to be instrumental to an overall improvement.

Initiators of idea/main actors

  • Government
  • Parliament
  • Providers
  • Payers

Stakeholder positions

As part of the annual negotiations ("budget game") between the central government and the Association of Counties it has been agreed that systematic productivity analyses' should be made and that the results should be published. The Minister/Ministry of Health was the driving force.

Producers - hospitals etc. and counties (which have a dual role both as payers and providers) - have generally been reluctant to adopt the idea. The official reason is that in a complex sector it is very difficult to meausure performance accurately. The underlying rationale may be that additional information may undermine their bargaining power.

Actors and positions

Description of actors and their positions
Minister of Healthvery supportivevery supportive strongly opposed
Govt and supporting partiesvery supportivesupportive strongly opposed
Opposition partiesvery supportiveneutral strongly opposed
Hospitalsvery supportiveopposed strongly opposed
Association of Countiesvery supportiveopposed strongly opposed

Influences in policy making and legislation

The initiative is still at the idea stage. It can, however, be implemented without any explicit legislation. The agreement between the government and the Association of Counties sketches certain initiatives and a timetable for their implementation.    

Actors and influence

Description of actors and their influence

Minister of Healthvery strongstrong none
Govt and supporting partiesvery strongstrong none
Opposition partiesvery strongweak none
Hospitalsvery strongweak none
Association of Countiesvery strongneutral none
Minister of HealthGovt and supporting partiesOpposition partiesHospitalsAssociation of Counties

Positions and Influences at a glance

Graphical actors vs. influence map representing the above actors vs. influences table.

Adoption and implementation

Adoption and implementation is pending.

Monitoring and evaluation

No particular mechanism has been suggested for reviewing the implementation of the idea. The plan appears to be that the Ministry of Health will do the reviewing. 

Expected outcome

One objection to the policy-idea is that additional information risks distorting performance so that effort which is valuable but difficult to observe is given a lower priority by producers. It is an open question whether this will be the case or if it is possible to collect broad enough information so as to achieve a net-gain. Assuming that a net-gain is possible (or at least accepting that we do not know and that a trial-and-error process is worth pursuing) the policy-initiative is reasonable. In fact, the main concern may well be that it will either not be carried out, or that, within the given structure of incentives, it will have no effect. The reasons to expect it to have little or no effect are the following:

  1. The regional bodies (which will replace the counties) will be in a similar relationship to producers as were the counties. That is: they will be integrated with producers. It is therefore to be expected that rather than pursuing purchaser - objectives will tend to collude with, e.g., hospitals. The Ministry envisons that by making information more readily available to consumers/voters they will put pressure on regional politician to ensure cost-efficient production. That, however, is to deny the presence of a free-rider problem and of rational voter ignorance. Individual voters will only have a weak incentive to process the information on productivity (even if it is asumed that the information provided is adequate). Moreover, politicians in low-performing regions will have an incentive and a possibility to cloud any information on productivity thereby making voters ability to check the system futile. The rational patient behaviour will instead be, if capable, to put an effort into making use of her possibility to excercise a choice of provider/doctor (which may still be across regions).      
  2. The Ministry refers to the new feature of the coming system in which municipalities become responsible for part of the funding of the regions (and thereby for the hospital-services provided by the regions). The argument is that the municipalities will act as agressive purchasers of the services provided by the regions. The underlying rationale (which is not spelled out, probably for tactical reasons) is similar to the one used in other countries in which a separation of purchaser and provider has been pursued. The Ministry's rationale is reasonable except that for the change to have a noticeable effect, one will have to increase the funding-share that municipalities are responsible for. 

Impact of this policy

Quality of Health Care Services marginal rather marginal fundamental
Level of Equity system less equitable neutral system more equitable
Cost Efficiency very low low very high

The likely outcome is that the additional information on productivity will have little impact on cost efficiency since purchaser (i.e. the counties/regions) have little incentive to put pressure on their own providers. Consequently there is also little risk that providers will increase shirking that reduces quality. 


Sources of Information

The policy-idea paper - Produktivitet på Sundshedsområdet [Productivity in the Health care Sector] is avaiable in Danish only. In September 2005 it was available at the followin link from the Ministry's homepage:  Produktivitet på Sundshedsområdet [Productivity in the Health care Sector]

Author/s and/or contributors to this survey

Michael O. Appel

Suggested citation for this online article

Michael O. Appel. "Performance measurement - productivity". Health Policy Monitor, 01/10/2005. Available at