Labour and social dimensions - Sectoral Activities

List of abbreviations

BMA

British Medical Association

CFDT

Confédération française démocratique du Travail

CNAM

Caisse nationale d'assurance maladie

CREDES

Centre de recherche et documentation en économie de la Santé

CSMF

Confédération syndicale des Médecins de France

DAG

German Union of Salaried Employees

DBB

German Civil Servants' Union

DoH

Department of Health, United Kingdom

DHA

District Health Authority, United Kingdom

EFILWC

European Foundation for the Improvement of Living and Working Conditions

EIRR

European Industrial Relations Review

FO

Force ouvrière, France

GDP

Gross domestic product

GP

General practitioner

IDS

Income Data Services

IHF

International Hospital Federation

IHG

International Hospitals Group

ILO

International Labour Office

IRS

Industrial Relations Services

NAO

National Audit Office, United Kingdom

NHS

National Health Service, United Kingdom

OECD

Organisation for Economic Co-operation and Development

…TV

Public Services, Transport and Communications Union, Germany

PFI

Private Finance Initiative, United Kingdom

RHA

Regional Health Authority, United Kingdom

TUC

Trades Union Congress, United Kingdom

WTE

Whole time equivalent

WHO

World Health Organization

Selected cases in western Europe
by Stephen Bach* ¹

* Lecturer in industrial relations at the Industrial Relations Research Unit, Warwick Business School, University of Warwick, Coventry CV4 7AL, United Kingdom (e-mail : IRO BSB@razor.wbs.warwick.ac.uk).

¹ I should like to thank Caroline Hyde Price, Gabriele Ullrich (ILO) and David Winchester (University of Warwick) for comments on an earlier draft of this paper. I also want to thank Marianne Lidbrink (Swedish Association of Health Officers) and Gerard de Pourourville (Groupe Image) for information on employment practices in France and Sweden.

Executive summary

This study examines the impact of health service restructuring for employment practices in the health sector in Britain, France, Germany and Sweden. The health systems of these countries vary in terms of the funding and organization of health care but, in common with most West European health systems, they have been bedevilled by increasing costs. In response to budgetary constraints, governments have sought to restructure their health systems and experiment with forms of privatization. In a labour intensive industry in which the bulk of health care expenditure comprises the paybill of health workers, these initiatives have challenged existing patterns of industrial relations.

Over the past thirty years expenditure on health care in Western Europe has doubled as a proportion of GDP and the health care sector comprises about 6 per cent of total employment of which a high proportion are women. This expenditure growth reflects increasing demand from an ageing population with rising expectations and supply side influences, particularly innovations in medical technology. Restructured systems of health care are separating the purchase of health care from its provision and countries are experimenting with privatization initiatives. In health care this has taken three main forms. First, there has been government support for the growth of the private health care sector. A second approach involves the private provision of public services through policies of contracting out and competitive tendering. Third, there is the private financing of health services with the private sector funding public sector investment projects and individuals bearing more of the cost of their health care. In Britain, there has been widespread contracting out of ancillary services with a sharp reduction in the numbers of staff employed in these services. Terms and conditions of employment have deteriorated with the removal of bonus schemes and the introduction of more flexible working practices. The experience of other countries highlights many of the same issues.

Although in many countries privatization initiatives remain at an early stage, it is not self-evident that the high expectations of privatization, in terms of increasing efficiency and reducing costs, have been fulfilled. It can prove difficult to attract private companies to provide public services and, when they do, it has often lead to worsening terms and conditions of employment. For governments, the expansion of private sector provision may run counter to attempts to reduce overall numbers of hospital beds and can increase the difficulties of managing the health care system.

An important feature of health care restructuring has been changes in pay determination and working practices. Across Western Europe there is tremendous diversity in patterns of health service pay determination, although systems of centralized collective bargaining remain dominant. Tighter control of health care expenditure invariably includes measures to curtail the growth of the paybill. Attempts have been made to decentralize aspects of pay determination to enable greater flexibility in pay setting at local level. However, the uneven development of decentralized pay bargaining in the health sector illustrates the complexities of decentralising pay bargaining. In resolving the tension between devolving greater responsibility to local managers and a concern to rein in health care expenditure governments have given precedence to expenditure control over management devolution.

Initiatives to make the paybill more flexible have included measures to target salary increases at occupations in short supply (market-related pay) or to reward performance (merit pay). The introduction of merit pay has proceeded furthest in Britain, but its effectiveness as a motivator has been questioned due to the absence of objective and measurable indicators of output and the costs of implementing a merit pay scheme.

In a context of public expenditure constraints and limited reforms to systems of pay determination, many countries have witnessed more far-reaching changes in the composition of the workforce and in altered working practices. These changes reflect a general concern to increase the efficiency of the workforce, to use labour more effectively and to recruit and retain scarce labour. There have been significant increases in the numbers of staff employed on more precarious forms of employment contract, notably fixed term and temporary contracts, although the reasons for these increases differ between countries. Another form of flexibility arises from a challenging of existing working practices and the boundaries between occupational groups. The health sector has evolved a complex division of labour with a high degree of specialization. In response to budgetary constraints and the difficulties of recruiting certain types of occupational groups, managers are reorganizing and reallocating tasks that staff undertake. Amongst qualified nursing staff there is a concern that changes in work organization are undermining the role of the qualified nurse.

The impact for employees of health system restructuring and privatization has been predominantly negative, although there are significant variations between and within countries. Britain is at one end of a policy spectrum. Health service employees have been confronted with continuous restructuring as a result of the market-style reforms and experienced work intensification, more precarious forms of employment status and job losses. The labour market has become more segmented with qualified staff, particularly nurses and doctors, experiencing relative improvement in their terms and conditions of employment compared to the experience of less well-qualified nursing and ancillary workers. In many other countries some of these outcomes are occurring and as the pace of restructuring intensifies these effects can be expected to become more widespread.

Health service staff have been quick to respond to these threats to existing working conditions. Industrial action has been threatened in all four countries. In Britain, during 1995, there was a prolonged dispute over the introduction of local pay bargaining. During 1996 and 1997 in France and Germany medical staff have been opposing budgetary constraints and have united to combat health care rationing. In Sweden, severe cost reductions triggered industrial action, particularly amongst nursing staff.

These actions have been essentially defensive as trade unions have attempted to limit the impact on their membership of budgetary restrictions. In a number of countries, particularly France and Italy, the official public service trade unions have been insufficiently sensitive to the demands of their members or potential members. Autonomous organizations have sprung up, galvanising nursing and medical staff resentment at deteriorating working conditions and the erosion of pay differentials. These developments have posed additional challenges to trade unions attempting to address the fragmentation of bargaining structures within the public services. Although devolved pay bargaining in countries such as Britain may encourage increased health service union membership, difficulties remain in encouraging members to participate in local bargaining activity in a climate of job insecurity and confrontational industrial relations.

Industrial action has delayed rather than overturned budgetary restrictions but they pose longer term challenges to the health sector. In an industry which has continually confronted shortages in recruiting and retaining professional staff, the public confrontations with nursing and medical staff may exacerbate staff shortages. Health service restructuring has reinforced the low morale that prevails across much of the health sector with potentially damaging consequences for the quality of patient care. A balance needs to be struck between ensuring the necessary regulation and accountability of professional staff to ensure cost effective health provision and addressing the legitimate concerns of health professionals that their working conditions and professional autonomy are being eroded.

One consequence has been the erosion of the public service ethos as commercial values have been imported into the health sector through privatization and marketization initiatives. This process has unpredictable consequences with managers responding to market signals in a way which is inimical to the purposes of socially provided health care. There are major doubts about the degree to which marketization and an increased role for the private sector will facilitate effective health service restructuring. Complex systems of managed competition, as exist in Britain, have increased administrative costs in the provision of health care. In France, the role of the large private health care sector and the subsequent fragmented pattern of health care provision has contributed to the very high levels of health care expenditure.

At a recent meeting of Health Ministers from Europe hosted by the World Health Organization, a number of principles for health reform were agreed which included an emphasis on quality, ensuring sound financing and reorientating human resources within health systems. The evidence presented in this report suggests that much still needs to be done to translate these principles into practice and that a more likely outcome is that the pace of health system restructuring will intensify during the 1990s and many health care staff will be swept away in an accelerated process of restructuring.

1. Introduction

This paper on the restructuring and privatization of health services in Western Europe was commissioned by the Salaried Employees' and Professional Workers' Branch and the Action Programme on Prioritization, Restructuring and Economic Democracy of the International Labour Office (ILO). In September-October 1992 the First Session of the Standing Technical Committee for Health and Medical Services called upon the ILO to undertake several studies on employment conditions in the health sector.

This study, which forms part of that activity, examines the impact of health service restructuring for employment practices in the health sector. In recent years, countries across Western Europe have been bedevilled by the increasing costs of health care with policy-makers anxious about the affordability of health services and the impact on competitiveness in an increasingly global economy. At the same time, the patterns of organization and financing of health services are deeply embedded in the histories of each nation State and restraining health care provision challenges a key element of the post-war consensus on the importance of effective health care provision available to all citizens. These solidaristic values remain strong in many societies which makes the task of health care restructuring fraught with difficulties.

Nonetheless, to a greater or lesser extent, all countries have embarked on health care reform in the 1990s and have studied carefully the reform initiatives in other countries. The similarities in terminology used to describe these initiatives have frequently clouded rather than illuminated the contours of restructuring. Terms such as "privatization", "managed competition" and "internal markets" take very different forms in western European countries and even similar reform initiatives can lead to different outcomes across countries. Despite these difficulties of comparison it is evident that governments have been embracing the values of the private sector and privileging market style mechanisms as a key element of restructuring initiatives.

Inevitably, in a labour intensive industry in which the bulk of expenditure comprises the paybill of health care workers, workers bear the brunt of these restructuring efforts. Moreover, as the service they deliver -- health care -- is a process involving constant interaction with patients, the latter are acutely sensitive to the working conditions, morale and ultimately quality of service provided by health workers. It is not only the economic impact of health care restructuring which is contested. The health sector as an integral part of the welfare state embodies the political values of each society. The restructuring of health systems has frequently questioned these values and the influence of existing professional elites, a process which has rarely been unchallenged.

This study examines the experience of health care restructuring in western Europe concentrating on developments in four countries: Britain, France, Germany and Sweden. These countries have been chosen because they are implementing significant health care reforms and because they illustrate the differences in funding and organization of health systems in western Europe. These countries can be categorized along two axes. First, in terms of the funding of health services there are differences between Beveridge-style health systems which are funded through central taxation with mainly public providers (Britain and Sweden) and Bismarckian social insurance based systems in which sickness funds are the main funders with mixed public and private providers (France and Germany). Although there are variations within these categories, there is a greater capacity for change within tax funded systems than in the more diffuse funding and organizational arrangements associated with social insurance systems. The second axis depicts the degree of restructuring in the health system in recent years differentiating between incremental and radical change. In all countries important changes have occurred, but in Britain and Germany there have been health system changes which break with earlier patterns of finance and organization. In France and Sweden health reforms have been more diffuse. In Sweden there have been variations in the pattern of restructuring between individual county councils and in France, until the mid-1990s, reforms were of a more incremental nature.

The author of the study was confronted with considerable limitations in the data available as has been recognized in earlier studies (ILO, 1992a). In many countries until recently there has been little interest in employment practices in the health sector and this is reflected in the absence of published studies in this field. The information that exists is frequently rather outdated and does not take account of recent upheavals within health systems. Within the time-scale available it proved impossible to gather much primary data or to visit the countries concerned. Moreover, comparative analysis, even between relatively homogenous groups such as nurses and doctors, is fraught with difficulties because the definitions of occupational groups and the tasks that they undertake varies considerably between countries.

This study is divided into five chapters. Chapter 2 considers developments in health care reform. It is only possible to analyse changes in employment practices after a consideration of the restructuring within health systems which has stimulated alterations to employment practices. Following an examination of these pressures for reform, chapter 3 analyses developments within each of the countries under consideration. Chapter 4 categorises the privatization initiatives being pursued within health systems and assesses the implications for industrial relations practice. This analysis is extended in chapter 5 where the consequences for health workers of privatization and marketization initiatives are examined in terms of the implications for pay and working conditions. More attention is given to pay determination than working conditions due to the limited information available on working conditions in the health sector. Chapter 6 provides an overall conclusion.

2. Trends in west European health care: Implications for employment relations

Introduction

Across western Europe health care systems are in a state of flux as governments grapple with rising demand for health care and escalating costs. The post-war trend of steady growth in health care expenditure coupled with rising health service employment was ruptured during the 1980s as governments sought tighter control of public expenditure. This reflected increasing concern about the growth of state-funded welfare provision which critics maintained eroded the competitiveness of western European economies as corporations and individuals were subject to increasing taxation to fund welfare services.

During the 1990s these concerns have become more urgent. This reflected the relative failure to control health expenditure during the 1980s. Although expenditure growth slackened, slower growth in one part of the health system, notably the hospital sector, was compensated for by more rapid expenditure growth in ambulatory care or drug expenditure. This substitution effect suggests that governments have not succeeded in curbing the growth of health expenditure. Increasing unemployment and the Maastricht Treaty timetable for economic and monetary union, have required governments to curb public spending to ensure that they are eligible to qualify for the single currency. Governments across western Europe are trimming welfare expenditure to meet the convergence criteria sparking widespread demonstrations against welfare retrenchment.

These macroeconomic concerns have been reinforced by microlevel criticisms of health services which suggested that the structure and financing of most health systems provided few incentives to use resources effectively. As in many other public services, market-based competition and effective price mechanisms have traditionally been absent from the health sector. But state regulation designed to substitute for market competition has been relatively unsuccessful in achieving optimal health outcomes. This reflects the complexity of many health systems in which central government may have only limited political and economic control over the health system. The influence of professional groups, trade unions and other stakeholders (e.g. pharmaceutical companies) supported by public opinion, suspicious of government attempts to curb health expenditure, have frequently proved too forceful to enable fundamental reforms to occur. This has fuelled policy-makers' views that fundamental reforms are required in most western European health systems and hastened the search for health reforms that alter the incentive and governance structures.

Health care expenditure

Over the past thirty years expenditure on health care in western Europe has doubled as a proportion of GDP. Most west European countries spend between around 7-9 per cent of GDP on health services (table 1). This is not dissimilar to the OECD average as a whole for 1992 which was 8.4 per cent of GDP, although this figure disguises some wide variations from 4.1 per cent in Turkey to 14 per cent in the United States (Oxley and MacFarlan, 1995). International comparisons indicate a clear relationship between the level of national income and health expenditure with wealthier countries spending a higher proportion of GDP on health care than poorer countries. In the 1980s there was a slow-down in the rate of increase in health care expenditure. This has been attributed to hospital spending growing at a slower rate than during the 1970s. However, in the early 1990s there has been a return to more rapid expenditure growth in a number of west European countries including the United Kingdom, Netherlands, France and Italy.

Table 1. Total expenditure on health care in GDP, 1960-92

1970

1980

1990

1992

USA

7.4

9.2

12.4

14.0

Japan

4.6

6.6

6.6

6.9

Germany

5.9

8.4

8.3

8.7

France

5.8

7.6

8.9

9.4

Italy

5.2

6.9

8.1

8.5

UK

4.5

5.8

6.2

7.1

Netherlands

6.0

8.0

8.2

8.6

Sweden

7.2

9.4

8.6

7.9

Average

5.8

7.7

8.4

8.9

OECD average¹

5.5

7.2

7.9

8.4

¹ Excluding Luxembourg, Portugal and Turkey
Source: OECD, 1995, cited in Oxley and MacFarlan, 1995

A variety of factors have contributed to the steady increase in health care expenditure over this period. On the demand side west European countries have experienced increased demand for health care due to the increasing proportion of elderly people in the population with a marked increase in those living beyond 75 years old. Elderly people consult medical practitioners more frequently, require more prescriptions and when they are admitted to hospital require lengthier stays. Consequently, health costs for those over 65 are typically four to five times the average health cost per capita, a figure which rises to seven to eight times that figure for those over 75 (OECD, 1995a).

The extension of mandatory health insurance ensuring universal, or near universal, coverage for the whole population could be expected to increase the demand for health care, although the impact would vary between countries depending on the precise financing arrangements. During the 1980s and 1990 universal health insurance was implemented in Greece, Ireland, Italy, Portugal, Spain and Switzerland, and the extension of mandatory insurance was under discussion in the Netherlands (Van de Ven, 1996). In addition, increased income levels within countries has stimulated demand for health care as citizens' expectations have risen and this has often gone hand-in-hand with demands for a personalized service provided in a more comfortable and convenient health facility.

Nonetheless, these demand-side influences are estimated to account for less than half of overall expenditure growth (Oxley and MacFarlan, 1995). Supply-side influences are at least as important in explaining the growth of health care expenditure. An important influence has been innovation in medical technology and surgical procedures which in conjunction with new drug regimes have been introduced at an unprecedented rate. These innovations have been a significant cause of escalating medical expenditure. Some medical innovations have the capacity to lower costs per case such as through the expansion of day surgery, new classes of drugs and the growing use of minimal invasive surgical techniques which contribute to shorter lengths of stay. However, these techniques by enabling a more intensive use of existing facilities rarely result in reductions in overall expenditure.

Comparisons between individual west European countries highlight a number of supply-side influences which impinge on overall levels of spending and expenditure control. In most West European countries the number of hospital beds has continued to expand over the last 20 years, although wide variations exist between countries in the number of hospital beds per capita. At the same time, average lengths of stay have shortened (figure 1, page 71). This has resulted in greater hospital capacity than is required, or which can be funded, but it has proved politically difficult to reduce capacity, in cities such as London, Paris and Lisbon (Rosleff and Lister, 1995). Alongside increases in hospital facilities has been the expansion of employment in the health sector, particularly amongst medical staff, with unemployment emerging amongst doctors in some countries (see Chapter 3).

There are wide variations between countries in the balance between private and public funding of health care. Countries which have greater reliance on private sources of finance to fund health care have traditionally had greater difficulty containing health care expenditure than those which rely predominantly on public funding (Ham, 1995). The starkest illustration of this point is the United States which has much lower levels of public funding than in Western Europe, but which has been spectacularly unsuccessful in containing health expenditure. A related issue is whether a country uses a single source of funding or multiple sources of finance. The evidence suggests that countries such as the UK, which rely on general taxation to finance health systems, have been more effective in containing costs than more complex, multiple finance systems such as France.

The distribution of health resources between acute in-patient care, ambulatory services and pharmaceuticals also varies widely between countries. This situation reflects social and cultural factors, including different medical practice between countries, but many of the variations can be attributed to the management arrangements in particular countries. For example, reimbursing hospitals on a per diem basis rather than through global budgets has contributed to relatively long in-patient stays in countries such as Germany. Similarly, across Western Europe the importance of general practitioners as a gatekeeper to more specialized care varies. In general, countries such as France and Germany where patients seek immediate specialist advice rather than first visiting a general practitioner, as is the case in the UK, tend to incur high levels of expenditure than in countries where access to specialist care is more tightly regulated.

Trends in health care restructuring:
Implications for employment practices

The need to contain expenditure has dominated health policy debate in European countries, despite the very different patterns of expenditure between countries. This has led to major restructuring and privatization initiatives which, as health services are highly labour intensive, impact directly on workers within the health sector. Reforms to the structure and financing of health services, frequently with a competitive element, have placed new pressures on workers. What are the main changes which are altering pay and working conditions in the health sector?

Although many countries are introducing similar sounding restructuring initiatives, these reforms may lead to very different outcomes. In Sweden and the UK similar market-style reforms have been introduced, but with a much stronger ideological emphasis in the British case. Health care reforms are a politically sensitive area of government policy in which ambiguous statements about the true character of proposed reforms abound. At certain times policy-makers emphasize the break with past policy to suggest radical change, for example, using the language of market competition. At other times, reassurance is emphasized by stressing values of equity and solidarity. Consequently, restructuring initiatives reflect the specific social, political and economic circumstances of each country. In some countries, such as Italy or Sweden, the impact of restructuring has been lessened by active labour market policies in which public service employment has been a significant means to reduce unemployment.

Public contract models:
Towards managed competition

A central element in health reforms sweeping west European countries is the maintenance of public funding of health care combined with a system of contracts between health service providers and the agencies charged with purchasing health care. Formerly, in insurance-based systems the role of the sickness funds was predominantly administrative with the sickness funds dispensing payments for services according to conventions negotiated with professional associations. In national health systems integrated systems of health care existed in which the funding and management of health services were combined together.

Restructured systems of health care are separating the purchase of health care from its provision and encouraging more active management of health service providers, to control costs and enhance efficiency. The purchasing role involves: assessing health needs and identifying demand for health care; evaluating the best means to fulfil these demands by placing contracts for health services with providers; and, monitoring the performance of providers against set quality and price standards. Providers are required to compete for contracts to secure income and are awarded contracts on a range of criteria including the price and quality of service provided. The separation of purchasing and providing, with purchasers contracting for services has been introduced in the United Kingdom, Sweden, Finland, Italy and Spain. In other countries such as Germany and the Netherlands measures have been taken to encourage competition between insurers whilst in France the pluralist system of health care and the over-provision of hospital beds has ensured a degree of competition between private and public sectors (Rosleff and Lister, 1995; WHO, 1996c).

In many countries systems of managed competition and related reforms are blurring the divisions between the public and private sectors with governments encouraging partnership between the two sectors. Countries commence from very different situations, reflecting historical differences in terms of the mix of public and private financing and provision. In broad terms countries which have Beveridge-style national health services (Britain, Sweden and Portugal) have traditionally made little use of private sector insurance or provision. This contrasts with the more pluralist systems of financing and provision in Bismarkian social insurance countries (France, Germany and the Netherlands).

Although historically the use of private sector companies to provide some services was not unknown, most staff remained directly, or indirectly, government employees. This began to alter during the 1980s with the increase in the contracting out of services and in the 1990s, systems of managed competition have, for the first time, allowed public finance to be directed towards private sector providers. This could have far-reaching consequences for health service employees beyond those already associated with contracting out of services (see next chapter). For example, reforms introduced in Portugal in 1993 have encouraged the involvement of the private sector in financing and operating hospitals. Similar developments are evident in Britain with the "Private Finance Initiative" requiring all health service capital schemes to be scrutinized to see whether private funding can be attracted. An incentive for private companies is that they are provided with the opportunity to manage the hospitals they build and to employ the staff directly on their own terms and conditions of service.

Implementing managed competition

It is too early to systematically evaluate the implications of these changes for the working conditions of health service personnel. Nonetheless, it is apparent that countries with systems of managed competition are unleashing powerful organizational forces which are impacting on employment practices, often with detrimental effects for the staff concerned. The reforms lead to less guaranteed income for hospital providers. They have to compete with other public and/or private sector providers to secure revenue and as a result of this increased uncertainty and existing budgetary constraints, they are being pressurized to be more cost effective. Workers in the provider units have to absorb these risks and managers are seeking to convert high fixed labour costs into variable costs. Saltman and Van Otter in their review of managed competition conclude:

It is probably no exaggeration to claim that flexibility in the use of labour, and in payment systems, is one of the most sought after effects of the entire health reform process. (Saltman and Von Otter, 1995, p. 13).

The Conservative government in the UK implemented a system of managed competition earlier than other West European countries and the attempts of employers to develop more flexible employment practices to cope with contract uncertainty and budgetary constraints are already evident.

First, health workers are increasingly being employed on a variety of employment contracts. There has been an increase in the hiring of temporary workers as managers seek to link the length of the employment contract to the period of guaranteed funding by the purchaser. This situation already existed for groups of predominantly ancillary staff, who were subject to a process of compulsory competitive tendering. For these staff the risk that their jobs could be contracted out had already encouraged changes in employment conditions (see chapter 3). The novelty of managed competition is that, potentially, these arrangements extend more precarious forms of employment to professional staff.

Second, the traditional high levels of job security prevalent in the health sector has been eroded. Hospitals have made staff redundant in response to contract uncertainty and the imposition of budgetary constraints. In the UK, this process commenced with the policy of mandatory competitive tendering for cleaning, catering and laundry services in the early 1980s leading to large reductions in employment amongst ancillary staff. In France, the trade unions have predicted workforce reductions as a result of austerity measures and, in Sweden, there are marked reductions in overall levels of health service employment (see Chapter 3).

Strengthening health services management

As OECD reports testify (OECD, 1995d; 1996) there have been numerous attempts to strengthen management practice within the public services. This shift from an administered service to a managed service has been a central part of the "New Public Management" which comprises: an emphasis on outputs rather than inputs; more professional and accountable management; the development of explicit performance standards incorporating measures of service quality; the breakup of large, uniform organizations into smaller business units; internal competition; and flexibility in the use of human resources (Ferlie et al, 1996; Walsh, 1995). This trend has resulted in government policy becoming less reliant solely on macroeconomic policy to control overall health expenditure. Greater attention has been given to the microeconomic level; the internal functioning of health systems and the incentives faced by the key stakeholders to control expenditure.

In many countries, hospital autonomy has been increased as administrative constraints are eased and planning decisions are devolved from national to regional level and in some cases, even to hospital level. Funding systems for hospitals have become more refined with the replacement of systems based on global budgets with those which link funding more closely to the services provided by a hospital. These reforms have required more sophisticated financial and personnel management in hospitals, encouraging the development of a cadre of professional managers, using techniques which originate in the private sector, to improve the efficiency and effectiveness of health services.

These managers are usually not medically trained and this may create tensions with the medical staff who feel threatened by the increasing power of managers. Doctors fear that their professional autonomy is being undermined as a budgetary logic overrides the needs of patient care. This process has been particularly marked in countries which have introduced forms of managed competition. In the UK, general managers were introduced in the mid-1980s. These managers on short-term contracts linked to performance-related pay had strong incentives to met their budgetary targets. The 1990 reforms which introduced competition between hospitals has strengthened further the position of managers to the dismay of the nursing and medical professions. In Italy, the 1995 health reforms introduced elements of managed competition and decentralized authority more to hospital level, reinforcing the position of hospital managers. For medical staff it can sometimes appear that:

Managers seem more interested in balancing budgets than in improving medical care... The payment system of hospitals, by tariff, has stimulated managers to increase the number of admissions to hospital ("productivity" is increased) without any consideration of appropriateness. (Del Favero and Barro, 1996; p. 168)

In the Netherlands there is evidence that health professionals are being increasingly subject to the control of health service managers (Ottewell, 1996) and in Germany hospital directors, in public hospitals, are being recruited from the private sector and salaries are becoming more in line with salaries of equivalent positions in the private sector (Hoffmeyer and McCarthy, 1994).

Participation of professionals in management

To lessen the tensions associated with the strengthening of hospital management in a context of budgetary constraints and more performance- related funding systems, there has been an increasing emphasis on involving clinicians and other professional staff in the management process. These reforms aim to develop a more strategic approach to hospital developments, including formulating priorities for funding. Managers recognize that professional staff need to be involved in these decisions, not least because managers realize that conflict with professional staff is short-sighted and can lead to their own dismissal, as has occurred in a number of NHS trusts in the UK.

These developments have led to new organizational structures, such as clinical directorates in which clinicians are encouraged to take a more active management role in the staff and financial management of their clinical service. Devolved budgetary responsibility has been facilitated by the development of information systems that yield information on the cost of resources consumed in relation to the service provided. In the UK and Sweden, which combine salaried hospital medical staff with systems of managed competition, clinical participation in management has proceeded furthest. It has been more difficult in countries with insurance-based systems in which hospital medical staff are frequently self-employed, and therefore reluctant to play a greater role in day-to-day management of hospitals through responsibility for their own budgets (Rosleff and Lister, 1995).

Even in countries where medical staff have become more involved in management, ambivalent attitudes remain. Medical staff may become involved in management to safeguard their clinical freedom rather than from a wish to cooperate with managers. Evidence from the UK indicates that the increased workload associated with managerial tasks, in addition to existing clinical commitments, has proved stressful for medical staff and many of them wish to return full time to medicine (Ashburner et al, 1996; Simpson and Scott, 1997). These pressures have been reinforced by the increased accountability demanded of medical staff. For example, in France, the lifetime appointments of medical directors have been replaced by five year renewable terms of office. The 1991 hospital reforms took this process a stage further by requiring chiefs of service to present a report of their activities and they are only reappointed after consultation with the hospital board. This potentially increases the influence of the hospital director in the appointment of senior medical staff to managerial positions (Bach, 1994).

Participation in decision-making has not been confined to medical staff but the results have been uneven. This is reflected in the extent to which poor relations with management have been identified as a risk factor in Britain, Germany and the Netherlands (EFILWC, 1995). In France, hospital reforms have been formulated during a period of sustained public sector discontent and the need to improve social relations in hospitals has been recognized. Particular attention was paid to the grievances of nurses, who demanded a greater voice in the management of public hospitals. The government responded by establishing new institutions of social dialogue including a new committee to address the concerns of nursing staff (Bach, 1994). These structures have had some effect in tackling routine issues but have been less successful in handling work organization and other complex issues (Mosse, 1996).

A focus on primary care

A final trend is the increased importance of primary care providers within the health service system. This reflects a belief that general practitioners (GPs) can act as effective gatekeepers to specialist ambulatory and hospital care. This is attractive for governments because it reduces expenditure on more costly, specialized care and ensures that when patients are referred to secondary services they are treated by the appropriate specialist. In virtually all Western European countries, measures are being taken to introduce GP systems or to strengthen the existing primary care system (Van de Ven, 1996). A further step is to provide general practitioners with budgets for the purchase of secondary care. The best known example is the system of GP Fundholding introduced in Britain as part of the 1991 reforms in which those GPs who choose to become fundholders, purchase secondary care on behalf of their patients. By 1996, about half the population was covered by the scheme and by April 1997 fundholders accounted for about 15 per cent of all NHS expenditure (Audit Commission, 1996). In some of the Swedish counties, experiments are being conducted with similar types of fundholding and in France and Germany to curb drug expenditure negotiations are in progress to make doctors financially responsible for drugs expenditure in excess of agreed guidelines.

The strengthening of primary care implies that more health service staff will be working outside hospital locations with less supervision. In situations in which GPs hold budgets, they may decide to provide more specialist services at their surgery and may become employers of staff in their own right. In Sweden, the establishment of a more formalized GP system in 1994 displaced some of the work undertaken by district nurses, provoking criticism from nursing trade unions. Moreover, it may prove difficult for trade unions to organize health care workers if the physical location of health workers becomes more diffuse. Although the demise of the acute hospital is almost certainly exaggerated, the high levels of union density which are facilitated by large organizational units may make it harder for trade unions to represent staff working in community-based settings.

A further implication of the focus on primary care is that governments are adopting measures which strengthen the position of GPs with respect to office and hospital-based specialists. This impacts on the relative power and remuneration of GPs. In Britain, the implementation of GP fundholding has significantly increased the influence that these GPs wield, relative to their hospital colleagues, as they control significant budgets which NHS trust managers are anxious to attract to their hospital. To encourage the development of general practice, the French government has conceded larger increases in fee budgets to general practitioners relative to specialists (de Bousingen, 1997).

Discussion

This chapter has examined some of the key trends that are impacting on health systems in Europe. The growth of health care expenditure has led governments to retrench during the 1990s. The belief that the demand for health care is almost limitless and that health systems contain incentives to continually increase the supply of health services has led to renewed attempts to control expenditure. Attention has been directed at developing financial incentives to control expenditure. Health reforms have strengthened management, re-organized services, increased hospital autonomy and, in some cases, introduced forms of managed competition. These developments place new pressures on staff, challenging traditional status divisions and threatening existing pay and working practices. Staff have not reacted passively to these changes and the dilemma for managers and policy makers has been that in the quest to contain health care expenditure problems of human resource management have been exacerbated with widespread industrial action by nursing and medical staff in many of the countries under consideration.

3. Restructuring health systems:
Country case-studies

BRITAIN

The centralized, publicly funded system of health care in Britain stands in stark contrast to the more pluralist, insurance-based systems of France and Germany or the decentralized model of Sweden. This is reflected in public debate on the health system which is synonymous with discussion of the National Health Service (NHS). The NHS, a tax-funded health system providing free health care at the point of delivery, holds a special place in the affections of the British people. As a result, attempts by Conservative governments since 1979 to restructure the health system, by introducing managed competition, has provoked strong opposition from health workers. An integral part of these reforms has been the decentralization of pay bargaining and changes to employment practices.

Although the Conservative government waited a decade before introducing radical reforms into the NHS, the foundations for these changes had been laid during the 1980s. Mrs Thatcher was elected Prime Minister in 1979, with the British economy in a precarious state, against a backdrop of widespread industrial action in the public sector. For the incoming government the revitalization of the economy required the curbing of public expenditure, diminishing the size of the public sector and reducing the power of public service trade unions. These policy priorities implied a challenge to the existing financing and organization of the NHS.

Organization and development of the health care system

The health system is financed almost entirely through general taxation. Prior to 1990/1 resources were cascaded down the organization by Regional Health Authorities (RHAs) and District Health Authorities (DHAs). These DHAs allocated budgets to the hospitals and community services they managed, employing staff on national terms and conditions of employment. In contrast to hospital medical staff, physicians, known as general practitioners (GPs), were self-employed and remunerated through a mixture of capitation funds, fee-for-service payments and income linked to meeting specific health targets (for example, child immunization rates). Payments to GPs and other aspects of primary care were managed by the Family Health Service Authorities.

This system of health care had two main beneficial characteristics. First, medical outcomes were at least as satisfactory as other more costly systems. The NHS provided near comprehensive care to almost the entire population regardless of their ability to pay, allowing relatively equitable access to health care. Second, the NHS partly due to its centralized structure, has been extremely cost effective. In 1992, the UK spent 7.1 per cent of trend GDP on health care, below the OECD average. Funding allocations and budgetary monitoring rested with central government who used a system of "cash limits" to ensure that health service managers kept within their budgets. Finally, GPs acted as gatekeepers to secondary care, which moderated the demands on the hospital services.

Paradoxically, these strengths of the NHS have also been characterized as its main weakness and indirectly precipitated reforms in the early 1990s. The ability of the central government to contain health care expenditure led to mounting concern that the NHS was underfunded. Although the Conservative government increased NHS expenditure in real terms during the 1980s this was at a much slower pace than earlier periods and coincided with the growth of the elderly population and the adoption of new medical technologies. A politically sensitive manifestation of this squeeze on resources was the concern about high levels of waiting lists which started to rise sharply during the 1980s to over three-quarters of a million (Yates, 1987).

During the 1980s the Conservative government introduced policy measures to enhance efficiency and to develop a more commercial ethos. These measures included the introduction of manpower targets to reduce staffing levels and obligations on health authorities to raise additional income, such as through the establishment of shopping malls in hospitals. Most important was the introduction of mandatory competitive tendering for cleaning, catering and laundry services which allowed senior managers to alter employment practices and undermine terms and conditions of employment (Bach, 1989).

Linked to these initiatives and crucial to their chances of success, was the Conservative government's view that the management process needed strengthening to ensure the more effective use of resources and to weaken the dominance of professional staff who were undermining the government's commitment to tighter expenditure control. To this end, following the recommendations of the Griffiths Inquiry (NHS Management Inquiry, 1985), general managers (predominantly with non-medical backgrounds) were appointed to take individual responsibility for the performance of their unit. General managers on short-term contracts linked to performance-related pay faced strong incentives to meet their budgetary targets. This enabled the government to exert tighter control over the direction and implementation of policies within the NHS. In this respect general management was an important pre-requisite to more radical market-based reforms of the NHS.

Table 2. Health services workforce in England in WTEs

1984

1989

1994

Medical and dental¹

42 384

46 256

52 153

Nursing and midwifery²

397 488

405 281

353 128

General and senior managers

4 609

22 954

Administrative and clerical

110 304

116 842

134 610

Professional and technical

72 656

81 168

92 769

Ambulance

18 104

18 862

17 949

Works and maintenance

26 213

21 183

15 198

Ancillary

154 159

102 360

72 815

Other³

1 381

Directly employed staff

821 308

796 561

762 957

FHSA practitioners⁴

48 072

49 399

51 242

¹ Includes locum and agency staff. ² 1994 figures include agency and health visitor students but exclude Project 2000 training courses (32,000 in 1994). ³ In 1991 an "other" category was established, comprising mainly health care assistants, in 1993 a further change resulted in most of these being recategorized into other categories. ⁴ Mainly GPs and optical practitioners (headcount) all other figures in the table are Whole Time Equivalents (WTEs).
Source: Health and personal social services statistics for England, 1996.

Table 3. Nursing and midwifery staff in hospitals in England

1984

1989

1994

Nursing Staff

Whole-time : male

38 171

41 740

36 410

Whole-time : female

226 960

224 618

175 332

Part-time : male

1 651

2 382

3 249

Part-time : female

135 749

145 209

158 786

Total

402 531

413 949

373 777

Midwifery Staff

Whole-time

15 143

14 720

14 909

Part-time

6 042

7 112

9 609

Total

21 185

21 832

24 518

The table includes staff in central services e.g. family planning and occupational health. It excludes agency staff and primary health care services staff.
Source : Health and personal social services statistics for England, 1996.

The health service employs more than one million staff of which over three-quarters work in England (table 2) and nearly half of these are nursing staff (table 3). The NHS is an important employer of women many of whom work on a part-time basis. The pattern of employment in the NHS has remained relatively stable in recent years, and there was not the growth that occurred in countries such as France during the 1980s (see below). However, this relative stability disguises important changes in the composition of the workforce. Two aspects stand out. First, there has been a sharp decline in the numbers of ancillary staff employed, reflecting the policy of compulsory competitive tendering. Second, the shift towards a more commercialized NHS and the establishment of a system of managed competition has led to a rapid increase in the numbers of managers employed and in their remuneration.

Collective bargaining and pay determination

From the establishment of the NHS until the early 1980s a system of centralized pay determination existed which exerted a strong influence over trade union and employer organization and practice. First, the most important decisions on terms and conditions of employment were negotiated in ten functional Whitley Councils, reflecting the tradition of "Whitleyism" in British public services: the principle that joint agreement between employers and employees should be reached whenever possible, and that the two sides should seek to resolve their differences within an agreed procedure that included arrangements for arbitration. Second, the structure of collective bargaining was highly centralized and detailed changes in the terms and conditions of employment after approval from the Secretary of State for Health, were applied in a prescriptive and uniform manner. Third, the pay of NHS employees were linked formally or informally with a number of external comparators, mainly in the civil service or local authorities (Winchester and Bach, 1995).

The structures and processes of collective bargaining, however, had to confront distinctive problems arising from the size and complexity of the workforce and the multi-tiered organizational structure of the NHS. The diversity of occupational groups was reflected in the multiplicity of staff organizations, about forty of which had national recognition. Staff-side representation was divided between TUC-affiliated unions often competing for NHS membership as well as members outside the service, and non-affiliated professional associations which recruited mainly health care staff. Intense organizational rivalry and conflict over bargaining objectives and tactics in defence of narrow occupational or professional interests complicated both national negotiations and local consultation. These tensions between the TUC-affiliated and non-TUC affiliated unions surfaced during the 1995 NHS dispute over local pay determination.

The national structures of pay determination survived the 1980s relatively intact. The level of pay awards for most groups, however, was depressed by the strict application of strict cash limits which required managers to accept the responsibility for staying within predetermined budgets. This forced the union and employer negotiators to confront the trade-off between income and employment. The cash limit included a pay assumption which, if breached, required the additional costs to be funded by job losses, higher productivity or service reductions. By the early 1990s, most of the national agreements had reformed wage and salary structures to produce less rigid job definitions and to facilitate local pay supplements to deal with recruitment and retention problems.

The system of pay determination in the NHS is complicated by the fact that more than half of NHS staff have their pay determined by a system of independent review. Since 1971, for doctors and dentists, and from 1983, for nurses and midwives and other health professionals, a system of pay review bodies has existed to advise the government on the pay for these occupational groups. Each year the pay review bodies take evidence from government departments, NHS managers and trade unions and develop an independent judgement on medium-term pay developments. Recommendations are made to the government and the assumption that the government will accept the recommendations, unless "there are clear and compelling reasons for not doing so", has been broadly realized in practice, although the full implementation of recommended increases has often been delayed or staged reducing the annual paybill costs substantially.

Evidence from Elliott and Duffus (1996) based on New Earnings Survey data covering the gross weekly earnings of non-manual staff and gross hourly earnings of manual workers, aged over 21 and working full-time supplemented by annual pay settlement data provides a detailed assessment of pay movements between 1970 and 1992. The analysis of real earnings growth reveals that between 1981 and 1992 doctors and qualified nurses saw their real earnings grow by more than 30 per cent. This was in marked contrast to the experience of male and female manual workers effected by competitive tendering where real earnings grew by less than 20 per cent. Nonetheless, Elliott and Duffus were surprized at the size of this increase for manual workers, considering the introduction of compulsory competitive tendering, and suggest that employment rather than earnings have been the main form of adjustment to reduce the paybill for these occupational groups (see Chapter 4). More generally, the growth of earnings of women working full-time was greater than those of men, and non-manual employees' earnings grew more rapidly than those of manual workers.

Policy developments

During the Winter of 1988 closures of hospital beds and repeated criticism from influential groups of medical staff that the NHS was underfunded, precipitated a political crisis which resulted in government proposals to reform the NHS (DoH, 1989). The radical changes in the organization and management of health care arising from the Conservative government's market-based reforms accelerated the reform of pay and working practices. Since April 1991 a system of managed competition has separated the purchasing of health care from its provision. District health authorities have become purchasing authorities, responsible for assessing the needs of their local population and placing contracts with a range of competing public and private sector providers.

On the provider side, the key change has been the establishment of NHS trusts which can comprise a single hospital, a particular service (e.g. ambulance) or a collection of community services. The government granted trusts greater managerial autonomy and encouraged trusts to mimic private sector practice: trusts are corporate bodies with their own board of directors; employ their own staff directly on trust terms and conditions of employment; can devise their own industrial relations policies and practices; are required to meet target rates of return on assets; can borrow subject to annual financing limits and are able to dispose of surplus assets.

These reforms have created significantly greater uncertainty for NHS managers. For trusts, revenue is largely dependent on winning contracts from numerous health authorities and GP fundholders, which review their contracts on an annual basis. This task is complicated as there is still limited data on costs, prices and quality of service, making it difficult for the market to function effectively. Moreover, the fragmentation of the NHS into separate trusts has made them more vulnerable, as they are no longer financially protected by the district or regional health authorities. Trusts have been encouraged to use the greater flexibility in managing human resources to respond to this financial uncertainty.

A central concern of trust managers is therefore to ensure sufficient contract income and to control costs, particularly labour costs which account for more than three-quarters of trust expenditure. The consequences of an inability to obtain sufficient contract income is clear with the outright closure or merger of units accompanied by substantial job losses becoming commonplace (Unison, 1994). Trust managers have pursued cost-savings by a variety of local initiatives. First, there have been changes in work organization, for example, combining formerly separate occupational groups such as domestic (cleaning) and portering staff into more flexible generic workers. Second, managers have altered the composition of the workforce through "skill-mix" exercises with a reduction in the ratio of qualified to less well qualified staff. A related development has been an increased use in the numbers of staff employed on temporary and short-term contracts, reflecting the short term nature of the contracting process (IDS, 1996). Third, trust managers have left vacancies unfilled, removed posts and in some cases made staff redundant. This has been combined with an emphasis on reducing sickness absence. These pressures on staff have been recognized by the review body for nurses which commented

Our visits tend to support the contention that while motivation and commitment remained high, morale among nursing staff was often low. The reasons varied, but included heavy workloads, exacerbated in some instances by staff shortages and the amount of change taking place. A frequent complaint made by staff was about a lack of promotion opportunities, or doing work out of grade because Trusts were reducing the numbers of highly graded posts. (Nurses' Pay Review Body, 1997).

Despite the extent of organizational restructuring, important aspects of NHS management practice have remained unchanged, constraining management autonomy at trust level. The discretion of professional staff to admit and treat patients with little regard for the resource and staffing implications combined with the effectiveness of their national representative bodies has ensured that professional staff retain significant influence. Although, this authority has been eroded in recent years, the ability of managers to alter personnel practice remains constrained by professional staff (Harrison and Pollitt, 1994). Most important has been the continuing existence of national pay determination arrangements with the pay review bodies and the Whitley Councils, which remain the most significant influences over the pay and conditions of most NHS staff. Consequently, national decisions including government policies of overt pay restraint, have severely limited trusts' ability to deviate from the lead set by national pay machinery (Bach and Winchester, 1994). Furthermore, trust managers are frustrated by the continuous but unpredictable interventions of national policy-makers, hindering the ability of personnel specialists to develop a strategic approach to the management of staff.

Discussion

The budgetary constraints on the NHS and the introduction of managed competition in Britain has had a significant impact on employment practices in the NHS. First, although the numbers employed in the health service have remained relatively stable there have been important changes in the composition of the workforce with marked increases in managerial staff and sharp reductions in the numbers of ancillary staff. Second, the greater uncertainty in funding for individual trust hospitals has led managers to increase the numbers of staff employed on more precarious forms of employment contract and to increase work intensity. Third, although some occupational groups, particularly doctors and nurses, have experienced strong real earnings growth this has to be set aside the reduced job security and more intensive working practices associated with the advent of a system of managed competition. This has led to sporadic industrial action and widespread stress and demoralization amongst NHS staff.

The recent election of a Labour government foreshadows important changes in health policy and employment practices. The Labour Party manifesto pledged to end the internal market and to reduce expenditure on the bureaucracy associated with the market-style reforms (Labour Party, 1997). However, as the Labour government plans to retain the purchaser/provider split, many elements of the Conservative reforms will remain in place. Moreover, as the incoming government has committed itself to the tight public expenditure plans of the previous Conservative administration, at least for the first two years, there will be limited resources available for increased health care expenditure or for pay increases.

Nonetheless, the Labour government may attempt to reassure health workers by encouraging trusts to offer more secure employment, to reduce their reliance on agency and temporary staff, to provide loyalty bonuses to aid recruitment and retention and to return to a system of national pay determination, albeit with significant local flexibility. The commitment to introduce a statutory minimum wage will benefit the low paid. NHS trusts, in anticipation of the minimum wage, are raising the pay of their lowest paid workers. Overall, some key features of the Conservative health reforms are likely to remain intact, but these will be combined with measures to reassure the health workforce and significant increases in health care expenditure over the medium term.

FRANCE

The industrial and social conflict that swept through France in the closing months of 1995, the most momentous since the "events" of 1968, was a response to a variety of proposals to reform the public sector and to alter the governance of the health system. The JuppŽ reforms outlived the immediate social movement of 1995, but subsequently led to further demonstrations and strikes amongst health workers, illustrating the conflictual industrial relations consequences that have ensued across Europe from structural changes to health systems. More specifically, they reflect anger amongst French health workers that these reforms were challenging fundamental principles of liberalism and solidarity which are deeply embedded in the French health system.

Liberalism has been exemplified by the patient's freedom of choice of doctor and hospital, whether private or public, and the limited controls on medical staff who are paid on a fee-for-service basis. The principle of solidarity has been associated with a system of universal health insurance.

The reforms by attempting to influence prescribing practice and increase co-payments potentially diluted this historical legacy. They were advocated as a way of curbing the costs of a system in which patients do not directly bear the costs of an increasing level of medical activity and where medical practitioners have an economic incentive to over-prescribe. As health expenditure exceeded the growth of national income, all governments from the mid-1970s onwards started to emphasize the need for expenditure control (Steffen, 1989).

A series of measures in the 1980s and 1990s aimed to contain expenditure and improve the management of the public hospital sector, the most important being the introduction of fixed global budgets for public hospitals in 1984. However, these measures had only a limited impact on the level of health service expenditure, which by 1992 absorbed almost 9.4 per cent of GDP (see table 1). This led to more far-reaching reforms in 1996 which altered the governance of the health system (OECD, 1997).

Organization and development of
the health care system

Patients have a free choice of medical practitioner, they may consult a GP or a specialist and are not committed beyond a single consultation. Direct payment by the patient to the doctor is intended to ensure that the medical practitioner is answerable to the patient alone. If hospital care is required, the patient, again, has freedom of choice between public and private hospitals.

The medical profession is split between primary and secondary care. The primary care sector is dominated by private doctors (liberal medicine) divided between specialists and GPs who are at liberty to set up practice anywhere in France and are paid on a fee-for-service basis. Many of them, particularly specialists, work at least part-time in the hospital sector. Secondary care employs full-time and part-time salaried doctors. Overall, a strong tradition of liberal medicine has coexisted with tight state regulation of doctors' fees which has frequently brought the medical profession into conflict with the national health insurance funds and indirectly the government (Burstall and Wallerstein, 1994).

The second dominant feature of the French system is the coexistence of public and private sector provision. Public hospitals, which account for about two-thirds of hospital beds, are classified by size and function. Public hospitals are funded by the government through semi-autonomous sickness funds and since 1984/5 have operated under cash-limited global budgets. The private sector, which comprises mainly for-profit hospitals, also has access to funding from the sickness funds but, until the passage of the 1991 hospital reforms, were not covered by global budgets, instead being reimbursed on a per diem basis. This allowed greater opportunities for expansion which did not exist in the public hospital sector (Huard et al., 1995).

Traditionally, the smaller private hospitals concentrated on minor surgical interventions, leaving complex surgery to the high technology public hospitals. During the 1980s this situation altered: many directors of private hospitals sold their hospitals to large commercial groups, these new entrants had sufficient capital to invest in new technology and were able to compete with the public hospitals in profitable specialities such as orthopaedics and ophthalmology. Hospital over-capacity, exacerbated by the development of day surgery and reduced length of stay has further encouraged this shift from complementary to more competitive relationships between the two sectors (de Kervasdoue, 1997).

The third key feature of the French health system is a system of financing based on statutory health insurance funds, paid for by compulsory employer and employee contributions. The sickness funds are organized on an occupational basis with the system dominated by the national health insurance fund (CNAM). The trade unions and employers have an important role in the management of the CNAM through their participation on its board of directors. Contributions vary between different schemes but are approximately 13 per cent for employers and 7 per cent for employees of their total salary. Although independent, the government exerts considerable influence over the activities of the sickness funds, establishing the level of pay-roll taxes which fund them and by approving the fee conventions that are negotiated between the medical profession and the sickness funds.

The system of reimbursement is relatively straightforward with the patient paying the doctor directly and then reclaiming the consultation fee from the local insurance office, excluding approximately 25 per cent of the cost, which is the patient's co-payment. In practice the majority of the population take out additional insurance through friendly societies (mutuelles) to cover these payments. Prescription charges are recovered in the same manner with reimbursement of 40 per cent and 70 per cent of the cost depending on the type of medication .

As the French health care system has evolved, the combination of liberalism, pluralism and solidarity has made it difficult to control expenditure. The medical profession has jealously guarded its autonomy. Although the CNAM has contained price increases in the negotiated fee schedules, it has little control over the activities of doctors who appear to pursue an income target through prescribing numerous tests and prescriptions. This situation has been exacerbated by the level of competition between doctors, as patients seem to judge the quality of care on the basis of the quantity of care provided (OECD, 1994a). An additional factor fuelling the growth of medical expenditure has been the rapid growth in the number of doctors, which has more than doubled since 1970.

The immediate difficulty has been the precarious funding of the health care system which is almost totally dependent on work-related income and is separate from the expenditure decisions of individual doctors. This has created a major source of instability in the system, as the revenue of the sickness funds are extremely vulnerable to fluctuations in employment. As unemployment started to rise steeply from the mid-1970s increasingly regular crises in financing the CNAM provided a major impetus to contain health care costs.

The French health sector has been one of the fastest growing employers in the country. The numbers employed in the health sector have increased rapidly over the last decade reaching a total of 1,657,839 by 1992 (see tables 4 and 5) accounting for 7.4 per cent of the working population in 1992 (International Healthcare News, June 1995). There has been more rapid growth in employment in the private hospital sector, which may reflect the different funding systems which operated between the public and private hospital sector during this period.

Table 4. Employment in the French health sector, 1982-92

Numbers employed

% growth

1982

1992

Hospital

838 513

962 268

1.4

Public

638 966

712 718

1.1

Private

199 547

248 550

2.3

Private practice

244 600

321 795

2.8

Doctors

127 143

156 589

2.1

Dentists

58 325

72 799

2.2

Auxiliaries

59 132

92 407

4.6

Pharmaceuticals

168 669

199 815

1.7

Laboratories

33 580

43 284

2.6

Other

91 939

130 677

3.6

Total

1 377 301

1 657 839

1.9

Source: CREDES in International Healthcare News, June 1995, 13

Table 5. Public hospital sector employment, 1987-92, by main category

1987

1990

1992

Nurses

154 186

162 028

168 823

Administration

63 731

71 821

74 618

Technician

10 149

98 465

94 342

Physicians

58 671

71 753

Source: cited in Mosse, 1996.

Collective bargaining and pay determination

Pay determination in the French health sector reflects the uneven development of collective bargaining in France and the strong interventionist role of the State in shaping employment practices. To a greater degree than the other countries, the public hospital sector remains subject to strong central regulation of its pay and employment practices with public hospitals forming part of the civil service and subject to the detailed regulations of employment matters in the civil service (Meurs, 1996). For example, the Ministry of Health controls the number of posts within public hospitals. Collective bargaining in the hospital sector is centralized with concertation between the State and union organizations. In the private hospital sector, there are several employers' associations representing for-profit and non-profit hospitals and these collective agreements are broadly aligned with the public hospital sector. Nonetheless, the conclusion of separate agreements has led to inequalities between pay levels in establishments belonging to different organizations (Birhaye, 1994).

The highly centralized system of collective bargaining has not always been able to respond to the particular needs of its members, a situation which has been exacerbated by the belief that the mainstream trade unions were disinterested in the demands of the predominantly female workforce (Piotet, 1994; Frader, 1996). Representation of nursing staff has becoming increasingly fragmented. This situation was vividly illustrated by the industrial action amongst nursing staff in the Autumn of 1988 and 1989 which was largely carried out by independent worker organizations -- coordinations -- and which prevented the official unions taking over the strike movement. It was the first time that women had organized on such a scale to lead a movement which defended their own interests and succeeded in gaining important concessions from the government on pay and working conditions.

A number of professional associations exist which represent the medical profession but these organizations are deeply divided and despite competition for membership they represent less than 20 per cent of all practising doctors (Rodwin, 1997). The largest organization is the Confederation of Medical Unions (CSMF) which represents specialists and GPs. Some organizations represent only GPs (MG France) and others only specialists. The four largest organizations negotiate with the sickness funds the national fee schedule for GPs and specialists and these doctors have a choice as to whether they practice in one of two sectors. Sector 1 doctors abide by the national fee structure, but Sector 2 doctors are able to set higher fees with the patient paying the difference between the nationally agreed fee and the actual fee charged. By the early 1990s about 30% of doctors had opted into Sector 2, a sharp increase on a decade earlier. This influx of doctors into Sector 2 practice meant that although the government and sickness funds attempted to control the growth of medical fees, extra billing by doctors fuelled overall growth in health care expenditure, a situation compounded by the sickness funds having little control over the services provided and the rapid growth in the numbers of medical staff. This led the government to freeze access to Sector 2 in 1990 (Huard et al, 1995).

Policy developments

The chronic financial deficits that have plagued the sickness funds during the last decade symbolize the difficulties that have beset the French health system and the problems of reforming a health system in which a number of interests have influence, but not the capacity to alter the overall health system. The foremost problem has been escalating health care expenditure. Despite a series of cost containment measures during the 1980s (see Bach, 1994), health expenditure has continued to grow. This reflects a number of factors including: the growth of employment in the health sector and increased paybill costs, not least due to wage increases for nursing staff to resolve their grievances; difficulties in reducing hospital over-provision; expansion of medical workload and the absence of an effective GP system; and the failure of public hospitals to keep within their authorized expenditure limits (Rosleff and Lister, 1995; Rodwin, 1997). Although the introduction of global budgets had an effect in containing health expenditure within public hospitals, it did not encourage increased efficiency because hospital budgets failed to take account of workload and global budgets froze pre-existing, and unequal, levels of funding between public hospitals (de Kervasdoue et al, 1997).

A second important issue is that the sickness funds have found it difficult to operate effectively because they suffer from a crisis of legitimacy which stems from the reductions in trade union membership and the ambiguity of decision-making between the CNAM, the State and health professionals. The sickness funds are jointly managed by employers and trade unions and for thirty years the presidency of the CNAM has been held by the FO union confederation, despite FO experiencing reductions in their share of votes in the public hospital sector (Mosse, 1996). Although FO relinquished the presidency of the CNAM to the CFDT, difficulties remain because of the tense relationship between these confederations, reflecting their different stance towards recent health reforms (EIRR, 1996). Moreover, the government's wish to increase its influence over the sickness funds to aid cost containment measures has further weakened their authority (Rodwin, 1997).

In November 1995 the government unveiled controversial health reform proposals which contributed to the social unrest of that period. These reforms, which became law in 1996, gave a new role to Parliament in fixing spending targets for health professionals and for putting in place mechanisms to control this expenditure. These controls have placed ceilings on the amount of expenditure that doctors can incur for the sickness funds and they are subject to penalties if they exceed these limits (International Healthcare News, February 1997). During Spring 1997, this reform led to prolonged industrial action amongst junior doctors (interns) who argued that the measures amounted to health rationing and who were concerned about the impact on their future income when they set up in practice after completing their hospital training.

Control of doctors' activity will be reinforced by the introduction of a personalized medical card which is designed to discourage patients consulting several doctors for the same condition. Hospital reforms have included alterations to the system of hospital planning and changes to the composition of the boards of public hospitals with the local mayor no longer automatically the board chairman, a measure designed to facilitate hospital restructuring. Finally, a new tax on incomes has been introduced, designed to repay the accumulated debt of the social security system (OECD, 1997).

Discussion

The French health system has been subject to a series of reforms, but these have had only a limited impact on employment practices. Employment within the health sector continued to grow rapidly during the 1980s, particularly within the private health sector which was not subject to the system of global budgets. Health workers are covered by the civil service labour code which prevents staff being made redundant and which places severe constraints on the ability of managers to alter working practices. More attention is being given to the internal management of public hospitals to improve communication and participation in order to facilitate hospital restructuring. Moreover, recent health reforms by allowing Parliament to intervene more directly in the management of the health system and by regulating more strongly medical practice may lead to more far-reaching changes in the health system. This is certainly the view of the trade unions which have predicted that 9,000 jobs will be lost in public hospitals due to tighter budgetary constraints (International Healthcare News, March 1997). Nonetheless, in recent years the most important changes in working conditions, particularly for nursing staff, have come about by industrial action, independent of the official unions, which have led to concessions by the government on issues of pay and working time.

GERMANY

The German health system has a complex structure, reflecting the principles of federalism and corporatism that have been the hallmarks of post-war German political economy. As a federal country divided between 16 states (LŠnder), it is difficult for the Federal government to introduce policy innovations without the agreement of the LŠnder. Most of the key institutions on the insurance and hospital side of the health care system are organized at the Land level. The corporatist bias within German society is reflected in the health system in which the State has passed legal authority for key aspects of health care to self- governing institutions -- the sickness funds on the purchasing side and the doctors associations on the provider side.

This fragmented system of health care has ensured that coverage of the population is virtually universal, there is a high degree of freedom for individual patients in their choice of doctor, and expenditure, although relatively high is not dissimilar from other social-insurance-based systems in western Europe (Oxley and MacFarlan, 1995). Nonetheless, Germany suffers from similar pressures to contain expenditure as in other countries and has the specific costs associated with the reunification. In common with other insurance- based systems of health care funding, the financial health of the system is sensitive to employment levels, with rising unemployment reducing receipts and pushing up expenditure. There have been some attempts to contain health care expenditure with reforms in 1989 and 1993. The initiatives were hailed as major reforms, but have only yielded short-term reductions in health care expenditure, leading to plans for further reforms in 1997. It has proved difficult for the consensus-orientated style of policy-making with numerous conflicting interests to achieve fundamental reforms of the health system.

Organization and development of
the health care system

German health care is based on mandatory health insurance which is obligatory for everyone under a certain income level. Exceptions are predominantly highly paid employees who are entitled to take out private health insurance. There are almost 1,000 sickness funds, although the numbers are falling steadily through amalgamation, which are organized along regional, company and occupational lines. Policy-holders pay an average monthly contribution of about 13 per cent of their income for their health insurance; half of this rate is covered by the employer (Selbmann, 1996). The average percentage figure disguises wide variations between funds (which are obliged to balance their books) reflecting the different health status of members of different funds and the incomes of those members.

This is a source of inequality as those on low incomes, but with high health risks, have to pay relatively high premiums. Despite these differences, all insurance funds have raized their contribution rates steadily and preventing contributions rising any further has become a high priority for policy-makers.

On the provider side there is a sharp division between hospital care and ambulatory care with different regulations and systems of financing. Hospitals, which comprise state hospitals, charitable hospitals and private hospitals, have contracts with the insurance funds which pay for operating costs. The methods of paying for hospital work are being refined and diagnosis related funding is gradually being introduced into hospitals. The LŠnder are responsible for hospital planning and fund major hospital investments.

Ambulatory care is completely separate from hospital care and GPs are relatively rare with a preponderance of specialist, office-based doctors. In comparison to Britain, where there are few restrictions on where medical staff can work, in Germany there are restrictions with doctors required to register with an Association of Sickness Fund Doctors based at Land level. These doctors, once registered with the regional doctors' association, can treat insured patients. Each quarter, the regional associations reimburse medical staff according to a fee-for-service model from the budget they have negotiated with the sickness funds.

The numbers employed in health care as a proportion of total employment increased from 2.9 per cent in 1970 to 4.5 per cent in 1980 and 5.5 per cent by 1989 (Oxley and MacFarlan, 1995). In 1990 there were 195,000 doctors in (western) Germany; of these 75,000 were office based, 96,000 were hospital based and the remainder were in public health and other forms of employment (Hoffmeyer, 1994). About 500,000 nurses work in hospitals and community-care settings (Wagner, 1996).

Collective bargaining and pay determination.

There is a specific legal framework for industrial relations in the public sector, although it is strongly influenced by the private sector tradition of formalized, industry-wide bargaining. There is an important distinction between public sector employees (Angestellte) and civil servants (Beamte). Angestellte have the same rights as white-collar employees in the private sector and are able to engage in collective bargaining and to take strike action, provided an emergency service is maintained. Beamte do not have the right to strike, but enjoy a lifetime employment guarantee. The majority of health service staff belong to the first category.

Since the 1949 reorganization which established industrial unionism, a relatively small number of organizations represent health care employees. The Public Services, Transport and Communications Union (…TV) has a health care section which represents health and medical workers in the public sector. Other organizations which have members in the health sector include the German Union of Salaried Employees (DAG) which covers white-collar employees and the Federation of German Civil Servants' Unions (DBB) which consists of forty professional associations such as the Federation of Public Health Service Doctors and the Marburger Bund (ILO, 1992a; Visser and Van Ruysseveldt, 1996).

For Angestellte wage bargaining is conducted between the trade unions and public sector employers' associations. Beamte do not have the right to bargain collectively and therefore the DBB acts more as a pressure group with wages and other conditions for these civil servants decided by parliamentary legislation after consultation with the unions. Doctors are normally members of three or four associations. Every doctor who wishes to treat sickness fund patients has to be a member of the Association of Sickness Fund Doctors organized at the Land level. In addition, every doctor has to be a member of the Land level Medical Chamber (Ärztekammer) which is responsible for educational and quality control issues. Hospital doctors are salaried employees in the public sector and their pay is the result of collective bargaining between the Land level hospital associations and the organization representing hospital doctors, the Marburger Bund. Hospital doctors' pay is governed by a broader contract for public sector employees which is negotiated by DAG and government representatives. The Marburger Bund and DAG collaborate closely on pay-bargaining matters (Giaimo, 1995; Hoffmeyer, 1994). Hospital medical staff have the right to strike for their wage demands as long as an emergency service is maintained. Doctors, may also be members of the Hartmannbund which is more akin to a pressure group for the medical profession.

Office-based doctors are paid on a fee-for-service basis, but this system is adjusted to take account of overall budgetary limits and the amount of work undertaken. At the Land level the sickness funds negotiate a budget for the year with the doctors' associations and the monetary value to be attached to the points-based fee schedule. Negotiations are also conducted on the points- based fee schedule for the services provided by office-based doctors. Every item of treatment is expressed in points. For example, a telephone conversation with a patient might be 80 points, whilst a home visit could be 360 points and a
X-ray could be double that value. These values are published and apply nationally. The actual revenue (Y) of a doctor will depend on the number of services (S) supplied, the average number of points (P) per service and the value (V) of one point in Pfennigs.

Y = S x P/S x V

V is derived from the total of all points billed by all doctors in a particular region and the total budget (B) for that region.

V = B/P

This system ensures that despite a fee-for-service system, total revenue cannot increase beyond the negotiated budget. The actual impact of this system on doctors' earnings has been influenced by a number of factors. First, in a fee-for-service system there is an incentive to "overtreat" patients as income is related to the volume of services provided. This tendency has been reinforced by competition between doctors who are anxious to retain patients by performing complex, more highly paid procedures. Second, the numbers of services has increased rapidly which has decreased the overall point-value. This can lead to a vicious circle where doctors carry out more services, because the relative value of each service is falling, which in turn contributes to a further fall in the points value. Third, this situation has been exacerbated by the steady increase in the numbers of doctors, further boosting the numbers of services provided and depressing the relative income of doctors. The overall impact is that, although this system led to doctors being exceptionally well paid by international standards, in the last twenty years this position has been eroded and the relative income of doctors is falling (Moran and Wood, 1993).

The medical profession has become increasingly concerned by health reforms designed to curb health expenditure and which will have further detrimental effects on their income. Since November 1996 there has been periodic industrial action and demonstrations against these measures. The dispute arose from government plans to make medical staff financially responsible for their prescription budgets with doctors required to repay the sickness funds the price of oversubscribed drugs. This could potentially saddle doctors with large debts which they may not be able to repay. In addition, the sickness funds are arguing for a 15 per cent reduction in private patients fees to bring them into line with the fee scales of public insurance scheme members (de Bousingen, 1996). The dissatisfaction amongst medical staff reflects not only anxieties about their salary position, but also a deeper concern that their autonomy is being eroded by more forceful regulation of their activities, particularly by the sickness funds.

Many of these concerns are shared by the nursing profession. Nursing in Germany developed from a strong religious tradition and the division between denominational and non-denominational organizations has hampered the development of the profession with many organizations representing nurses. It was not until 1985 that a specific law regulating nursing education based on European Community regulation came into force. Since that time degree courses in nursing have been introduced and salary structures and career opportunities have improved (Wagner, 1996). In response to concerns about poor working conditions and the unattractiveness of nursing, a 1993 law introduced tighter regulation of nursing workloads to ensure that quality of care was maintained. Government plans to abolish these regulations has been met with fierce opposition from nursing organizations (Morgelin, 1997).

Nursing organizations have also resisted government plans to introduce new occupations into the nursing sector which would not be subject to the 1985 Nursing Act. The view of the German Nurses' Association is that plans to introduce a new occupation into the home care sector represents a form of deprofessionalization. It is anticipated that these workers would be paid less than qualified nurses and as there are already four forms of basic nurse education this development would further confuse the public (Morgelin, 1997).

Policy developments

The number of actors within the health care system, and the delegation of authority through a system of self-regulation, has made it difficult to reform health care despite numerous incremental reforms. Between 1977 and 1993, there were nine acts designed to contain health expenditure (Schneider, 1994). Although the proportion of GDP devoted to health care actually decreased between 1980 and 1990, this has not blunted demands for more rigorous cost containment with the cost of health care identified as the most pressing issue confronting the health system amongst the German policy elite (Taylor-Gooby, 1996).

This position has arisen partly in response to the costs of reunification, rising unemployment and more generally because of concerns amongst employers about the impact on competitiveness of the growing burden of indirect labour costs such as health insurance contributions. Moreover, if employers are to succeed in enforcing wage increases at or below the rate of inflation then health contributions to the sickness funds must not be allowed to continue their upward progression (Hinrichs, 1995). Cost pressures have been exacerbated by the almost complete separation between ambulatory and hospital care which has led to duplication in services provided between the two sectors. The tendency to "over-treatment" in the ambulatory sector has its counterpart in the hospital sector in which payment based on bed occupancy encourages lengths of stay double that of France, Sweden or Britain (see figure 1).

In 1989 the Health Care Reform Act was introduced. The original proposals envisaged more radical reforms but these were diluted by effective lobbying from the medical profession (Giaimo, 1995). The reforms concentrated on the ambulatory sector, and in particular, improving the financial position of the sickness funds. To this end, the sickness funds and the doctors' associations were mandated to stabilise sickness fund contributions by ensuring that the ambulatory budget negotiated did not require increased sickness fund contributions. In addition, payments were raised for patients, some benefits were reduced and reference prices for drugs were introduced. The reforms only had a short-term impact in 1989 and 1990 but failed thereafter because the doctors' associations bitterly resisted the imposition of a legal obligation to stabilise contribution rates and refused to co-operate. The law also left the hospital sector relatively unaffected but costs were rising rapidly in this sector (Giaimo, 1995).

In late 1992, the Health Care Structural Reform Act was passed which took effect almost immediately. This act introduced substantial changes to hospital funding, introducing, for the first time, global budgets for each hospital, subsequently replaced, from 1996, by a system of case-mix based funding which links funding more closely to performance. The reforms tightened the budgets for the ambulatory sector by removing the discretion of the sickness funds and the doctors' associations to negotiate the regional budget and limited the numbers of doctors that could affiliate to the sickness funds on a speciality basis. This led to a surge in the number of doctors affiliating to the sickness funds in the period prior to this measure becoming law which further reduced the reimbursements per service available to doctors. Finally, it was proposed that from 1996 individuals insured by the sickness funds would have the opportunity to change the fund to which they belong. This is intended to stimulate competition between the sickness funds and enhance efficiency (Schwartz and Busse, 1996).

Discussion

The German health system has been subject to numerous reforms to contain costs but the diffuse system of policy-making and fragmented structure have made it difficult to reform. As the German economy has been confronted with the costs of reunification, concerns about competitiveness and rising unemployment there has been an increased sense of urgency about the need to reform further the health care system, with a particular concern to reduce the charges that employers pay. However, it has proved difficult to implement reforms because of disagreements between the LŠnder, the federal government and the sickness funds and differences between the main governing parties about the best way to reduce health care expenditure. There have been limited changes in employment practices, but the relatively privileged position of the medical profession is being increasingly questioned and the surplus of medical staff is eroding their labour market position. Finally, there is an emphasis on a more commercial approach towards the management of hospitals and if a system of managed competition emerges this could be expected to bring about more far-reaching changes in employment practices.

SWEDEN

The Swedish health system forms part of one of the most highly developed systems of welfare. The "Swedish model" has been characterized as comprising a strong welfare state, with a minimal role for private sector funding or provision of services. This reflected the solidaristic values of Swedish society, with the dominance of the Social Democratic party in government, which espoused the view that no profit should be made from meeting basic social needs. This consensus was bolstered by corporatist arrangements in which the peak associations of trade unions and employers reached an accommodation which provided for solidaristic wage policy and revenues from economic growth to be channelled into a growing welfare sector. This led to rapid expansion of public sector employment in the postwar period with very high participation rates by women in the labour market.

The changing political economy of Sweden had a marked impact on discussions about the size and scope of the public sector. From the late 1960s the welfare system began to be criticized and during the 1970s and 1980s the "Swedish model" entered a crisis. The values of equality and solidarity, which had resulted in high levels of taxation, were questioned and economic performance fluctuated with steep increases in unemployment (Kjellberg, 1992; Visser, 1996). This profound economic and political crisis led to greater willingness to experiment with forms of privatization and strong pressure to curb health care expenditure with reductions in the overall size of the workforce. This altered economic and political context continues to shape health care employment practices.

Organization of the health care system

The Swedish health care system is a tax-funded system which is characterized by public sector financing, ownership of facilities and control. Private health care exists only to a limited extent. Responsibility for in-patient and out-patient services has been progressively decentralized and rests with the 26 local county councils (more accurately 23 counties and three municipalities of county status). Elections are held every three years and these elected politicians have overall responsibility for the policies of the county council. Each county council is responsible for the health care of its geographic area, on average about 300,000 inhabitants. There is a strong orientation towards hospitals, with a typical county council having about two to four smaller general hospitals and one main hospital. Since 1992 the responsibility for long-term care services for the elderly has been the responsibility of the municipalities.

Health care is the main responsibility of the county councils and accounts for about 80 per cent of their expenditure. The majority of this expenditure is funded by taxation levied by the county councils. The bulk of the remainder is composed of central government funding, allocated on a population-based formula.

Patients' fees are a minor component, about two per cent, although this element has increased considerably in recent years (Calltorp, 1996).

Patients pay a fee to consult a physician, which includes associated tests, but there are additional charges for services such as physiotherapy. A standard daily charge is also paid for in-patient care. There is an annual maximum payment per patient of about 250 dollars.

The numbers employed in health care increased in tandem with the overall growth in health care expenditure. Employment in health care increased from 6.2 per cent of total employment in 1970 to 9.9 per cent in 1980 and the political and economic crisis of the Swedish economy ensured that this proportion remained virtually unchanged up to 1992 (Oxley and MacFarlan, 1995). The numbers of personnel employed in health care increased from 215,000 in 1970 to 387,000 in 1980 and then grew more slowly to 420,000 by 1991. Over 85 per cent of health care personnel are women. This total corresponds to about 340,000 full-time staff with 25,000 active physicians and more than 110,000 nurses (OECD, 1994a). More recent data suggests that the post-war growth in employment has been reversed and amongst certain groups, such as nursing auxiliaries, numbers have declined (Swedish Association of Health Officers, 1997).

Table 6. Health employment in the county councils, 1992-96

Category

Number of employees

Change (%)

Nov. 1992

Nov. 1996

Physicians

19 714

20 462

4

Nurses/laboratory technicians/midwives

67 766

66 362

--2

Qualified auxiliary nurses

44 981

38 264

--15

Auxiliary nurses

21 413

4 570

--79

Nursing personnel at mental hospitals

16 118

13 118

--19

Physiotherapists

4 930

5 023

2

Occupational therapists

3 864

3 501

--9

Others

19 224

16 112

--16

Total

198 010

167 412

--15

Source: Swedish Association of Health Officers, 1997.

Collective bargaining and pay determination

The large degree of decentralization in the Swedish public sector is replicated in the collective bargaining structure with separate negotiations conducted in the central government, municipal and county sector. The Federation of County Councils negotiates the salaries of health service personnel, although there is generally coordination with the Association of Local Authorities. Membership is voluntary, but in practice, all the county councils are represented. Doctors and nurses are represented by their trade unions, the Swedish Medical Association and the Swedish Association of Health Officers.

From the early 1980s, the system of public sector pay determination has become more flexible in response to an imbalance in pay between the private and public sectors and resulting staff shortages. This process of decentralization was formalized in 1985 when Parliament gave its assent to the process of decentralization that had been under way for some time. Until 1993, central agreements covering pay and conditions existed, but they no longer specified either rates of pay or general salary increases. Instead they determined the size of a pay fund for each area of government, out of which came the pay increases that were agreed. From July 1993, a new system of allocating grants was established based on a system of cash limits, known as "frame grants" which were less prescriptive than the previous system. These grants are determined by procedures outside the collective bargaining arrangements and are upgraded periodically, linked to an index that takes account of wage movements in the private sector. However, these increases are not automatic and depend on political decisions to either increase or decrease activity in a particular area. This system places similar incentives on employers in the public sector to keep paybill costs down as exists in the private sector (OECD, 1995b; Schager and Anderson, 1996).

The negotiations within the county council sector can be protracted and have led to lengthy periods of industrial action in recent years amongst nursing and medical staff. Wage bargaining is conducted by the cartel KTK, the Federation of Salaried Local Government Employees and affects the great majority of nursing staff. Nursing staff, which are divided into a number of categories, are relatively low paid. This situation is exacerbated by high levels of part-time working and the gender segregation associated with the "caring" professions (Birhaye, 1994). The position of women medical staff is also a cause for concern with women over-represented in the less prestigious fields of paediatrics and geriatrics (ILO, 1992b). The trade unions have emphasized that low-paid workers should receive proportionately higher wage rises, but it is difficult to shift relative levels of pay within the public sector.

Nonetheless, following nearly two months of industrial action during 1995, nursing staff accepted a five year pay deal which will run until the year 2000. This provided for increases of 0.5 per cent above the settlement for other local government employees, in the remaining two years of the deal, and for additional monies to be allocated in earlier years specifically to female employees. The deal provides for these increases to be awarded by local bargaining (EIRR, 1996). Local bargaining has been used also to resolve particular disputes. One of the most widely publicized was the dispute at Malmš Hospital amongst specialized nursing staff who demanded a pay rise of 30 per cent per month to raise their salary levels to that of their colleagues in neighbouring Denmark. In addition, to concerns about pay, the dispute highlighted issues of understaffing and work intensification amongst nursing staff. Significant pay rises were secured under a local agreement alongside concessions on working time and workloads (EIRR, 1995).

Medical staff are represented by the Swedish Medical Association who have secured relatively high wages for their members reflecting the position they secured during the 1970s when there was a severe shortage of medical staff. The Swedish Medical Association in negotiations with the county councils have given hospital medical staff, who are salaried employees of the county councils, increasing amounts of time off in lieu or additional payments for working long hours of overtime and for being on call. Swedish medical staff received two hours of paid leave for every hour worked. During the 1979-85 period this gave the average hospital doctor an extra 25 days of paid leave in addition to the 7 weeks he or she would have received normally (Rosenthal, 1989).

Doctors used their increasing amount of free time to practice privately. This was more attractive than simply collecting extra pay for working nights or weekends because of the workings of the Swedish tax system in which tax income earned through labour was more highly taxed than income derived from profits (Ollson, and Cohn, 1995). However, there are reasons to believe that the professional position of medical staff is being challenged.

During 1994, the county councils, to reduce expenditure, proposed to eliminate overtime compensation for hospital doctors by introducing shift work as for nurses. Medical staff feared a substantial loss of earnings and pointed out that the long period of training left them with substantial loans to repay. They argued that the existing system allowed greater continuity of care for patients even though they conceded that long hours of work and lack of sleep may have affected their judgement in critical situations. These proposals led to strike action in March 1994 organized by the Swedish Medical Association. The dispute was resolved after mediation, with medical staff conceding the right to employers to schedule doctors' rotas but the employers agreed to pay compensation to ensure that no doctor was left worse off. These developments have been viewed as a threat to the power of the medical profession (EIRR, 1994; Riska, 1995).

The position of employers has been strengthened by the changing labour market position of doctors. In the 1990s, unemployment amongst medical staff has emerged. This reflects declining opportunities for employment in the public sector with the numbers of medical staff being trained reflecting assumptions about the continued growth of the health sector, which is no longer sustainable. Consequently, the oversupply of medical staff is increasing. In 1994 nearly 600 doctors, over 2 per cent of the total, were unemployed with no significant gender variations between the employed and the unemployed (Riska, 1995).

Policy developments

In the 1980s, the Swedish health system encountered many difficulties. Slower economic growth combined with rising medical expenditure led to pressure to contain expenditure. Attempts were made to reduce health spending as a proportion of GDP. County council income tax rates had been rising steadily to fund the health service, a position that started to be reversed in 1990, when the Swedish Parliament passed a law freezing county tax rates for two years. In 1994, the tax freeze was formally lifted, but the county councils were given incentives to stem tax increases (Garpenby, 1995). The counties partly passed on this shortfall by increasing user charges. Since 1970 the fee for visiting a doctor has risen more than 14-fold compared to a 4-fold increase in the consumer price index (Hort and Cohn, 1995). An obvious source of cost savings has been by reducing staff numbers and this has been especially true for auxiliary nurses in the major towns (Garpenby, 1995).

A second concern has been the lack of choice available to patients. Primary care has been overshadowed by the dominance of hospital care which has contributed to high levels of health expenditure (Agdestein and Roemer, 1991). Primary care has been organized in health centres with physicians working alongside other health personnel. The system has been criticized due to problems of access and for allowing little choice to patients in their choice of doctor. Health centres have experienced difficulties in attracting medical staff, despite good salaries because general practice has low status and doctors have little control over their work (Glennerster and Matsaganis, 1994).

To these criticisms can be added concerns about the lengthy waiting times for certain procedures, such as hip replacements, cataracts and coronary surgery.

Recognition of the system's shortcomings fuelled a debate about the reform of health care with prominent health economists being invited to propose remedies (See Culyer 1991, Enthoven, 1989). The county councils were under pressure to improve the situation as critics pointed to the lengthening waiting times as the numbers of health personnel continued to increase. They responded by establishing a split between the purchasing and provision of health care, although there are important differences in the exact arrangements introduced in each county council. The best known reform initiatives have been termed the "Dala model" and the "Stockholm model". In the first approach a primary care system of purchasing health care has been established which resembles, in certain respects, the system of GP fundholding in the UK.

Since 1992 in the Stockholm county, in place of global budgets for hospitals, resources have been channelled to local health authorities which purchase health care on behalf of their population. Hospitals are reimbursed for services they use on the basis of diagnostic-related groups. This was designed to put pressure on the hospitals to increase efficiency. Patients have been given the freedom to choose their provider and as county councils have directly elected politicians, freedom of patient choice has higher priority than in the UK internal market, where individuals are appointed to health authorities and NHS trusts. Although it is relatively early to assess these reforms, there is general agreement amongst commentators that productivity has increased with the virtual elimination of waiting lists (Anell, 1995; Garpenby, 1995; Hakannson, 1994). However, the measurement of health services productivity is complex and a variety of factors may account for this change including: altered economic incentives as a result of the reforms; the pressure on staff to work harder in harsher labour market conditions and reductions in personnel.

Discussion

The debate about health care in Sweden has led to many changes in the health care system in recent years with widespread experimentation with systems of managed competition. Sweden has managed to contain health care expenditure more effectively than in many European countries, but it is evident that health service staff have had to cope with the budgetary and efficiency pressures that have resulted from the restructuring of Swedish health services. Well-organized staff groups such as medical and nursing staff have taken industrial action in response to a perceived attack on their terms and conditions of employment and periodic shortages of nursing and medical staff illustrate the problems of recruitment, retention and low morale within the Swedish health system. However, it is evident that market style reforms cannot tackle many of the fundamental problems of the health system such as the need to rationalise hospital provision and the continuing financial difficulties of many hospitals. However, these issues are dealt with whether through the market or as appears more likely through planning mechanisms, the outcomes for staff are likely to be negative.

4. Privatization

Rationale for privatization

Global restructuring and the fiscal pressures associated with European integration coupled with upward pressures on public sector expenditure have led policy-makers to initiate major programmes of organizational and financial restructuring in the public sector. Increasingly the size and scope of public sector activity has been questioned and the perception has grown that the public sector is less efficient than the private sector and should become more business-like. As citizens' expectations of public services have increased, this has been accompanied by greater willingness to seek alternatives from the private sector when public services are found wanting. An increasingly common response by governments has been to use forms of privatization to curb expenditure and increase efficiency.

Privatization was a term originally associated with sales of state assets but has increasingly been used to indicate the ways that employment and management practices are being aligned with practices in the private sector (Ferner, 1991).

There has been considerable variation between the four countries in the scope and pace of privatization. Britain has been at one end of the spectrum and proponents of privatization have emphasized the market ideology more prominently than has been the case in other countries. In France and Germany there has been a more limited and pragmatic response to privatization (Ferner, 1991). In Sweden, concerns about the growing tax burden within an expanded public sector led to an implicit anti public sector alliance which fostered a willingness to experiment with privatization initiatives (Ferner, 1994). A prime justification for privatization, not only in Britain, has been the argument that public service organizations are immune from the pressures of the market-place which leads inevitably to inefficient service provision. The lack of competition results in the absence of incentives for public service managers to increase efficiency. Critics of public service organizations argue that these shortcomings are exacerbated by the difficulties of measuring performance, preventing the development of clear sanctions and rewards for good performance. Many public service reforms have focused on devolving financial responsibility to more independent business units to ensure that performance can be measured and accountability increased (OECD, 1995d; Walsh, 1995).

Public choice theorists have broadened this critique by questioning the motives of bureaucrats and politicians which results in government failure. The underlying assumption is that as individual utility maximizers, politicians, voters and bureaucrats act in a manner that generates fiscally irresponsible outcomes. Politicians have an interest in "overselling" their product in the political marketplace and voters have an incentive to "buy" (i.e. vote for) the most desirable product. This generates an over-supply of public services, a situation which is exacerbated by the behaviour of public bureaucrats who engage in bureau-maximising behaviour to increase their status and remuneration (Niskanen, 1971). This aspect of public choice theory has been bluntly refuted by Self: "Éas a general theory, Niskanen's is empirically wrong in almost all its facts" (Self, 1993, p. 34). However, the premise of public choice theory that bureaucrats and politicians can't be trusted has been influential in justifying privatization initiatives.

Privatization has proved attractive for governments as a means to raise additional revenue and to reduce public expenditure. As unemployment has risen in western Europe there has been increasing pressure on social security budgets and, at the same time, countries have been struggling to meet the Maastricht convergence requirements for a single currency which requires a budget deficit of less than three per cent of GDP. Opponents of public spending have argued that the funding of the welfare state with its unsatisfiable appetite for resources requires collecting high levels of taxation on profits. This "crowds out" private sector investment eroding the competitiveness of private industry (Bacon and Eltis, 1978). Privatization is a means to diminish this effect and if loss-making enterprises can be converted into profitable ones then additional tax revenue will accrue to government.

In some countries, privatization has been supported by governments as a means to open up large new markets to the private sector. In the UK, contracting out of services was relatively rare before the advent of the Conservative government in 1979. Faced with a mature, declining market in manufacturing industry, contract cleaning and catering firms were anxious to diversify into new markets. As Ascher comments on their lobbying campaign:

The strategy employed by the major contractors to gain a foothold in public sector markets has been both simple and successfulÉThe (contractors') campaign has been low-key often operating behind closed ministerial doors, and virtually invisible to those outside mainstream Conservative Party politics (Ascher, 1987, p. 72).

Underlying many privatization initiatives has been a belief that monopoly public service provision has ceded too much power to public service trade unions who have extorted pay rises from hapless public service managers. High levels of union density in the public services and the ability of these trade unions to embarrass governments due to the political sensitivity and economic importance of public services has provided some legitimation for these views. In the health sector, the influence of the medical profession has inhibited privatization initiatives in most countries, reducing the scope for expenditure reductions. Consequently, the strengthening of the management function, as described in Chapter 1, linked to competitive incentives forcing managers to manage have been important aspects of the privatization process.

Finally, privatization has been advocated as a method of obtaining specialist expertise which may not be available within public health services. This has not only been due to a lack of technical expertise, but also a response to difficulties in recruiting and retaining staff. In Britain, a number of hospitals in the London area, which have a tradition of contracting out cleaning and catering services, were originally attracted by their inability to recruit staff on meagre NHS wage levels and turned to private provision (Bach, 1990).

Forms of privatization

Privatization has developed rapidly in recent decades encompassing more countries and a wide variety of approaches which has extended beyond a narrow focus on the sale of public enterprises to private owners. A broad definition of privatization has increasingly been used which includes all initiatives to encourage private sector participation in the provision of public services (Oestmann, 1994; Rondinelli and Iacono, 1996). In this looser definition of privatization, three main forms can be identified in the health sector.

The first approach involves government support for the growth of the private health care sector. This sector can be divided between the private health insurance industry and private hospital provision. In the 1980s and 1990s many governments have engaged in highly publicized asset sales in diverse industries such as telecommunications, airlines and electricity. Although this form of privatization has occurred in the health sector, with public hospitals being sold to private hospital groups, a more common development has been the growth of private hospital provision. The role of the private sector in health care provision varies markedly between countries, but there is a trend towards increasing private provision of health care (Van de Ven, 1996; WHO, 1996c). The growth of the private sector may lead to different terms and conditions of employment between public and private hospitals.

A second approach involves the private provision of public services. Contracting out of services by the State to private companies is well known and has been viewed as an integral part of "Reinventing Government" in which public service organizations concentrate on their "core business" and contract out other parts of their activity (Osborne and Gaebler, 1992). A variation of this approach is to require public service organizations to test the market through a process of competitive tendering. This may result in services being contracted out or remaining in-house, with managers encouraged to adopt the most cost-effective approach. Finally, in between contracting out and competitive tendering are a range of possibilities for joint public-private sector partnerships.

Third, there is the private financing of health services. In terms of public expenditure this can be reduced by encouraging the private sector to fund public sector investment projects. On the revenue side, health service organizations may be induced to generate more of their own income by increasing the proportion of fee-paying patients (although this is usually carefully regulated) or by diversifying their activities. For individuals the costs of health services may be privatized with individual patients bearing a larger share of the costs through increases in charges and the imposition of new payments.

A term increasingly used alongside these different categories of privatization identified already, is referred to as marketization or commercialization (Colling and Ferner, 1995; Oestmann, 1994). This implies the introduction of market-type competition and tighter managerial control into public services. For the health sector, a key development has been the introduction of systems of managed competition which was discussed in Chapter 1. There is considerable overlap in the usage of the terms privatization and marketization but in this section the focus will be on the forms of privatization discussed above.

The growth of private hospital provision

In recent years the character of the private hospital sector has altered with mergers and acquisitions increasing the prominence of multi-national health corporations.

Nonetheless, although policy-makers are interested in extending the role of the private sector in health care provision (see Taylor-Gooby, 1996) there is a strong sense that the public nature of the health sector remains sacrosanct and that large-scale privatization is difficult to envisage. Within individual countries the role of the private sector varies widely. Countries with national health systems such as Britain and Sweden have tended to have relatively small private sectors, although this is not the case in Italy. In countries with systems of health insurance the private sector has been more prominent and this has particularly been the case in France.

In Britain during the 1980s, there was rapid growth of the private hospital sector. In 1979 there were 150 independent acute hospitals in the UK with 6,700 beds overall and by 1996 there were 224 hospitals with 11,200 beds (Laing and Busisson, 1996) The hospital market has evolved and is dominated by the for-profit European companies, of which the most important is Compagnie GŽnŽrale des Eaux. (Laing and Buisson, 1996). The Conservative government encouraged this growth by easing planning regulations on building private hospitals and instructing NHS managers to make use of private hospital facilities to ease waiting lists and to take advantage of spare capacity in the private sector. The 1991 health service reforms encouraged further the public funding of private hospitals as health authorities can place contracts for NHS patients in the private sector. However, by allowing NHS trusts to act in a more commercial manner these reforms encouraged them to expand their private patient activities which is a valuable source of additional revenue. NHS trusts have built dedicated private units and this has posed a considerable threat to the independent sector which has lost market share to the NHS (Laing and Buisson, 1996).

In France, private hospitals may operate on a non-profit or for-profit basis. Some of these hospitals participate in the public health system and are covered by global budgets. Those hospitals that do not participate in this way, particularly the for-profit hospitals, may still draw on public funds which prior to 1991 was on a cost per day basis. The constraints on public hospital funding under a system of global budgets which did not apply to the for-profit private hospitals enabled continuing expansion of this sector in the 1980s (Huard et al, 1995). This situation altered as a result of the 1991 hospital reforms and profits in this sector have been disappointing with a number of establishments going out of business.

In Germany, there is also an important private hospital sector which accounts for almost half of all hospital provision with a split between private non-profit hospitals and a smaller proportion of for-profit hospitals, often owned by doctors. There has been a trend amongst local authorities to establish private companies as direct owners of public hospitals. This has allowed more flexibility with respect to wage-setting for managers and some clinicians. Managers have been appointed on temporary rather than unlimited contracts (Hoffmeyer, 1994).

In Sweden, health care provision has been the responsibility of the county councils and there were only a handful of private hospitals concentrated in the main cities. Since then doctors have used their free time to see patients privately and with the aid of a company owned by them, established a private clinic in Stockholm (Hort and Cohn, 1995). As in Britain, the system of managed competition has enabled the county councils to make greater use of private facilities. A trend that may have been reinforced by the guarantee to patients that certain conditions will be treated within three months (WHO, 1996b).

Although it is difficult to generalize between countries in which the size and functions of the private hospital sector differ markedly, two issues can be highlighted. First, the growth of private health services can exacerbate the difficulties of recruiting and retaining staff within the public health sector. Notwithstanding significant variations between countries, occupational groups and geographical locations in any assessment of staff shortages, the health sector is widely acknowledged to be vulnerable to shortages of qualified personnel such as nurses (see Birhaye, 1994).

The growth of private health provision, dependent on the recruitment of qualified staff, trained in the public health service represents a leakage of health resources from the public sector. Second, this leakage may be intensified if working in the private health sector is viewed by professional staff as more attractive than employment in the public sector. In certain cases this arises from the opportunity to earn higher salaries in the private sector, but even if salaries between public and private sectors are comparable, as in Britain, private hospitals compete for professional staff by offering more flexible terms and conditions of employment, better facilities and less intensive working arrangements (Laing and Buisson, 1996).

Contracting out and competitive tendering

A second form of privatization has been the contracting-out of health service activities which may be accompanied by a process of competitive tendering. In the health sector the contracting out of hospital services including cleaning, catering and laundry services has been widespread in Britain, France and Germany (Fajertag, 1988). Other services effected include ambulance and transport services, pathology testing and information technology.

The most systematic use of competitive tendering and contracting out in the health sector has occurred in Britain. In 1983 health authorities were instructed to test the cost effectiveness of their domestic (cleaning), catering and laundry services by use of competitive tendering with contracts usually awarded for three years. Authorities were instructed to accept the lowest cost tender unless "compelling reasons" dictated otherwise. Health authorities had to produce a timetable for competitive tendering by February 1984 and were encouraged to extend competitive tendering to other support services where savings could be made. In the White Paper Working for patients (DoH, 1989), the Conservative government proposed extending competitive tendering into clinical services such as radiology and pathology, but stopped short of making this mandatory.

There has been considerable variation between individual services and geographic regions in the extent to which services have been contracted out. For domestic services 20% of contracts have been awarded to the private sector. In laundry services 17% of contracts have been awarded to outside contractors and in catering less than 5% of contracts were awarded to private firms (Treasury, 1991). A 1990 survey of catering managers in 280 NHS hospitals reported an even lower figure with no catering services contracted out as a result of the competitive tendering exercise (Kelliher, 1995). This was accounted for by the larger capital outlays required than in domestic services and the private firms dislike of fixed-fee contracts. Even these relatively low levels of contracting out may overestimate the extent of private sector participation as the statistics for contracting out include services provided by one NHS trust for another. This is particularly the case for laundry services which due to the level of capital investment has precluded every hospital establishing their own laundry service.

The impact of the competitive tendering initiative has not been diminished by the relatively low levels of private provision. The threat of contracting out has proved a sufficient threat to the workforce to lead to substantial changes in employment practices. This situation is reflected in the levels of savings generated. In 1987 the National Audit Office (NAO), a regulatory organization of central government, estimated annual cumulative savings as a result of tendering were £73 million, or 20% of the previous cost of services prior to competitive tendering (NAO, 1987). Government estimates suggest that between 1984-85 and 1989/90 the cost of cleaning and other domestic services in the NHS had fallen from £514 million to £482 million a reduction of 29% in real terms (Treasury, 1991). This led the Conservative government to conclude that:

the stimulus of competition has improved the performance of those in-house operations who won their contracts in open competition. The process has made both NHS units and support service providers more accountable for both the value and the quality of the support service provided (Treasury, 1991).

A range of studies seemed to reinforce this interpretation, estimating that the cost of providing domestic and catering services fell by up to 35% (Domberger, Meadowcroft and Thompson, 1987; Milne and McGee, 1992).

Nonetheless, this interpretation ignores a number of important points about the competitive tendering exercise. First, the estimated savings from the competitive tendering exercise have been disputed. It is not only that there are inconsistencies in the way that the savings have been reported, but also that the costs of severance payments for staff made redundant and the administrative costs associated with the exercise are frequently excluded from the calculations. Cost savings have frequently arisen, particularly in domestic services, because NHS managers have reduced the frequency of the service provided. Consequently, it is not possible to equate cost reductions with higher levels of efficiency. The implication is that savings may flow from lower standards of service rather than greater efficiency.

Second, financial savings have been achieved mainly through reductions in labour costs with substantial reductions in employment levels, worse terms and conditions of service and more flexible employment practices. These outcomes have a disproportionate effect on women workers who are overrepresented in low paid occupations in the health service. Trade union figures suggest that by 1988, 92,000 ancillary service jobs (30% of the total ancillary workforce) had lost their jobs (Labour Research Department, 1990) and government statistics indicate that ancillary staff employment fell from 154,000 to 73,000 between 1984 and 1994 (DoH, 1996).

Terms and conditions of employment have been reduced for both in-house and private contract staff. In addition to lower overall staffing levels, the most frequent source of savings have resulted from the removal of bonus schemes and overtime working, the elimination of sick pay, changes to annual leave entitlement and avoidance of national insurance payments by employing more part-time staff. Greater flexibility from the workforce has been demanded, frequently a euphemism for work intensification, with employees expected to be more mobile, moving between different workplaces and shifting between contracts as opportunities for task flexibility are exploited (Ascher, 1987; Bach, 1989; Joint NHS Privatization Unit 1990; Colling and Ferner, 1995).

Third, lowering of service standards has been a prominent criticism in trade union accounts of privatization (Joint NHS Privatization Research Unit, 1990) although these claims are disputed by the organization representing the private cleaning contractors (Contract Cleaning and Maintenance Association, 1990). The criticisms are confirmed, at least in part, by case-study evidence. Bach in a study of tendering for domestic services found that it proved difficult to set sufficiently clearly and monitor effectively the standards expected of the contractor. As cleaning standards declined, due to understaffing and poorly trained staff, the health authority felt compelled to terminate the contract and return the service in-house (Bach, 1989). These concerns are reflected in managers' views of competitive tendering which revealed high levels of ambivalence about the value of competitive tendering and contracting out. There was no support amongst trust managers for competitive tendering or contracting out clinical services (IHG and Salomons Centre, 1995).

Fourth, competitive tendering has been used as a means to enhance managerial control over the workforce and has posed problems for trade unions. Competitive tendering has undermined national agreements on pay and conditions by legitimating local negotiations. For trade unions their opposition to competitive tendering has made them vulnerable to the charge that they are defending inefficient working practices, diverting resources which could be more effectively used for patient care. When services are contracted out, it is more difficult to organize workers in the private service sector, but if the service is retained in-house job losses reduce membership and unions are forced to accept poorer terms and conditions of employment.

The experience of other countries highlights many of the same issues. In Germany, the …TV has claimed that contracting out has resulted in substantial job losses and a 30% reduction in earnings. Similar points are echoed by French unions who note also that contracting out services undermines union solidarity as workers with different terms and conditions of employment work alongside each other (Fajertag, 1988). In Sweden, privatization of the ambulance service in one county council led to reductions in salaries by 10 to 15% and cuts in premium payments (Saltman and Van Otter, 1995).

Private financing of health services:
The privatization of costs

The privatization of costs has been an attempt by governments to transfer some of the increasing costs of health care from the State to private individuals. This has undermined the solidarity principle as low-paid workers are disproportionately effected by user charges, despite attempts to exclude those on low incomes. France provides a clear illustration of the trend towards increased patient charges. In 1983 the Fabius government introduced a FF20 daily charge for hospitalization which has risen steadily to a level of FF70 per day. In 1987, the Chirac government introduced controversial measures that severely restricted the numbers of long-term sick who were eligible for exemption from the co-payment, contributing to the reductions in the number of patients receiving free treatment (Huard et al, 1995). Patients have also been required to pay more of their drugs costs, with a steady reduction in the number of prescribed medicines subject to a full rebate. Individual contributions to the social security funds have risen and as these measures have not managed to eliminate the persistent deficit of the health insurance system, additional taxes have been introduced to raise revenue for the health system (Bach, 1994).

A second form of the privatization of costs is the growth of private medical insurance. In countries with social insurance health systems some groups, for example, higher earners in Germany, have always used private rather than public systems of health insurance. In France, citizens have taken out complementary insurance through the Mutuelles to cover co-payments. In both countries the private insurance sector is becoming more active. In tax-funded national health systems there is less of a tradition of private health insurance but this altered during the 1980s. In Britain and Sweden, dissatisfaction with waiting times for treatment was one of the most important reasons for the growth of private medical insurance although in Sweden the numbers covered remain small. In Britain, during the 1980s membership of private medical insurance schemes increased markedly encouraged by tax incentives.

A third form of privatizing health costs is the attempt by governments to privatize the costs of providing health facilities. This process has proceeded furthest in Britain under the Conservative Government's Private Finance Initiative (PFI) launched in 1992. NHS trusts are required to seek out private financing for any capital spending over £250,000. Construction and facilities management companies have formed consortia to bid for schemes to build new hospitals which the consortia owns and then leases back to the NHS for a
25-50 year period. The private sector consortia manages the services and employs the staff directly, except clinical staff, which effectively extends the contracting out of services to large new areas of the public sector.

The PFI initiative has been beset by difficulties and only one hospital building contract has been signed although a number of smaller schemes have been approved (Dix, 1997). Nonetheless, constraints on public expenditure and cross party support for the principle of using private finance to fund health service projects will ensure the continuation of the PFI. The British Medical Association and the public sector union, Unison, have expressed their opposition to the PFI scheme because of their concerns that it will lead to poorer terms and conditions of employment and undermine the public service ethos by introducing private sector values into the delivery of health care (Suzman, 1995). It is feared that it would reduce trade union representation in the NHS, as many of the major construction and service companies are opposed to recognition of trade unions for negotiating purposes (Whitfield, 1996). The division between "clinical" staff who will remain directly employed by the trust and "non-clinical" staff who will be employed by the private sector will exacerbate the divisions between different sections of the workforce that results from contracting out. This will complicate the management process within hospitals which led a Parliamentary Committee to conclude:

We are concerned that PFI should not introduce inappropriate and arbitrary demarcations in hospital management (Treasury Committee, 1996, p. xx).

Discussion

During the post war period as countries established systems of universal health insurance and national health systems the role of the private sector diminished. In the last two decades this trend has been reversed and there has been an increasing role for private sector provision and funding within health systems. This reflected concerns about the "fiscal crisis" faced by governments and influential critiques of the profligacy of health services. During the 1980s, privatization became the new orthodoxy and despite the political sensitivity of applying forms of privatization to the health sector, privatization initiatives have been extended to most West European countries, although the scope and pace of privatization has varied considerably between countries.

Although in many countries privatization initiatives remain at an early stage of their evolution it is not self-evident that the high expectations of privatization have been fulfilled. The limitations of privatization are evident from the experience of Britain. First, despite a supportive government private sector companies have shown limited interest in providing services for the health service as the difficulties of persuading companies to competitively tender for ancillary services and the slow development of the PFI demonstrates. The complex and costly tendering processes have discouraged private sector involvement and ironically, the establishment of a competitive internal market in which NHS trusts have merged due to financial difficulties has discouraged private sector companies worried that trusts could default on their payments.

Second, when services are transferred to the private sector this has had a significant impact on the terms and conditions of employment for the staff concerned. Even when the service is retained in-house the competitive tendering initiative has led to substantial job losses, work intensification and less job security for those that remain in employment, regardless of whether they are employed by the public or private sector. There is also a growing concern, voiced most strongly by professional staff, that commercial values are infusing the health care sector which places a priority on financial indicators to the detriment of patient care. Paradoxically, if employment practices increasingly mirror those found in the private sector, this process may erode employee commitment to the public service and they may become indifferent as to whether they are employed in the public or private sectors with important implications for union organization and management practice.

Third, it is not self-evident that the expansion of private provision results in more cost-effective health services. For governments expanding private provision is attractive if it substitutes for public provision and, directly or indirectly, is paid for by the individual. However, health service professionals are trained at considerable cost by the public sector, the transfer of these staff to the private sector represents a cost to the State, requiring further expenditure on training. For individuals, it is not clear whether they are willing, or able, to finance a higher proportion of their own health care expenditure. In Britain, there has been a decline in the numbers of people covered by private health insurance, as premiums have risen, and the position is similar in Germany, where the market is stagnant (Laing and Buisson, 1996; International Healthcare News, July 1996).

Most countries are attempting to reduce the numbers of hospital beds and in countries such as France, the expansion of the private sector has made it more difficult to achieve this objective. Consequently recent hospital reforms have placed strong emphasis on closer co-ordination between public and private hospital provision, but in pluralist systems of health care this is inherently more difficult to achieve. In addition, over capacity in health systems results in relatively low occupancy rates in private hospitals and the duplication of costly medical technologies which does not provide value for money for governments.

5. Employment practices and working conditions

The health care sector is an important industry in European countries and there are a number of relevant ILO labour standards. Freedom of Association and Protection of the Right to Organize Convention, 1948 (No. 87), and the Right to Organize and Collective Bargaining Convention 1949 (No. 98), are fundamental international labour standards which underpin sound industrial relations. Nursing Personnel Convention, 1977 (No. 149), considers the employment, training, career development, remuneration, working time and involvement of nurses. Nursing Personnel Recommendation, 1977 (No. 157), provides more detailed guidance in these areas.

The health sector comprises about 6% of total employment within OECD countries; in Sweden this figure rises to 10% (table 7). In all these countries there has been a substantial increase in the proportion of people employed in the health sector since the 1970s.

Table 7. Employment in health care, 1970-92

Per cent of total employment

1970

1980

1990

1992

USA¹

3.7

5.3

6.2

--

Japan

1.4

--

2.4

2.4

Germany

2.9

4.5

--

5.5

France²

--

--

6.8

--

Italy

1.6

3.9

4.3

4.4

UK

3.1

4.7

4.6

4.8

Netherlands

0.4

6.4

6.4

6.6

Sweden

6.2

9.9

9.9

10.0

Average³

2.8

5.8

5.5

5.6

OECD average³

2.8

5.0

5.2

5.8

¹ Last available year is 1989. ² Last available year is 1987. ³ Where data is available.
Source: OECD, 1995, cited in Oxley and MacFarlan, 1995

The health sector is a very important employer of women. They are often employed on a part-time basis and concentrated at the bottom of the employment hierarchy; as a result there is an acute low pay problem. Nonetheless, the public sector also employs substantial numbers of women in professional and managerial grades. There are important implications for public sector trade unions whose membership is drawn heavily from women. More generally for the trade unions in a period of retrenchment, in most countries, membership in the health services remained far higher than in the private sector and has not been subject to the same degree of decline.

Evidence from the ILO (ILO, 1992a; ILO, 1992b) indicates the predominance of women within the health sector. Sweden has one of the highest proportions of women within health care with approximately 80% of health personnel being women. A similar figure is reported in the Netherlands and slightly lower levels for Britain. This figure is even higher in the private health sector in France in which it is reported that 93% of medical staff within the private sector are female.

Although women predominate numerically, they are located towards the bottom of the employment hierarchy. This is even the case in occupations in which women form the majority of those employed. For example, in Britain and France although male nurses form a relatively small proportion of nursing staff they are disproportionately represented in management. In the medical profession, women are frequently concentrated in the less prestigious specialties. For example, in Italy although women make up 59 per cent of those attending medical school, only 28 per cent of surgeons are women. Although this represents an increase from 13.5 per cent in the 1970s women remain severely underrepresented particularly amongst head physicians where just 3% are women. This reflects the lack of childcare facilities and the difficulties of combining a career with parenthood (International Healthcare News, February 1997: 12).

The following paragraphs focus more on developments in pay determination than working conditions in general because, to date, there have been a number of important innovations in pay determination. However, with increasing concerns about job insecurity amongst health personnel, this may be changing.

Pay determination

Across western Europe there is tremendous diversity in the systems of health service pay determination. Often, different systems of pay determination are applied to distinct occupational groups, particularly medical staff. It is frequently the case that health service systems of pay determination are strongly influenced by the prevailing arrangements in the private sector. Consequently, in countries in which collective bargaining is well entrenched in the private sector, collective bargaining is the predominant model in the public sector. More recently, techniques associated with the private sector, for example performance-related pay, have been extolled as being applicable to the public sector. This picture is complicated by the importance of the private health care sector in many of the countries under consideration, although they are also influenced strongly by public sector pay arrangements and in some cases are covered by the same conventions as the public hospital sector.

Several ILO instruments deal with pay matters. Some of them are of general application, such as the Minimum Wage Fixing Convention, 1970 (No. 131); others consider more specifically the situation of health care workers. For example, the Medical Care Recommendation, 1944 (No. 69), states that adequate income should be provided for doctors and members of allied professions so as not to distract their attention from the maintenance and improvement of health of their patients. The Nursing Personnel Recommendation, 1977 (No. 157), recommends that remuneration of nursing personnel should be fixed at levels which are commensurate with their socio-economic needs, qualifications and responsibilities and which is likely to attract persons to the profession and retain them.

Collective bargaining is the dominant method of pay determination in the health sector and has been highly centralized, particularly for pay, in most countries. It is less common that pay is decided unilaterally by employers, although in Germany the special status of the Beamte, precludes them from a formal system of collective bargaining. However, few health service staff have Beamte status. Alternatives to collective bargaining include the use of third party review, as exists in Britain for nurses and doctors (see Chapter 3).

Governments have had to grapple with the complexities of pay determination in the health sector in which a very large and diverse workforce has been geographically dispersed in different labour market conditions and employed on a variety of contract types. Centralized and inflexible systems of pay determination have been insufficiently sensitive to the particular grievances of occupational groups such as nurses, because of the substantial cost implications. With the paybill comprising such a high proportion of health services expenditure, governments have been reluctant to countenance general rises in salaries. The opposite has been more prevalent with attempts to constrain health expenditure intimately connected to government attempts to curtail paybill growth.

In response to these conflicting pressures many countries have witnessed substantial reforms to pay determination in the health sector, although this has frequently been in a piecemeal manner in response to a specific political crisis. One response has been to decentralize pay determination to regional or enterprise level, allowing managers more discretion over pay-setting. Another approach has been to experiment with systems of performance-related pay to encourage good performance. The use of special supplements to aid recruitment and retention has been applied also in an attempt to avoid wholesale reform of pay determination mechanisms.

Market-related pay and merit pay

Attempts to control overall pay costs have been coupled with measures to make the paybill more flexible so that salary increases could be targeted at occupations in short supply (market-related pay) or to reward performance (merit pay). By individualising the employment relationship, the introduction of merit pay has been part of the process of devolving responsibility to managers and bolstering their authority with professional staff. Moreover, when managers have become subject to merit pay, it has made them more amenable to a system of command and control from higher level managers.

The proliferation of special bonuses and supplements in the health sector has been a widespread mechanism to:

...circumvent the strict pay regulations within the public service, which have led to a fixing of a comparatively low salary level and have thus provoked severe staff shortages. Allowances such as these provide a loophole whereby public sector salaries can be made more competitive. (ILO, 1992a, p. 45)

In Sweden, they have been viewed as a mechanism to overcome rigidities in the labour market which have resulted in small wage differentials between occupations, despite different labour supply and demand conditions (Wise, 1993).

The adoption of market-related pay has been influenced strongly by the prevailing labour market conditions. In Britain, at the end of the 1980s, the Department of Health introduced a pilot scheme of flexible pay supplements for hard-to-fill posts. The Pay Review Body for Nurses expressed doubts about the value of these supplements, arguing that they would move shortages around, rather than compensate for more general supply side shortages, and supplements could become a soft option for poor management (Thornley and Winchester, 1994). Subsequent, more radical reforms to health service pay determination (see below) led to the scheme being discontinued and managers have been anxious to simplify the complex system of leads and allowances that have proliferated in the health service.

In France, the public hospital system is one of the three branches of the civil service and forms part of the single pay classification which covers the whole civil service. Every position has a number of points attached to it which is located within an overall civil service grid. This grid is divided into occupational categories which are classed as A, B and C categories in descending order in the occupational hierarchy. For example, managers and senior nurses are classed in category A, nurses in category B and nursing aides as class C (Piotet, 1994). There is the risk for the government that shifting the position of one occupational group could trigger demands from other groups of workers due to the interconnected job classification system. Consequently, the government has used other means to boost salary levels with the spread of a plethora of bonuses, many of which are not included in the official statistics (Meurs, 1996).

A frequent criticism of health service wage-setting arrangements has been the absence of a link between pay and performance and the subsequent lack of incentives for improved performance. It is argued that introducing a merit element will motivate staff to improve performance as a direct link is established between pay and performance; allows greater flexibility in the use of the paybill; complements the use of other new public management techniques by devolving management authority and increasing accountability for performance; and contributes to the process of organizational change that is required in response to privatization and marketization initiatives.

The use of merit pay has been most widespread in Britain with the Conservative government being strong advocates of its use across the public sector. Alongside the introduction of general managers in the mid-1980s a system of merit pay was implemented covering the 1,500 most senior managers which was extended to incorporate a further 7,000 middle managers in the late 1980s. At the same time these managers were removed from the Whitley system of national collective bargaining, the seniority-based system of annual increments was abolished and these managers were placed on short-term contracts (Seifert, 1992). The establishment of NHS trusts as part of the health service reforms allowed NHS trusts to establish their own terms and conditions of employment and some of them extended merit pay to managers with a clinical background. These schemes, usually based on the original national scheme, evaluated individuals against set objectives and awarded performance increases of up to approximately 6% according to the rating obtained.

The British Medical Association has been strongly opposed to a system of management controlled merit pay which they view as a means to enhance managerial control and subordinate medical staff to an agenda dominated by financial considerations. Nonetheless, senior medical staff (hospital consultants) have a system of distinction awards awarded on the basis of "outstanding professional ability". These awards, grouped into four categories, are allocated by a profession-dominated committee and about one third of medical staff receive an award at some stage in their career. For the few staff that obtain the top award this can double their salary (Moran, 1993). Since 1990, after vigorous lobbying, managers have been included on the awards committees and the distinction award system has been subject to further modifications.

In other countries there has been some interest in the use of merit pay in the health sector, but its application has been very limited. In Sweden, the devolved system of health service bargaining has provided opportunities to experiment with systems of merit pay, but its use has not been widespread because of the difficulties in establishing objective measures of performance and a reluctance to apply the principles of merit pay to the health sector (Wise, 1993). In France, there has been more emphasis on bonuses than merit pay and in Germany, although there is the establishment of a more commercial approach to the management of hospitals with discussion of merit pay for senior hospital doctors, developments remain limited (IHF, 1994).

Britain stands out therefore as a country in which merit pay has been systematically used in the health sector, but its effectiveness has been widely questioned. First, in keeping with research findings in other public services (Marsden and Richardson, 1994) there is little evidence that merit pay acts as a motivator for staff and frequently is a demotivator. This stems from the lack of an objective performance appraisal system accompanying the allocation of merit payments, leading to subjective judgements and the distribution of payments in an unfair and arbitrary manner which may reinforce existing gender bias (Staff Side, 1996).

This situation reflects a fundamental problem in establishing merit pay schemes in the health sector; the absence of objective and measurable indicators of output. Indicators of NHS performance have been developed but these concentrate almost exclusively on quantifiable outputs and neglect qualitative aspects, particularly the quality of service. This led the Chief Executive of the NHS to comment:

We may well have reached the point where we need to think about the qualitative aspects of care and be less concerned about always increasing throughput in hospitals. That means the drive for efficiency in resources might have gone a bit far (Langlands in Financial Times 18/2/96).

In the context of budgetary constraints NHS trusts have found it difficult to release sufficient resources to ensure that good performance is adequately rewarded. Small merit pay increases are spread across a sizeable number of staff and accounts for only a small proportion of an individual's pay. Forced distributions are frequently used which frustrate staff who believe that they deserve a higher rating. It is unsurprising therefore that managers are disenchanted with merit pay and have been particularly critical of the inability of individual merit pay schemes to reward team performance and corporate success (Dawson et al, 1996). Despite its limited impact on individual performance, for a trust hospital the budget for merit pay represents a substantial additional cost. In the light of these difficulties many trusts are discontinuing their system of individual merit pay (Institute of Health Services Management, 1996, 1997).

Despite the problems of merit pay in the NHS which reflect many of the difficulties reported in other public sector environments (OECD, 1993) its use continues to be advocated. As Ferner suggests (Ferner, 1991) this reflects the symbolic value of merit pay in signalling that public service organizations are able to change and emulate private sector "best practice". This has a particular resonance in the British case where during the high water mark of the Thatcher era private sector techniques were imposed across the public sector.

Collective bargaining reform

Collective bargaining remains the dominant method of pay determination in the health sector, but the level at which bargaining is conducted varies between countries. In Britain and Sweden there has been a marked trend towards decentralized pay bargaining, but this is much less evident in France and Germany. The most radical developments have occurred in Britain with the establishment of NHS trusts accompanied by a shift towards bargaining at trust level. This development potentially overturned the system of national collective agreements negotiated in Whitley Councils and undermined the role of the Review Bodies for nursing and medical staff. Government policies extolled the virtues of a diverse pattern of establishment-level pay and employment packages that would be more sensitive to local labour market conditions and organizational needs. Yet despite the enthusiasm and rhetorical support of some managers for radical change, progress towards decentralized pay determination has been very limited (Bach and Winchester, 1994; IDS, 1996).

This situation can be accounted for partly by the inconsistent policy interventions of central government. Although there has been an emphasis on devolving pay bargaining to trust level this has been largely illusory as public expenditure constraints and the political sensitivity of government health reforms have led to covert instructions from central government about expected pay settlements. Moreover, government control over health service pay has been strengthened over the last four years by the application of a paybill freeze and the requirement for trust managers to fund pay increases through efficiency gains.

The organizational prerequisites to develop local pay bargaining have been largely absent. NHS managers have accorded a low priority to local pay determination, faced with pressing financial problems and a complex agenda of change associated with the market style reforms. Hospital trusts are complex organizations containing a diversity of occupational groups, often located in different workplaces with distinct industrial relations practices. As a result managers face a formidable task developing effective local pay determination.

The creation of trusts has placed new demands on the personnel function, particularly in the area of pay and rewards. The legacy of national bargaining meant that expertise required for the development of pay and reward strategies was absent at local level and it remains the least effective aspect of the NHS personnel function (Guest and Peccei, 1993). Personnel departments are also hindered by their lack of resources and their inability to ensure that human resource issues have a high-profile within NHS trusts (Bach, 1995).

A further set of obstacles arise from the occupational identity and labour market characteristics of nurses and doctors. Professional associations and trade unions have given the highest priority to the retention of national salary and grading structures. In their view they not only define terms and conditions of employment but also shape career expectations, influence mobility patterns and safeguard professional standards of service. Brown and Rowthorne agree, suggesting that:

fragmented bargaining within individual public services could be expected to give rise to an increasingly uneven quality of service nationwide (1990, p. 13).

Nursing and medical staff have waged high profile campaigns against local pay determination within the NHS which has contributed to the unwillingness of local managers and government ministers to pursue vigorously the establishment of local pay determination. Medical staff in particular have been successful in persuading the Pay Review Body that local pay is inappropriate for medical staff.

The labour market position of nurses and doctors is also distinctive: they are trained and employed predominantly by the government; aggregate effective demand is dependent on the allocation of resources for health services, and the near monopsonistic power of the health service, effectively dictates the "market rate" of nurses' pay.

Despite these difficulties, NHS trusts anticipating the demise of the Whitley system and anxious to enhance competitiveness are persevering with measures to establish the foundations of an enterprise system of bargaining. Most trusts have started to establish local collective bargaining machinery: new recognition agreements have been signed; consultation and negotiation arrangements have been established; and disciplinary procedures have been reformed. There is considerable local bargaining activity at trust level occurring which is concerned less with pay than with negotiating changes in working practices and discussing non-pay terms and conditions (IDS, 1996; IRS, 1996).

The uneven development of decentralized pay bargaining in the health sector illustrates the complexities of decentralising pay bargaining. For governments there is a tension between devolving responsibility to local managers to encourage flexible employment practices and an anxiety to maintain tight central control over public expenditure. As earlier chapters noted, there is a trend to more active government intervention to curb health expenditure which takes precedence over decentralized pay bargaining. A further consideration, which has been highlighted in Britain, has been the costs associated with the development of local pay bargaining. Instead of implementing national pay agreements, every NHS trust has been required to establish local pay machinery and conduct negotiations over the local pay element. Some trusts have gone further and developed a single pay spine for their workforce. This invariably requires a complex, time-consuming and costly job evaluation exercise to be conducted. Trade unionists and many trust managers share a belief that local pay bargaining has required substantial expenditure with few tangible results (Staff Side, 1996).

Public health systems are predicated on values of solidarity and equity and health ministers have reaffirmed that these principles should guide health system reform (WHO, 1996a). Decentralized pay bargaining potentially jeopardises these principles by encouraging differentiated pay and conditions between NHS trusts and across occupational groups. This is resulting in winners and losers (Elliot and Duffus, 1996). For some groups which have a crucial influence on the success of a hospital trust, such as consultant medical staff, financial inducements have been offered to attract key staff. In addition to the dangers of pay leapfrogging, these practices reinforce the hierarchy between "successful" and "unsuccessful" trusts. The latter enter a spiral of decline and ultimately face merger or outright closure.

For trade unions, decentralized pay bargaining poses a challenge to the centralized organizational structures which mirrored the national system of pay determination. Health service trade unions have limited experience of local pay bargaining and have invested heavily in training full-time officers and lay representatives to cope with local pay bargaining. These lay representatives will more frequently come into conflict with local managers and have to contend with increased workloads which may discourage local union involvement. More significant, in the long term, are the implications of a shift in industrial relations activity from national to local level. Trade unions and professional associations have been able to use the publicity accompanying the work of the Review Bodies to comment on national policy developments and the Review Bodies have been sometimes unwilling to accept the expenditure control priorities of the government. The ability to influence national policy would be weakened by decentralized bargaining which separates the level at which policy is established from the level at which bargaining occurs.

Flexible working arrangements

The health sector is a very significant employer of women and many of these work on a part-time basis. The growth of part-time employment is linked to the increasing participation of women and in general terms its growth has been more rapid than the growth of full-time employment. The nursing profession has a particularly high proportion of women working on a part-time basis, although the definitions of part-time working vary and can include a wide variety of working hours arrangements. In France, there has been rapid growth in part-time work amongst nursing staff and there has been a significant increase in working four-fifths of full-time hours which has grown more rapidly than other forms of part-time working (Piotet, 1994). In Britain approximately half the nursing workforce is employed on a part-time basis.

For women faced with severe constraints in their ability to reconcile domestic and work commitments, part-time working may, at best, be an attractive option or, at worst, the least bad option. However, there is a reluctance amongst employers to allow women, particularly in more senior positions, to work on a part-time basis. Evidence from Britain and Sweden suggests that there are relatively few opportunities for women to work part-time in senior management or in the medical profession (Dixon, 1996; 1992b). Employees may believe that working on a part-time basis is detrimental to their career progression. Although measures are being taken to try and improve the position of women within the health services, for example in Britain through the Opportunity 2000 initiative (see below) progress is slow and there is frequently a concentration on managerial and professional staff to the exclusion of low-paid occupational groups (table 8).

Table 8. Summary of Opportunity 2000 goals and outcomes, 1991-94¹

Increase the numbers of women in general management posts from 18% in 1991 to 30% in 1994. Outcome: 28%
Increase the percentage of qualified women accountants in the NHS from 23% in 1991. Outcome: 31%
Increase the percentage of women consultants from 15.5% in 1991 to 20% in 1994. Outcome: 18%
Accelerate the rate of increase in the number of women consultants in surgical specialties from the current 9.7% per annum to 15% per annum.
Increase the representation of women as health authority/trust members from 29% in 1991 to 35% by 1994. Outcome: 39%
Ensure women aspiring to management positions go through a development centre to establish their own personal development needs.
Introduce initiatives on recruitment and retention to ensure that the numbers of qualified nurses/midwives leaving the profession does not rise.
Ensure that following maternity leave/career breaks all women return to a grade commensurate with their leaving grade and to work of similar status.
Monitor the time taken for nurses to reach management positions to ensure that men and women have equal access to these positions.

¹ Where data is available.
Source: NHS Executive, 1996.

This underutilization of the skills of women represents a considerable waste of resources as women fail to reach their potential and in the costs of training as women leave the health care sector. This situation can be expected to become more acute as working conditions deteriorate (see below), discouraging entry into health care. This will exacerbate the shortages that exist in many countries.

There have been significant increases in the numbers of staff employed on more precarious forms of employment contract, notably fixed-term and temporary contracts, although the reasons for these increases differ between countries. In France, since 1986, civil service status has incorporated the public hospital sector which places severe constraints on employers in terms of recruitment and selection, remuneration and dismissal. To overcome the inflexibility of this system public hospital employers have been recruiting a higher proportion of workers who lack civil service status. Many of these are young and unskilled workers employed on less favourable contractual terms which in some cases pay below the statutory minimum wage. It is estimated that as many as 10% of clerical jobs in public hospitals are comprized of workers on precarious status (Meurs, 1996; Mosse, 1996).

In Britain, temporary labour has traditionally been used for two main purposes. First, most NHS trusts have a system of "bank" nurses which cover for absence or unfilled vacancies. Second, staff from private sector agencies are employed for the same purposes. In recent years a novel aspect has emerged in which trust managers are placing more staff on short-term contracts (Buchan, 1994). Lloyd and Seifert (1995) point towards the casualization of labour through increases in the use of agency and temporary staff. This may reflect a managerial response to the funding uncertainties associated with the contracts system of the internal market. Buchan disputes this interpretation and argues that for nursing staff, in his case-study trusts, the main rationales reported by managers for using temporary staff were traditional reasons of covering for absent staff, to reduce staffing costs and to cover short-term peaks and troughs in demand.

Work reorganization

Another form of flexibility is where existing working practices and the boundaries between occupational groups are being questioned. The health sector has evolved a complex division of labour with a high degree of specialization. In response to budgetary constraints and the difficulties of recruiting certain types of occupational groups managers are challenging these existing boundaries. Many of these developments are modelled on private sector forms of flexible working practices. For example, management consultants across Europe have been active in advocating forms of "Patient Focused Care", resembling Business Process Reengineering, in which multi-skilled staff are encouraged to carry out a wide range of tasks (Hurst, 1995; Rosleff and Lister, 1995).

For managers reorganizing and reallocating tasks that staff undertake is an attractive option to reduce paybill costs. In the health service in Britain, managers have sought cost savings through "reprofiling" or grade-mix exercises, frequently a euphemism for skill dilution. Attention has centred on the nursing profession where managers are altering the composition and deployment of their workforce. This was encouraged by the creation of a new grade of "health care assistant" and the symbolically important insistence of the NHS Management Executive that pay and conditions of the new grade should be excluded from any of the national pay arrangements and be determined at local level.

Reprofiling is a particularly attractive option as it allows managers to develop posts outside traditional demarcation arrangements and existing Whitley terms and conditions of service. NHS professionals have been relatively immune from the changes in job content and job boundaries over the last forty years despite important changes in medical practice. NHS trusts are therefore experimenting with the introduction of a range of "generic" workers which combine a number of previously separate roles, not only on hospital wards, but also in paramedical and laboratory areas.

A number of factors are influencing the extent and pace of change. First, there are variations, dependent partly on the stance of the local trade unions, in the extent to which managers are able to substitute health care assistants and other types of generic health worker for existing staff. There is clearly a danger for managers that new grades of staff will supplement rather than replace existing staff groups as professional groups attempt to control the reprofiling exercises. Second, managers in Britain as in most countries are under pressure to improve the quality of public services and to explicitly recognise patients' rights (WHO, 1996b). Reprofiling exercises can jeopardise the quality of care through their use of less qualified staff (Bagust, 1992), and this is an uncomfortable message for managers, mindful of both the requirement to improve the quality of care and the need to trim their paybill.

It is not only managers who are questioning existing occupational boundaries and patterns of work organization. Industrial action amongst nursing staff in Britain, France, and Sweden suggests that nursing staff are disenchanted with their low status and poor pay. Technological change has increased the responsibilities of nursing staff, but their pay has failed to keep pace with these developments. In France, industrial action amongst nurses in 1988 was triggered by proposals to dilute entry standards to nursing. This would have allowed candidates without the baccalaureate to enter the examinations for nursing college places. This decree which was rescinded, highlighted nurses' concerns about their status, working conditions and pay (Piotet, 1994). In Germany, there is debate about whether nurses should be allowed to train as doctors by removing the Abitur as a prerequisite for medical training (Karcher, 1995) and a more general concern to improve the working environment for nursing staff.

Occupational health protection

The working environment of the health sector is characterized by a number of risk factors. This section draws on research commissioned by the European Foundation for the Improvement of Living and Working Conditions (EFILWC) which identified three main physical risk factors associated with hospital work (EFILWC, 1995). First, musculoskeletal loads: hospital workers are exposed to strenuous working postures such as twisting, bending and kneeling and they have to carry heavy weights like patients on a frequent basis. Although lifting aids are available, they are not always used, due to their inconvenience or the reluctance of patients and staff to use them. As a consequence back pain is common amongst staff particularly, although not exclusively, amongst nursing staff. For example, The European Foundation cites a French study in which 48 per cent of the nurses complained about back pain within a 12 month period and a study in Britain by the public services union Unison reported that 26 per cent of nurses had suffered a back injury in the previous 12 months. In total, it is estimated that 80,000 suffer back injuries each year and 750 are forced to take early retirement (Labour Research, 1996a).

A second risk factor concerns biological agents. This arises when health workers come into contact with patients and their blood and occurs usually through accidents involving needle-stick injuries and cuts from sharp objects. This can result in workers being infected by contaminated blood or other micro-organisms which can cause hepatitis B and other infectious diseases. In many countries, health workers are vaccinated against hepatitis B to reduce this risk factor. A third hazard arises from the wide variety of chemical substances used in hospitals. These substances pose a variety of risks to health. In particular a number of substances are carcinogenic, whilst others are harmful to the skin or respiratory system.

A second set of risk factors arises from particular features of the work environment, particularly long and anti-social working hours. Because of the need to provide a continuous service, hospitals use a wide variety of shift patterns and these cover the majority of nursing staff. In addition to working shift patterns, a smaller proportion of nurses work permanent night shifts estimated by the European Foundation as 10% of hospital workers in France, 13% in Britain and 38% in Germany. Although in countries such as France there has been a reduction in the number of working hours to 35 per week when working at night, there is scepticism about the ability of hospitals to honour this agreement as the Ministry of Health has instructed hospitals to bring about these reductions without creating new posts.

Working hours

The difficulties associated with anti-social work hours can be exacerbated by the intensification of work and long working hours. Although in most countries a standard working week for health service staff comprises between 35-39 hours per week (for details see ILO, 1992a) these figures do not reflect the actual hours worked which vary according to occupation and grade. There are reasons to believe that the intensity of work is increasing for health services personnel. First, evidence cited in Chapter 1 (figure 1) indicates that the length of patient stay in hospitals is reducing and more procedures are being carried out on a day case basis. This implies that patients are sicker and more dependent when in hospital which places additional pressure on staff. Second, in most countries staff shortages exist. This arises from a combination of supply side shortages and funding difficulties in which posts remain unfilled or are reduced, intensifying the work of those staff that remain in post.

In Britain, annual surveys of qualified nurses indicate that workloads have increased, the number of hours of unrewarded overtime have gone up and at the same time staff numbers are falling (Seccombe and Patch, 1995). This led the Review Body to conclude:

However, the parties' evidence suggests that while different methods of working, new technology, etc., were leading to greater productivity, staff workloads were also increasing. In our own visits, staff said that they were caring for more patients with fewer staff; that many staff had to cover absences with no extra resource; and that there was often an unnecessarily long gap between a post becoming vacant and it being filled. There were concerns that quality of treatment was suffering and a fear that future pay awards might be financed by reducing manpower. (Nurses' Pay Review Body, 1996: para 63).

A similar picture emerges for junior medical staff. Although hours of work have been reduced (see below) the British Medical Association (BMA) concludes:

The BMA welcomes the considerable progress that has been made in reducing the hours which junior doctors are contracted to work. Unfortunately one of the effects of that reduction is the increase in the intensity of work both during the day and out of hours. This increase in work intensity, for many juniors, mitigated against any improvement in their working life (BMA, 1996).

One consequence is rising levels of stress-related illness amongst health service staff (EFILWC, 1995). In Britain, stress was a major concern of 71 per cent of the NHS safety representatives surveyed and stress appeared to be particularly prevalent within the "caring" services (Labour Research, 1996b).

Long working hours and heavy workloads contribute to workplace stress and ill health. Although overtime working is regulated in various ways, in many countries high levels of overtime are worked which may exceed statutory regulations. In Germany, the Union of Salaried Employees claims that the overtime worked by health care staff is equivalent to 20,000 extra full-time staff (ILO, 1992a). Junior medical staff are particularly vulnerable to working long periods of overtime. In Britain, after mounting concern about long hours worked by junior medical staff an agreement was concluded in 1991, "The New Deal", to reduce junior doctors hours initially to 83 hours a week and then to 72 hours a week. Although hours have been reduced, a BMA survey in November 1994 showed that 23% of junior doctors were contracted to work above 72 hours a week (the December 1994 target) and that 60% of doctors were working over their contracted hours, a situation that has continued susbsequently (BMA, 1996; Miller, 1995).

6. Conclusions

In the postwar period, health systems across Europe experienced rapid growth and the numbers employed within the health sector outstripped population growth in most countries. Employment relations shared many of the characteristics of public service employment: high levels of job security; national systems of pay determination; an underdeveloped management function; relatively high levels of union density and low levels of industrial action. This situation started to alter in the 1970s. A series of oil price rises were symptomatic of the upheavals that were engulfing Western European economies as international competition intensified and growth stagnated. It was not long before this harsher economic climate jeopardized the consensus about the contribution of the welfare state to economic growth and social solidarity. These concerns have led policy-makers to call for sharp reductions in public sector spending, particularly for labour intensive services such as health care, which have continually eluded attempts to curb costs.

In the 1990s it has become a truism to recognize that most countries are trying to reform their health systems to contain costs (WHO, 1996c; Altenstetter and Bjorkman, 1997), but as this report has illustrated there are variations between countries in the reform strategies pursued and in the impact that these measures are having on staff. In the burgeoning literature on health reform it is conspicuous how little attention is given to the impact of these policies on the workforce. This is a serious omission which may reflect the fiscal concerns and policy preoccupations of governments and the health economists that advise them. Yet, despite variations between countries it is indisputable that in a labour-intensive industry like health care it is employees that have been most directly effected by restructuring initiatives and are confronted with a range of conflicting pressures. The expectations of patients are increasing for high quality services as are the demands by governments for improved cost effectiveness. This has led managers to question the working practices and professional autonomy of health care staff.

The impact on employees has been predominantly negative, although there are significant variations between and within countries in the impact on the workforce. Britain is at one end of a policy spectrum, adopting radical changes in the financing and organization of health care and embracing forms of privatization. Health service employees have been confronted with continuous restructuring as a result of market-style reforms and have experienced work intensification, more precarious forms of employment status and job losses. In many other countries some of these outcomes are occurring and as the pace of restructuring intensifies these effects will become more widespread.

Health care staff have been quick to respond to these threats to existing working conditions. Industrial action has been threatened by health sector staff in all four countries. In Britain, disenchantment with NHS reforms and government insistence that trust managers engage in local pay bargaining led a number of professional unions, notably the Royal College of Nurses, to secure withdrawal of their rules forbidding industrial action. Localized industrial action has occurred within individual trusts in response to specific redundancy and privatization initiatives. During 1996 and 1997 in France and Germany medical staff have been opposing budgetary constraints and have united to combat health care rationing. In Sweden, severe cost reductions have led to industrial action, particularly amongst nursing staff.

These actions have been essentially defensive as trade unions have attempted to limit the impact on their membership of budgetary restrictions. In a number of countries particularly France and Italy the official public service trade unions have been insufficiently sensitive to the demands of their members or potential members and autonomous organizations have sprung up, galvanizing nursing and medical staff resentment at deteriorating working conditions and the erosion of pay differentials. These developments have posed additional challenges to trade unions attempting to address the fragmentation of bargaining structures within the public services. Although devolved pay bargaining in countries such as Britain may encourage increased health service union membership, difficulties remain in encouraging members to participate in bargaining activity in a climate of job insecurity and confrontational industrial relations.

A final issue for trade unions is the impact of restructuring initiatives on inter- and intra-union relations. Market-style reforms and budgetary constraints establish "winners" and "losers" which can ferment conflict. This process was apparent in the dispute over local pay bargaining in the NHS with divisions between the Royal College of Nursing and Unison over how to combat government plans for local pay bargaining. In France, there were sharp divisions between FO and CFDT in their response to plans to restructure the social security system and more recently tensions have emerged between general practitioners and private specialists over government regulations which allow for more rapid increases in fees for GPs than specialists (de Bousingen, 1997).

Industrial action has delayed rather than overturned budgetary restrictions but they pose longer term challenges to the health sector. In an industry which has continually confronted shortages in recruiting and retaining professional staff, the public confrontations with nursing and medical staff may exacerbate shortages of professional staff. Health care restructuring has reinforced the low morale that prevails across much of the health sector with potentially damaging consequences for the quality of patient care. A balance needs to be struck between the necessary regulation and accountability of professional staff to ensure cost-effective health provision and the legitimate concerns of health professionals that their working conditions and professional autonomy is being undermined.

In the wake of these changes has come an erosion of the public service ethos as commercial values have been imported into the health sector through privatization and marketization initiatives. This process has unpredictable consequences with managers responding to market signals in a way which is inimical to the purposes of socially provided health care. As a recent WHO study commented:

The disadvantages of privatization are, however, considerable. Private management and invested capital require financial returns consistent with those obtainable in markets in other sectors of the economy. Pressures to achieve these returns can result in abandoning the social character of health services and intentionally discriminating against the sick and other vulnerable groups who require care (WHO, 1996c, p. 12).

Even the previous British Conservative government, a staunch advocate of privatization, had become less convinced about privatizing public services, acknowledging that competitive tendering has a negative effect on staff morale and had not produced the expected levels of savings (Cabinet Office, 1996).

Although, for governments, some of these policies may have proved a useful catalyst to alter pay and working practices there are doubts about the degree to which marketization and an increased role for the private sector will facilitate effective health service restructuring. Complex systems of managed competition as exist in Britain have increased administrative costs in the provision of health care and led to a massive increase in the number of managers and in their remuneration. In France, the role of the large private health care sector and the fragmented pattern of provision has contributed to the very high levels of health care expenditure (see table 1).

At a recent meeting of Health Ministers from Europe, hosted by the World Health Organization, a number of principles for health reform were agreed which included an emphasis on quality, ensuring sound financing and re-orientating human resources within health systems (WHO, 1996a). The evidence presented in this report suggest that much still needs to be done to translate these principles into practice and that a more likely outcome is that the pace of health system restructuring will intensify during the 1990s and many health care staff will be swept away in an accelerated process of restructuring.

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Updated by BR. Approved by OdVR. Last update: 28 September 2000.

BMA	British Medical Association
CFDT	Confédération française démocratique du Travail
CNAM	Caisse nationale d'assurance maladie
CREDES	Centre de recherche et documentation en économie de la Santé
CSMF	Confédération syndicale des Médecins de France
DAG	German Union of Salaried Employees
DBB	German Civil Servants' Union
DoH	Department of Health, United Kingdom
DHA	District Health Authority, United Kingdom
EFILWC	European Foundation for the Improvement of Living and Working Conditions
EIRR	European Industrial Relations Review
FO	Force ouvrière, France
GDP	Gross domestic product
GP	General practitioner
IDS	Income Data Services
IHF	International Hospital Federation
IHG	International Hospitals Group
ILO	International Labour Office
IRS	Industrial Relations Services
NAO	National Audit Office, United Kingdom
NHS	National Health Service, United Kingdom
OECD	Organisation for Economic Co-operation and Development
…TV	Public Services, Transport and Communications Union, Germany
PFI	Private Finance Initiative, United Kingdom
RHA	Regional Health Authority, United Kingdom
TUC	Trades Union Congress, United Kingdom
WTE	Whole time equivalent
WHO	World Health Organization


	1970	1980	1990	1992

USA	7.4	9.2	12.4	14.0
Japan	4.6	6.6	6.6	6.9
Germany	5.9	8.4	8.3	8.7
France	5.8	7.6	8.9	9.4
Italy	5.2	6.9	8.1	8.5
UK	4.5	5.8	6.2	7.1
Netherlands	6.0	8.0	8.2	8.6
Sweden	7.2	9.4	8.6	7.9
Average	5.8	7.7	8.4	8.9
OECD average¹	5.5	7.2	7.9	8.4
¹ Excluding Luxembourg, Portugal and Turkey Source: OECD, 1995, cited in Oxley and MacFarlan, 1995


	1984	1989	1994

Medical and dental¹	42 384	46 256	52 153
Nursing and midwifery²	397 488	405 281	353 128
General and senior managers	4 609		22 954
Administrative and clerical	110 304	116 842	134 610
Professional and technical	72 656	81 168	92 769
Ambulance	18 104	18 862	17 949
Works and maintenance	26 213	21 183	15 198
Ancillary	154 159	102 360	72 815
Other³			1 381
Directly employed staff	821 308	796 561	762 957
FHSA practitioners⁴	48 072	49 399	51 242
¹ Includes locum and agency staff. ² 1994 figures include agency and health visitor students but exclude Project 2000 training courses (32,000 in 1994). ³ In 1991 an "other" category was established, comprising mainly health care assistants, in 1993 a further change resulted in most of these being recategorized into other categories. ⁴ Mainly GPs and optical practitioners (headcount) all other figures in the table are Whole Time Equivalents (WTEs). Source: Health and personal social services statistics for England, 1996.


	Numbers employed		% growth
	1982	1992	% growth

Hospital	838 513	962 268	1.4
Public	638 966	712 718	1.1
Private	199 547	248 550	2.3
Private practice	244 600	321 795	2.8
Doctors	127 143	156 589	2.1
Dentists	58 325	72 799	2.2
Auxiliaries	59 132	92 407	4.6
Pharmaceuticals	168 669	199 815	1.7
Laboratories	33 580	43 284	2.6
Other	91 939	130 677	3.6
Total	1 377 301	1 657 839	1.9
Source: CREDES in International Healthcare News, June 1995, 13


	1987	1990	1992

Nurses	154 186	162 028	168 823
Administration	63 731	71 821	74 618
Technician	10 149	98 465	94 342
Physicians	58 671		71 753


Category	Number of employees		Change (%)

	Nov. 1992	Nov. 1996
Physicians	19 714	20 462	4
Nurses/laboratory technicians/midwives	67 766	66 362	--2
Qualified auxiliary nurses	44 981	38 264	--15
Auxiliary nurses	21 413	4 570	--79
Nursing personnel at mental hospitals	16 118	13 118	--19
Physiotherapists	4 930	5 023	2
Occupational therapists	3 864	3 501	--9
Others	19 224	16 112	--16
Total	198 010	167 412	--15
Source: Swedish Association of Health Officers, 1997.


	Per cent of total employment
	1970	1980	1990	1992

USA¹	3.7	5.3	6.2	--
Japan	1.4	--	2.4	2.4
Germany	2.9	4.5	--	5.5
France²	--	--	6.8	--
Italy	1.6	3.9	4.3	4.4
UK	3.1	4.7	4.6	4.8
Netherlands	0.4	6.4	6.4	6.6
Sweden	6.2	9.9	9.9	10.0
Average³	2.8	5.8	5.5	5.6
OECD average³	2.8	5.0	5.2	5.8
¹ Last available year is 1989. ² Last available year is 1987. ³ Where data is available. Source: OECD, 1995, cited in Oxley and MacFarlan, 1995

Labour and social dimensions of privatization and restructuring : Health care services

Restructuring and privatization of health care services: Selected cases in western Europe by Stephen Bach

Labour and social dimensions of privatization and restructuring :
Health care services

Restructuring and privatization of health care services: Selected cases in western Europe
by Stephen Bach