2013-05-23 09:25:07
Sweden is leading the world in allowing private companies to run public
institutions
May 18th 2013 |From the print edition
SAINT GORAN S hospital is one of the glories of the Swedish welfare state. It
is also a laboratory for applying business principles to the public sector. The
hospital is run by a private company, Capio, which in turn is run by a
consortium of private-equity funds, including Nordic Capital and Apax Partners.
The doctors and nurses are Capio employees, answerable to a boss and a board.
Doctors talk enthusiastically about the Toyota model of production and
harnessing innovation to cut costs.
Welcome to health care in post-ideological Sweden. From the patient s point of
view, St Goran s is no different from any other public hospital. Treatment is
free, after a nominal charge which is universal in Sweden. St Goran s gets
nearly all its money from the state. But behind the scenes it has led a
revolution in the relationship between government and business. In the
mid-1990s St Goran s was slated for closure. Then, in 1999, the Stockholm
County Council struck a deal with Capio to take over the day-to-day operation
of the hospital. In 2006 Capio was taken over by a group of private-equity
firms led by Nordic Capital. Stockholm County Council recently extended Capio s
contract until 2021.
St Goran s is now a temple to lean management an idea that was pioneered by
Toyota in the 1950s and has since spread from carmaking to services and from
Japan to the rest of the world. Britta Wallgren, the hospital s chief
executive, says she never heard the term lean when she was at medical school
(she is an anaesthetist by training). Now she hears it all the time.
The hospital today is organised on the twin lean principles of flow and
quality . Doctors and nurses used to keep a professional distance from each
other. Now they work (and sit) together in teams. (Goran Ornung, a doctor,
likens the teams to workers in Formula One pit stops.) In the old days people
concentrated solely on their field of medical expertise. Now they are all
responsible for suggesting operational improvements as well.
One innovation involved buying a roll of yellow tape. Staff used to waste
precious time looking for defibrillator machines and the like. Then someone
suggested marking a spot on the floor with yellow tape and insisting that the
machines were always kept there. Other ideas are equally low-tech. Teams use a
series of magnetic dots to keep track of each patient s progress and which beds
are free. They discharge patients throughout the day rather than in one batch,
so that they can easily find a taxi.
St Goran s is the medical equivalent of a budget airline. There are four to six
patients to a room. The decor is institutional. Everything is done to maximise
throughput . The aim is to give taxpayers value for money. Hospitals should not
be in the hotel business, the argument goes. St Goran s has reduced waiting
times by increasing throughput. It has also reduced each patient s likelihood
of picking up an infection. However, scrimping on hotel services means that it
has to invest in preparing patients for admission and providing support after
they are released.
The hospital has helped to change the way Swedes receive health care. Ms
Wallgren likens it to a hare that sets the pace of a dog race. The hare can run
fast because its staff think of themselves as part of a team, and because
managers emphasise collective learning. But St Goran s is also a symptom of a
wider change.
Sweden has gone further than any other European country in embracing the
purchaser-provider split that is, in using government money to buy public
services from whichever providers, public or private, offer the best
combination of price and quality. Private firms provide 20% of public hospital
care in Sweden and 30% of public primary care. Both the public and private
sectors are obsessed with lean management; they realise that a high-cost
country such as Sweden must make the best use of its resources.
St Goran s also acts as a hare for Capio, one of Europe s largest health-care
companies, with 11,000 employees across the continent and 2.9m visits from
patients in 2012. Sweden is Capio s biggest market, accounting for 48.2% of its
sales (France comes second with 37.6%). The firm performs 10% of all Swedish
cataract operations, and much more besides. Capio thinks it can make huge
savings in other countries by transferring the lessons it has learned in
Sweden. The average length of a hospital stay in Sweden is 4.5 days, compared
with 5.2 days in France and 7.5 days in Germany. Sweden has 2.8 hospital beds
per 1,000 citizens. France has 6.6; Germany, 8.2. Yet Swedes live slightly
longer.
Capitalists under the bed
Spreading efficiency will not be easy, however. Europeans instinctively recoil
from private companies making money from health care. British placards protest
against modest reforms with pictures of fat cats helping the health minister to
disembowel a patient labelled NHS (National Health Service). Even in Sweden,
the mood has grown more hostile since some private-equity companies were
embroiled in scandals at nursing homes.
The public-health business is hardly alluring for investors, either.
Cash-strapped European governments are striking hard bargains. Leif Karnstrom,
a senior figure at Stockholm County Council, is excited about a new system of
outcome-based health care that allows him to claim his money back if providers
perform poorly. Most people in the private-equity business think there are
easier ways to make money than taking over bits of the state.
This is a pity. Private health-care companies have several advantages over
public organisations. They have more incentive to make services more efficient,
since they typically keep some of the savings. They are better at persuading
their employees to adopt new ideas. And they are better at spreading new ideas
across borders. Europe should be proud of its public-health services. But if it
wants them still to be affordable in the future, it should allow more private
companies into the mix.