As a part of the major health and social services reform, the Finnish Government published on 9 May 2017 a proposal for new regulation (the “Freedom of Choice Act”), enabling patients to choose between healthcare providers from the private and public sectors.
The Government published a draft proposal on the freedom of choice in December 2016, after which the draft proposal was circulated for expert opinions in early spring 2017. Based on over 600 expert opinions, certain parts of the draft proposal were amended. Following our D&I Alert issued on 23 December 2016 on the draft proposal, in this D&I Alert we focus on some of the key amendments implemented in the government proposal.
The Proposal in Brief: The Patient Becomes the Customer
Currently, social and healthcare services are largely provided by municipalities. Regulatory obstacles have effectively kept the market share of private healthcare providers fairly low. The proposal aims to make the market more effective by enabling grand-scale competition on the market.
In the proposal, a social and healthcare county (“County”) procures the health and social care services from direct service providers (“suoran valinnan palvelun tuottaja“) (i.e., service providers offering services with the same broad scope as the current public health and social care centers) by paying a fee based on the age, location and health conditions of the persons under the direct service provider’s primary responsibility.
The customer may choose, for one year at a time, which direct service provider to use, paying the same basic fee regardless of the service provider used. Furthermore, some social and healthcare services are made available through vouchers or a personal budget. The vouchers effectively extend the customer’s freedom to choose which service provider to use.
Amendments from the Draft Proposal
Based on expert opinions certain amendments were made to the draft Freedom of Choice Act, comprising in particular the following:
- the direct service providers and the Counties shall offer consultation, assessment and coordination services;
- a direct service provider shall provide a minimum of 60 % of its services by using its own staff, i.e., without using subcontractors, and provide security for protection against insolvency;
- the criteria for the remuneration paid to direct service providers were amended to include the customer’s need for services; and
- the timetable for the implementation of the new rules was specified.
Possible Implications for the Private Sector
The private sector currently holds a 25 % share of the social and healthcare market. The new regulation enables new business opportunities due to e.g.:
- private and public service providers competing for the same customers in a situation where the private sector is more used to competition than the public sector;
- small and midsized private service providers are expected to participate on the market by providing their services in exchange for vouchers or customers’ personal budgets;
- private service providers being able to offer services without taking part in tenders due to a new notification system introduced in the proposal; and
- private service providers being able to use their expertise in customer service and cost efficiency to win over patients from other service providers.
The health and social care centers run by the Counties will mostly be challenged by large service providers offering their services directly to the Counties. The market for providing direct services is completely new, which could allow new entrants to gain a significant market share in a short period of time and existing private sector actors to strengthen their positions.
The Government has expressed a strong will to carry out the reform with a tight schedule. According to the schedule, the reform should be handled by the Parliament prior to the summer break of 2017.
Should the proposal be approved, it would come into effect in two stages. From the entry into force on 1 January 2019 (the Counties may opt for a transfer period) until the end of 2021, the focus will be on basic level services. Thereafter, the scope will be widened, and finally in the beginning of year 2023 the legislation would be in full effect.
We at Dittmar & Indrenius are happy to discuss any questions you may have regarding the Finnish health and social services reform and its expected implications.