Coordination through contracting

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Coordination through contracting: Experience with the Estonian out-of-hospital emergency medicine a

a

Külli Sarapuu & Veiko Lember a

Ragnar Nurkse School of Innovation and Governance, Tallinn University of Technology, Tallinn, Estonia Published online: 07 Apr 2015.

Click for updates To cite this article: Külli Sarapuu & Veiko Lember (2015): Coordination through contracting: Experience with the Estonian out-of-hospital emergency medicine, Public Management Review, DOI: 10.1080/14719037.2015.1029350 To link to this article: http://dx.doi.org/10.1080/14719037.2015.1029350

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Public Management Review, 2015 http://dx.doi.org/10.1080/14719037.2015.1029350


Abstract The article examines the effects of markettype contracting on the capacity of the government to integrate public service stakeholders and to assure coherence in service provision. The study focuses on the case of the Estonian out-of-hospital emergency medical care and analyses it through an analytical framework, concentrating on basic coordination mechanisms, coordination resources and their application in a specific policy field. It is found that effective market-based coordination presumes longterm learning and the use of various coordination resources that go beyond simple bargaining. In addition, contracting for service delivery has a significant influence on the capacity of the government to coordinate both policy-making and the interlinkages of different policies.

Key words Market-based coordination, contracting, coordination capacity, public service, out-ofhospital emergency medicine

COORDINATION THROUGH CONTRACTING Experience with the Estonian out-of-hospital emergency medicine Külli Sarapuu and Veiko Lember Külli Sarapuu Ragnar Nurkse School of Innovation and Governance Tallinn University of Technology Tallinn Estonia E-mail: [email protected] Veiko Lember Ragnar Nurkse School of Innovation and Governance Tallinn University of Technology Tallinn Estonia E-mail: [email protected]

© 2015 Taylor & Francis

2 Public Management Review


INTRODUCTION ‘Coordination’ has become a central issue in contemporary public management discourse. International engagement with different ‘whole-of-government’ reform endeavours (see, e.g., 6, P 2004; Bogdanor 2005; Lægreid et al. 2014) reflects the need to cope with increasingly complex societal problems and to address the structural fragmentation of administrative systems. Within this discourse, a lot of attention has been paid to network-type collaboration as a new paradigm for enhancing public sector integration (cf. Keast, Mandell, and Agranoff 2014; Osborne 2010). The discussion on the market as a basic coordination mechanism and on contracting as its key instrument has been far more modest. Although the idea of improving the provision of public service through market-type incentives has had a great impact on the way of delivering public services, there has been little systematic debate on contracting from the perspective of the capacity of the government to integrate different public service stakeholders and to assure coherence in service provision. Academic attention paid so far to the delivery of public services through contracts (e.g., Romzek and Johnston 2002; Brown, Potoski, and van Slyke 2006; van Slyke 2003; Lember and Kriz 2010) can predominantly be characterized by a narrow focus on the organizational aspects of contracting. The research has mostly concentrated on the technical elements relevant for the successful performance of contracts, but has paid only limited attention to the relationship of contracts with the governance system in which they are situated and the government’s need to ensure that its different public policies are in harmony with one other (cf. Johnston and Romzek 2008, on social services; Klijn 2002; Kettl 2010, on general issues). Consequently, there is a need for a refined understanding on the implications of contracting from the angle of public sector coordination. The article at hand focuses on contracting from the perspective of the coordination capacity of the government. The question guiding the study is ‘How does contracting for service delivery affect the government’s capacity to coordinate different actors engaged in designing and implementing the policy?’ In order to answer the question, the case of the Estonian out-ofhospital emergency medicine (EMS) is analysed. As a public service embedded in a complex health care system and delivered through different contracting arrangements since the introduction of major market-type health care reforms in the 1990s, the Estonian EMS has a potential to offer valuable insights into the coordination discourse. The article is structured as follows. In the next section, the analytical framework for the study is built. It discusses the concept of coordination, analyses contracting as a specific coordination instrument and examines the characteristics of EMS as a policy issue. Next, the methodology of the study and the case of the Estonian EMS are presented. Finally, the evolvement of the Estonian EMS system is analysed and the effects of market-type contracting on the capacity of the government to integrate service stakeholders and to assure coherence in service provision are summarized.

Sarapuu & Lember: Coordination through contracting 3

THEORETICAL FRAMEWORK


Public sector coordination Coordination can be analysed both as a process of binding the actions of different actors together and as an outcome of that process (Bouckaert, Peters, and Verhoest 2010). From the perspective of outcome, coordination can be defined as ‘an end-state in which the policies and programs of government are characterized by minimal redundancy, incoherence and lacunae’ (Peters 1998, 296). Coordination as a process, on the other hand, becomes manifest in ‘instruments and mechanisms that aim to enhance the voluntary or forced alignment of tasks and efforts of organisations within the public sector’ (Bouckaert, Peters, and Verhoest 2010, 16). In other words, coordination is about the harmonization of the duties and actions of different actors in order to achieve maximum synchronization of public policies and their implementation. Although subjects related to coordination have been discussed widely in academic literature, it does not provide a ready-made template for the analysis of specific coordination ‘instruments’ – ‘activities or structures created to bring about coordination’ (Bouckaert, Peters, and Verhoest 2010, 50). In order to build an analytical framework for examining contracting as a coordination instrument, the article relies on three key issues that emerge from the coordination literature. The issues that need to be addressed in order to understand the characteristics of a specific instrument and its functioning are: (1) basic coordination mechanisms underlying the instrument, (2) resources available for making the instrument work and (3) the nature of the policy field where the instrument is supposed to work. To begin with, there are three basic types of coordination ‘mechanisms’ recognized, which rely on different core processes for achieving coordination. These basic types are hierarchy, market and network (Bouckaert, Peters, and Verhoest 2010; Thompson et al. 1991; but see Peters 2003). ● ● ●

For hierarchy, the central pattern of interaction is authority. Coordination is achieved through administrative orders, rules and planning on the one hand, and dominance as the basis of the control system on the other. The market as a coordination mechanism relies on exchanges between actors, with bargaining and competition as basic processes. The activities of individual actors are coordinated by the price mechanism, incentives and self-interest. Network-type coordination becomes manifest mostly in the form of cooperation between actors who acknowledge their reciprocal interdependence and responsibilities. Networks typically build on common interests, values and trust.

Although pure types in theory, these basic mechanisms combine in practice in different ways and individual coordination instruments normally rely on more than one basic



mechanism. At the same time, individual coordination instruments usually still have a dominant logic that binds them more or less strongly to one mechanism or another. Accordingly, contracts are commonly regarded as the core instrument of market-type coordination. Further, in order to enforce specific coordination instruments, governments can rely on different resources. Peters (2003, 7–8) lists six such resources or ‘fundamental political processes’: authority, power, information, bargaining, mutual co-optation and norms. As mutual co-optation can be understood as a specific form of bargaining (ibid.), it is omitted here. Consequently, the basic resources that underlie the coordination capacity of the government can be described as follows: ● ● ● ● ●

Authority implies the legitimacy of the government to express its expectations towards actors and their behaviour. Power indicates the ability of the government to enforce its expectations through control over the legislation, financial resources or coercion. Information entails spreading or making available information so that actors could make an informed decision in order to adapt their behaviour. Bargaining implies exchange between relatively equal actors who each have something to bring to the trading process. Norms help legitimize certain behaviours and actions through making them meaningful. Among them, the norm of trust is most emphasized in the literature.

Although basic coordination mechanisms (hierarchy, market and network) can draw on more than one resource, the relationship between them is normally of varying strength. Market as a basic mechanism for contracting is expected to first and foremost rely on bargaining as a central process for achieving coordination. Finally, the characteristics of a specific policy problem in the centre of coordination activities need to be taken into account, as the nature of the problem can support or inhibit the use of specific coordination mechanisms or resources. The more complex problems are, the more challenges they pose from the perspective of coordination. However, the notion of ‘complexity’ has been conceptualized in many different ways (see, e.g., Christensen and Lægreid 2011; Klijn 2002; Peters 2003). One way of characterizing public policy problems in order to understand how difficult it is to coordinate them is to look at three dimensions (Head 2008, 103) – their complexity of elements, subsystems and interdependencies; their uncertainty in relation to risks, consequences of action and changing patterns; and their divergence and fragmentation in viewpoints, values and strategic intentions. The greater the complexity, the uncertainty and the divergence of policy issues, the more ‘wicked’ the problems are (see also Rittel and Webber 1973). Increasing wickedness is commonly associated with growing barriers in terms of coordination.



Contracting as a coordination instrument The mechanisms, resources and characteristics of the policy field create a framework for dissecting contracting as a coordination instrument. ‘Contracts specify the terms of agreement between two parties and represent the transaction or work to be done’ (Schepker et al. 2014, 194). They denote a relationship between two relatively equal partners. The idea of using contracts for coordinating the provision of public service largely builds on neoclassical economics (agency theory and new institutional economics), which emphasizes the use of contractual incentives and safeguards so that coordination could occur in a self-reinforcing manner (Bouckaert, Peters, and Verhoest 2010; Frances et al. 1991). According to these theoretical premises, competition, specification and enforcement tools should create incentives that align the performance of policy actors and ensure maximum value-for-money for the government and the success of the programme (Lowndes and Skelcher 1998). However, as noted by Exworthy, Powell, and Mohan (1999), markets in the public sector seldom occur in pure form and the ideal-type characterizations of policy fields as market-, hierarchy- or network-kind fail to recognize the real-life political and organizational complexities. Similarly, contracting, although it epitomizes market-type coordination, seldom takes an absolute form and mostly appears in some sort of combination with network and hierarchy-type coordination elements. This is recognized also in the general literature on contracting, which differentiates between classical contracts and relational contracts (Alford and O’Flynn 2012; Bradach and Eccles 1989; Williamson 1985). While classical contracting relies on the ex ante creation of complete playing rules, relational contracting combines market incentives with reciprocal trust, shared values and relational norms (Granovetter 1985). Although exposing contracting parties to the risk of misbehaviour, the advantage of relational contracting is its greater flexibility in the context of uncertainty, more flexible exchange of information and easier problem solving (Schepker et al. 2014). The need to assure the execution of contracts and to deal with uncertainties of the environment at the same time means that in practice, contractual relations usually work as a combination of market incentives, network-type cooperation and some hierarchical elements. Consequently, in terms of the resources engaged in the coordination process, contracting does not rely on bargaining as a central process of market-type coordination alone, but also makes important use of other resources – authority, information, power and norms (see Yang, Hsieh, and Li 2009; Fernandez 2009). Nevertheless, the enforcement of a market-type system of public service provision through contracts means that other resources, besides bargaining, can be used only to a limited extent. In respect of the coordination capacity of the government, it is important to bear in mind that contracting necessarily presumes some autonomy of action on behalf of service providers and limited possibilities for aligning actors through authority or norms (Bouckaert, Peters, and Verhoest 2010; Thompson et al. 1991). The underlying logic



of a market-oriented regime is that it induces actors to prefer their independence and to collaborate only when it is estimated that it will be economically beneficial (Lowndes and Skelcher 1998). Thus, although the coordination of public service delivery through contracting relies on bargaining as the core resource and requires information and power from the government in order to enforce contracts, it can be expected to set limits to coordination through authority and norms. Lastly, the use of different resources also depends on the policy field and the specific public service at hand. The more complex the problems are, the more difficult it is to coordinate them through bargaining. Furthermore, if the ‘transaction costs’ of contracting (e.g., the need to deal with uncertainties or to collect information for negotiating and enforcing contracts) are high, there is a weak case for contracting them out (Frances et al. 1991, 13–14; Schepker et al. 2014). In order to benefit from using market incentives in the delivery of public service, governments need to make sure that there is a clear purchaser/provider split, the competition is real, sufficient information is available for all market participants and there are no incentives for ‘cream skimming’ (i.e., preferring more profitable users) (Powell 2003, 729; Van Slyke 2003). Even though these qualifying conditions make many public services unsuitable for contracting, there are a number of public services that have been estimated to benefit from the market regime and have been contracted out in the last decades. Emergency medical care Emergency medical care is a special type of public service that is delivered to people either in hospitals or out-of-hospital (Arnold et al. 2001). Out-of-hospital EMS refers to medical care that is provided at the scene of emergency (e.g., in case of accidents) and on the way to the medical facility (David and Chiang 2009, 313). In terms of service provision models, governments have introduced varying delivery mechanisms for out-of-hospital EMS, which range from direct provision by government to privatized systems, where the full service or some of its components (e.g., medical transportation) are contracted out to more or less autonomous service providers. Although a medical service by nature, EMS is frequently delivered in cooperation with rescue administrations (e.g., by fire departments) and can therefore be characterized as a public service lying on the borderline of health care and internal security. As a medical service, out-of-hospital EMS is closely linked to the other elements of the medical system. Together with general practitioners and hospitals’ EMS departments, EMS constitutes a gateway to access medical care and, as such, has globally been under pressure from growing demand (Arnold and Della Corte 2003). The increasing need for EMS has been associated with changing societal structures (e.g., ageing), the transformation in the epidemiology of diseases and injuries and societal expectations towards the service. The finding that a substantial share of EMS patients do not actually need emergency care (as their condition falls within the sphere of general practitioners



or social services) has prompted discussions on the nature of the service and its delivery arrangements (see Arnold and Della Corte 2003; Lee, Schuur, and Zink 2013; Van Geloven and Obertop 2003; Victor et al. 1999). Nevertheless, international comparative research on EMS is still modest and the multitude of variations and combinations of factors involved in EMS has inhibited the development of universal indicators for evaluating the service (Arnold et al. 2001; MacFarlane and Benn 2003). In order to analyse an EMS system from the perspective of coordination, the respective delivery structure has to be examined and the general indicators of the quality of EMS have to be embraced. Combined, these two sets of indicators suggest that a contracting arrangement should help the government align the behaviour of EMS providers, so as to assure a uniform medical response in line with the urgency of incidents, which is delivered by people with necessary qualifications and technological support, in a cost-effective system that contributes to sound public health, does not discriminate patients based on their financial possibilities and leads to high patient satisfaction (see WHO 2000, 49–72; MacFarlane and Benn 2003; David and Chiang 2009). The enforcement of such an arrangement requires a clear purchaser/provider split from the government and a good possession of coordination resources (especially bargaining, power and information) in order to execute, implement and monitor contracts and to safeguard against the potential misbehaviour of service providers. THE CASE OF CONTRACTING EMS IN ESTONIA Description of the case In Estonia, out-of-hospital EMS has been defined as ‘out-patient health services for the initial diagnosis and treatment of life-threatening diseases, injuries and intoxication and, if necessary, for the transportation of persons requiring care to a hospital’ (article 16, The Health Services Organisation Act). The Estonian EMS can be characterized as stemming from the ‘specialty model’ of EMS, which is grounded on emergency physicians who are ready to provide medical care to people with an acute phase of any disease or injury (see Arnold and Della Corte 2003, 182). Out-of-hospital EMS is a distinct element of the Estonian health system with a separate financing model and separate provider organizations. The functions of purchasing and delivery are clearly separated and the service is provided on a contractual basis by independent service providers. The Ministry of Social Affairs acts as the agent of users, selects the providers and sets conditions for their operation. The requests for EMS are answered and processed by the Emergency Response Centre (ERC), which is a government agency under the Ministry of Internal Affairs. The Centre processes different kinds of emergency calls (fires, traffic accidents, etc.) and coordinates response. From the perspective of EMS provision, such a division of functions means that only the delivery of medical service is contracted out and the



function of granting access to the service (i.e., ‘rationing’) is delegated to ERC, which acts as the gatekeeper in the system. The contracts between the government and the providers specify the area of service (a provider has a monopoly in the specified area) and regulate the nature and the quality standards of the service (location, type and number of crews, response time, etc.). The Estonian EMS is embedded into a wider health care system that relies on predominantly market-based coordination. The Health Services Organisation Act establishes the general regulatory framework for the different branches of the health care system – primary (‘family medicine’), secondary and emergency care. Although there are a number of diverse organizations operating in the field, there are only a few direct subordination relationships, and the health care system functions based on the regulation and contractual relations (Jesse 2008). Health care providers mostly operate as private legal persons, owned by the state, local governments or the private sector. Methodology of the study The analysis is based on a two-phase research project on the Estonian EMS system. As an initial step, a study on the instrument of contracting and its evolvement was carried out from 2004 to 2005 by one of the authors (see Lember 2006). The study drew on document analysis and interviews with key stakeholders. As the second step, an additional round of data collection was carried out by the authors from 2012 to 2014 within the EU FP7 COCOPS1 research project in order to cover the developments until January 2014, to address the gaps in the existing knowledge and to acquire additional information from the perspective of coordination. Overall, the information relied upon in the article was drawn from a number of legislative and administrative documents, including both external and internal audit reports, state budgets and service contracts (all contracts in 2005 and 2014 were examined), the websites of government agencies and public databases (primarily the NIHDD (2015)), as well as discussions in public media (leading daily newspapers and information portals). The two rounds of semi-structured interviews (ten altogether, usually lasting from 1.5 to 2 hours) aimed to cover key stakeholders (heads of organizations) in the contracting process, both public officials (in the field of health and ERC) and the representatives of EMS providers (the Union of Estonian Medical Emergency (UEME) as well as individual providers). The interview protocol addressed four key topics: the key events in the development of the EMS system; key actors and their agendas; resources engaged in governing the system; and the performance of the system. The main limitations of the information gathered were related to the unsystematic nature of public documentation (especially in earlier years) and the limited availability of reliable statistical data (only the last years of the period were sufficiently covered).


The analysis of the Estonian out-of-hospital EMS proceeds in two steps. First, the application of the contracting instrument is described in a longitudinal perspective (from 1991 to 2014) with the help of the theoretical concepts presented above (the characteristics of the policy field, coordination mechanisms and resources used). Second, the implications of coordination through contract-based regime are examined.


Contracting of EMS in Estonia from 1991 to 2014 Since Estonia regained its independence in 1991, EMS has been provided through different contracting arrangements. Based on the research performed, three phases of development can be distinguished, which run from the chaotic era (from 1991 to 2001) to the relational contracting era (from 2001 to 2013) and over to the competitive contracting era (2013 and onwards), as indicated in Table 1 below. The table summarizes the phases and their key characteristics in terms of coordination. Phase I: chaotic era The first phase of EMS development began in 1991 and lasted until the government adopted a complete package of new regulations in 2001. This phase may be characterized as a chaotic era with limited coordination. EMS provision was underregulated and lacked clear policy. The administration of the system was split among fifteen counties (regional units of the central government), each managing the service in line with its own particular logic and principles (Riigikontroll 1999). The county governors, lacking any guidance framework for conducting the process, were responsible for the contracting with EMS providers (forty-five providers with eight-seven crews in 1999; at that time they were all public organizations). In the majority of these contracts, the terms and conditions for the delivery of service were specified vaguely, and in some cases the service was delivered without any written agreement at all (EKL 2000). Although the Ministry of Social Affairs was responsible Table 1: Phases of EMS development in Estonia Phase

Period

Characteristics of coordination

Chaotic era

1991–2001

Loose local networks coordinated by county governors through

Relational

2001–2013

Emerging EMS market coordinated by the Ministry of Social

norms, authority and bargaining. contracting era

Affairs and the Health Care Board through the increasing use of power and bargaining together with norm-based

Competitive contracting era

2013-

cooperation. Quasi-market coordinated by the Health Board through bargaining, power and information.



for the overall coordination of the system, in practice, its role was limited to making decisions with regard to the allocation of resources and later on also to licensing. EMS was financed by several central government sources, but as allocations fell short of covering its costs, owners of the EMS crews (local governments and also state-owned and local government-owned hospitals) voluntarily covered a certain part of associated costs. The requests for EMS were processed in a number of call centres dispersed all over the country using different manuals (in 1991, there were fortytwo centres; the ERC Webpage 2015). As expressed by the interviewees, both from the purchasing and provision sides, at that time there were several different EMS systems in operation in the territory of Estonia, and the contracting instrument could not ensure any coordination in terms of the nature and quality of the service. The service was based on local policy networks that functioned on the basis of reciprocity, bargaining and the authority of county governors. The Ministry had the capacity to align neither the county governors nor service providers. Phase II: relational contracting era The beginning of the second era was marked by the adoption of the new Health Services Organisation Act in 2001, which introduced an overwhelming reform of the health care system. In the field of emergency care, the general idea was to replace the existing fragmented and inefficient system with fully functional health care quasimarkets, where the (semi-) privatized EMS organizations would compete with private providers for government-awarded contracts. The newly established Health Care Board assumed a central coordinating position in the EMS system, whereas county governors were deprived of their role. An open bidding for EMS provision was announced in March 2003, but was recalled in June 2004 after several postponements. The course of action revealed that the government lacked finances and information for a successful bargaining within the contracting process. The government did not have any analytical basis for deciding on the numbers, locations and types of crews needed and their maintenance costs (see Lember and Sarapuu 2014). As a result, the existing contracts with licensed service providers were extended for up to 5 years. By 2004, the number of EMS providers had decreased to twenty-six (Riigikontroll 2004), and one fully private provider had entered the emerging EMS market. The experiment with open bidding led to considerable policy learning and had a lasting impact on the EMS system. In addition to revealing the low administrative and policy capacity of the Health Care Board, it brought about the introduction of a government-imposed cost model in 2006. The monitoring of service provision was linked to input-based aspects (the availability of cars, equipment standards, service and personnel standards, etc.). The financing of EMS improved, partly due to the rapid economic growth during the period, and partly also because of the cost model that made the position of EMS stronger in the state budget process (from 1998 to 2008, the EMS budget grew by 4.15 times).



During the second period, the introduction of a clear purchaser/provider split, increased budget, the growing capacity of the Board and the institutionalization of standard input-related contracts allowed the government to introduce much stronger incentives for aligning provider behaviour. In this period, a central coordination regime for EMS evolved through the employment of hierarchical power along with the increasing role for bargaining. By and large, the EMS market was established. However, in preparing for the regulatory and administrative changes and implementing them in practice, the providers still performed an important role as a source of information and expertise. The norm-based interaction between the purchaser and the providers refers to a significant role of network as a coordination mechanism and makes it thus appropriate to label the period as an era of ‘relational contracting’.

Phase III: competitive contracting era In 2013, the Health Board (the successor agency to the Health Care Board) announced a competitive bidding for the provision of EMS in Estonia. This marked the end of the second period and the beginning of the third phase in the development of EMS. By launching and implementing the competitive contracting process, the Health Board aimed to reorganize the delivery of EMS. Official explanations referred to the changes in the distribution of population, transformed legislative framework and the developments in the policy field of health in general (see, e.g., Riigikogu 2014). The key aim of the reorganization was to consolidate service providers and to increase their service delivery capacities in order to ensure the continuous operation of EMS as a ‘vital service’, according to the 2009 Emergency Act. With the enforcement of the new arrangement for the delivery of EMS, the number of service providers diminished from twenty-four to twelve and the number of service areas from fifty-four to ten. The number of service crews increased from 90 to 117. The changes officially took effect on 1 January 2014. The competitive contracting regime was, in principle, launched in 2013 and this made the market the dominant coordination mechanism for the state in steering the EMS system. The enforcement of the market regime presumed reliance on hierarchy and power as a coordination resource and left considerably less room for network and norm-based cooperation.

CONTRACTING AS A COORDINATION INSTRUMENT Coordination refers to the harmonization of the duties and actions of different actors in order to achieve a maximum synchronization of public policies and their implementation. In order to understand how contracting as a coordination instrument has worked in the Estonian EMS and how the findings relate to the coordination capacity of the government, we have to look both at the results of the government’s coordination



efforts and at the mechanisms and resources that have been used. In sum, the three phases of development presented above indicate that the contracting arrangement has allowed the Estonian Government to increasingly align EMS providers, and the delivery of service has become more harmonized over time. EMS has enjoyed a continuously high level of public support – in between 2008 and 2013, 85 per cent to 91 per cent of people expressed their satisfaction with the EMS service received (see SP 2013). Although there have been some minor scandals, reports on mistreatment and criticism towards the system, there is no serious evidence to suggest major failures or systemic dysfunctions in the Estonian EMS system. However, the ability of contracting to bring about coherence in service delivery has depended on the institutionalization of clear purchaser/provider split and the government’s possession of specific coordination resources. The integration of the EMS system has improved due to the fact that the capacities of the government in terms of selecting providers, executing, monitoring and enforcing contracts, and in using financial incentives have all improved over the last two decades. The contracts have become very detailed (as expressed by a provider: ‘our contracts have grown from half-a-page to sixty pages’), and the government has been able to enhance its bargaining power by considerably increasing the budget of EMS (3.3 times, from EUR 9.3 million to EUR 31.1 million between 2001 and 2014). The evolvement of the competitive regime has depended on the government’s implementation of its hierarchical power in setting the playing rules on the emerging EMS market. The progress towards greater coherence in the provision of service has also been supported by structural consolidation in the field of internal security, where the introduction of the 112 common emergency number, the mergers of different emergency call centres and the increasing standardization (all hierarchybased changes) have brought along more integrated approach to the processing of emergency calls. Overall, the coordination of EMS provision has become more intensive over the years and the reliance on market and hierarchical power has increased. At the same time, the strengthening of contracting regime in service provision has been accompanied by the changes in the EMS policy-making. Above all, increasing coordination through power and bargaining has left less room for norm-based cooperation. In the 1990s and the 2000s, network-type elements played a central role in the designing of the EMS policy. The UEME had a crucial role as a source of EMS expertise and there was a high level of reciprocal interdependence between the government and the service providers. As the government’s capacity in steering the system was weak, it continuously relied on the information and policy ideas presented by the providers. The UEME led the drafting of the first regulations and the development strategy of EMS for 2000–2010. The government’s increasing ability to specify the characteristics of the provision of service through contracts has gradually restrained policy dialogue between the purchasing and the providing sides. However, the dialogue has been necessary for coping with the changes in the service environment and with the ensuing pressures to adjust the nature of EMS. The general budget constraints of the state have induced the government to search for more



cost-efficient health care solutions. In EMS, the originally physician-based service has gradually, although not entirely, turned into a nurse-based medical service. Although the State Audit Office drew attention to the unsustainability of relying on physician-based EMS crews already in 2004 (see Riigikontroll 2004), the government did not acknowledge publicly that the transition was an official policy goal, because the idea was unpopular and there was strong opposition from the UEME. In practice, the need to incentivize providers with sufficient financial resources, the increasing shortage of qualified physicians, the growing role of nurses in the medical system as a whole and the lower cost of nurse-based crews have brought about a shift from a purely medical system to a system with more paramedical elements. In between 1998 and 2013, the share of nursebased crews grew from 43 per cent to 70 per cent (NIHDD 2015). However, the developments required in the EMS policy in order to compensate the potential loss of quality in the provision of service (e.g., e-medicine solutions for supporting nurse-based crews with specialized medical know-how in hospitals) have not progressed as quickly as expected. Larger providers, in particular, claim that the development of the EMS system as a whole has slowed down (in the words of a provider, ‘all the good ideas for improving the quality of the service get stuck in the Board’). It has become increasingly obvious to the government that a functional contracting regime on its own is not sufficient enough to address all the issues related to the service, as EMS is closely related to the other elements of the health care and governance systems, and it is also shaped by societal trends and ‘co-production by consumers’ (Osborne, Radnor, and Nasi 2013). The divergent viewpoints of the EMS stakeholders have made it difficult to adapt the system. Although the contracting arrangement has induced the consolidation of the EMS policy field towards a smaller number of larger providers, its interdependencies with other elements of health care and internal security require the coordination of different coordination regimes. This is especially evident in the light of the need to address the growing demand for EMS. In 2012, there were 6 per cent more EMS visits performed than in 2004 (NIHDD 2015).2 While the share of ‘injuries’ prompting EMS requests has declined, the share of ‘illness’ calls has risen (from 82 per cent to 86 per cent of all calls from 2004 to 2012; NIHDD 2015). Although the main reason for patients to contact emergency care was, in their own estimation, ‘a serious illness’ (SP 2013), then according to the assessment of EMS physicians, a large share of the patients should have been treated by their family doctors or even social workers (interviews with providers; also Kiivet 2013; Kõrgvee 2013). These numbers indicate problems with access to primary care, which was rated as unsatisfactory (in 2013, 51 per cent of respondents to a regular quality survey rated it as bad; SP 2013).3 Family doctors have limited reception hours, the number of home visits declined (a notable 61 per cent less visits in 2012 than in 2004; NIHDD 2015), and waiting lines are longer than deemed acceptable by the patients. The surveys indicate that patients perceive EMS as a legitimate alternative for receiving health counselling in the evening, at night and over the weekend (SP 2013). The service is free



for people and there are no financial barriers to access it. Although the option for the settlement of accounts between EMS providers and family doctors has been provided for in the regulation, this has never been used. The EMS providers have seen strengthening the gatekeeping role of ERC as the main solution for addressing the problem (Kõrgvee 2013; interviews). From their perspective, the problem derives from the deficient capacity of ERC to properly process the requests because they have limited competence in health matters and vague manuals. However, according to the assessment of ERC, their procedures for processing the requests are effective and enable unsubstantiated calls to be differentiated from emergencies. As an agency oriented towards ensuring societal security, ERC is aware of the uncertainties associated with not sending EMS crews out in case of calls, and does not regard that its role is to resolve the problems of the health care system. One can observe how the divergence in ideas, values and risk perception reinforces the interdependency problems inherent in public services coordination. Also, all the key components of the Estonian health care (EMS, hospitals and family doctors) operate in their own contractual regimes managed by two different purchasers (the Health Board and the Health Insurance Fund). There are three different contracting arrangements in operation that coordinate the access of patients to the medical care, each following their own standard operating procedures and routines. Such a context has presented the government with a major coordination challenge and a need to counterbalance the side effects of market-based steering systems with a smart use of information, authority and norms. However, their potential in assuring coordination is downplayed by the dominant role of bargaining.

CONCLUSION Although contracting in itself is a long-standing practice, the extent of its use in delivering public services is new (Powell 2003, 726; Kettl 2010). Such a change in public sector governance creates new synergies and interactions of different steering instruments, which need to be studied and evaluated. The case of the Estonian EMS provides some valuable insights into this discussion. The analysis shows that it is relevant to look at contracting from the perspective of public sector coordination and there are more aspects related to the use of contracts than just the government’s capacity to execute and enforce them. First, from the perspective of coordination mechanisms and resources, the case study demonstrates that a contracting regime may appear in very different combinations of network, hierarchy and market mechanisms, depending on the amount of purchasers and providers in the system and the coordination resources that the purchasers use. The capacity of contracting to assure coherence in the provision of EMS has depended on the government’s ability and willingness to rely on a mix of specific coordination resources. With regard to the aim of establishing a quasi-market of ESM, the most critical



resources have been power, information and bargaining. Enforcement of the market as a dominant coordination mechanism has presumed substantial financial investments from the government, information and knowledge to create right incentives and the power to introduce market-like playing rules. Increasing ability to use these resources has resulted in the greater alignment of EMS providers. Importantly, this ability has not resulted from a one-off introduction of the contracting regime, but the coordination has been achieved only after longitudinal policy learning. Second, a great deal of the current research on contracting builds on the premise that policy implementation and policy design can be neatly separated. Such a perspective has not reflected on the impact of contracting on the capacity of governments to coordinate policy design. However, the two are closely interrelated in practice. The case of the Estonian EMS shows that the institutionalization of service provision through contracting has had a substantial impact on the EMS policy-making. A market-type incentive system has distanced the service providers from the purchaser, has reinforced the self-interested behaviour of the providers and diminished both their motivation and possibilities to contribute to the development of the system beyond fulfilling their contractual obligations. Coordination through bargaining and power has set limits to coordination through authority and norms and it has undermined network-type interactions necessary for adapting to the changes in the service environment. In other words, the increasing capacity to coordinate policy implementation through contracting has limited the range of instruments that are available for the government in coordinating policy-making. Third, within the public sector context, it is seldom possible to analyse a specific policy in isolation from other policies. Usually, there are some interlinkages and dependencies present that influence coordination. That is the reason why it has been argued that barriers to coordination may be particularly evident in the public sector (Bouckaert, Peters, and Verhoest 2010, 30–31). In the case of the Estonian EMS, the combination of various institutional routines, which coordinate access to medical care, has made it increasingly difficult to align the actions of stakeholders in order to deal with the systemic challenges. Coordination difficulties are not necessarily related to lacking ambition for harmonious action, but to the way the existing contracting regimes have evolved over time – through dynamic processes addressing specific service provision needs rather than the health care system as a whole. Although the increasing contracting capacity of the government has allowed more efficient health care providers to be established, it has simultaneously diminished the government’s ability to respond to the social changes and shifts in the demand for medical care. Consequently, it can be inferred that coordination through a wide-scale use of contracting places great demands on the government. The use of contracting for coordination requires a complex mix of resources in order to counterbalance the assumption of provider autonomy embedded in such a steering system and to align contracting arrangements with other coordination regimes that interact with them. In summary, the article demonstrates that coordination mechanisms and resources are useful concepts for examining coordination instruments and their functioning in



particular policy fields. With regard to contracting as a coordination instrument, the study confirms that contracts deserve more attention from the perspective of public sector coordination. In addition to highlighting the relevance of the capacity of the government to execute and enforce contracts, the analysis of the Estonian out-ofhospital EMS indicates that the contracting of service delivery has a significant impact on the capacities of the government to coordinate both stakeholders involved in policy design and the interdependencies of different policies. ACKNOWLEDGEMENTS The authors would like to thank colleagues who have commented on the earlier versions of the study and acknowledge valuable feedback from the two anonymous reviewers whose constructive criticism helped improve the article to a great extent.

DISCLOSURE STATEMENT No potential conflict of interest was reported by the authors.

FUNDING This study was supported by the European Union’s Seventh Framework Programme [grant number 266887] (Project COCOPS); the Estonian Ministry of Education and Research [grant number IUT 19-13]; the Estonian Science Foundation [grant number 9435], [grant number 9395].

NOTES 1 ‘Coordinating for Cohesion in the Public Sector of the Future – COCOPS’; see http://www.cocops.eu/. 2 The number of patients who turned directly to the emergency departments of hospitals also increased considerably – by 29 per cent in the period from 2006 to 2012 (NIHDD 2015). 3 At the same time, the majority of people are satisfied with the quality of family medicine (80 per cent in 2013; SP 2013).

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