Shared value in health: a system of incentives.

What is shared value?

Shared value is defined as policies and practices that enhance the competitiveness of companies while improving social and environmental conditions in the regions where they operate. It is a business strategy focused on companies creating measurable economic benefit by identifying and addressing social problems that intersect with their business.

Health systems in western democracies around the world face the same challenge: delivering broad access to health services while improving quality of care and controlling costs. The health sector exists to address a fundamental social need: the right to good health. We continue to live longer with a population that is ageing, with increasingly complex health needs, and placing greater overall demands on health services. Government strategies are attempting to deal with the fact that 50% of Australians live with at least one chronic condition. Despite a comparably good system, Australia lags many countries on health equity.

“The health sector has grown to 10 per cent of GDP and 13 per cent of total employment — making it the largest part of the Australian economy.”
-ANZ Health Economics Report

Considering these challenges, the lens of shared value reveals opportunities. Shared value is created where such challenges are met with unique sector/organisational assets and expertise to meet business and social needs. The opportunities available in the health sector work on two levels: (1) collective, sector based opportunities, and (2) individual provider opportunities.

Opportunities, naturally, are shaped by the major forces of change within the sector.

Forces for change.

1. Fragmentation of the sector.

Over the past few weeks, I’ve had some issues with my wisdom teeth. It’s been an interesting journey: I went to the dentist, the dentist sent me to get x-rays then referred me to a surgeon, the referral didn’t go through properly, the x-rays were lost, and meanwhile I was still in pain so I went to the GP, who referred me to a different surgeon, where I couldn’t get an appointment for six weeks… I was passed from one service provider to the next, and frustratingly slipped through the gaps. My experience is not uncommon.

Across the health continuum, there are many intersections between different organisations and doctors that disrupt the flow of the services for patients, as they try to jump the gaps. One organisation’s focus on the patient outcome is siloed only to the treatment they receive at that particular health service, and doesn’t take a holistic view of the patient experience. This leads to fragmentation across the sector, where patients can drop out of sight in service gaps and don’t receive necessary follow-up treatments. The cost of this on the health system is significant.

2. Increasing demand with a lack of transparency.

There is an increasing demand for hospital services in cities, particularly within growth corridors where health services have not been able to keep up with the pace of population growth. On top of this, higher rates of multimorbidity and an ageing population are compounding both the demand and the complexity of cases coming in.

It’s difficult for health services to manage this demand and complexity. There is a need for more effective distribution of demand, through better visibility over the quality of care, the capacity of health services, and the specialist assets within each service. Currently, the distribution of demand largely relies on doctor referral networks alongside catchment pools for public, and word-of-mouth consumer knowledge for private.

Improving the distribution of demand will require real competition between hospitals and between doctors. Ideally, this will mean that doctors can decide where their list goes (and patients can influence where they go) with visibility over whether the other end has the quality, capacity, and assets to provide the necessary service with greater efficiency and equivalent quality than their default choice. This will lessen the pressure on overburdened providers, whilst enhancing patient outcomes.

But, of course, competition is a double-edged sword.

3. Increasing innovation. Constant cost pressures.

The wider health sector is awash with innovations attracting local and international investment. But these innovations struggle to reach the hospital system, where it becomes difficult for health services to pay for and scale innovative solutions.

Sector funding rewards high volume operations, but not cost effective or high-quality service provision, which is where many of these innovations are aimed. If costs are the only measurement of success, half the picture remains invisible. Quality is not effectively measured and reported, reducing incentives to deliver high-quality care, and forcing innovation – and its promise of more agile operations – down the list of priorities.

This poses the question: how can a health service improve the quality of care in a system set up to incentivise volume of care?

Opportunities for Shared Value.

1. Address needs along the customer journey.

Recognising the interconnectivity and interdependence of the healthcare system is paramount, especially when seeking to improve patient outcomes. Mapping the patient journey within and at the boundaries of each service, can uncover the persons unmet needs, points of risk and points of greater reward.  What does this journey look like and how can the sector intervene at key points of tension or enhanced need, to improve the functioning of the system as a whole? This sector-level change can benefit from the collective impact model.

At an organisational level, this relies on improved communications before and after customers receive treatments to reduce the risks of relapse or readmission. A recent pilot program by HCF showed that a simple 15-minute phone call following hospital discharge reduced readmission rates by nearly one-third, keeping insurance premiums low, saving the cost of this on hospitals, and helping to ease demand.

2. Support and protect the value of employees.

Employees are at the frontline of healthcare – and this doesn’t just mean doctors. Every health worker can be empowered make improvements as agents of change.

For instance, evidence shows healthcare workers experience higher psychological distress than the broader community. Every dollar spent on creating a mentally healthy workplace will, on average, have a positive return on investment of $2.30. In health services, improved mental health of employees also improves patient outcomes, recruitment and retention and organisational sustainability – thus improving productivity in the value chain.

“The major opportunities are in building an employer brand around purpose, and deeply engaging employees in designing, executing and advocating for community, environment or broader social impact initiatives that are deeply embedded in the organisational strategy.”
– Blog: 5 key social impact opportunities

3. Design efficiencies for improved patient outcomes.

A better understanding of internal systems within health services, their strengths and weaknesses for the people working within the system and benefitting from the system, can improve these systems for everyone involved. Co-design can assist healthcare organisations to identify opportunities and innovate to fill shortfalls. In considering cost pressures, collaboration will be key to develop viable, feasible and desirable innovations within the broader health system for collective impact. Strengths-based partnerships can build and scale innovations for mutual benefit.

Not only can this increase efficiencies and improve patient outcomes, but it can also result in cost-saving measures, for instance through a reduction of waste in product and service delivery – by virtue benefitting environment and society as well as cost margins.

In achieving this, the health system needs to empower entrepreneurs to solve challenges, considering alternate structures for innovation for scaling solutions across wards, organisations and systems. For instance:

“GE’s R&D engineers spent months reinventing their incubator and dramatically reducing its cost but calculated that GE would still have to charge $2,000 for the product—far too much for Indian hospitals and clinics. GE then learned of Embrace, a social enterprise that had created a $200 incubator […]. GE partnered with Embrace to distribute the product in India.”

– Marc Pfitzer, Valerie Bockstette & Mike Stamp via Harvard Business Review

In a system that is incentivised for volume, the first step in the shared value journey for the health sector is to define, elevate and innovate around quality, and the improved health outcomes it generates.

Talk to us about shared value in the health sector.

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