The glacial rate of change in healthcare management

On some dimensions healthcare is rampantly creative—a lantana of invention. On other dimensions it is a petrified desert of fossilised forms.

Imagine two great historical figures summoned from the grave. First, Alexander Graham Bell is transported into an average Australian household occupied by millennials. Asked to identify the telephone, he is stumped and then, when shown, amazed at both the technical progress and the diffusion of the technology aided by its extraordinary cost/quality efficiency.

Then picture Florence Nightingale spirited into an Australian acute hospital. After an hour’s in-service Florence is almost ready to clock on for a shift. She has identified the location of the nurses’ station, orientated herself to a familiar set of patient beds, with nurses dispensing medications, updating charts at the foot of beds — and has in no time identified that familiar (still rankling), socially conveyed, demarcation between doctors and nursing staff. Florence isn’t just almost ready for work, she feels at home.

Healthcare has innovated at pace its procedural clinical interventions, its curative molecules, its diagnostic capacities, its treatment possibilities, etc — but its managerial and business systems have been glacial in their rate of change and innovation. They have been at best sporadic, non-persistent and not transforming of the mainstream of activity in the sector.

The fossilised business systems of healthcare are now among the most consequential barriers to valuable innovation. They have militated against the achievement of the Triple Aim of healthcare’s Improvement Movement – improved patient experience (quality and satisfaction), improved population health, and reduced per capita cost of healthcare.

To unleash innovation that tackles this Triple Aim, we need to think both broadly and clearly about healthcare as an economic system – a system of incentives that needs to be re-orientated around consumer needs — which it currently isn’t.

In economic terms, today’s healthcare system can be characterised as an arrangement of producer interests. It is an arrangement with any number of voices raised, all claiming the consumer or patient interest—but a notably weak voice of the consumer or patient themselves.

This arrangement of producer interests runs deep. We are talking about a 200 year-old (or more) process of institutionalisation—a process that has produced an imposing edifice of healthcare, buttressed by powerful elements:

• Information asymmetries between clinician and patient;
• Funding arrangements for activities not outcomes;
• Persistent industrial practices that shape relations between clinicians, between primary care and specialisms, between clinicians and allied healthcare;
• Capital formation processes that strongly influence the allocation of capital to physical assets, and certain types of assets at that, for instance acute hospitals;
• Demarcation and boundary management issues that riddle the sector;
• Training models that too often reflect and entrench existing boundaries; and
• Relationships with bureaucracy that are inflected by government’s many and sometimes conflicting roles, including as funder, regulator and as itself a producer.

In parallel, technology and managerial systems have leapt ahead—leaving the healthcare sector flailing expensively; trying to deal with chronic disease, explosions in scientific knowledge and ageing populations using increasingly outmoded industrial, technological and managerial models.

Against this condition, one might suggest a number of prescriptions to foster business systems innovation. Clearly, micro-economic reform approaches have much potential value to offer

In part, the sector eluded such an approach during the major reform era due to its inherent complexity, the splayed nature of healthcare across all levels of government and across market sectors, its structural rigidities (including its connection with the rigidities of our federal) and its relatively unsurveyed nature. Governments at all levels fail to generate effective, system-wide regulatory and accountability frameworks because of their incomplete and fragmented coverage together with their essential complicity in the operations of parts of the sector.

The Productivity Commissioner has this week been reiterating the ready availability of savings in the healthcare of some 20 percent, by driving it towards levels of efficiency that it manages to achieve in some of its parts, but which it seems unable to generalise across the sector.

Twenty percent of the some $150 billion dollars that is expended annually on healthcare (by all payers) is more, at $30 billion, than any likely increase and nett reallocation of GST to healthcare is ever likely to achieve.

Further, real and extensive business model innovation (rather than just improved accountability and efficiency in the current system) could lead to even more considerable improvements in the value achieved for our health dollar.

At the very least we need to invest in public, transparent and improving systems of measurement for healthcare and its participants. Even this limited call can raise howls of protest about the complex exceptionalism of healthcare by many a complicit stakeholder.

To them, I offer Galileo’s insight: “Measure what is measurable, and make measurable what is not so.”

Rohan Mead is Group Managing Director of Australian Unity Limited, and Chairman of the Business Council of Australia’s Healthy Australia Taskforce. This is an edited extract of a speech he gave at the Centre for Independent Studies conference on Health Innovation in Sydney on September 22.