national strategies in federated health systems dr mark britnell chairman and partner global health...

National strategies in federated health systems

Dr Mark Britnell

Chairman and Partner Global Health Practice KPMG

@markbritnell

2© 2013 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. All rights reserved.

Mark Britnell – over 60 countries, 170 occasions.


A

The exam question

QIs it possible to have a national healthcare strategy in a federated political system?

It is probably not desirable to have a comprehensive national strategy but it makes sense to have some national strategies.


My argument

‘Most systems adopt transactional not transformative strategies for change but there is a growing realisation that integration might lead to more sustainable systems.

Many national strategies aspire to this but many barriers, including fragmentation and misalignment, hinder laudable and lofty ambitions.

So, federate where necessary, localise where possible.’


Health systems require major change; integration will be an important tool for achieving this

Healthcare strategies the world over tend to have a lot in common

How do these common themes play out in practice in other federated health systems?

This presentation

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43%

32%

30%

25%

24%

21%

21%

20%

18%

15%

13%

12%

10%

10%

6%

3,000 CEOs from all industries see the importance of transformational change but focus their attention on short term transactional efficiency.

Changing business operations to realize cost efficiencies

Improving cash and working capital management

Exploiting growth opportunities through successful transactions

Preparing your organization for major business model changes

Managing and retaining the right people within the organization

Addressing risk throughout the organization

Looking for growth in emerging markets

Innovation through product development

Adapting to take into account changing customer and stakeholder behavior

Using information to forecast response to uncertain times

Refinancing or seeking capital

Using technology as a strategic enabler, not just an operational facilitator

Embedding sustainability in the business model

Responding to regulatory change

Seizing opportunities offered by increasing public/private sector interaction

KPMG research: Transaction trumps transformation.

Note: (a) Due to rounding up and down total figure may vary from 300%

Source: KPMG ‘Succeeding in a Changing World’ 2012

Total adds up to 300% all respondents had three votes(a)


Healthcare

27%

50%

15%

33%

15%

18%

18%

17%

20%

10%

12%

27%

17%

17%

5%

32%

43%

21%

30%

15%

25%

4%

21%

18%

12%

10%

24%

13%

20%

10%

Total Healthcare

Healthcare leaders are even more focused on the urgent issues of today and less on the important ones of tomorrow.

Note: (a) Due to rounding up and down total figure may vary from 300%

Source: KPMG ‘Succeeding in a Changing World’ 2012

Total adds up to 300% all respondents had three votes(a)

Improving cash and working capital management

Changing business operations to realize cost efficiencies

Addressing risk throughout the organization

Exploiting growth opportunities through successful transactions

Using information to forecast response to uncertain times

Preparing your organization for major business model changes

Seizing opportunities offered by increasing public/private sector interaction

Looking for growth in emerging markets

Adapting to take into account changing customer and stakeholder behavior

Using technology as a strategic enabler, not just an operational facilitator

Embedding sustainability in the business model

Managing and retaining the right people within the organization

Refinancing or seeking capital

Innovation through product development

Responding to regulatory change


KPMG in Rome, 2012. Over 40 senior executives and clinicians from 22 countries debated major global challenges of today.

Frances DiverExecutive Director, Victorian Department of Health

Chris RexCEO, Ramsay Health Care

Dr. Claudio Luiz LottenbergChairman & President, Hospital Israelita Albert Einstein

Prof. Axel EkkernkampCEO, Unfallkrankenhaus, Berlin

Glenna RaymondPresident and CEO Ontario Shores Centre for Mental Health Sciences

Dr. Kevin SmithPresident and CEO, St. Joseph's Health System

Prof. Shan WangCEO, Peking University Peoples Hospital

Christian BoelVice Healthcare President in Region Midtjylland

Filippo Monteleone Managing Director, General de Santé

Prof. Dr. Udo JanssenChairman, German Hospital Institute

Prof. Anupam SibalMedical Director, Apollo Hospital

Dr. Terry McWadeDeputy CEO, Royal College of Surgeons in Ireland

Carlo PerucciHead of the National Outcomes Programme, National Healthcare Agency

Dr. Giancarlo RuscittiCEO Fondazione "Opera San Camillo"

Paolo Rolleri Director General IRCCS San Raffaele Pisana – Istituto di Ricovero e Cura a Carattere Scientifico

Dr. Masami SakoiPlanning Policy Director, Ministry of Health, Labour and Welfare

Dr. Chul LeeCEO, Yonsei University Health System

Prof. Dr. Hans BüllerCEO, Erasmus Medical Centre

Prof. Dr. Bastiaan BloemMedical Director, Radboud University Nijmegen Medical Center

Dr. Pieter Hasekamp CEO, Dutch Health Insurers Association (ZN)

Unni HembrePresident, European Federation of Nurses Associations (EFN)

Isabel VazCEO, Espírito Santo Saúde

Bala KrishnanDirector of Development Office of Chairman, Aspetar Scientific Advisory Board

Orsida GjebreaSenior Policy Advisor, Supreme Council of Health

Prof. Benjamin OngCEO, National University Health System

Dr Brian RuffHead of Risk Intelligence and Access Innovating Divisions, Discovery health

Martin GerberCFO, Universitätsspital Basel

Dr. Jennifer DixonDirector, Nuffield Trust

Sir Ian CarruthersCEO, NHS South of England

Sir Jonathan MichaelCEO, Oxford University Hospitals NHS trust

Sir Robert NaylorCEO, University College London Hospitals NHS Foundation Trust

Valerie MichieGlobal Head of Health, SERCO

Tim HarfordSenior Columnist at the FT and Author of Adapt: Why Success Always Starts with Failure

Sir Bruce KeoghMedical Director of the NHS and NHS Commissioning Board

Gary KaplanCEO, Virginia Mason Medical Center

Dr. Arthur SouthamExecutive Vice President, Kaiser Permanente

Ron WilliamsFormer Chair & CEO of Aetna Inc. and member of President Obama’s Management Advisory Board

Anne McElvoyPublic Policy Editor, The Economist

Paul Cummings Director of Finance, Northern Ireland Health and Social Care Board

Lord Nigel Crisp

Independent Crossbench Member of the House of Lords


The paradox.

Most people believe that their health sectors need substantial change but think their own organisational plans are robust.

They can’t all be right. Transformational change requires the majority to have a new vision. That's why change is hard.

Focus remains on transactional change not transformational reforms.

Leading hospitals, health plans and life sciences executives believe their

business models are ‘somewhat sustainable’

From volume to value (USA):

Source: Transforming Healthcare: From Volume to Value – New Research on Emerging Business

Models KPMG 2012

HC Systems (104) Health Plans (51) Pharma (54)

8% 8%17%

25% 20%

19%

40% 53% 43%

18%18% 20%

9%

2% 2%

Not very sustainable

Somewhat sustainable

Very sustainable

Extremely sustainable

Not sure

Sustainability of current business models over next 5 years:

But they don’t feel their industries will stay the same…

…with moderate to major change coming in their

sectors

HC Systems (104) Health Plans (51) Pharma (54)

65%

41%

24%

33%

53%

63%

2% 4% 13%

Moderate changesMajor changesNot sure

Source: Transforming Healthcare: From Volume to Value – New Research on Emerging Business

Models KPMG 2012

Extent of changes to your industry over next 5 years:


Healthcare leaders in Rome also demonstrate the paradox.

‘Most (75%) think that current business models are somewhat sustainable but almost all (95%) expect moderate (30%) or major (65%) business model change in the sector’

Question – The current business models operated by hospitals are:

Somewhat sustainable

Question – How much change do you expect to see in the shape of the

provider system and in their business models in the next 5 years?

Major changes

Source: Pre-conference survey Something to teach, Something to learn, KPMG Rome 2012

They believe that integrated care will…

Source: Pre-conference survey Something to teach, something to learn, KPMG Rome 2012

…offer new possibilities for quality and cost

Reduce costs

(75%)

Improve outcomes (90%)


21st century healthcare is a chaotic combination of 20th century acute care and 19th century general practice.

Competing and conflicting business and care models destroy value.

Some hospitals are beginning to understand they need to change their value proposition and integrate.

■ A clearly defined population

■ The ability to do reliable risk stratification and develop registries

■ Accountability for outcomes, supported by aligned contracts and incentives

■ Systematic clinical care

■ Staff and systems to support coordination

■ Shared records

■ Shared quality governance arrangements between participants

■ Payment mechanisms that support these arrangements

■ The development of a workforce with new skills including the ability to manage multiple morbidity including dementia and work in multidisciplinary teams

Prerequisites for an integrated system

Integration.


Consensus on major trends.

Payers are becoming ‘activist’. 1

Some hospitals are transforming into health systems.2

Patients becoming active partners.3

High growth health systems, providing new perspectives on health reform.4

Innovative integration and partnership.5





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Same strategy, different country – there are core elements that we see repeated in most healthcare strategies throughout the developed world

Coordinated / integrated care

Stratifying and segmenting patient populations

Designing systems & processes around patients’ needs, not existing structures

Co-ordination across a broad continuum of care rather than independent silos

Strengthening the capacity and capability of primary and community care

Flexible workforce, fit for the future

Developing new roles &responsibilities; staff working to the limit of their licences

Teams that cross organisational boundaries

Paying for quality, not volume and cost containment

Creating pricing and payment structures that support co-ordination & quality


Same strategy, different country (continued)

E-Health and technology

Making better use of data to understand and target patient populations

Providing better access to diagnostics, often in less acute settings

Provider networks

Consolidating the most specialised services, potentially through networks

Collaboration between public and private sectors

Patient information and transparency

More easily accessible information about outcomes and patient feedback

Patients taking control of their own health information

Creating portable electronic patient data to improve continuity of care


These recurring themes resonate with what Don Drummond found here in Ontario

“What we have is a series of disjointed services in many silos. Ontario needs to integrate these silos ... that impede efficient and effective service”

“Our health system developed to deal with acute care and largely remains in that mode. Today, the key health issues are increasingly shifting to chronic care questions”

“All health services in a region must be integrated”

A workforce trained (and structured) to meet the needs of complex patients:

A health system coordinated around the needs of patients – particularly those who use it the most:

“Physicians’ primary goal should be prevention and keeping people out of hospitals.”

“Medical schools should educate students on “system issues” so that they better understand where physicians fit in the whole health care system.”


These recurring themes resonate with what Don Drummond found here in Ontario

“Extensive use of IT is key to pushing the health care system to operate in a co-ordinated fashion.”

“Accelerate the adoption of electronic records, working from the bottom up.”

Organisational structures that promote quality and efficiency:

A health system that makes the best use of technology:

“Centralize all back-office functions such as IT, human resources, finance and procurement.”

“Hospitals are paid on the basis of average costs ...so there is no incentive to increase efficiency. ... A blend of activity-based funding (i.e., funding related to interventions or outcomes) and base funding would work best.”

Payment mechanisms that incentivise quality & efficiency, not volume:


The strategic goals in other federated health systems – Australia

Payment reform

Setting a national price for activity-based funding for hospitals, through a government agency, the Independent Hospital Pricing Authority

The Commonwealth Government to fund 50% of the efficient cost of hospital care

A more coordinated system with a stronger role for primary care

Establishing Medicare Locals to coordinate and integrate primary healthcare and to provide the link between primary health and the hospital networks

eHealth

Rolling out Personally Controlled Electronic Health Records

Australia’s 2011 reform agenda aims to create a more uniform, national system.

Some of the core elements of these reforms make for familiar reading


The strategic goals in other federated health systems – Australia

A shift towards prevention rather than cure

The Australian National Preventive Health Agency was established in January 2011

Structural reforms to the acute sector

Creating networks of hospital providers through the LHNs

...continued...


The strategic goals in other federated health systems – South Africa

Funding and payment reform – National Health Insurance

Achieving universal coverage and reform of the funding and payment system is at the heart of a whole suite of health reforms

Costing services accurately and creating payment models that encourage efficiency

Pricing to allow private sector involvement in National Health Insurance system

A more coordinated system with a stronger role for primary care

Linking primary and secondary care facilities

New structures for primary care that are more flexible and closer to the patient

The Federal Government is rolling out fundamental reforms to the national health system. Despite a less well-developed starting point, many of the reforms mirror those of more developed systems.


The strategic goals in other federated health systems – South Africa

New organisational structures

Networks of providers to improve continuity of care and management capability

Public / Private collaboration to build capacity and improve quality of acute care

Workforce reform

Defining new roles and strategic planning to meet a serious workforce shortage

... continued ...


The strategic goals in other federated health systems – Germany

There have been a series of reforms in Germany, legislated between 2009 and 2012, aimed at:

Payment reform

Creating a new model of financing for social health insurance, moving towards per-capita flat-rate financing, reducing geographic health inequalities

A more coordinated system with a focus on quality

Allowing payers to pay hospitals based on outcomes, not volumes; establishing a new body to define quality metrics to support this

eHealth

Rolling out new electronic patient information cards and expanding their scope


The strategic goals in other federated health systems – Germany

...continued...

Controlling costs

Reforming the relationship with pharmaceutical companies to ensure best value and efficacy for the drugs sold into the public health system

A central role for patients

Strengthening patients’ rights, particularly in the relationship between provider and patient; and creating a statutory duty to provide information to patients upon request





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Three federated systems with different characteristics

Strong role for the States – even in policy making

Different masters for different parts of the patient journey

Subsidiarity and ‘corporatism’

Little direct government control, either as payer or provider

Clear National / Provincial distinction for policy & strategy

Silos for priority areas of delivery


The federal / provincial split in Australia, Germany and South Africa

AustraliaDivided responsibilities for most aspects

GermanyDecentralised with many autonomous agents

South AfricaClear division of policy & delivery ... with exceptions

Funding & payment

Primary = CommonwealthSecondary = C’th &State

Capex = StatesActivity = ABDRGs & pricing = AB

Pricing = NationalBudgeting = Provinces

Delivery C’wealth = Primary & agedStates = Acute

AB payers and provider associations

Tertiary = NationalSecondary = ProvincesPrimary = Districts

Policy & strategy

C’wealth govt passes legislation; States tweak and implement (COAG)

Federal government National government

Workforce & training

Primary = CommonwealthSecondary = States

(w/ universities)

Regional 3rd parties Education = NationalTraining = Provinces

Drugs Commonwealth Govt ALB National Government

AB = Autonomous BodyALB = Arm’s Length Body (Govt Agency)


The 2011 Australian health reforms aim for a more uniform, national approach to pricing and performance

Public funding is currently split 60/40 between Commonwealth and States

Independent price setting authority and activity-based funding – will increase ‘clout’ of the Commonwealth Govt

The creation of government agencies is central to this reform – some operate at a local level, such as LHNs and Medicare Locals

Funding & payment


Currently a C’wealth agency runs GP training; States plan acute education & training

Policy & strategy

C’wealth passes legislation; COAG tweaks it ...then States implement in different ways

Primary care is a national issue; hospital care is a State issue

Delivery

National Health Performance Authority established to oversee performance

Some governance is being devolved to 136 LHNs and 60 Medicare Locals


Lessons from Australia

The States need a voice in the policy process (the COAG) but this doesn’t ensure harmony

Local flexibility is needed even when there is national agreement ......New South Wales is nothing like W. Australia

Party-political difference between States and Commonwealth can undermine reform

Different masters for primary and secondary care make integration very difficult


Ostensibly the South African system appears to separate strategy from operations but there are silos of National Government top-down control

Source:: 1 - The Lancet, Nov 2012, ‘Health in South Africa: changes and challenges since 2009’,

The National Govm’t sets prices and Provincial budgets; Provinces administer budgets

The National Govm’t also regulates private health system but struggles to control prices

Funding & payment


National Govmt’ drives national strategy and is responsible for medical education

Provinces are responsible for training but have no control over no. of graduates

Policy & strategy

National Government sets strategy, legislates and defines norms & standards

Delivery

Provinces manage secondary hospitals; Districts manage primary care

Some high-priority services have been ‘prioritised’ creating operational silos (HIV, TB)

National Govt recently took on direct management of the 10 Academic Hospitals


Lessons from South Africa

Federal action has a positive impact where Provinces don’t have scale (antiretroviral coverage, for example 2)

But knee-jerk political responses to disease crises create delivery silos

Source: 1: The Lancet, Nov 2012, ‘Health in South Africa: changes and challenges since 2009’, http://dx.doi.org/10.1016/ S0140-6736(12)61814-52. World Health Organisation (2011 & 2013)

Provinces have little opportunity to tailor reforms(KZN is very different to Gauteng but has the same systems)

Different masters for primary and secondary care create disjointed care


The German system is characterised by numerous autonomous bodies representing different interests – this undermines Federal / State action

Sources: 1. Civitas, ‘Healthcare Systems: Germany’, Jan 2013

Hospital investment is funded by the Länders; activity is funded through G-DRGs

Payroll-tax-funded but payers are autonomous sickness funds

The sickness funds contract providers through regional physician associations

Funding & payment


Physicians’ chambers are responsible for training & education and standards.

They are regional organisations but are coordinated nationally

Policy & strategy

Federal Govmt responsible for reform; legislation at Federal and Länder level

Highly collaborative system – the Fed. Joint Committee is a ‘negotiation platform’ including sickness funds, hospital associations and physician organisations1

Delivery

Länders own most University hospitals but the Government (State or Federal) has virtually no role in the direct delivery of health care 1


Lessons from Germany

Continuum of care paid for by the same payer (the sickness funds) so they have an incentive to buy efficient, integrated care

However, it is still possible for Government to drive care reform through regulation of the internal insurance market

Central Health Fund now allocates money to sickness funds based on risk1, intended to drive competition based on quality & efficiency

Sources:1. Civitas, ‘Healthcare Systems: Germany’, Jan 2013

Multiple independent actors representing different interests – doctors, insurers, pharma – make it...

“difficult for any one group to change the rules ...without the consent of the other parties ... as required changes can come up against vested interests.”1


The paralysis caused by a lack of cohesion and perverse incentives is not unique to the German system

“The health care system is not really a system: What we have is a series of disjointed services in many silos.”

“The public debate has been poisoned in recent decades by a widespread failure to comprehend the trade-offs that must be made; by knee-jerk reactions to worthy but complex ideas for change; by politicians (and media outlets) who have been too willing to pander to fear-mongering; by stakeholders in the health care system who, wishing to cling to the status quo, resist change; and generally by a lack of open-minded acceptance of the reality that change is needed now and that money alone will solve nothing.”

“The government should remove perverse incentives that undermine care: physicians are penalized when one of their patients goes to another walk-in clinic but not when the patient goes to the emergency department of a hospital.”

Don Drummond on Ontario:


Final thoughts

Federate where necessary, localise where possible;

The developed world isn't so different; we have broadly similar strategies;

Nation building and political context always make it look different;

The federal / state divide is sometimes overcome through 'arms length bodies';

Some areas like financing, education, workforce supply and pricing seem to be centralised;

Often, fragmentation within health systems is a bigger problem than political division;

What makes sense from a patient and population health point of view?

Launched at Davos...

Necessity: the mother of innovation

Low-cost, high-quality healthcare

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© 2014 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firmsof the KPMG network of independent firms are affiliated with KPMG International. KPMGInternational provides no client services.

The KPMG name, logo and “cutting through complexity” are registered trademarks or trademarks of KPMG International.

The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavour to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.

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