Why we must find better ways for the public and private sectors to work together.

As I pondered the dialogue at a recent meeting of Healthcare IT leaders, it struck me we were talking all about solutions to transform healthcare. The topic was Alternate Service Delivery models, aka Public-Private Partnerships or P3s. But I wondered, what was the problem we were trying to solve? Had we just assumed we had a problem to solve that would require radical and difficult solutions? Or did we all simply know the problem so well we didn’t have to vocalise it? Or worse, were we a solution looking for a problem?

So for a moment I suspended disbelief and contemplated the problem and the facts. Was Canada indeed heading for a healthcare crisis? One that indeed demands such a transformative solution as P3s? Well that’s pretty obvious isn’t it…

More than 50% of public dollars going to healthcare in every large province within a few short years. Two-thirds of all healthcare costs are directed to those with chronic illness.

According to the Commonwealth Fund’s 2014 Update on International Healthcare Systems, Canada has the worst wait times, worst access to primary care, and the greatest use of EDs. In fact we rank in the bottom three countries on all measures of quality, access, efficiency, equity and healthy living. The only measure where we close to top of the heap (fifth) is on spending per capita.

Case made for the problem!

So the next piece of the puzzle – technology. Is technology readily available and aligned to help address the healthcare crisis afore us? Well, what can you say when we have mature clinical systems fully deployed in many organizations, and 57% of physicians are equipped with EMRs and growing. Not to mention the incredible growth of telehealth for remote consultations, wearable devices and biometrics for remote health monitoring, and integrated mobile tools that connect physicians and pharmacists with their patients in order to manage prescriptions.

Then there is connectivity. According to the OECD, Canadians enjoy data speeds that are twice as fast as the average speeds in Germany and Italy, three times that of the U.S. and France; and nine times faster than in the U.K. Canada is #1 with respect of telecom investment per customer amongst the OECD’s member nations – double the average – thereby connecting 85 per cent of the population.

Case made for the availability of technology and connectivity!

Now let’s come back to P3s. By the way, one thing I realised was that we should redefine the acronym to be Public-Public-Private Partnerships. By that I mean partnerships between the private sector and the two arms of the public system: government and health delivery organisations.

We have good examples of P3s today – admitted mostly for infrastructure like roads, schools and hospitals. But we also have good examples in information management. Take Teranet for example where the Ontario government contracted out the management of land titles for the province to a private consortium under a 50-year agreement. This has generated billions of capital to the government, eliminated the need and risk of investment of public dollars, and driven huge performance improvements and reduced processing times.

So why can’t we apply this model and thinking to healthcare?

The fact is we can and have. It became evident to me through the dialogue that there is a large spectrum of approaches to P3s, from simple outsourcing to full risk-reward sharing arrangements like Teranet. We have live examples today of full outsourcing of payroll and financial processing for governments and healthcare organisations, under 10-15 year agreements. Under these arrangements the private sector puts up the capital, commits to technology refresh, and is governed jointly by service level agreements. And the partner is incented to drive innovation as this reduces their costs and improves their service delivery.

Case made for the availability and ability of P3s to be a transformative tool.

So, onto the barriers and enablers.

First funding and incentives. We debated at length the perversity in the current funding formulas for hospitals. While we could make the case for large-scale healthcare IT system investments, the payback was 75% based on avoided costs, and only 25% of real cost reductions. In the private sector one could make that business case quite easily, but in healthcare the funding formula for hospitals discounts the avoided costs. Worse the accounting would double-count the expense during the implementation years so as to completely destroy the PBAM-based funding formula. Finally the benefits of such investments would accrue across the healthcare delivery spectrum and not necessarily be the sole purview of the organization making the investment. The business case therefore needs to be considered holistically across the system.

Another way to look at incentives is to align payment to outcomes, or desired methods of practice. What about a performance bonus for physicians who practice in a way only possible with EMRs, such as managing chronic disease. Not only would this incent the adoption of EMRs (and higher quality of care) it would provide a clear business model that the private sector could make a case for investment, under a shared risk/ reward scenario. What about paying a premium for electronic transactions, such as prescriptions or referrals or bookings? Each of these mechanisms creates the conditions for which the case for an investment of capital is clear.

Other elements we identified for the success of such P3 ventures were scale of service and contract duration. It’s a simple equation – the greater the scope and duration of service to be provided, and hence the value, the greater the appetite for investment and assumption of risk. This allows the private sector to look at a total portfolio of services across which it can spread its risk. It allows the public sector to ensure long-term service and cost certainty. Innovation can be baked in and costs can be controlled, based on smart service level agreements.

So why are P3s not more prevalent in healthcare IT? Could it be public perception, especially in the current environment of public skepticism of the public and private sectors working together for the betterment of our treasured healthcare system. No question there have been legitimate concerns, but surely we have learned from the experience and can inject new ideas based on those learnings? Are we that risk adverse that we are not willing to try?

Perhaps the greatest risk we face is doing nothing. For if we accept that path, then we will be assured of a broken healthcare system for our children to inherit. Not an acceptable outcome for me. What about you?

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