Organizing for sustainable healthcare




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CHAPTER 1

ORGANIZING FOR SUSTAINABLE HEALTHCARE:

THE EMERGING GLOBAL CHALLENGE


Susan Albers Mohrman, Ph.D.

Senior Research Scientist

Center for Effective Organizations

University of Southern California

3415 S. Figueroa St., #200

Los Angeles, CA 90089

1-213-740-9814

smorhman@marshall.usc.edu


Abraham B. (Rami) Shani, Ph.D.

Orfalea College of Business

California Polytechnic State University, San Luis Obispo, CA, USA,

and Politecnico di Milano, Milan, Italy

+1-805-756-1756

ashani@calpoly.edu


Arienne McCracken

Program Manager and Research Associate

Center for Effective Organizations

University of Southern California

3415 S. Figueroa St., #200

Los Angeles, CA 90089

1-213-740-9814

amccracken@marshall.usc.edu


Abstract

Purpose

This chapter frames the topic of organizing for sustainable healthcare in terms of the environmental trends that have rendered current healthcare approaches unsustainable, the embeddedness of healthcare in society’s triple bottom line, and the need to build adaptive capability within the complex healthcare eco-system.


Design/Methodology/Approach

We synthesize documented trends and empirical findings regarding the viability of current approaches to healthcare, and provide a theoretically framed treatment of the adaptation process in the complex healthcare system that can lead to the emergence of sustainable approaches.


Findings

There is a misfit between current approaches to delivering healthcare and the requirements and trends in contemporary society. Fundamental transformation is required that entails a broadening of purpose, a future orientation, and a rethinking of how healthcare adds value and how it is embedded in society.


Originality/Value

By reconceptualizing healthcare reform as intricately related to societal sustainability and the triple bottom line, we open the possibility of transcending a narrow focus on reengineering to create more efficient organizations and work processes that consume fewer resources and deliver greater value. We invite healthcare practitioners and scholars to rethink all the connections in the healthcare eco-system, and the need to build in self-organizing capabilities and adaptive capacity. The cases in this book provide knowledge from systems engaged in fundamental transformation, analyzed through the lenses of theoretical frameworks that help us better understand essential dynamics involved in creating sustainable healthcare systems.


Keywords:  Sustainability, sustainable healthcare, complex systems, adaptation, triple bottom line, embeddedness, emergence, learning

Paper Category:  Theory Development


Healthcare as it is organized today is not sustainable. Healthcare systems in the developed world are encountering increased demand for high quality healthcare even as they face the limits of the resources that they can command from society. Developing nations are challenged to secure a flow of resources to make even basic healthcare available to rapidly growing populations who have increased expectations for services and quality of life. Healthcare managers, professionals, and academics worldwide are debating how to redesign healthcare’s current organizational configurations and delivery paradigms to deliver more with less, amidst profound changes in the populations that need to be served, and changing healthcare priorities. The healthcare challenges generated by demographic, economic, and ecological trends are a microcosm of the overall sustainability challenges being faced by mankind, as the requirements of our burgeoning and highly interconnected global economy approach the “carrying capacity” of the earth on which we live.

This second volume of the Emerald Press series Organizing for Sustainable Effectiveness examines the topic of Organizing for Sustainable Healthcare. The chapters systematically examine healthcare systems that are aggressively grappling to build the foundations for sustainable, high quality healthcare. From these case-based analyses, we will learn about substantive organizing changes aimed at operating within resource limitations while addressing the burgeoning expectations of the population and taking advantage of the explosion of knowledge in the form of medical advances that hold the potential for unprecedented positive impact on the health of individuals and societies. We will also learn about the change capabilities that healthcare systems need in order to implement fundamental change and continue to evolve through time.

We believe that closely examining change in the healthcare sector will provide insight into the overall question of how humanity can put into place sustainable models of organizing. This sector is competing against other purposes for scarce societal resources, and is facing unavoidable trade-offs and pressures for financial responsibility and delivering value. Healthcare’s societal impact manifests in the close connection between the health status of a population and societal wealth and well-being. In turn, the resources available to promote a population’s health are a function of the levels of societal wealth. At the individual level, whether this sector thrives or struggles impacts a large portion of the population in developed nations who work in healthcare related jobs. The U.S. Bureau of Labor Statistics reports that workers in the healthcare and social assistance sector made up 11.5% of the workforce (about 16,400,000 jobs) in 2010 (Henderson, 2012). In the EU-27, there are over 21 million health and social services workers (European Union, 2011). And how well the healthcare sector is organized and performs impacts almost every member of society, whether through the good or poor care they and their family members receive or through the absence of care and the financial toll that illness entails. Healthcare is intricately interwoven in the interlaced societal, economic and natural dynamics that impact environmental sustainability—both as polluter and as the antidote to disease that is triggered by toxic and unsafe environments.

In short, the challenges healthcare faces are multidimensional and interconnected. This reality is captured by Elkington’s (1997) notion of the “triple bottom line,” a framework that entails commitment to and measurement and improvement of outcomes along the three intertwined dimensions of economy, society, and environment. Societal institutions at all levels are involved in and affected by how healthcare functions and is organized: national and local governments, communities, businesses, families, the developers and manufacturers of healthcare related products and services, as well as citizens, patients, and the organizations and individuals who provide healthcare related services. The healthcare eco-system is expansive, complex, and diverse.

Our healthcare systems are being threatened by the growth and aging of populations requiring care and by changes in the substantive demands being placed on the systems. Care for individuals with chronic illness has surpassed acute care as the major focus of healthcare services and consumer of healthcare resources (Lambrew, 2007; National Center for Chronic Disease Prevention and Health Promotion, 2009a; 2009b). Healthcare systems are also being challenged by the burgeoning costs of new technology, and the increasing expectations of citizens to receive the most advanced and up-to-date treatment that often carries with it the promise, whether grounded in research or not, of great benefit as well as a high price tag. All of these demand-oriented forces are crashing into the resource limits of societies and individuals and causing fundamental reexamination of the premises, purposes, and organization of healthcare in countries around the world.

Sustainability has become a fashionable, if controversial, term that covers an umbrella of concepts, approaches and implications. Early use of the word pertained largely to efforts to develop sustainable patterns in the consumption of natural resources and to avoid the negative environmental and social impacts of unrestrained exploitation of the natural environment (see foundational environmental texts such as Carson, 1962). Sustainability has expanded to include social responsibility, including concern for communities and social justice (Googins, Mirvis, & Rochlin, 2007). The very word sustainability implies temporal responsibility: putting in place practices that can be maintained through time and that protect the needs of future generations. The triple bottom line perspective recognizes the close interdependency of economic, environmental and social outcomes and emphasizes the need to simultaneously address all three focuses rather than pursuing a course of action that emphasizes one at the expense of the others. Our working definition is that healthcare is sustainable if:

The eco-system for the sustainable provision of healthcare outcomes operates to continually increase health, societal, and ecological value, functions with a viable economic model, and conserves resources for future generations.1


Healthcare is knowledge based, and there is a staggering acceleration of scientific and socially evolved understandings of health and well-being and their antecedents, correlates, causes, and dynamics. Humanity knows much more than we have put into practice, and we are developing knowledge at unprecedented speed. For this reason, the sustainable healthcare eco-system must incorporate not only effective ways of organizing to address the challenges it is currently facing, but must also be agile enough to incorporate changes and advances in knowledge that will lead to sustainable effectiveness through time. This volume pays attention not only to how a sustainable system is designed but also to how it can build in the necessary agility and learning capacity to continually change.

Finally, given the criticality of the healthcare system to the well-being of nations, the sector exists in a highly politicized environment. The healthcare sector is shaped, enabled and limited to a large extent by the political forces at work that impact funding and regulation. Indeed, the purposes, priorities, and support for publicly funded healthcare and for the policies and regulations that shape action of the many diverse elements of the healthcare eco-system emerge slowly through societal debate. They are formalized and changed through political processes by which different stakeholders and interests contend for their preferred outcomes. These political processes go on simultaneously with the technical processes of care delivery and improvement in the complex healthcare eco-system, often pitting the interests of various sub-populations of actors against one another. The 2010 passing of the Affordable Care Act (or the Patient Protection and Affordable Care Act, Public Law 111–148) and its 2012 challenge in the U.S. Supreme Court, (reviewing issues from three separate court cases: National Federation of Independent Business v. Sibelius, Secretary of Health & Human Services, et al.; Department of H & HS, et al. V. Florida, et al.; and Florida, et al. V. Department of H&HS, et al.), is just one example where many stakeholders with very different ideologies and preferences have utilized legislative and judicial mechanisms at state and local levels to try to shape the future of healthcare in the country (Supreme Court of the United States, 2012). This act, if upheld, will require individuals to buy health insurance, greatly expand the availability of health insurance to the poor and to those with pre-existing conditions, and move the U.S. toward an outcomes-based reimbursement system, among other impacts. These are ideas that have been debated in the U.S. for decades, and where social consensus has not yet been achieved. Any discussion of sustainable healthcare is incomplete without acknowledgement of its tight connection with the polity.

In this introductory chapter, we describe and frame healthcare’s sustainability challenges using a complex adaptive systems perspective (Miller & Page, 2007; Holland, 1995; 1998), and we draw from the literature to examine how sustainable effectiveness has been approached and what has been learned to date. We focus particularly on the issues of purpose and capabilities development. A capabilities development perspective leads us to focus on organization design and learning processes that are critical to building sustainable healthcare. First we will more carefully describe the challenges that are being faced by healthcare systems around the world that are rendering current ways of organizing unsustainable.


Challenges to Sustainability

Reliable and sustainable healthcare delivery is a high-priority goal for all nations—and is integral to achieving a vigorous economy and a vibrant and productive society. Yet, despite having been identified as a key societal issue and looming crisis for decades and the funding and implementation of many healthcare improvement initiatives, the unsustainable cost trajectory continues in most countries. Perhaps the most dire situation is in the United States, a country that has relied on a mixture of private insurance, government benefits for the poor and elderly, and the delivery of care through a mixture of public and private institutions. Healthcare costs continue to escalate at a rate of about seven percent per year, more than twice the rate of growth in the overall economy (Towers Watson, 2010; Bureau of Economic Analysis, 2012). Projections over the next six to eight years are for similar annual rates of growth, although growth has recently slowed as a consequence of the 2008 recession (Keehan, Sisko, Truffer, Poisal, Cuckler, Madison, Lizonitz, & Smith, 2011; Martin, Lassman, Washington, Catlin, & National Health Expenditure Accounts Team, 2012). The United States pays far more of its GDP on healthcare than any other nation -- 17.9% of U.S. GDP in 2010, projected to grow to 20% by 2020 (Martin et al., 2012; Fleming, 2011). Total average out-of-pocket spending on healthcare has risen steadily while family incomes remain largely unchanged (Social Security Advisory Board, 2009). Average family healthcare insurance premiums constituted 18% of the median family income in 2009 and are projected to go to 24% by 2020 (Commonwealth Fund, 2011). Associated social costs are staggering: the U.S. has nearly 50 million people without health insurance (Christie, 2011).

Even in Europe, where healthcare is largely paid for by taxation of the population at large and the financial risks are pooled, costs are outstripping economic growth. The World Bank projects that public expenditure on healthcare in the EU is on its way from the average 8% of GDP in 2000 to 14% in 2030 and will continue to grow (Economist Intelligence Unit, 2011). Public expenditures in Japan grew from 6.2% in 2000 to 6.7% of GDP in 2009 (World DataBank, 2012).

Three trends are cited as fueling the increase in societal healthcare costs: the aging of the population and related increase in healthcare needs; an increase in chronic disease; and the high cost of developing new technology combined with the population’s expectation of receiving state-of-the art care. These all contribute to increasing demand for healthcare.

Another force behind the rise are the costs that result from the increasing misfit between the way healthcare is organized and the services and value that the healthcare system needs to deliver in this changing environment. This misfit can lead to poor outcomes that increase the demand on the healthcare system. We will discuss these challenges next, and at a high level will examine the opportunities for aligning healthcare systems with the changing realities they are facing.


The Aging Population

Societies worldwide are aging as birthrates fall and life expectancy increases (Greenberg et al., 2011; Humphreys, 2012). Although the world’s population continues to swell, worldwide the average woman bears half as many children as she would have 30 years ago (Longman, 2004). For the developed nations, the large post-World War II generation, the “baby boomers,” are starting to retire and enter their most healthcare-intensive period, while the working population constitutes a smaller and smaller portion of the population. By 2050, at least 37% of the populations in Europe and Japan will be in the over-60 age group (European Commission, 2012). From 2000-2050, the worldwide population of people ages 60 or older will triple to include 2 billion people, and most of that increase will occur in developing countries (World Health Organization, 2011c).

This population shift forecasts an increased demand for healthcare, and a proportionately smaller increase in nations’ ability to cover the costs. This will put a larger strain on all countries, but particularly on those governments that offer such things as pensions and national healthcare benefits (Andreason, 2011). Funding either for government financed (tax-based) or employer paid (insurance-based) care depends on having a robust, healthy, working population. Many governments are being faced with declining revenue growth from a shrinking pool of working-age citizens, and hence, decreased taxation and insurance funds that could go to healthcare (Economist Intelligence Unit, 2011). This structural shift is putting pressure on governments to adopt various policies to scale back benefits, raise the retirement age, or raise taxes to deal with this shift in the population (Andreason, 2011). Often lost in these macro-economic analyses is the complementary requirement that healthcare systems have to reduce costs and/or sharply curtail services.

Chronic Illness

Disease profiles are shifting, with a staggering increase in prevalence of chronic illnesses, often lifestyle related, that consume a rapidly increasing percentage of healthcare expenditures (Lambrew, 2007). Cancer and chronic diseases such as hypertension, diabetes, asthma, and COPD, are increasing worldwide, affecting both developed and developing nations (World Health Organization, 2011d). In 2007, a quarter of EU citizens had one or more chronic diseases (Watson, 2007). By 2020, an estimated 157 million Americans will have at least one chronic condition, and spending for chronic conditions will account for 80% of all healthcare spending (Wu & Green, 2000). The annual cost of chronic disease in the U.S., including healthcare expenses, lost income, and lost productivity, is estimated to be $100 billion (National Institutes of Health, 1998).

Chronic diseases, especially cardiovascular disease, have found a “new frontier” in lower-income nations, including China, India and the nations of Africa (Greenberg, Raymond, & Leeder, 2011). Obesity and overweight, conditions very closely related to cardiovascular disease, diabetes, kidney disease, and some forms of cancer (Eckel, 2008; Eheman et al., 2012), are increasing globally. More than half the adult population in the EU and two-thirds of all Americans are overweight or obese (OECD, 2010;) There are now over 35 million overweight children in developing countries, notably in urban centers (World Health Organization, 2011a).

Cancer, a term that encompasses more than 100 diseases, remains a critical concern across the globe. These diseases have many possible causes, including the inheritance of high-risk mutations in specific genes (e.g., BRCA1 and BRCA2 mutations for breast cancer) (Offit, 2006). Some known human carcinogens are tobacco, alcoholic beverages, excess body weight and other lifestyle factors; UV rays from the sun and radon (natural environmental factors); and aluminum production, coke production, and iron and steel founding (workplace exposure) (American Cancer Society, 2012). In 2008, there were over 12 million cancer cases and almost 8 million cancer deaths worldwide. The developing world accounted for 56% of the cases and 64% of the deaths (Jemal et al., 2011), although the mortality rates in some countries have been declining and overall incidence rates of cancers have been stabilized (Eheman et al., 2012). As populations worldwide are aging, incidence rates are expected to increase in the future, however. Aggregate 5-year costs of cancer care for the U.S. elderly Medicare population were estimated to be $21.1 billion in a 2008 study (Yabroff et al., 2008).


Technology

Healthcare is also experiencing pressure from the increasing costs of technological and pharmacological innovation, as new devices, equipment, techniques, and drugs become more and more costly to develop. The cost to bring a new drug to market in 2006 was over $1.3 billion – a tenfold increase from the cost in 1975 (Economist Intelligence Unit, 2011). Much of this increase is attributed to the investment in and cost of biomedical research (DiMasi & Grabowski, 2007) and innovations in material sciences, genetics, biotechnology, bioinformatics, advanced imaging technology, and e-health. Pharmaceuticals have been the fastest growing component of healthcare costs in the U.S. (NHE Fact Sheet, 2009).

Technology has brought great advances in ability to treat disease and improve chances for survival, but these advances have been costly. In the U.S. alone, spending on pharmaceutical research and development was estimated to be $37 billion in 2010. American biotechnology R & D spending was $30 billion in 2009, and medical technology R & D spending accounted for $9 billion in 2009 (Research!America, 2010). Annual costs of the biologic medicines used to treat the chronic disease psoriasis ranged from $18,000 to over $27,000 (Beyer & Wolverton, 2010), and other biologic drugs and new chemotherapies are similarly priced. Purchasing one  Da Vinci surgical robot can cost a hospital approximately $2 million, not including maintenance costs (Varney, 2012). The average hospital charge in Texas for a coronary bypass surgery with insertion of a cardiac catheter was almost $136,000 in 2010, not including physician fees (Texas PricePoint, 2010). And the list goes on and on. Genetic testing enables patients to know whether they have the risk factors associated with many diseases, and raises the possibility of taking medical measures to prevent disease that a person may never contract.

These advances often bring or promise improved chances of preventing or surviving disease and slowing progression, of making surgery less invasive and therefore less dangerous, enabling the replacement and repair of defective organs, joints or limbs, and enhancing the quality of life and extending it. Although great progress has been made in treating illness, the breakthroughs required to cure chronic and many other life-threatening conditions have been slow to come. Such progress would allow us to radically change the cost structure of healthcare. While the mapping of the human genome seemingly ushered in a new age of gene therapy and genetic intervention, the reality is disappointing: no non-experimental gene therapy drugs or procedures are currently available to U.S. patients (Lindee & Mueller, 2011). Genetic interventions have yet to fulfill their promise.

Information about new technologies is readily available to people through news media, on the internet, and also from advertising by the companies who develop them. In the U.S. in particular, but increasingly in other countries, the population is exposed to a barrage of advertisements about drugs, devices, and procedures that are touted to help detect problems, prevent the onset of illness and/or to be effective in addressing existing conditions. Public awareness has increased, expectations have been established about receiving state-of-the-art care, and patients often arrive at the doctor’s office requesting specific treatments. Undeterred by very public exposure that many claims about the benefits of new technologies are not well grounded,2 patients may equate the quality of care they are receiving or the caliber of the hospital where they may be treated with the presence of approaches they hear about on the airwaves and read about on the internet. This places pressure on healthcare costs, and raises the politically explosive questions of who should pay, and of what is society’s healthcare obligation to its population and what is individual responsibility.


Organizational Misfit with the Changing Healthcare Needs

Increased demand may be triggering the current sense of urgency about healthcare sustainability, but the inadequacy of our current models of healthcare delivery has also become a major focus as nations consider the question of how to respond to these changes and to provide more value for the healthcare dollars that are spent. We know that sustainable healthcare delivery cannot be achieved by continuing to accelerate resource consumption. Witness the U.S. which, while paying almost twice as much per capita as the next closest nation for healthcare, is rated in comparative studies toward the bottom on many measures of quality and patient satisfaction, including safety, access, efficiency and longevity (Davis, 2010). The U.S. healthcare system is apparently not organized to effectively use resources “to continually increase health, societal, and ecological value, to operate with a viable economic model, nor to conserve resources for future generations” (our working definition of sustainable healthcare as described earlier in this chapter).

This U.S. anomaly can be explained by many factors. Much of the R&D and innovation that has led to new technological capabilities has occurred in the United States, and the cost of such development has disproportionately been passed on to that healthcare market. Other nations’ government-run systems have implemented price caps and have received the same drugs and devices less expensively, while also making the decision not to introduce expensive drugs and technology into their formularies and guidelines that cannot be shown to deliver increased value. (Darzi et al., 2011; Anis, 2011) U.S. healthcare is largely delivered by physicians in private practice, often by for-profit hospitals and affiliated healthcare service organizations, and almost half of its healthcare is administered by for-profit insurance companies. None of these actors have had any incentive to change their practices to restrain healthcare costs; in fact, they thrive when they receive more resources. Approximately 31% of healthcare costs cover the administrative costs and the profits of insurance companies (Woolhandler, Campbell, & Himmelstein, 1999), and this number increases as much as 6.6% per year (Blanchfield et al., 2010). Despite the fact that almost 50% of U.S. healthcare costs are paid for by the government in the form of the Medicare program for seniors and the Medicaid Program for the poor (Kaiser Family Foundation, 2009), approximately 16% of Americans have no insurance, and consequently a large number of Americans receive their “primary” care in emergency rooms at great expense.

Arguably, these parameters of the U.S. healthcare eco-system add significantly to the high costs. But another factor is also at work in most developed nations: the healthcare system as currently designed is not effective at dealing with the kinds of substantive health issues that are being faced in today’s society, and in fact is very inefficient at doing so (Christensen, Grossman, & Hwang, 2009; Berwick, Nolan, & Whittington, 2008). A specific and very costly example is that the traditional hospital-based and private-practice-based delivery system is not suited to deliver coordinated life-cycle care for chronic disease treatment and prevention, nor coordinated care for an aging population with multiple, interacting disease states. The U.S. system may have been deluged by lifestyle-related chronic conditions earlier than many other countries, but this problem is now global.

Current healthcare systems developed over time as hospitals and other healthcare organizations evolved to address the changing needs of physicians and their patients and were largely shaped around the acute illness model of care and the need to have places to house patients with persistent infection (Wagner et al., 2001). Our success in finding effective treatment for infection has resulted in less need for hospitalization for individuals with infections, but has also increased lifespans and the related increase in incidence of chronic care. Failing to effectively prevent and manage chronic disease results in people getting sicker, having more acute episodes, and requiring more complex and expensive care (Pencheon, 1998). Moving “upstream” in chronic disease life cycles has a significant potential return on investment, yet both in the U.S. and the EU people are receiving only half of the preventive care that they should be getting (Rand Health Research Highlights, 2006). Prevention and wellness are receiving no more than 5% of the money spent annually on healthcare (Economist Intelligence Unit, 2011; Kelley, Moy, Kosiak, McNeill, Zhan, Stryer, & Clancy, 2004). This is because we have a system designed to provide episodic care—not to keep people well and manage the life cycle of health.

The treatment of chronic illness demands early detection, preventive measures including lifestyle intervention, continual monitoring and control, and coordinated treatment. Yet we retain a highly fragmented system that is organized around specialized medical disciplines rather than around the coordinated treatment, where each specialty reacts to particular patient symptoms and conditions rather than coordinating and being proactive in addressing prevention, disease control, and patient wellbeing. Patients in a sense start over at each encounter and wind their way through many specialties, services, offices and locations in order to get treated for particular episodes of care. Patient information often is not readily available and does not flow with the patient, and patients often have to coordinate their own care.

Fragmentation also negatively impacts the treatment of patients with acute illness, serious injury, and complex and perhaps poorly understood diseases that require the coordinated services and knowledge of many medical professionals for efficient diagnosis, treatment, and recuperative care (Bohmer, 2009; Christensen et al., 2009). Yet these patients frequently are treated sequentially and in an uncoordinated fashion by many departments, each of whom deals with a small piece of the puzzle (or the human system), and none of whom take responsibility for outcomes.


Fragmentation is reinforced when providers are reimbursed for procedures, activities, and episodes of care rather than for health outcomes. The stream of resources to healthcare providers depends on demand for their services, and each provider acts in a way that ensures an ongoing stream of resources; perpetuating fragmentation in the care of patients. Poor healthcare leads to greater demand—and much greater costs to society in terms of resources consumed and health status and quality of life of the population. Even error gets reinforced, as preventable iatrogenic disease such as hospital acquired infections and adverse drug interactions result in more demand for health services and more reimbursement for care (Darzi, 2011). In the U.S., hospital-acquired sepsis and pneumonia, for example, created 2.3 million additional days of patient hospitalization and over $8 billion of in-hospital costs in 2006 (Eber, Laxminarayan, Perencevich, & Malani, 2010).

The challenge is to reverse this cycle of escalating costs by aligning the healthcare system with the delivery of high quality care and outcomes, and moving its focus upstream to prevention, early treatment, and control of chronic disease, thereby greatly increasing value to patients and society (Porter, 2009; 2010; Kaplan & Porter, 2011). Kaplan and Porter note that better healthcare outcomes are linked with lower total care cycle costs. They strongly believe that the healthcare field has great potential to simultaneously improve outcomes and drive down costs -- by systematically measuring outcomes and using an accurate cost measurement system (Kaplan & Porter, 2011
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