What are the main reasons behind the rising costs of healthcare?
I think the main reason involves the impact of an aging population, some of whom age healthily, but many of whom, unhealthily, particularly those from poorer sectors of society.
It's also about complex conditions or comorbidities in the long term that represent chronic disease and are therefore very costly to treat. They're very costly because the healthcare organization in most countries is still hospital-dominated, and hospitals are high-cost organizations.
What impact is the ageing population projected to have on healthcare costs?
I think it's a problem not just for the western world and resource affluent countries, but a global problem that extends to resource poor countries, as they also have an aging population.
The impact of the aging population is reflected in GDP figures. In 2010, the U.K's share of GDP on healthcare is relatively low compared to many countries, at around 10%, whereas in the U.S. the figure is 17.4%.
Over the next 20 to 50 years, healthcare is predicted to take up more and more of our GDP. The only way for any country to absorb the impact is to tax people enough to pay for it.
How can business schools help to solve the problems of rising healthcare costs?
There are two levels we can have an impact at: the organizational level and the managerial level. It’s a question of how we organize ourselves to address this problem as well as how we manage and develop the managerial capability to transform healthcare.
Hospitals are where the high costs lie and we need to work towards getting people to self-manage and self-monitor, in a preventative way, some of the problems that might lead to them visiting hospital as a result of their long-term conditions.
This is difficult to implement and a lot of those implementation challenges relate to things that business schools know about and can research and educate people about. It requires, for example, work force development and taking resource away from doctors and putting it towards cheaper labor, while still ensuring quality.
There would be organizational resistance because hospitals rely on people coming through their doors for income. If we stop people coming through the doors, we've got to reallocate the resource somewhere. Therefore, within the NHS, you might get battles between primary care providers, mental healthcare providers and acute providers.
When we start looking cross sector, there’s the possibility of moving money from healthcare and the NHS to local authority. However, there's not enough money for the NHS and there is not enough money for the local authority.
So, what about bringing in the private sector? That in itself is also associated with a number of problems. The benefits of new ideas such as private-public partnerships are slow to realize, if they're ever realized.
The business school is well positioned to address those problems.
With regards to the managerial level, something I think people need to be aware of is that general management costs are amongst the lowest in the NHS compared to other countries. In any one hospital, general managers typically only constitute 3% of the workforce.
The important managerial capability, indeed, doesn't come from them. It comes from hybrid managers, who are doctors or nurses working in managerial roles where they combine clinical and managerial responsibility.
A recent study by the King's Fund shows that these hybrid managers constitute 30% of the workforce in any hospital. One of the problems with this is what happens to a doctor or a nurse when they move into a managerial role. Typically, it's something that feels uncomfortable for them. It represents a transition.
Business schools can do research around that problem and more importantly, they can provide educational interventions to help doctors and nurses cope with that transition and enhance their ability in a managerial role.
I absolutely counter the populist view propagated by politicians and in the media about the value of mangers in the NHS. It actually needs better management, maybe even more management, not less. That may not mean more managers, and it may not mean ‘pure play’ general managers, but it's about enhancing a hybrid managerial capability.
The business of making healthcare work
What insights can be used from other sectors?
What we have had is a generic transfer of private sector management and organization models to the public sector. In fact, public sector organizations, particularly hospitals, are much more complex than any private sector organization.
In the 1980s, John Harvey-Jones did a troubleshooting series where he turned around a number of companies, one of which involved him visiting the Shropshire Health Authority and looking at how to reconfigure hospital provision.
He said it's unmanageable and that all the things learned in the private sector that would constitute the right management model could not be applied as public sector organizations are too complex.
More recently, Mintzberg reinforced that. In essence, he said that even the best manager of a corporate organization would struggle to manage a complex organization like a hospital.
That doesn’t mean that models from the private sector can't be transferred. It's not necessarily a problem of principle, but a problem of implementation.
There are private sector models of quality management service improvement that we can apply, but the context in which they're being implemented needs to be understood and they have to be implemented with sensitivity to that context. Otherwise, when you intervene, you end up with a failure and a principle that could have been quite useful ends up being dismissed.
What needs to be done to make healthcare more efficient?
It's not just about reduction in costs. Quality, innovation, prevention and productivity should be sustained together.
For example, innovation can improve quality towards prevention at the same time as it is productive because you stop the revolving door syndrome, where people go out of hospital only to come back in some weeks later. If you can prevent people going into hospital in the first place, you'll reap the rewards of cost saving .
Indeed, much of the costs are coming from re-admission and GPs seeing the same patient 40 or 50 times in a year. There may well be a limited number of extended families taking up a disproportionate amount of healthcare that could be dealt with in a more preventative way and in a more collaborative way by putting education, social care, housing, healthcare etc. together.
Please can you outline the project your team completed with Nottingham University Hospitals NHS Trust?
The project with Nottingham University Hospital's Trust was funded by the National Institute of Health Research (NIHR). They have a program called Health Services and Delivery Research (HS & DR) which, largely focuses on service delivery, a significant component of which is the organizational management of service delivery. That’s something business school academics like me have expertise in. That's where we make a contribution.
Much of my research funding comes from NIHR HS & DR. The project at Nottingham University Hospital's Trust, which also encompassed Heart of England Foundation Trust and Sherwood Forest Hospital's Trust, was about elderly care and the serious incidents that occur in elderly care. The three most common incidents concern falls, medication management problems and transition within and between the hospital and other settings. These problems tend to be related in part.
We are looking at what hospitals are doing regarding the response to serious incidents for those important issues in elderly care and, in particular, what the role of hybrid middle managers is in responding to those issues.
Hybrid managers are ideally placed as linking pins up and down the organization to make sure that lessons are gleaned from the clinical frontline to inform better practice and strategic change.
With regard to your bigger question about the aging population and older people going into hospital, a current project I am working on at the moment is looking at CCG-led commissioning networks, to reduce needless admissions of older patients to hospitals. The problem lies outside of hospitals and we need to commission interventions that will stop people going into hospital and provide care outside of hospitals.
Did you manage to reduce the number of falls recorded by the Trust?
Obviously, we are not the clinical frontline people. We were invited by their executive team to look at the processes and report back to the clinical risk committee, following which we engaged with people in the area where, for example, falls were most frequent.
We brought their clinical teams together to talk to them about our findings. We then tasked them with acting on the issues that had arisen as problematic and in need of fixing.
We are going back in six to nine months time to follow that up and ask them whether they have taken the actions that emerged through the root cost analysis process.
I think then we'll find out whether we have had an effect. Some of the clinicians, the geriatricians and executive management felt our intervention was hugely useful and significant in terms of how they would move forward in this area.
What impact can ‘hybrid managers’ have on healthcare?
I just think that they're the key people. Many people are hybrid managers. Indeed, they’re trying to blend managerial logics and clinical logics to provide effective and efficient care, which is absolutely key and that goes right up to chief executive level.
There are very few chief executives in this country who are doctors, for example. The exact opposite is the case in the U.S. where medical management is well established and often the chief executive is a doctor. However, we just don't seem to have gone down that avenue and I think it’s partly because doctors don't see it as an attractive sort of career or position for themselves.
Why don’t doctors in the UK see management as an attractive career choice? Would you recommend introducing incentives?
Most doctors would get to a certain level, medical consultant or perhaps a medical director, and then think to themselves that they really don’t want all the accountability that goes with being a chief executive.
A chief executive is responsible for anything that happens. They may be responsible for a number of hospitals, which are huge places and you have a limited degree of control over clinical activity. Yet, you're responsible for that. Similarly, if chief executives don’t hit the waiting list or waiting time goals, they can be dismissed for that.
Then there's the salary differential. I have sat as a nonexecutive on a board and I have seen the salaries of both executive directors and doctors. There have been a significant number of doctors who've earned much more than chief executives. Now, what career route are they going to take? What's the incentive when you consider the levels of accountability?
I also think that management is seen as dirty work or the “dark side” by doctors, meaning they tend to lose legitimacy with their peers if they move across to a managerial role. I think that's probably less acute for doctors, but it's certainly something I've observed as acute for nurses.
How important do you think innovation will be in tackling rising healthcare costs going forwards?
It's absolutely crucial. There's no way we're going to be able to cope with this ticking time bomb of the aging population anyway without innovation, let alone an unhealthy aging population with comorbidity.
I've already highlighted how a significant increase in GDP is going to be devoted to healthcare if we continue along our current trajectory.
It's about prevention and reorganizing healthcare so it's delivered outside the hospital. It’s also about a degree of self-management on our part and a lot more public health intervention so that we lead healthy lifestyles as we age. A revolution is required and there's not even a choice about it.
Where can readers find more information?
More information can be found in the following article: http://www.wbs.ac.uk/wbs2012/assets/PDF/downloads/press/david-brindle-healthcare-wbs-core-edition-two-online.pdf
If you would like access to the expertise of Warwick Business School please visit their Organising Healthcare Research Network (OHRN) website: http://www.wbs.ac.uk/research/specialisms/research-centres/organising-healthcare-research-network/
About Professor Graeme Currie
Graeme Currie is Professor of Public Management at Warwick Business School, England. His main research interests are in healthcare organization and management, specifically leadership, strategic change, human resource management, knowledge management.
He is deputy director of a translational health research institute, called NIHR CLAHRC West Midlands, where he leads on research about getting evidence into practice.
Currently, he leads further large scale research, funded by NIHR (National Institute for Health Research, UK), into commissioning service interventions to reduce needless admissions of older people into hospital.
In a previous life, prior to becoming an academic, Graeme worked in an organization development role for a car manufacturer and then for the National Health Service (NHS).
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