HMPI

Clear Vision+ Great Culture + Disciplined Strategy = Winning Innovation

Steve Bonner, Entrepreneur in Residence, Harvard Business School, and former CEO, Cancer Treatment Centers of America

Abstract

What is the message?

While success of innovation is not guaranteed, several key elements are part of the pathway to possible wins: strategic purification, culture optimization, and structure and decision-making.

What is the evidence?

The author draws on his experience as a successful entrepreneur.

Submitted: July 1, 2017; accepted after review: July 29, 2017

Cite as: Steve Bonner. 2017. Clear Vision+ Great Culture + Disciplined Strategy = Winning Innovation. Health Management Policy and Innovation, Volume 2, Issue 2.

Download PDF

Maximizing an Idea’s Chance of Success

Powerful business ideas surround us. The human instinct for improvement and success, inspired by the imperfect world around us, and accelerated by exploding access to information and new technologies, delivers limitless ideas that seem intuitively destined for success.

In the business world, of course, some great ideas will fail, and others that seem less innovative may succeed wildly. How can we as business leaders quickly discern which might be commercially viable and which are more likely to fail?

More importantly, what can we do to maximize an idea’s chance for success? Answering that question has been the focus of my life for the last few decades. In addition, in my role as an educator and mentor, I have been trying to not only answer that question, but to improve our education with tools and processes that will drive great ideas to market success.

While my focus has been on innovation in healthcare, these tools are universally applicable to industry sectors. For example, I have personally applied them in healthcare; before that in financial services; and also in business-to-business-to-consumer information services. These settings have included various governance structures: publicly traded companies, privately held companies, mutual ownership, and even not-for-profit organizations.

Three Categories: Focus Your Efforts

I group the tools and processes in three categories: strategic purification, culture optimization, and structure and decision-making.

Strategic Purification

If you know where you are going and what will drive success, you can focus all resources there and avoid distracting intrusions. An idea is not a strategy; an idea without a strategic plan to move it to action is almost certain to flatline. Here are some steps to strategic purification:

  1. Customers: Identify your customers and study them incessantly. Define the consumer value inherent in the new solutions you offer; define the nature and durability of customer relationships; define how you will communicate with, and serve, your customers; ascertain how their needs will evolve as you deliver your value. Remember that once you have solved a customer need, you are irrelevant to their future unless you can discern and deliver solutions to new desires.Example: At Cancer Treatment Centers of America (CTCA) we deployed Net Promoter Score measures with patients and their families every day in every center. We also invited a patient to attend every board meeting to share their insights on the CTCA experience. We engaged patients in the process of designing new centers and improving existing ones.
  2. Elevator speech: Express your idea in a very concise, compelling way that will get eyebrows raising and heads nodding at the concept. This will not only help you with key audiences, it will sharpen your own thinking, and it will make sure you know the key elements of your idea. Pare away everything that is not essential to the idea.Example: At CTCA we developed our vision: “To be recognized by people living with cancer as the premier center for healing and hope!”
  3. Differentiation: Specifically define your competitive differentiation—identify existing competitors and how they succeed, followed quickly with your description of what will make your innovation different. Include an articulation of how you will continue to outdistance the competition, knowing that they will respond to your intrusion. Express all the aspects of differentiation as specifically as you can. This will help you keep your eye on the ball at the beginning, but also it will help push you to stay in front of the competition as they start to react to your intrusion in the market.Example: At CTCA we pursued differentiation though excellence in four areas: (1) service and information delivery, (2) patient loyalty, (3) talent management, and (4) market and customer research.
  4. Unique attributes: Identify and protect truly unique attributes of your innovation—consider intellectual property you are creating, and make sure it is protected by patents, trademarks, copyrights…and secrecy. This will also make sure you are not encroaching on anyone else’s IP without permission. Blanket your communication of these unique attributes with confidentiality and non-disclosure agreements in all cases.
  5. Financial models: Create reliable financial models for your innovation, including at least five years of projections for your balance sheet, income statement, cash flow, and capital investments. Identify sources of capital, and consider alternative funding models to sustain the business while also protecting your personal innovation. (For healthcare, specific analysis is required to understand how you will get paid for your goods and services, given prevailing separation between the consumer and the payer.)
  6. Talent: Build an insightful model of the talent you will require to start and scale the business. Consider the key roles and skills you will need and assess the availability of those attributes in the talent pool you will access.

Culture Optimization

Successful implementation of innovation demands a discreet, unique culture that includes shared passion, an appetite for smart risks, an appreciation for scarcity, and a work ethic that will not be deterred by setbacks and surprises. Innovation commands high levels of intelligence, high-volume curiosity, and a shared sense of humor. Entrepreneurs should also share a commitment to clarity and a willingness to discover and share the truth transparently with each other.

  1. Mission: Expand your elevator speech into a clear articulation of mission, vision, values, and your brand promise. Include your entire team in creating these tools, and make them a part of your daily culture.
  2. Recruit: Recruit consciously to these cultural values. Every new hire will be a cultural terrorist, not intentionally, but unless you recruit and onboard them to your unique culture, they will bring the cultures from their past into your company.
  3. Rewards: Establish recognition and reward systems that align your team, and incent the behaviors for success. Consider an incentive plan that includes every single employee, sharing the value they create.
  4. Information: Create direct pipelines and interactive information flow with your customers. Achieve an intimacy that will keep you moving with the needs of your customers and that will help them tell you what you need to do to improve.
  5. Dashboard: Extract simplicity and focus from complexity through an enterprise dashboard that everyone understands and contributes to. This should include the significant few (5 to 10) metrics that will reveal the key successes, challenges, and shortfalls to keep the collective eyes on the right targets.

Structure and Decision-Making

Great implementation of great ideas implies swift decision-making and optimal authority in the hands of those who are closest to the customer. If you have a clear culture and aligned strategy, you can confidently delegate lots of authority to your frontline team members.

  1. Plans: Well-defined and aggressive annual plans and budgets create a framework for empowerment.
  2. Filters: Creating and sharing key strategic filters, providing a context for decision-making, also enhances the framework for empowerment.
  3. Communicate: Publicly commit to a culture of innovation, and recognize your leading innovators. Catch people doing the right things and shine a light on them for all to see.

A Final Point

Above all, have fun! Innovation is a special calling. It is intense, and you should make sure you surround yourself with other folks who share your passion and the quest for success.

 

Improving the Management Skills of Primary Healthcare Leaders: The “Mid-Level Management Training” Program in Nigeria

Nora Brown, MA, USAID; Sandra Dratler, DrPH, University of California, Berkeley; Muhammad Pate, MD, Duke University; Kristiana Raube, PhD, University of California, Berkeley; Will Mitchell, PhD, University of Toronto

Contact: William Mitchell, william.mitchell@Rotman.Utoronto.Ca

Abstract

What is the message?

This article describes the Mid-Level Management Training (MLMT) program in Nigeria, which provided ten months of health management training to about 100 clinical and administrative leaders in the Nigeria public primary healthcare sector from December 2009 through October 2010.

  • The MLMT was organized by the National Primary Health Care Development Agency (NPHCDA) of Nigeria, with technical support from Duke University, the University of California at Berkeley, and the Global Business School Network in the U.S. Participants from 36 of Nigeria’s states and Federal Capital Territory undertook a series of six week-long residencies in Abuja, the capital of Nigeria.
  • The summary evaluation of the program is that the curriculum identified relevant topics and that participants gained knowledge and confidence in the topics; moreover, the largest improvements occurred in a complex problem-solving exercise based on practical applications, which is arguably the most relevant evaluation.

What is the evidence?

Experience of the authors with the program, plus detailed program evaluations.

Links: Appendix A (curriculum philosophy) | Appendix B (curriculum detail)

Submitted: June 1, 2017; accepted after review, August 29, 2017.

Cite as: Nora Brown, Sandra Dratler, Muhammad Pate, Kristiana Raube, and Will Mitchell. 2017. Improving the Management Skills of Primary Healthcare Leaders: The “Mid-Level Management Training” Program in Nigeria. Health Management Policy and Innovation, Volume 2, Issue 2.

Download PDF

Introduction: The MLMT

In December 2009, eighty-four mid-level managers from primary healthcare facilities across Nigeria had thirty minutes to complete a problem-solving exercise:

“Assume that as a manager in a primary healthcare organization, you have been asked to come up with a plan to help your organization achieve an important element within one of the Millennium Development Goals by 2015. Using the data below, choose one area of focus for your plan:

[targets: (1) reduce child mortality; (2) reduce under-five mortality; (3) increase percentage of one-year-olds fully immunized; (4) reduce maternal mortality; (5) increase attended deliveries; (6) reverse the spread of HIV/AIDS; (7) reverse the spread of malaria]

In the next 30 minutes, outline a plan (using bullet points) using management approaches to achieve a MDG of your choosing. The management approaches may include skills such as statistics, computer applications, communication, strategy, financing, leadership techniques, client orientation, and monitoring & evaluation. Remember to focus on strategies that you as a manager can affect.”

Based on criteria from healthcare leaders and business faculty from the U.S. and Nigeria, the participants achieved a mean score of 32/100, ranging from 5 to 60. Clearly, there was room for improvement.

The test-takers were about to participate in the inaugural offering of the Mid-Level Management Training (MLMT) program, sponsored by the National Primary Health Care Development Agency (NPHCDA) of Nigeria. The MLMT would last until October 2010; the program included six week-long residencies held in the national capital, Abuja, plus inter-session projects.

The MLMT has a simple and powerful goal: To improve management skills so that public primary healthcare facilities can provide better services. With 170 million people, Nigeria is the most populous country in Africa. Health outcomes in the country are improving, particularly with increased emphasis on strengthening primary healthcare services; from 1990 to 2009–2010, life expectancy increased from 48 years to 54 years, while infant mortality during the first year of life decreased from 126 to 88 per 1,000 births.[1] Despite these gains, Nigeria has a long way to go to reach its Millennium Development Goals. The initial problem-solving exercise suggested that participants had opportunities improve their management skills and, in turn, help their facilities improve healthcare.

The World Bank’s 1999 report, Better Health for Africa (2), suggested that achieving better health is often constrained by poor management of health services. Limited but growing evidence from the gray literature of on-site reports and a small body of academic studies is beginning to document health management education programs (3–13). Reports suggest that most management education for health facility workers in low- and middle-income countries involves short courses. In parallel, there is growing interest in longer programs that are beginning to be developed at business and public health schools in Kenya, South Africa, Uganda, and elsewhere, sometimes with initial assistance from foreign universities. The MLMT program, sponsored by the NPHCDA, was designed to provide extended management education for middle-level managers in government-run healthcare facilities in Nigeria.

The NPHCDA is a parastatal agency linked to Nigeria’s Federal Ministry of Health, supporting more than 1,000 primary healthcare facilities (http://nphcda.org/index.php/history). The NPHCDA manages programs for vaccination, midwifery training, and other services (14). The agency views management training as a critical complement to its clinical services.

The MLMT was initiated by the CEO of the NPHCDA, Dr. Muhammad Pate (Dr. Pate later served as Minister for State for Health in Nigeria), together with agency staff members under the leadership of Dr. David Malgwi. Planning for the MLMT by staff members of the NPHCDA and faculty from a Duke University in the U.S., where Dr. Pate earned an MBA degree, began in 2009. The Health Sector Management program at Duke University’s Fuqua School of Business provided technical assistance for the inaugural MLMT.

Format and Participants

Curriculum

The MLMT teaches basic skills of general management and health policy, based on an approach of “contextualization in the classroom.” The format combines skills and experience of “content experts” who have knowledge of general management and health policy issues, together with “context experts” with relevant health sector experience.

The MLMT curriculum covered principles in twelve topics. The topics included epidemiology/statistics, leadership, financial management, communications, strategic planning, health economics, national healthcare policies, supply chain and logistics, quality of care, computer skills, and information systems. These topics encompass key elements of leadership and analysis.

Faculty from local institutions with experience teaching relevant concepts served as what the program referred to as content experts. These institutions included business and public health schools, plus Nigeria’s Center for Management Development. The faculty members were recruited via contacts of the NPHCDA.

Officials of the NPHCDA and several government agencies with relevant experience in practice served as what the program referred to as context experts. NPHCDA staff members have led vaccination, midwifery training, and other programs; this experience helped link management principles to participants’ experience. The NPHCDA also has extensive public- and private-sector contact, which helped identify other context experts.

The content and context experts worked together to plan and deliver sessions. Sessions, which usually lasted ninety minutes, typically included presentation of core principles by the content expert, examples of their use by the context expert, and ongoing discussion with the participants about their experience. Most sessions were followed by “skills stations” in which small groups of participants applied material from the sessions.

The six residencies, each lasting a week, contained subsets of the twelve core topics threaded together through the program. The threading reinforced topical interdependence. The appendices describe the program format in some detail.

Each participant applied the skills to an ongoing project at her or his facility between the sessions. Projects included improving data collection, expanding immunization and maternal and child health programs, conducting computer training in their organizations, and other topics. Participants provided updates and presentations about their work at the beginning of each session. Staff members from the NPHCDA reviewed the presentations and reports.

The program required substantial financial commitment. Core funding from the Head of the Civil Service of the Federation supported faculty stipends, program infrastructure (rental for training space and lodging, meals, and travel for participants), materials, and other expenses. The Bill and Melinda Gates Foundation supported international travel, materials development, and program evaluation. Duke’s Health Sector Management program supported initial travel costs.

Participants

Healthcare officials in each of Nigeria’s 36 states plus the FCT nominated five participants. The NPHCDA then invited three participants from each jurisdiction, basing choices on responsibilities, span of control, and education. Participants received invitations in early December for a program that would begin ten days later. Despite the short notice, 84 of the 121 invited participants joined the first session, with another 19 joining during the second session in February 2010 (people who joined in February came early for a two-day catch-up workshop). Of the 103 participants (55 men and 48 women), 96 remained through the final exam.

Participants had varied positions and responsibilities. The largest cohorts were healthcare administrators (32%), community health workers (27%), registered nurses (17%), and physicians (17%). Participants were responsible for community health education, maternal and child healthcare, immunization, communicable and non-communicable diseases, and other functions; more than half of the participants had at least two responsibilities (indeed, 17% reported responsibilities for “all PHC areas”). Most participants had substantial experience in their organizations (16.8 years mean) and current positions (5.0 years), with an average of 52 direct reports.

Evaluation: Relevance and Learning

The Global Business School Network (http://www.gbsnonline.org/) and two faculty members from the University of California Berkeley conducted five sets of within-subject evaluations.

Relevance and program evaluation

At the beginning of the program, participants indicated the frequency of use during the past three months (rarely, sometimes, often, always) of epidemiology, leadership, financial management, communications/presentations, and strategic planning. More than 50 percent of the individual participants used four of the five skills at least “often,” while epidemiology reached often-level use for just under 50 percent of individuals and more than 50 percent for their organizations. Hence, each area was relevant.

At the end of the program, the participants evaluated the quality of the MLMT. Scores reached 4.1/5 for instruction and assignments, 4.2 for participants, 4.4 for content, and 4.6 for relevance. Despite noting opportunities to improve, participants rated each aspect well.

Topical knowledge

Pre- and post-material evaluations focused on six subjects. The evaluation team used materials from the instructors and the team members’ knowledge of the topic to develop the tests. Each test included five to ten questions. Participants completed the post-assessments after the second session of each topic.

Scores improved in five topics (Table 1). Substantial gains occurred in epidemiology and health economics, which had the lowest bases (epidemiology: 48% to 65%; health economics: 51% to 60%). Strategic planning increased from 72% to 79%. The participants began with higher levels for leadership and communications, reflecting high use of these skills within their positions, yet still improved (leadership: 83% to 94%; communications: 81% to 88%). All five scores increased significantly (p<0.01, paired sample t-tests).

Table 1. Pre- and post-instruction tests of topical knowledge

All five scores increased significantly (p<0.01, paired sample t-tests)

 

By contrast, financial management had little improvement after the second session (57% to 58%). The result for this topic may reflect initial choices of faculty, who had some difficulty connecting with the participants. After observing these results at a mid-point of the MLMT, the curriculum added a supplemental financial management class during the final session.

Confidence and empowerment

Before and after receiving instruction, participants reported their confidence in using six topics. Epidemiology, which had the lowest pre-instruction confidence, produced the greatest increase, from 3.4 to 4.3. For financial management, despite the relatively low test scores, confidence grew from 3.5 to 4.2. Participants indicated relatively high confidence initial levels in leadership, communications, and strategic planning; even these areas showed increased confidence by the end of the program (each moving from 3.9 to at least 4.1). Mean confidence in all six comparisons increased significantly (p<0.01; paired sample t-tests).

Pre- and post-program evaluations also found increased leadership empowerment, including making decisions and bringing about change. Average responses for empowerment to make decisions in participants’ current positions rose from 3.6 to 4.5; perceived ability to bring about change rose from 4.0 to 4.4 (both p<0.01; paired sample t-tests). Importantly, for both questions, the lower tails of the distributions rose substantially. More than a third of participants reported scores below 4 in the pre-program reports; fewer than 10 percent reported post-program scores of 3 (none below 3). The program appears to have helped participants who felt marginalized within their organizations gain self-assurance about their ability to lead.

Final exam

The participants completed a 100-question multiple-choice final exam, covering nine topics. Instructors provided the questions. The mean score was 76 percent (Table 2), ranging from 39 to 93 percent. Within topics, results ranged from 82 percent for individual leadership (9 questions) to 55 percent for communications (6 questions). The lower results for communications may arise because the instructors who set the questions were not those who delivered much of the material, so that the students may not have been tested on material that they learned.

Table 2. Final exam: Correct responses (96 participants)

Intriguingly, the results for financial management (77%) were stronger than the results following the first two financial management sessions. The difference likely stems from the supplemental financial management session that occurred after the evaluations of the initial sessions reported limited learning.

Problem-solving exercise (PSE)

At the beginning and end of the MLMT, participants completed the problem-solving exercise we described in the introduction. The exercise sought to assess the integrative skills that they would need to address the complex problems that their organizations faced. The same team scored both PSEs. Scores rose substantially from December 2009 to October 2010 (Table 3): from means of 32 (range: 5 to 60) to 55 (range: 14 to 88) (p<0.01; paired sample t-test). Indeed, the final mean score approached the maximum initial score. This was strong evidence about the learning that took place during the course of the program.

Table 3. Pre- and post-program PSE results (77 participants)

The pre- and post-program differences are statistically significant (p<0.01; paired sample t-test)

 

We investigated how the PSE scores related to education, sex, age, and years in organization or position. Only education level had a substantial relationship with PSE gains (r=0.36), and even there, the correlation arose from high starting scores and corresponding low increases for 11 participants at one of the lower levels of education (two-year national diplomas). Indeed, even three participants with the lowest education level (grade 12) moved from very low scores on the PSE pre-test to near the mean in the post-test. The main implication is that the program led to increased skills for participants with multiple backgrounds.

We also assessed correlations between PSE and final exam scores. Intriguingly, final exam scores had weak correlation with pre-program PSE (r=0.14) but stronger correlation with PSE increases (r=0.48) and post-program PSE (r=0.59). These results reinforce the conclusion that participants gained substantial knowledge.

Implications

The evaluations have two summary implications. First, the MLMT identified relevant topics. Second, participants gained knowledge and confidence in the topics. Moreover, the largest improvements occurred in the problem-solving exercise, which is arguably the most relevant evaluation—the complex challenges of the PSE reflect the practical activities that are the heart of the MLMT.

Clearly, the identification strategy of the evaluation has substantial limits. Although we examined multiple dimensions, the assessments investigated short-term impact and do not include a control group. We sought post-program review of the participants and their organizations, ideally including control groups who had not yet taken the MLMT, but logistic challenges made this impossible. The NPHCDA plans longer-term reviews as part of the ongoing MLMT.

We conclude by considering factors that underlay the initial successes of the MLMT and, in turn, opportunities that lie ahead. We stress that these points are not definitive conclusions, but rather offer a basis for discussion.

Success factors

We believe that the success of the MLMT stems from in achieving balance across what we refer to as the “tripod” of content, instruction, and program management.

Content is the first leg of the tripod. The emphasis on basic principles of core management, which the participants reported were highly relevant, coupled with active “contextualization in the classroom” was important. Contextualization connects the core skills to the participants’ daily management activities: in classroom sessions, skills stations, and ongoing projects. Contextualization helped provide robust frameworks with links to participants’ needs, plus relevant practice in using the frameworks.

Instruction is the second leg. Shared instruction by content and context experts linked framing with applications. The fact that local faculty provided almost all the instruction meant that lectures and discussion reflected the participants’ context. One of our favorite written evaluations from a session delivered by a non-local instructor (one of the authors) drove this point home for us: “What is this white guy doing trying to teach us? I don’t understand a word he is saying.” Even though all instructors, including local faculty, taught in English, effective communication required local nuance. Local faculty—whether academic instructors or practicing staff—could connect directly to the participants, speaking not just the formal language of English but also their daily language of practice.

Local program management is the third leg. Local staff organized the sessions, identified and communicated with participants and their superiors, and delivered the MLMT. Without local leadership, it would have been impossible to identify strong participants and, in turn, maintain their commitment through the ten months of the program. In parallel, local responsibility for primary funding created local commitment to the program.

Opportunities

Substantial work remains. First, discussion about content with participants suggests ongoing need to find a balance between generic management skills and relevant applications in the environments of Nigeria, a setting that is both heterogeneous across regions and dynamic across time. Moreover, there is a need for continued experimentation with combinations of in-depth instruction about topics within sessions and threaded instruction about related material across sessions.

Second, instruction generates multiple challenges. Participants evaluated most faculty members highly but did not connect well with a few instructors. Effective instruction requires faculty who are knowledgeable, engaged in the classroom, and willing to coordinate with other instructors. One of the takeaways from the initial differences in finance versus other topics was that success reflected instructors who worked closely with each other and engaged participants in discussions and applications.

In turn, at least four refinements have high potential. First, building a base of local materials would be valuable, particularly in translating generic skills into local contexts. Second, it would be useful to build “train the trainer” expertise for both classroom faculty and project mentors. Third, deeper collaboration with local business schools would help provide program management and instructional skills need for sustainability. Fourth, it would be useful to teach groups of colleagues from individual facilities, rather than bring only one individual at a time, or explicitly teach participants how to teach their colleagues back at home.

Clearly, management education needs to reach beyond the MLMT’s initial one hundred participants, to the thousands of people who provide primary healthcare services in Nigeria. We believe that the MLMT provides a strong basis for continuing health management education. The program contributed to the participants’ confidence and management knowledge. These skills are key complements to their clinical skills and the healthcare missions of their facilities.

Indeed, the MLMT has spawned a successor project. With initial support from the Nigerian Ministry of Health, the Gates Foundation, and local business leaders, in 2015, an independent Healthcare Leadership Academy (HLA) was established in the country.[2] Drawing on the lessons learned from the MLMT as well as other relevant programs, the HLA now offers regular health management programs for both public and private sector health care leaders in Nigeria. Thus, the initial success of the MLMT provided a stepping stone to a broader based initiative.

References

  1. World Health Organization. 2012. World Health Statistics, 2012. World Health Organization, Geneva.
  2. World Bank. 1999. Better Health in Africa: Experience and Lessons Learned. Washington, DC: The World Bank.
  3. Aina, O. 2011 (August 4). Health-care in Nigeria can’t improve beyond health workers capacity to manage WELL. Nigerian Health Journal. http://nigerianhealthjournal.com/?p=1219
  4. Briggs D.S., P. Tejativaddhana, M. Cruickshank, Fraser J, Campbell S. 2010. “The Thai-Australian Health Alliance: Developing Health Management Capacity and Sustainability of Primary Health Care Services”. Education for Health, 23 (3): 457.
  5. Egger D., P. Travis, D. Dovlo, L. Hawken. 2005. “Strengthening Management in Low Income Countries. Making Health systems Work”. Working Paper No.1, Department of Health Systems Policies and Operations. Evidence and Information for Policy. WHO/EIP/Health Systems. http://www.who.int/management/working_paper_1_en_opt.pdf.
  6. Egger D., E. Ollier. 2007. “Managing the Health Millennium Development Goals: The Challenge of Management Strengthening. Working Paper No. 8. Geneva: Department for Health Policy, Development and Services, Health Systems and Services, World Health Organization.
  7. Lee K., G. Walt, A. Haines. 2004. “The challenge to Improve Global Health: Financing the Millennium Development Goals. Journal of the American Medical Association, 291(21): 2636-8.
  8. Lewin S., J.N. Lavis, A.D. Oxman, G. Bastías, M. Chopra, A. Ciapponi, A. Flottorp, S.G. Martí, T. Pantoja, G. Rada, N. Souza, S. Treweek, C.S. Wiysonge, A. Haines. 2008. “Supporting the Delivery of Cost-effective Interventions in Primary Health-care Systems in Low-income and Middle-income Countries: An Overview of Systematic Reviews.” The Lancet, 372: 928-939.
  9. Management Sciences for Health. 2010. “Linking Management and Leadership Training to Service Delivery Outcomes”. Report on the impact of the Leadership Development Program (LDP) on service delivery outcomes in Kenya.  http://www.msh.org/projects/lms/NewsRoom/upload/Kenya-LDP-4pager_2010-10-05.pdf.
  10. Mansour, M., J.B. Mansour, and A. HE Swesy. 2010. “Scaling Up Proven Public Health Interventions through a Locally Owned and Sustained Leadership Development Programme in Rural Upper Egypt.” Human Resources for Health 8:1.  http://www.human-resources-health.com/content/8/1/1
  11. Moe J., C. Hope, L. Chhatwal, N. Homaifar, T. Koo, A. Maiga, G. Scheidler, M. Merson. 2008. “Private Health Sector Innovation in Response to the Human Resources for Health Global Crisis”, Report published by the Duke Global Health Institute. http://globalhealth.duke.edu/announcements/2008/DukeUniversityFinal_Report7-15-08.doc.pdf
  12. Thomas S., G. Mooney, S. Mbatsha. 2007. “The MESH approach: Strengthening Public Health Systems for the MDGs.” Health Policy, 83(2-3): 180-185.
  13. Travis, P., S. Bennett, A. Haines, T. Pang, Z. Bhutta, A. A. Hyder, N.R. Pielemeier, A. Mills, T. Evans. 2004. “Overcoming Health-systems Constraints to Achieve the Millennium Development Goals.” The Lancet, 364: 900-906.
  14. National Primary Health Care Development Agency of Nigeria. 2012. “2012 Nigeria Polio Eradication Emergency Plan” http://www.polioeradication.org/Portals/0/Document/Aboutus/Governance/IMB/6IMBMeeting/7.5_6IMB.pdf

 

[1] Rates for Africa in 2009–2010 were 54 years (life expectancy) and 75 deaths (infant mortality), compared to 76 years and 14 deaths in the Americas; 75 years and 11 deaths in Europe. (1)

[2] http://hlaafrica.org/

Strengthening the Private Health Sector in Africa: The PharmAccess Solution

Sashidaran Moodley, MD, CareMore Health Plan, Los Angeles, CA; Anant Vasudevan, MD, Brigham and Women’s Hospital, Harvard Medical School; Kevin Schulman, MD, Duke University

Contact: Kevin Schulman kevin.schulman@duke.edu

Abstract

What is the message?

A private-sector healthcare service has created a three-pronged approach addressing supply and demand for healthcare services through certifying quality of care, offering micro-finance for providers, and facilitating mobile payments for patients that is improving access to high-quality care in Kenya and elsewhere in Africa.

What is the evidence?

The article highlights the experience of the PharmAccess NGO, which supports private-sector health delivery in Tanzania, Kenya, and elsewhere in Africa.

Submitted: January 25, 2017; Accepted after review: August 25, 2017

Cite as: Sashidaran Moodley, Anant Vasudevan, and Kevin Schulman. 2017. Strengthening the Private Health Sector in Africa: the PharmAccess Solution. Health Management Policy and Innovation, Volume 2, Issue 2.

Adapted From: Schulman, Kevin, Sashidaran Moodley, and Anant Vasudevan. “PharmAccess and the M-TIBA Platform: Leveraging Digital Technology in the Developing World.” Harvard Business School Case 317-103, March 2017.

Download PDF

Introduction

Global health often focuses on the role of the public sector in healthcare delivery. Yet, in many of the countries of Africa, the majority of healthcare services are actually delivered by the private sector. Despite the importance of private healthcare delivery, these systems remain underdeveloped across the continent. Additionally, international resources focused on healthcare or health system strengthening often are directed to the public healthcare sector, even when there is little chance of success of these efforts, further undermining potential contributions by the private sector.

At the core, the challenge in many countries in Africa—and around the world—is to attract capital and resources to the private healthcare markets. In countries with large formal sectors of the economy, this generally includes some level of provision for employer-based insurance schemes. However, in countries that have large informal sectors of their economies, employer-based approaches are not sufficient.

PharmAccess is an Amsterdam-based NGO that since 2001 has been working to strengthen the private health sector in Tanzania, Kenya, and elsewhere in Africa. PharmAccess began by working with Dutch private employers in Africa to develop private health insurance for African employees. They then worked to develop re-insurance programs to sustain private health insurance for employers caring for patients infected with HIV. In this work, they were able to observe some of the many challenges faced by the private sector as government investment and donor directed funding crowded-out efforts to recruit private capital for the health sector from within the local markets.

Reflecting on a decade of experience in the field, PharmAccess was realistic in their assessment of the challenges on the ground. On the supply side, clinical services suffered from underinvestment and lack of capital. This underinvestment led to worker shortages and, sometimes, to appalling quality of clinical services. On the demand side, these markets suffered from a lack of demand for medical services—because there is little demand for poor-quality medical care—and limited willingness to invest in scaling the care that was available.

By linking together supply and demand of healthcare services, PharmAccess realized that they needed to address both sides of the market simultaneously if they were going to have a significant impact. By articulating the model in this fashion, they made a conceptual link from considering healthcare as a market to envisioning healthcare as a network of suppliers and purchasers. Networks grow in value in a virtuous cycle, but collapse in value in a vicious cycle. By this definition, the private healthcare market in Africa was in the midst of a vicious cycle. PharmAccess began to formulate a hypothesis that to transform the market, they would have to transition from a vicious cycle to a virtuous cycle addressing supply and demand concurrently.

One striking result of this planning process was recognizing the need to focus on trust in developing their solution. At the core, PharmAccess saw healthcare as an exchange of services; namely the exchange of money for treatment. As with any platform or exchange, users—in this case patients, payers and providers—will only use the service if there is a high level of trust in the system. Patients need to feel confident that they will be seeing qualified physicians in a practice equipped to treat them, and providers need to feel confident that they will be reimbursed for their services by patients, insurers, or other payers. If there is no transparency at the exchange level, financial companies, including banks, investors, and insurers, will not enter the market. Thus, Pharmaccess needed to address trust as a core part of their strategy to create a virtuous cycle in the market, as Figure 1 depicts.

The PharmAccess Approach: Three Programs

The result of this planning process was a strategy they called the PharmAccess Approach, which would systematically build trust and strengthen the private healthcare market. To accomplish this goal, PharmAccess would address supply-and-demand issues concurrently in the market. On the supply side, they established quality standards and business and quality trainings for providers (SafeCare, 2011). In addition, they developed a small and medium-size enterprise (SME) financing scheme to allow providers to invest toward meeting these new standards (the Medical Credit Fund, 2009). On the demand side, they addressed demand for services by developing a trusted platform to pay for healthcare services, while providing payment assistance for the most vulnerable (M-TIBA, 2015).

The PharmAccess Approach developed into three mutually reinforcing programs that would be implemented concurrently: quality of care, micro-finance, and mobile health payments. The three programs, and all of the partners PharmAccess recruited to implement the programs, became the platform on which to build a new private healthcare economy (1). This remarkable effort initially focused on the private healthcare market in Kenya and has since expanded to Nigeria, Tanzania, and Ghana.

Program 1 (supply): Quality of care—SafeCare

SafeCare addresses the quality of facilities and services in healthcare. To help ensure broad recognition of SafeCare standards, PharmAccess partnered with two internationally recognized healthcare-quality review bodies, the Joint Commission International (JCI) and Council for Health Service Accreditation of Southern Africa (COHSASA). JCI is an offshoot of the major U.S. based healthcare accrediting organization. COHSASA is based in South Africa. The main focus of SafeCare would be on “bottom of the pyramid” facilities. The goal was to improve the quality and safety of healthcare for the lowest-income, resource-poor settings (2).

Enrolled healthcare facilities would proceed through a staged process of quality improvement. The program grades facilities into five levels. At the lowest end, a Level 1 facility is the most unsafe and high risk, typically with limited facilities for sanitation, medication storage, or waste management. As a facility becomes more adept at providing care that minimizes the risk of infection, complications, and improper diagnosis or treatment, the quality and safety of services improve and the facility progresses from Level 1 to Level 5. Through the SafeCare program, facilities are encouraged to adopt standardized clinical, financial, and managerial processes as well as develop better record keeping to allow analysis of clinical performance and to create a feedback loop for the facility. Once a facility reaches Level 5, it can start a process for accreditation through JCI or COHSASA.

Facilities enrolled in SafeCare are evaluated by PharmAccess against these performance metrics at least once every two years. They are graded on each of a set of quality items as compliant, partially complaint, non-compliant, or non-applicable. The evaluation is positioned as more of a learning opportunity and partnership where SafeCare representatives provide concrete recommendations to the clinic based on the metrics of how to improve quality and safety of care, and how to prioritize these efforts. Individual facilities are expected to improve their performance over time, with corresponding gains in their SafeCare level.

As of October 2016, 1,300 out of 9,000 relevant facilities in Kenya had enrolled in the SafeCare program. Of that number, 30 enrolled facilities had succeeded in achieving a SafeCare Level 3 and one had attained Level 4. Many larger facilities had internal quality-improvement meetings on a monthly basis to track their progress toward recommended benchmarks, although smaller facilities struggled to institutionalize quality improvement.

Program 2 (supply): Micro-finance programs for providers—Medical Credit Fund

PharmAccess’s Medical Credit Fund provides capital to small and medium-size healthcare facilities to improve the healthcare infrastructure in the private sector. The MCF was established in 2009 with support from private investors and had its first funding closing in 2012 with $28 million from Development Finance Institutions, Development Agencies, private investors, and donors. The MCF has received several awards for its innovative “layered capital” structure, which includes blending grants, equity, and debt financing. The MCF operates in Kenya, Nigeria, Tanzania, and Ghana (3).

The MCF defined high-impact clinics as small to medium-size facilities located in urban and rural areas. In terms of the lending program, the MCF program shares the risk of local bank loans to providers. The program provides training to bank staff to help originate loans, as well as to clinic providers to help them better manage their businesses.

MCF works closely with SafeCare to ensure that clinics receiving investments under this program are serious about improving quality of care. These steps help banks mitigate uncertainty in provider lending and serve to make investment capital accessible to providers at more tenable rates. The program helps open bank partners’ eyes to the opportunities of the healthcare SME market. Some partners have started developing their own loans products for providers, as well as assuming a growing share of the risk.

Structurally, the MCF program has trained around 1,000 loan officers in four countries with the plan to eventually shift the training burden to more local partners. MCF has achieved a stunning repayment rate of around 97 percent over 950 loans (4). The organization attributes its success and competitive advantage to “hard work,” consisting of a diligent loan-appraisal process, regular technical consultancy assistance to borrowers, an in-depth understanding of the clinics’ and doctors’ needs, and a steadfast focus on accountability (5).

Program 3 (demand): Creating a trusted mobile health payment platform—M-TIBA

PharmAccess considered the challenges of a payment model in Kenya. An estimated two out of five Kenyan patients lack the money needed to seek care at hospitals. Poor mothers and children are especially vulnerable. With limited financial means, patients must call on extended families for financial assistance in emergencies. For relatives, tracking whether friends and family used the financial assistance for intended purposes is virtually impossible.

Donors had an interest in addressing the access issues for vulnerable populations, but they typically work through public-sector facilities and were reluctant to address care delivery in the private sector, even when the private organizations were largely servicing the poor. The “informal settlements” at private facilities made accountability for use of funds difficult. Further, for donors and private investors, the resources involved in healthcare created a large risk of diversion of funds from what they saw as their core uses (6).

While these issues were in play, the financial market in Kenya was moving in a novel direction. In 2007, Safaricom, Kenya’s largest cellular provider launched M-PESA. M-PESA is a mobile-money system through which users can purchase credit and pay for day-to-day expenses using a virtual currency. Today, the Central Bank of Kenya estimates that 25 million customers use mobile money payment systems, representing US$24 billion of transferred funds annually (7). M-PESA accounts for more than 90 percent of mobile money transactions in Kenya (8).

In 2013, Safaricom reached out to PharmAccess to see if M-PESA could be leveraged more directly to support the healthcare sector in Kenya. The concept they came up with, M-TIBA (in Swahili “tiba” means treatment), was envisioned as a healthcare-focused version of M-PESA: a mobile health wallet allowing anyone with a SIM card to obtain, save, and spend funds for healthcare using a mobile device. That same year, a Memorandum of Understanding was signed between PharmAccess, Safaricom, and the M-Pesa Foundation to form the partnership.

The M-TIBA system aimed to address the financial access challenges in the private healthcare market. First, through M-TIBA, patients can save money specifically for healthcare. Patients can add this money to their M-TIBA account quickly and easily directly from their normal M-PESA account on their own mobile phone (to top up their M-PESA accounts, Kenyans can visit any of the more than 100,000 M-PESA agents located on virtually every block in Kenya). M-TIBA only allows payments for healthcare services at providers contracted by CarePay, as we describe below. Once funds are available, M-TIBA can transfer money directly to a healthcare provider or facility for services. Typical monthly M-TIBA deposits, which could not be used for any purpose other than healthcare, were modest (usually less than 500 Kenyan shillings/month, about US$5).

The system did encounter challenges in the market. The healthcare restriction was a sticking point for many Kenyan patients since their limited disposable income forced them to prioritize necessities over preventative care. Most tended to view healthcare just like any other emergent expenditure, such as their dwelling being damage— unlikely to happen and, therefore, not critical to save for in advance.

Despite the challenges, the program has had strong success. Besides facilitating and potentially stimulating savings for health, M-TIBA builds trust within the existing “harambee” community-based informal financial support systems. Depositors know that their remittances to relatives and friends in need are actually used for healthcare.

Beyond individuals, M-TIBA solved the accountability problem for donors. With this system, donors have a secure way to transfer money to individuals through a platform where the money can only be withdrawn for healthcare purposes. Transactions can be tracked and audited to ensure the integrity of the system. The data obtained through the M-TIBA transactions can be aggregated to show payers including insurers and donor organizations how their money is used, as well as to increase insight into the health situation of certain target groups.

M-TIBA also provides access to populations that do not have access to public healthcare facilities—typically in rural areas and urban slums. For donors, this creates an opportunity to provide direct, efficient support to the lowest income populations who secure care through the private sector. Indirectly, M-TIBA could work directly to facilitate health-system strengthening through the re-establishment of normal market mechanisms for the delivery of care in the private sector.

The PharmAccess Solution: Looking Forward

While the PharmAccess solution has had success in its pilot testing, the final verdict on the network approach to developing the private healthcare market in Africa remains a work in progress. Concurrently with implementing of this program, public physicians in Kenya launched a national strike, highlighting the importance of the private sector in caring for all segments of society.

While the PharmAccess approach is novel, it also resembles a more generalizable platform model that has been successful in other markets. In the PharmAccess model, the three-pronged approach helps expand the private healthcare market as a trusted platform. By starting from this framework, PharmAccess has opportunities to analyze its initial learnings as they face challenges in implementation. Further, this framework can serve as a model to develop novel programs in other markets. More generally, characterizing the failures of the private healthcare market in Africa as a failure of a network of buyers and sellers is a key perspective that can open doors to addressing the challenges of global health in Africa, some of the most pressing global health challenges in the world.

Figure 1: The PharmAccess Virtuous Cycle (Source: [9])

References

  • Platform Revolution: How Networked Markets Are Transforming the Economy—And How to Make Them Work for You. Sangeet Paul Choudary, Marshall W. Van Alstyne, Geoffrey G. Parker. W. Norton and Company, NY. 2016.
  • SafeCare Standards V3.1. July 2016. http://www.safe-care.org/uploads/standards/2016/SafeCare%20Standards%20for%20Website_V3.1.pdf. Accessed 10/19/16.
  • Medical Credit Fund, Africa. http://www.medicalcreditfund.org/clinics. Accessed 5/2/16.
  • Medical Credit Fund. http://www.medicalcreditfund.org/results/contents/#loans, accessed 10/19/16.
  • Conversation with Monique Dolfing-Vogelenzang and Bart Schaap. Mar 18 2016.
  • PharmAccess brief received from Alexander Boers by email. Accessed Mar 11 2016.
  • Ochieng, Moses. “Why Obama will need M-Pesa for his visit to Kenya.” FSD Africa (July 23, 2015), accessed online 5/3/16. http://www.fsdafrica.org/knowledge-hub/blog/why-obama-will-need-m-pesa-for-his-visit-to-kenya.
  • USITC Executive Briefing on Trade, “Mobile Money in Kenya.” https://www.usitc.gov/publications/332/executive_briefings/forden_mobile_money_kenya_june2015.pdf, accessed 5/3/16.
  • Schulman, Kevin, Sashidaran Moodley, and Anant “PharmAccess and the M-TIBA Platform: Leveraging Digital Technology in the Developing World.” Harvard Business School Case 317-103, March 2017.

 

 

Education, Prevention, Access, and Efficiency: Notes and Insights from a Conference of Health Care System Leaders from the Americas

Steven Ullmann, PhD, Chairman, Department of Health Sector Management and Policy; Director, Center for Health Sector Management Policy, School of Business Administration, University of Miami

Abstract

What is the message?

Partnerships of for-profit firms with not-for-profits, non-governmental organizations, and government agencies offer strong opportunities to address challenges such as hypertension, universal access to high quality care, education and communication, healthy cities, and women’s cancers.

What is the evidence?

Insights from discussions during a workshop at the University of Miami involving leaders of not-for-profit firms, non-governmental organizations, government agencies, and for-profit firms based in countries throughout Latin America.

Submitted: August 30, 2017; accepted after review: November 13, 2017

Cite as: Steven Ullman. 2017. Education, Prevention, Access, and Efficiency: Notes and Insights from a Conference of Health Care System Leaders from the Americas. Health Management Policy and Innovation, Volume 2, Issue 1.

Download PDF

Introduction

Communicable diseases are increasingly being brought under control globally.  Improved sanitation, water supplies, infrastructure, and mosquito control are all leading to improved health associated with these disease processes.  And while these issues are increasingly being controlled, the focus of health care management and policy globally is shifting to prevention and treatment of non-communicable diseases.

The University of Miami School of Business Administration’s Center for Health Sector Management and Policy recently hosted a working conference on heart disease, brain disease, and women’s cancers­­­­­ in Latin America.  The focus was on creating partnerships between not-for-profit firms, non-governmental organizations (NGOs), for-profits firms, and government agencies. The concept was to create symbiotic relationship to better manage disease processes.

Over 100 participants — individuals in leadership positions from each of the four sectors and representing many of the countries in Latin America — gathered for this one day intensive conference/workshop.  Presentations and discussions were centered around partnering in order to increase and improve processes and outcomes associated with disease prevention, education, access, and treatment. A key theme was development of interactive management processes involving cross-sectoral partnerships.

Partnerships are critical to address key challenges and achieve broad-based high quality care. This includes partnerships with the private health care delivery sector, partnerships with the private health care insurance marketplace, partnerships with the private medical device sector and partnerships with the pharmaceutical sector. Furthermore, there is a need to think beyond these generally recognized sectors.

Examples of Opportunities

Hypertension: Hypertension is one such challenge. High blood pressure is one of the leading factors affecting health worldwide.  Studies show that nearly 18% of myocardial infractions1 are caused by hypertension and 35% of strokes are similarly caused by hypertension2.  In 2010, high blood pressure was the cause of 9.4 million deaths and 7% of the disease burden globally3.  Smoking, physical activity and diet were other significant factors as indicated by the American Heart Association.

Ralph Sacco, a Chaired Professor of Neurology at the University of Miami’s Miller School of Medicine, Former President of the American Heart Association, and current Chair of the Board of Neurological Science, explained that one of the issues associated with prevention of hypertension was in the basic management of the technology.  Specifically, blood pressure measurement abilities are highly variable and particularly problematic in developing countries.  There is a lack of accessible, inexpensive, and accurate blood pressure measurement devices; those that do exist have not been validated for accuracy.  There is also a lack of human resources who have been trained to use the equipment accurately.  So, even if the interventions and actions associated with the perils of high blood pressure are undertaken, accurate measurement and provision of the needed information is not available to the population.  If this first step is problematic, then all the steps that follow relating to prevention, access, and treatment will be for naught.

Universal access to high quality care: Dr. Sacco moderated a panel of experts from ­throughout the Americas representing the government, for-profit, not-for-profit, and non-governmental organization entities from a variety of countries.  Discussion revolved around the concept forwarded by Enrique Rueles, former Vice Minister of Health of Mexico, that universal access to health care, a mantra forwarded by those in the health industry, should not be the goal if the health care one has access to is not good health care.   Dr. Lottenberg, former President of the Albert Einstein Israelite Hospital in Brazil and currently the CEO of United Health Care, Brazil, indicated that when one speaks to quality care, safety is part and parcel of this.

In Brazil by example, as well as in many other countries in Latin America, health care is considered a right.  But sometimes it is believed that a social right is equivalent to total government oversight, management, and responsibility, with the implication that there is little or no personal or private sector responsibility. But social responsibility does not mean that there is no role for the private sector.

 Funding of care is central to universal access. An interesting process enters in when discussing funding of care in a number of countries in Latin America.  A treatment for a given illness may be denied if not a part of a formulary of services under government provision of care.  But there is an option when the denial occurs.  An appeals process is available.  It is a costly process, but it is a process used relatively often, begging the question as to whether evidence of medical return on investment is being examined. Here, too, private sector firms can play a leading role.

Healthy cities: “Healthy cities,” a concept championed by former Mayor Bloomberg in New York City and a concept adopted by the World Health Organization (WHO) was brought up in discussion.  A healthy city concept involves partnerships with numerous partner categories and an integrated strategic approach. It involves an integration of educational institutions from the earliest child education and development stage through their years in school, and involves health care institutions and employee wellness programs.  The latter was suggested as an approach that indicates that employers value their employees, productivity is increased and, in turn, benefits accrue to both employee and employer. Ultimately, the benefits accrue to society as a whole.

Women’s cancers: The concept of partnership in health care between for-profit, not-for-profit, and government sectors, was also a subject of significant discussion with respect to women’s cancers. As discussed in a keynote address by Dr. Felicia Knaul, Professor and Director of the Institute for Advanced Study of the Americas at the University of Miami, Senior Economist at the Mexican Health Foundation, Founding President of Tómatelo a Pecho, and a honorary Research Professor of Medical Sciences at the National Institute of Public Health of Mexico, cancers appear to track economically.  Cervical cancer is more common in poorer areas and breast cancer is more common in higher income areas. Much of cancer death these days is avoidable, but as Dr. Knaul indicated, when we speak of prevention and cure, we should not speak “separate” but should think “diagonally.”  This requires thinking beyond just the clinical aspects, and looking at non-clinical areas including managerial, financial, and delivery aspects. Further when we speak “diagonally,” we should also speak to financing and delivery.

Thus, for example, in 2012 Mexico introduced universal health coverage for several prevalent cancers including cervical, breast and colorectal. Yet, even though treatment was and is now free for all, detection in poorer areas of the country continues to be a major issue and is the Achilles heel of the Mexican cancer system.

A theme of lack of training and accurate diagnostics was emerging, as this issue was brought up earlier in the discussion concerning hypertension. In Mexico, one of the first needed points of intervention turned out to be education of primary care physicians re: detection.  It reflected a similar discussion relating to hypertension in that primary providers are similarly not equipped to do basic and accurate testing for hypertension.

As Dr. Eduardo Cazap, Founder and President of the Latin American and Caribbean Society of Medical Oncology (SLACOM), past president of the International Union Against Cancer (UICC) and member of the Executive Committee of the National Cancer Institute of Argentina indicated, such issues are independent of the overall wealth or development of the country.  These issues are rather a function of distribution of income and variance in the level of education of individuals in the population of any given country.

There are 1.1 million cases of cancer and 600,000 cancer deaths annually in Latin America and the Caribbean4. Breast cancer has the highest incidence of all cancers among women in the world. In Latin America, approximately 114,900 cases are diagnosed annually with associated mortality of approximately 37,0005.  It is expected that the number of deaths from breast cancer will double by the year 20305.  With respect to cervical cancer, nearly 75,000 women received diagnoses of cervical cancer and the number of deaths exceeded 31,3006.  In the absence of improvements in prevention, it is anticipated the number of deaths will reach over 43,500 by the year 20356.  As indicated by the panelists, nearly all of these deaths are preventable.

Country comparisons are noteworthy.  With cervical cancer being one of the women’s cancers that is highly preventable, if one looks at the Americas in totality, 80 percent of cervical cancer deaths occur in Latin America7. In part, this is due to the fact that health expenditures are quite low in many countries in Latin America, coupled with the fact that a focus on health care expenditures continue to be focused on contagious infectious disease processes and there has been a lack of strategic shift to non-infectious diseases even though this has been the pattern of shift in disease processes8.

Here is where the use of big data analytics as a management tool can be instrumental in creating more focused, more effective, more efficient interventions.  Further, given that in industrialized countries, while there is generally a seventeen year lag from science and research to clinical practice, the time lag is longer yet in developing countries.  Managing the technology and focusing on translational medicine becomes critically important. Partnerships are critical in attaining this.  Health care systems and insurance providers can partner in the use of big data to assure mutually beneficial cost-effective and targeted care.  Effective translational medicine requires partnering between university medical centers and the medical research arms of government agencies and pharmaceutical companies with health care providers in the community to assure that new and effective prevention and treatment modalities get to the people.  Evidence based medicine was seen as a critical aspect but it was also noted that politics enter into what diseases are actually funded and covered by public insurance.

“Reverse” innovation: There is sometimes a perception that cutting edge health care and cutting edge health care management is a one-way street, with innovations coming from the United States, Europe, and Canada and flowing south to Central and South American.  It was noted that there are many medical advances that flow from Latin America up to the north.  For example, non-invasive heart valve replacement procedures have been done in a premier hospital in Brazil years before similar processes and procedures were provided in the United States.  As Alvaro Roto from Roche’s Latin America unit indicated, Cuba has become another country worth watching in terms of flow of medical innovation both north to south and south to north.  For example, a vaccine for lung cancer has shown effectiveness for a number of years in Cuba, and which for years was not evaluated or available in the U.S. due to the 55 year-old embargo with Cuba.  The Roswell Park Cancer Institute in the U.S. has now signed an agreement with Cuba’s Center for Molecular Immunology to further develop and test the vaccine in the U.S.  Similarly, the Feinstein Institute for Medical Research in the U.S. has been working with the Center for Molecular Immunology in Cuba for more than six years on another cancer vaccine.

Brainstorming

One of the most interesting aspects of the conference was the brainstorming sessions involving the health care leaders, panelists and attendees. Focus was on issues of education, access, and efficiency relating to women’s cancers and heart disease.

Education and communication: Education and communication critically important.  Educating students while they are still in school, where they are in an environment that is conducive to absorbing information about diseases and awareness regarding detection and prevention, can be highly effective. The role of modern communication is central here.  Smart phone technology is pervasive throughout the Americas.

Partnerships are highly relevant for education and communication. The activities cannot be reliant solely on the government. Early education is where things should begin.  The work environment is another significant point of contact in order to create an environment of wellness, and an opportunity to provide information on disease processes, prevention and detection.

Partnerships with cell phone carriers to disseminate information offer an efficient way of messaging and educating.  Further, it may create efficiency in processes and outcomes to communicate to younger individuals who are heavy users of the technology, so that they may learn about and observe older relatives and act accordingly in a time effective and therefore cost effective manner.  Many of the cultures in Latin America have very strong intergenerational family ties and this could potentially be a very powerful and effective tool.

Disease control: An example of the opportunities that exist for improvement in disease control, as we noted earlier, is hypertension.  According to the Pan American Health Organization (PAHO) somewhere between 20 and 35 percent of the population over the age of 18 had hypertension.  A journal of the American Medical Association (JAMA) of four countries in Latin America indicated that the rate of individual awareness of high blood pressure was only 57 percent9.  Only 18.8 percent of those individuals with high blood pressure had their blood pressure under control9.  And these were four countries in Latin America were ones that had a somewhat greater focus on health: Argentina, Brazil, Chile and Colombia9.

Many of these problems can be mitigated in the work environment. It becomes an important role for those overseeing human resources management.  What is common in many disease processes including women’s cancers and heart disease is that focus tends to be more on treatment after the fact rather than prevention before the fact.  Educational partnerships are critical to achieve these goals: government, policy makers, health workers, employers, medical device companies, health insurance providers, media, and others must all be in this together.

Going Forward

Going forward, it is critically important to achieve stronger partnerships across the health care sector, rather than rely solely on governments and front line health providers.  Clearly, health workers are a critical player in this process as well. Unfortunately, as indicated in the breakout discussion, physicians are focused on cures. They have few incentives to educate their population as to prevention or observing warning signs indicating early stages of a disease process.  Early detection brings about great efficiency.  And earlier and directed access also improves efficiency. This lack of focus is in part a result of how medical personnel themselves are educated.

In terms of efficiency, thought leaders also indicated that awareness, prevention and treatment needs to be more focused. Approaches need to be tailor made to the specifics of each community and the differential needs within that community.  Focus should be on high risk populations. Telehealth can be a highly effective tool to reach populations in a cost efficient manner. Returning to an earlier theme, efficiency also relates to the value proposition that value equals some combination of quality and cost.  Health care provision involves a cost. Efficiency is provided only if the quality of care is also fostered as one looks at the cost of the provision of care.

Perhaps what is the most important outcome from the annual LIFE conference is that the partnerships that are created between clinical providers, insurers, medical device companies, policy makers, and NGOS that were explored in the conference setting will now be operationalized at the local and national level within countries.  The concepts and relationships that were developed at the conference provide opportunities for partnering across countries. As the former Minister of Health of Mexico and current President of the University of Miami, Dr. Julio Frenk, indicated, health care is local but at the same time it is global. This conference pointed this out clearly.

References

  1. Population Attributable Risk. Yusuf, S., et. al. Lancet.  2004; 364: 937-52
  2. O’Donnell, M., et. al. Lancet. 2010; 376: 74-75
  3. Ezzati, M., Riboli, W., N. Engle. J. Med 2013: 369: 954-964.
  4. American Cancer Society, Inc. (2014). Cancer in Latin America and the Caribbean. Retrieved August 24, 2017, from http://canceratlas.cancer.org/the-burden/cancer-in-latin-america-and-caribbean/
  5. Justo, N., Wilking, N., Jönsson, B., Luciani, S., & Cazap, E. (2013). A Review of Breast Cancer Care and Outcomes in Latin America. The Oncologist, 18(3), 248–256. http://doi.org/10.1634/theoncologist.2012-0373
  6. Bychkovsky, B. L., MD, MSc; Knaul, F. M., PhD; De Lima Lopes, G., Jr., MD, MBA, FAMS. (2017, May 25). Cervical Cancer in Latin America. Retrieved August 24, 2017, from https://am.asco.org/cervical-cancer-latin-america
  7. Pan American Health Organization. Cervical Cancer in the Americas. Retrieved August 24, 2017, from http://www.paho.org/hq/index.php?option=com_docman&task=doc_view&Itemid=270&gid=17498&lang=en
  8. Maria Paula Curado, Dyego Leandro Bezerra de Souza, Cancer Burden in Latin America and the Caribbean, Annals of Global Health, Volume 80, Issue 5, 2014, Pages 370-377, ISSN 2214-9996, http://dx.doi.org/10.1016/j.aogh.2014.09.009. (http://www.sciencedirect.com/science/article/pii/S2214999614003129)
  9. Pan American Health Organization. (2017, May 17). Countries of the Americas show benefits of initiative to reduce cardiovascular risk through the control of hypertension.  Retrieved August 24, 2017, from http://www.paho.org/hq/index.php?option=com_content&view=article&id=13314%3Apaises-americas-presentan-beneficios-iniciativa-reducir-el-riesgo-cardiovascular-control-hipertension&catid=740%3Apress-releases&Itemid=1926&lang=en

Diffusion of Global Innovations in Health Care: How to Make It Happen

Regina E. Herzlinger, Harvard Business School, and Kevin A. Schulman, MD, Duke University School of Medicine

Contact: Regina E. Herzlinger, rherzlinger@hbs.edu

Regina E. Herzlinger is the Nancy R. McPherson Professor of Business Administration at the Harvard Business School. She was the first woman to be tenured and chaired at Harvard Business School and the first to serve on many established and start up corporate health care /medical technology boards.

Kevin A. Schulman, MD, MBA is a professor of medicine at Duke University. He is an associate director of the Duke Clinical Research Institute (DCRI), the world’s largest academic clinical research organization. He is also the founding president of the Business School Alliance for Health Management (BAHM).

Abstract

What is the message?

Business model innovations that successfully meet health care challenges commonly have two features:
• Successful innovations focus on only one of three opportunities: Consumer-facing activity; system integration; or technical advance.
• Successful innovations align well with six factors in their political and economic environments: Market structure; financing; consumers; public policy; accountability; and technology.

What is the evidence?

These recommendations draw from multiple case studies of organizations operating in emerging markets with innovations that have implications for “reverse innovation” to traditional developed markets.

Links: Slide

Submitted: August 21, 2016; Accepted after review: October 30, 2016

Cite as: Regina E. Herzlinger and Kevin A. Schulman. 2017. Diffusion of Global Innovations In Health Care: How To Make It Happen. Health Management Policy and Innovation, Volume 2, Issue 1.

Download PDF

Introduction

Health care faces daunting challenges globally. The supply of health care services is constrained by the inefficiency of service models, limits in workforce capacity, and the need for capital investments in critical infrastructure. Simultaneously, demand is growing through the transition from communicable to non-communicable diseases and population aging.

This article highlights examples of successful reverse innovations. We clarify the basis of their success by placing the cases within a health care framework that identifies the core purpose of the innovations and their alignment with six key environmental factors (see Figure 1): Market structure, financing, consumers, policy, accountability metrics, and technology (2).

Examples of Successful Health Care Reverse Innovations

The cases below describe how these “do good and do well” innovations expanded globally, benefiting from choices of operating focus and alignment with the six environmental factors.

1. Longer Term Bundles for Chronic Diseases: Health Care Global (India)

Dr. B.S. Ajaikumar, CEO of Health Care Global (HCG), an Indian cancer care delivery system, created a long-term bundle of care for a long-term disease (3,4). HCG’s bundle contains comprehensive diagnostics and therapy, including pathology, surgery, radiation and chemotherapy, and routine follow-up at regular intervals for up to five years.

HCG’s focus on one disease simplified the development of an innovative hub and spoke business model configuration. The hub contains the expensive radiation and surgical equipment often required during the course of treatment. In turn, community-based spokes provide patients with easier access to less capital-intensive chemotherapy and rehabilitation services, referring patients when needed to the hub.

In the HCG model, pricing of hub services varies by time of day. This approach drives round-the-clock utilization of expensive capital equipment, reducing average costs for this service. Accountability at HCG is supported by a home grown IT system (5). Although it is a for-profit organization, HCG sets aside 20% of its profits to subsidize poorer patients.

HCG’s low cost, high quality cancer care disseminated rapidly in India. HCG also entered three African countries – Uganda, Kenya, and Tanzania — again with low-cost models that used telemedicine from India to leverage HCG’s scale.

2. Behaviorally-Sound Wellness Incentives: Discovery Insurance (South Africa)

South Africa’s Discovery Insurance company, established in 1992 (6), provides a blue print for an insurance program that controls costs by maintaining and improving health status through behavioral interventions (7-10).

Discovery established its Vitality program on a system of reward points – incentives that patients achieve by following a personally customized wellness program based on their behavioral, age, and health profile. The incentives were designed by a team of psychologists and behavioral economists (11).

The firm posited that 10% of health care costs are driven by modifiable lifestyle choices. Studies commissioned by Discovery indicated it achieved 10%-15% lower costs for active participants in its programs along with gains from redirecting the costs of chronic diseases (12). Like HCG, lower-income participants receive discounts and financial support at Discovery.

Vitality’s parent firm, Discovery Group, grew from an initial capitalization of $2 million to $4.7 billion of organic growth in its home market. Based on its success in South Africa, Vitality then grew globally: it entered the U.S. market in a joint-venture with the health insurer Humana in 2011 (13) and, in 2015, with life insurer John Hancock (14); in 2004, it formed a joint venture in England with Prudential UK (15); and, in 2012, Discovery introduced Vitality to China through a joint-venture with Ping An, a major Chinese financial services firm (16).

3. High-Touch Dental Care and Long Term Insurance: OdontoPrev (Brazil)

OdontoPrev, Brazil’s most trusted brand in dental care, offers more than 100 plans, many of them for a three year term (17). Since inception, the company rewarded practitioners who invested in initial preventive care. This practice helps reduce the incidence of dental disease and so both improves patient health and controls costs. The strategy yielded lower profit margins in the first year of a contract but generated longer-term financial strength. OdontoPrev thus controlled the long-term cost of care while achieving important public health goals.

OdontoPrev decided early on to focus on providing only customized dental benefits and avoiding the cross selling of medical benefits plans. The focus enabled development of a proprietary IT platform and high-touch customer service. The company’s asset-light model avoided ownership and operation of dental clinics, but, instead, focused on scaling its network of dentists.

OdontoPrev became the most trusted brand in dentistry and one of the 50 most valuable brands in Brazil. In testimony, the company enjoyed the highest renewal rate in the market.

In 2009, OdontoPrev entered the broader Latin American market through a joint venture with the Iké group, a provider of services to insurance companies in Mexico, Argentina, Venezuela, Colombia, and Brazil. The partnership marked the start of the largest dental benefits company in Latin America (18).

4. Health Care Vertical Integration: Amil (Brazil), La Ribera (Spain), and Acibadem (Turkey)

Amil: Brazil’s vertically integrated delivery and insurer, Amil, is a model so attractive that U.S. based United Healthcare purchased a majority share in 2012 for $4.9 billion (19).

Amil differs from most U.S. vertically integrated delivery systems in its governance. Amil was founded and was majority-owned by a physician entrepreneur, whose goal was to create an efficient, high quality system of care, rather than by a hospital system concerned about maintaining its occupancy rate. This focus freed Amil to organize itself with three levels of care differentiated by the severity of the patients’ needs, rather than by the site of care (20).

Amil assigns patients to the appropriate level of physician for their care. Financial incentives are aligned: primary care is provided by a network of independent physicians under a fee-for-service model, while the most complex care is provided by salaried physicians. Physicians working within the different levels have different payment models, designed to generate competition by performance on a regional, facility, and specialization basis.

The differentiation of care structure enabled Amil to create insurance plans tailored to the patients’ needs and to perform intelligent underwriting. A homegrown IT system supports communication and performance measurement.

La Ribera: The La Ribera health department in Valencia, Spain, provides integrated, population–based health for its region through an innovative public-private partnership (21). The result is a model notable for achieving high quality health care at 25% lower cost than regional public hospitals (22). In 2013, La Ribera’s global patient satisfaction index was 9.1 out of 10 (22), and it ranked first in performance among all 24 Valencian health facilities (21). In 2015, the hospital was awarded ‘Best in Class’ in Spain by Medical Gazette and Rey Juan Carlos University (23).

The Valencian government pays an annual fixed and pre-established amount for every inhabitant, adjusted annually for changes in health care costs and inflation. Like the U.S. population-based health model, La Ribera is responsible for the health care of all patients, regardless of where they are treated. For example, it is reimbursed only 80% of the cost of patients treated in other regions.

La Ribera’s model is based on four pillars: Public financing, public control, public ownership, and private management.

To account for “public control’ of quality, a government-appointed Commissioner is based at the hospital.

The ‘public ownership’ pillar required all equipment to be returned to the Valencian health ministry at the end of the contract.

The ‘private management’ pillar caused the most debate. For-profit La Ribera faced the challenge of attracting patients — who are fiercely protective of the public health system — while also meeting tighter budget constraints than its competition. In response, La Ribera adopted patient-oriented policies, including the absence of a gate-keeping function; hospital room features such as companion beds; flexible opening hours; and shorter waiting times for elective surgery and outpatient visits than the Spanish average.

To attain quality and efficiency, La Ribera implemented integrated clinical pathways to identify where and how patients should be treated. Hospital physicians visited primary care centers weekly to transmit best practices and assist with the adoption of new clinical pathways, thus freeing them to focus on more complex cases in their practices.

By 2015, the model had expanded to three additional hospitals in Valencia. At the same time, though, a low operating margin of 1% created the challenge of sustaining interest from private health care providers.

The for-profit model also encountered national political resistance. In 2014, after awarding contracts for the management of six hospitals to three private providers — including Ribera Salud — Madrid’s regional government canceled the agreements (24). In 2015, the new socialist Valencian government announced that all privately-managed health departments would return to public management when the contracts expire in 2018 (25).

Confronted with these structural, financial, and public policy challenges, Ribera Salud looked outside Spain for growth. It found a new deep pocket partner for structural and financing support in U.S.-based Medicaid insurer Centene Corporation — a $21 billion firm. Centene, dwarfed by more than $100 billion revenue rivals such as United and Anthem and challenged by its undiversified Medicaid portfolio, acquired a 50% stake in Ribera Salud (26). For Centene, the Ribera Salud model was closely aligned with its core competencies in serving government-sponsored health care programs and providing better health outcomes to local communities at lower cost (27).

Ribera Salud used this U.S. base for additional global growth. They launched in Peru, a potential gateway to the Latin America market (28). Chile, Brazil, Colombia and Mexico, whose private health expenditures as a percentage of total health care ranged from 24% to 53% (29), are interested in the model. In 2015, Ribera Salud was among five companies chosen for a tender for a new hospital in Slovakia (30).

Acibadem Hospital Group: Launching inauspiciously in 1990 in a low-end hospital with second hand equipment in Turkey, Mehmet Ali Aydmlar, an accountant, transformed the operations of the hospital chain Acibadem (31). He established professional management systems and used his accounting background to establish business and financial transparency. Growth was driven by an opportunity to provide clinical services to a previously underserved market.

Acibadem’s culture reflected Aydmlar’s focus on detail — for instance, in its rigorous management of patient feedback. Acibadem collected customer feedback through surveys; calls to patients from its call center; in person, through the patient relations supervisors in each hospital; and via an online customer complaint system, which promised a response within three days. Customer complaints were reviewed by management in a complaint-by-complaint process that served as the platform for Acibadem’s customer engagement and service strategy. This attention to detail supported internal development of managers and leaders, with 80% of the top leadership promoted internally.

Acibadem developed additional systems for all activities, including ancillary services and project and construction management. By design, every hospital used the same style, business process, and technology. The group implemented a matrix structure, with functional unit heads reporting to both the hospital director and to the head of the functional area in the corporate office. Standardized IT platforms included a patient portal for personal health management and appointment bookings, and standardized internal reporting tools including key performance indicators that offered real-time reporting and hospital-level comparisons for managers across the network.

Growing from one physician-owned hospital, Acibadem became the largest private hospital system in Turkey. After a merger with Singapore’s Parkway-Pantai to form International Healthcare Holdings Berhad, Acibadem became the world’s second largest publically traded hospital group, after U.S. based Hospital Corporation of America (32).

Two Principles for Successful Health Care Innovation

From these case studies and other examples, we highlight two principles for successful health care innovation.

1. Choose only one of three primary opportunities for health care innovation.

Successful innovations in health care focus on one of three opportunities: consumer-facing operations (Discovery/Vitality), system integration (Acibadem, Amil, HCG, La Ribera, Odontoprev), or technology. It is exceedingly difficult to execute all three dimensions, or any two combinations, simultaneously. To illustrate the difficulty, consider the key skills of the resume of the CEO of a consumer–facing innovation versus a CEO who runs integrated care facilities. The consumer–facing CEO needs retail experience, while the integrator should have created cost effective roll-ups in her past. Moreover, neither resume – retailer nor cost cutter – contains the key skill sets for the leader of a technology-innovating firm.

2. Align your venture with the Six Factors in your political and economic environment.

The venture needs to align with the structure of the system, including sources of financing, requirements for accountability and public policy, and technology and consumer desires. In doing so, you strategies that manage interactions with both friends and foes.

Unfortunately, many current initiatives conflict with these principles. Take the Accountable Care Organization (ACO) approach in the U.S. Like many other innovation initiatives, the ACO has the laudable goals of improving patient experience, improving health, and reducing per capita cost.

ACOs, however, conflict with the two principles for success we identified in the reverse innovation case studies. For one, it is exceedingly difficult to simultaneously achieve consumer friendliness and cost-reduction via system integration. Then, too, consider the challenges ACOs face in aligning with the six factors in the environment. First, vertically integrated business models are rarely known for consumer-friendliness and face challenges in innovating new technologies and processes (33). Second, the broad scope of current initiatives complicates meaningful accountability and requires massive financing. Third, their expensive business models of owning assets and installing IT systems (some cost over a billion dollars) require such high market shares to break even that they create serious public policy anti-trust threats (34).

The innovations we discuss in this paper differ from ACO-type models across the two principles of focus and alignment, as the cancer care integrator, HCG, illustrates. HCG focuses on one goal – lowering costs. Its efficient hub and spoke model enables it to operate successfully in India, in which the financing factor requires that patients pay primarily out of their own pockets. The community–based spokes align with the consumer factor. The financing factor is further addressed by a care bundle that encompasses five years of comprehensive care for patients rather than focusing on short term surgical procedures alone. Early investments have paid off in subsequently lower costs.

HCG’s focus on one disease, rather than the entirety of the health care needs of a population, aligns with the accountability factor. HCG’s business model further reduced costs via asset-light joint ventures rather than asset-heavy M&A activity, as well as home grown, lower cost, focused IT systems that aligned with the technology factor.

HCG addressed the public policy factor in two ways: first it subsidized needy patients and, second, it drew those who could afford to pay out of the public health insurance system, thus leaving more resources for the poor.

Discussion

These case studies support optimism about innovations in health care and health more generally. They highlight the ability of entrepreneurs to bring new solutions to address pressing unmet needs. They document the scaling of these innovations both within markets and across markets.

The cases underscore the opportunity of using case studies to better understand innovation in the health sector. Case studies of innovation document an innovative business model or solution, describe the evolution of that model over time, and highlight managerial responses to the challenges faced in implementing the solution in the real world (35).

Cases that focus on innovations serve as important counter-factuals to a status quo bias in many health policy discussions. Firms and markets are not fixed solutions, but rather evolve over time based on new perceptions of value by consumers, novel integration concepts in health care financing or delivery, or through the introduction of technology–based solutions that alter traditional care delivery models.

Two aspects of the case studies we selected illustrate the value of a consistent framework in evaluating innovative business models. First, we recommend a rigorous focus on one key aspect of the core business: consumer, integrator, or technology models.

Second, the Six Factors framework asks specific questions about the alignment of an innovative venture and its environment, including the role of consumers, market structure, financing mechanisms, regulatory conditions, accountability, and the nature of technology in facilitating the innovation.

This dual approach enables understanding the context for the innovation in the local market environment as well as challenges to scaling within or across markets.

Of course, there are limitations to this methodology. It is often difficult to assess the generalizability of qualitative studies. Nevertheless, case studies can stimulate discussion and debate and lead to new insights despite these limitations.

The core message is that health care innovation has become a global phenomenon, offering opportunities for adopting new models within and across countries. In the face of the enormous challenges facing the sector, innovative global business models present significant opportunities for novel solutions to diffuse, benefiting by following the principles of focus and alignment that we discuss in this article.

References

(1) Richman BD, Udayakumar K, Mitchell W, Schulman KA. Lessons from India in organizational innovation: a tale of two heart hospitals.

Health Aff (Millwood). 2008 Sep-Oct;27(5):1260-70.

(2) Herzlinger Regina E. “Innovating in Health Care – Framework.” Harvard Business School Case 9-314-017, July 8. 2015.

(3) Herzlinger, Regina E., Amit Ghorawat, Meera Krishnan, and Naiyya Saggi. “Hub and Spoke, Healthcare Global, and Additional Focused Factory Models for Cancer Care.” Harvard Business School Case No. 313-030, August 2012, (Revised August 2015).

(4) Herzlinger RE, Schleicher SM, Mullangi S. Health Care Delivery Innovations That Integrate Care? Yes! But Integrating What? JAMA. 2016; 315(11):1109-1110.

(5) Ajaikumar BS, Gopinath KS, Srinath BS, at al. “Disease-free survival pattern in breast cancer patients in India treated in a single institution.” J Clin Oncol 30, 2012 (suppl; abstr e12030).

(6) Herzlinger, Regina E. “The Vitality Group: Paying for Self-Care.” Harvard Business School Case No. 310-071, February 2010. (Harvard Business School Publishing, Revised March 2014).

(7) Baicker, Katherine, David Cutler, and Zirui Song. “Workplace wellness programs can generate savings.” Health Affairs 29, no. 2 (2010): 304-311.

(8) Berry, Leonard and Mirabito, Ann M. and Baun, William B. “What’s the Hard Return on Employee Wellness Programs?” Harvard Business Review, December 2010.

(9) Naydeck, Barbara L., Janine A. Pearson, Ronald J. Ozminkowski, Brian T. Day, and Ron Z. Goetzel. “The impact of the highmark employee wellness programs on 4-year healthcare costs.” Journal of Occupational and Environmental Medicine 50, no. 2 (2008): 146-156.

(10) Halpern SD, French B, Small DS, Saulsgiver K, Harhay MO, Audrain-McGovern J, Loewenstein G, Brennan TA, Asch DA, Volpp KG. Randomized trial of four financial-incentive programs for smoking cessation. N Engl J Med. 2015 May 28;372(22):2108-17.

(11) Vitality Group website, “Vitality History,” http://www.thevitalitygroup.com/company/, accessed March 18, 2016.

(12) D. Patel, E.V. Lambert, R. da Silva, et al., The association between medical costs and participation in the Vitality health promotion among 948,974 members of a South African health insurance company. American Journal of Health Promotion, January/February 2010. 24(3): 199-204.

(13) http://www.businesswire.com/news/home/20110221006121/en/Humana-Offer-Industry-Leading-Vitality-Wellness-Loyalty-Program (Accessed June 20, 2016).

(14) “John Hancock Introduces a Whole New Approach to Life Insurance in the U.S. That Rewards Customers for Healthy Living,” John Hancock website, April 8, 2015. http://www.johnhancock.com/about/news_details.php?fn=apr0815-text&yr=2015, accessed May 31, 2016.

(15) http://discovery-holdings-ltd.mynewsdesk.com/pressreleases/discovery-acquires-full-ownership-of-its-uk-joint-venture-uk-businesses-rebranded-1081644 (Accessed June 20, 2016)

(16) Nick Hedley, Discovery takes its Vitality model to China, BIZCOMMUNITY, May 22, 2012, http://www.bizcommunity.com/Article/196/320/75528.html, accessed May 31, 2016.

(17) Herzlinger, Regina E., Matthew Lingenbring, Joshua Turnbull, and Ricardo Reisen De Pinho. “OdontoPrev.” HBS Case No. 314-038, September 2013. (Harvard Business School Publishing, Revised May 2014).

(18) Odontoprev gives first step towards internationalization, Exame.com, May 28, 2009, http://exame.abril.com.br/negocios/noticias/odontoprev-primeiro-passo-internacionalizacao-473568, accessed May 31, 2016.

(19) Caroline Humer, UnitedHealth to buy most of Brazil’s Amil for $4.9 billion, Reuters, October 8, 2012, http://www.reuters.com/article/us-unitedhealth-takeover-amil-idUSBRE8970E120121008, accessed May 31, 2012.

(20) Herzlinger, Regina E., and Ricardo Reisen de Pinho. “Amil and the Health Care System in Brazil.” Harvard Business School Case 312-029, August 2011. (Harvard Business School Publishing, Revised July 2014).

(21) Herzlinger RE, Moloney E, Beyersdorfer D. “La Ribera Health Department.” Harvard Business School Case 9-315-006, September 2014.

(22) NHS European Office. The search for low-cost integrated healthcare. The Alzira model-from the Region of Valencia. NHS Confederation 12-14-2011. (Accessed at http://www.nhsconfed.org/resources/2011/12/the-search-for-low-cost-integrated-healthcare, June 20, 2011).

(23) http://www.hospital-ribera.com/noticias/ver_noticia.php?destino=4&id=788# (Accessed June 20, 2016).

(24) European Union. EXPERT PANEL ON EFFECTIVE WAYS OF INVESTING IN HEALTH

(EXPH). Health and Economic Analysis for an Evaluation of the Public Private Partnerships in Health Care Delivery across Europe. 27 February 2014 (https://eupha.org/repository/sections/hsr/003_assessmentstudyppp_en.pdf accessed June 20, 2016)

(25) http://www.elmundo.es/comunidad-valenciana/2016/02/02/56afb50be2704ef6408b4593.html

(26) “Centene Corporation Purchases A Noncontrolling Interest In Spanish Health Management Group,” PR Newswire (U.S.), April 7, 2014, via Factiva, accessed January 2016.

(27) Liss, Samantha, “Nation’s largest insurers knock Obamacare marketplaces, but Centene finds success,” St. Louis Post-Dispatch, February 28, 2016, via Factiva, accessed March 2016.

(28) “Ribera Salud asume la pérdida de Alzira en 2018 y buscará crecer fuera de España; La concesionaria ya trabaja con la hipótesis de la no renovación del contrato y descarta la creación de nuevos hospitales en la Comunitat Valenciana y Madrid bajo gestión privada – Perú y Eslovaquia son los países en los que ya tiene proyectos en marcha; Sanidad,” El Mercantil Valenciano, July 2, 2015, via Factiva, accessed January 2016

(29) World Health Organization, Global Health Observatory data repository, http://apps.who.int/gho/data/node.main.75?lang=en, accessed June 14, 2016

(30) M. Brain, “Slovakia: Ministry chooses five consortia for further bids in hospital tender,” Esmerk Eastern European News, July 29, 2015.

(31) Herzlinger Regina E., Esel Cekin, Natalie Kindred, Gamze Yucaoglu, Michael Chu. “Acibadem Healthcare Group,” Harvard Business School Case N9-315-120, December 2015.

(32) http://www.ihhhealthcare.com/hospital-portfolio.php. Accessed June 12, 2016.

(33) Huesch, Marco, Douglas, Pamela, Schulman, Kevin, 2014 “Could Accountable Care Organizations Stifle Physician Learning and Innovation?” Health Management, Policy and Innovation, 2 (1): 18-28

(34 ) Regina E. Herzlinger, D.B.A., Barak D. Richman, J.D., Ph.D., and Kevin A. Schulman, M.D. Market-Based Solutions to Antitrust Threats — The Rejection of the Partners Settlement.

N Engl J Med 2015; 372:1287-1289.

(35) Herzlinger R, Ramaswamy VK, Schulman KA. Bridging health care’s innovation-education gap. Harv Bus Rev. 2014 Nov 11. https://hbr.org/2014/11/bridging-health-cares-innovation-education-gap.

Using Acquisitions for Successful Growth: Learning from Stryker Corporation

Kevin A. Lobo, Chairman and Chief Executive Officer, Stryker Corporation, and Will Mitchell, Rotman School of Business, University of Toronto

Contact: Will Mitchell, william.mitchell@rotman.utoronto.ca

Kevin Lobo has been CEO of Stryker Corporation since October 2012 and Board Chair since July 2014. Kevin’s experience includes executive positions with KPMG, Unilever, Kraft, Rhone-Poulenc, and Johnson & Johnson.

Will Mitchell holds the Anthony S. Fell Chair in New Technologies and Commercialization at the Rotman School of Management of the University of Toronto. Will’s research focuses on business dynamics in developed and emerging markets, with an emphasis on the global life sciences sector.

Abstract

What is the message?

M&A success arises from five principles for acquisition excellence

  1. External R&D via M&A complements internal R&D.
  2. Serial acquirers create shareholder value.
  3. “Bolt on” and “extension” deals leverage core strengths at home and abroad.
  4. Balance capital allocation among acquisitions and shareholders.
  5. Seek deals that are accretive to growth.

What is the evidence?

These recommendations draw from research on business growth, together with executive experience at multiple life sciences businesses.

Links: Slide

Submitted: December 13, 2016; Accepted after review: February 27, 2017

Cite as: Kevin A. Lobo and Will Mitchell. 2017. Using Acquisitions for Successful Growth: Learning from Stryker Corporation. Health Management Policy and Innovation, Volume 2, Issue 1.

Download PDF

 

Introduction

Markets reward firms that achieve ongoing profitable growth. Despite the conventional wisdom in the popular press that M&A destroys value for acquirers, and so damage a buyer’s ability to achieve profitable growth, recent research demonstrates a strong complementarity between internally and externally driven growth strategies. Laurence Capron and Will Mitchell’s book “Build, Borrow, or Buy” (HBS Press, 2012) highlights the value of pursuing a balanced strategy of seeking resources both internally and externally. At the core, multiple studies find that firms that know when and how to use both internal development and M&A gain advantages for innovation, growth, profitability, and long term survival.

The benefits of balanced resource seeking arise strongly in the commercial life sciences sector. Health care and life sciences leaders such as Johnson & Johnson, Siemens Healthcare, GE Healthcare, Hitachi Medical Systems, and many others have built decades-long strength by both investing heavily in internal projects while also actively seeking acquisition targets that provide new products and capabilities. This article highlights the lessons learned at one of the leaders in the life sciences sector, Stryker Corporation.

Background: Stryker Corporation

Stryker is a medical technology company headquartered in Kalamazoo, Michigan. The company was founded based on innovation in mobile hospital beds in 1941. Stryker now offers products and services through three business segments: Orthopaedics, MedSurg, and Neurotechnology-Spine. In 2016, the company had ~33,000 employees, total revenue of $11.3 billion, and total assets of $20.4 billion, with net profit of 14.5% of sales (8.1% of assets). Stryker entered the Fortune 500 in 2002; in 2016, the company was ranked at #287. For many years, Stryker has regularly shown up on U.S. and international listings of highly admired companies in terms of innovativeness, shareholder returns, and employment.

Growth at Stryker Corporation: Based on Internal &D and Acquisitions

Stryker is a growth company. Since going public in 1979, Stryker has had 37 consecutive years of sales growth; Exhibit 1a depicts the steady growth in revenue since 1988.  The company has also been reliably profitable (Exhibit 1b). Due to the combination of growth and profitability, the market has driven Stryker’s stock price up at several multiples over the Dow Jones Industrial Average over the past two decades (Exhibit 1c).

The core question is what strategies have driven the profitable growth that the market has rewarded?

At heart, Stryker’s growth strategy relies on two major levers: organic growth based on investments in internal R&D and marketing, complemented by supporting growth based on acquiring whole or parts of businesses. Exhibit 1d reports the growth of R&D since 1988. R&D now exceeds $700 million annually (more than 6% of sales). In parallel, Exhibits 1e and 1f highlight examples of Stryker’s acquisition activity; both numbers of deals and reported value have increased in recent years.

Opportunities to grow based on internal investments in R&D will come as no surprise to our readers. The gains from greenfield investments in existing skills are central to most growth prescriptions – compared to external sourcing, internal investment often offers benefits of greater control, deeper understanding, and faster projects.

But those benefits arise primarily if the internal projects build directly from existing strengths. Attempting to jump start even moderately exploratory new products through internal initiatives frequently ends up with projects that are slow and flawed, leaving firms lagging more successful competitors.

This is where “external development” via acquisitions complements gains from internal R&D. Buying via M&A offers a means of gaining faster and more effective access to new products, new markets, and new skills. The advances can reach far beyond a firm’s ability to build internally.

Critically, internal R&D and M&A are not substitutes in this balanced approach to growth. Rather, they are complementary strategies. Stryker’s combination of continued growth of investment in R&D at the same time as it has increased its acquisition activity is a strong example of this complement.

Yet simply buying targets is no guarantee of M&A success. The conventional wisdom that acquisitions destroy value stems from highly visible deals that failed dismally, because buyers bought in the wrong conditions, over-paid, and could not integrate the targets effectively. What then is the magic of successful M&A strategy?

Starting Points: Four Basic Rules for Acquisition

In part, M&A success stems from a few long-standing rules.

  1. First, know the strategic value that you want to achieve from a deal and establish major milestones for getting there.
  2. Second, undertake deep due diligence of both the financial value of a target and the strategic value of a deal.
  3. Third, know who the key people from both the target and acquirer will be in achieving the strategic value – and make sure they have motivations to stay.
  4. Fourth, have the discipline to walk away from a deal, either because the price is too high, the strategic value is too low, or the people you need are likely to leave. Quite simply, let your competitors do the bad deals.

Stryker pays close attention to these four basic rules. Yet following the basic rules, as obvious as they may seem, is often difficult. Stryker’s experience highlights several themes that help firms follow the basic rules, while building an even more nuanced acquisition strategy. In the remainder of this article, we discuss five key principles for making acquisitions a part of a successful growth strategy.

Beyond the Basics: Five Principles for Acquisition Excellence

Stryker adheres to five principles for its acquisition activity.

Principle 1: External R&D via M&A complements internal R&D

We made the central point of this first principle earlier. The core issue is that no company or division will ever have enough resources to fund all ideas or enough knowledge to explore all paths. Even financially strong and intellectually rich companies face real constraints in funding longer-term bets internally through the profit and loss statement. Acquisitions help avoid P&L burn.

Yet acquisitions are not a means of “saving” a weak division. Stryker requires strong internal R&D and marketing organizations to make its acquisition strategy work. Before a deal, internal personnel are critical for assessing targets, helping separate the wheat from the chaff.  After a deal, internal staff members become even more important, in engaging and integrating the products and capabilities that come with the target. Hence, even as Stryker has increased the pace of its acquisitions in the past five years, internal R&D has risen over 100 basis points, from about 5% of sales to more than 6% of sales. Selling, general, and administrative expenses, meanwhile, also have increased substantially in magnitude (to almost $4 billion in 2016) while becoming more efficient, falling from 37% of sales in 2011 to under 35% of sales in 2016.

Principal 2: Serial acquirers create shareholder value

Research by Bain & Company (2012) shows that serial acquirers create more value than ad-hoc buyers. Firms that regularly undertake acquisitions learn how to seize the gains while avoiding pitfalls. Quite simply, repetition of similar activities creates value. Stryker has built strongly on this lesson.

Drawing from its experience, Stryker has developed a playbook that has improved the company’s acquisition batting average. Codifying the experience in the playbook helps achieve more thorough due diligence, underlies strong negotiations and bid strategy, drives superior integration planning and implementation during the critical first 100 days of a deal, and gives a due diligence team confidence to walk away from a deal.. At its core, the experience-based playbook helps the company adhere to the basic rules we described above, while providing deeper nuance beyond the basics.

Stryker also has learned to pace its flow of serial acquisitions. As Exhibit 1f highlights, after a burst of acquisition value, the company typically takes a year or more “digestion period” before seeking another large meal. Even a company with extensive acquisition experience and a strong acquisition playbook faces limits in time and personnel to devote to due diligence and integration. The slower pace of deals allows experienced staff to focus on making sure that recent larger deals succeed.

In turn, success in integrating the serial flow of acquisitions has increased the flow of companies approaching Stryker seeking buy-outs. Potential targets know that they have a better chance of success within Stryker than within many of its competitors. Many value the potential growth for their products and the continued opportunities for employees if they become part of Stryker.

Principal 3. Seek “bolt on” and “extension” deals that leverage core strengths at home and abroad

Most of Stryker’s deals provide new products and capabilities that leverage existing core strengths. The company has a strong sales organization in its U.S. home market, with marketing competencies and contracting capabilities that go far beyond the skills of smaller targets. Existing sales staff, complemented by new team members from the targets, drive value by selling new products that come from the deals. Thus, leveraging existing market strength via “bolt on” deals has been highly effective for the company.

The principle of leveraging core strengths goes beyond bolt on deals that add scale to existing product lines, also providing support for “extension” deals. The company’s three main business units – Orthopaedics, MedSurg, and Neurotechnology-Spine – each have a dedicated R&D group. The development staff in each unit can build on new capabilities that arrive with acquisition targets, quickly iterating new products that provide stronger customer solutions than either Stryker or its target could have achieved alone.

Beyond its home market, Stryker has growing global presence. The geographic scope provides global opportunities for both “bolt on” and “extension” deals. International breadth allows the company to gain competitive advantage by taking U.S. technologies abroad. In parallel, the growing number of ex-U.S. deals creates opportunities to bring international technology and products into U.S. markets. Together, the mix of “bolt on” and “extension” acquisitions in the U.S. and worldwide provide innovative products globally, as well as job growth in the company’s home market.

Stryker engages in far fewer “white space” deals that explore market and technological space far beyond the company’s current core. While the occasional white space acquisition is valuable in opening up new markets and potentially creating new divisions, these deals are far more challenging than bolt on and extension deals. One of the lessons of the serial acquisition experience is to reserve white space deals for a small number of exploratory initiatives. These deals are typically smaller experiments that provide potential launching pads for path-breaking growth, but will not damage the core business if they struggle to take flight.

Principal 4. Balance capital allocation among acquisitions and shareholders

Investing most available resources in growth is tempting, particularly for a successful firm in a dynamic industry, but also risks making long-term shareholders nervous about when they will receive payouts. Stryker’s annual capital allocation typically devotes somewhat more than 50% to acquisitions, with the remainder to dividends and share repurchases. The strong investment in targets to obtain new products and capabilities helps fuel the growth engine. At the same time, using current success to provide ongoing financial rewards to shareholders helps build loyalty and support for the company’s vision for its future

Principal 5. Seek deals that are accretive to growth

Big bets with long horizons are tempting, but often take so long to pay off that they draw down resources and constrain the ability to play the next round. Stryker most often seeks deals that offer near-term pay-offs as well as the potential for long-term wins. The early pay-offs in reduced costs and new revenue, typically aiming for milestones within the first year, maintain market confidence in the company’s growth strategy. Just as importantly, the pay-offs provide resources for investing in organic R&D and marketing initiatives.

The emphasis on accretion is central to the ability to support both internal and external resource sourcing. Internal resources that arise from accretive deals help the company avoid falling into the trap in which acquisitions suck resources away from internal activity. Instead, accretion supports the virtuous cycle of balanced growth in both internal development and acquisition activity.

Conclusion

The commercial life sciences sector is dynamic and uncertain, with rapid pace across products, markets, technologies, and competitors. Many once-leading firms have disappeared, missing changes in their core markets and being absorbed by more effective competitors. Stryker is one of the few firms that have thrived year after year in the midst of market and technological turmoil. At the core, the company’s dual growth strategy of internal development and active acquisitions underlies the ongoing success.

References

Bain & Company. February 3, 3012. Four ways to improve your chances of success in M&As. The Economic Times.

http://www.bain.com/publications/articles/four-ways-to-improve-your-chances-of-success-m-and-a.aspx

Capron, Laurence, and Mitchell, Will. 2012. Build, borrow, or buy: Selecting pathways for growth. Harvard Business Review Press: Cambridge, MA.

 

 

EXHIBIT 1.  STRYKER CORPORATION FINANCIALS AND ACQUISITION TRENDS

1c. Stryker Stock Trend v. Dow Jones Industrial Average (DJIA), 2001-2017

 

 

EXHIBIT 2. EXAMPLES OF STRYKER ACQUISITIONS, 1979-2016

Year Value ($ million) Target company / product lines Country Key products and capabilities
2016 $2,775 Sage Products US Medical supplies
2016 $1,280 Physio-Control US Urgent patient care
2016 $51 Stanmore Implants Worldwide UK Orthopaedic oncology
2016 CareFusion products (Becton, Dickinson) US Vertebral compression fracture products
2016 Ivy Sports Medicine US Meniscal repair
2016 Synergetics Neuro portfolio (Valeant) US Neurosurgical instruments
2016 Restore Surgical / Instratek US Implants for feet, ankles, and upper extremities
2016 SafeWire LLC Product Portfolio US Minimally invasive spine surgery instruments
2015 Muka Metal Turkey Patient room furniture
2015 CHG Hospital Beds Canada Hospital beds
2014 $375 Small Bone Innovations US Joint replacement
2014 $172 Berchtold Holding Germany Hospital equipment
2014 $120 Patient Safety Technologies / SurgiCount US Operating room compliance software
2014 Pivot Medical US Hip instruments & implants
2013 $1,650 MAKO Surgical US Robotics
2013 $764 Trauson Holdings China Spinal instruments
2013 $30 ActiViews Ltd Israel CT-Guide navigation
2012 $135 Surpass Medical Israel Stent technology
2012 Innovative Infusions US Infusion services
2012 P.M.F. SAS France Spine surgery
2011 $1,500 Neurovasco (Boston Scientific) US Neurovascular technology
2011 $316 Orthovita Inc US Orthobiologic and biosurgery products
2011 $150 Memometal Technologies France Podiatric surgery
2011 $135 Concentric Medical US Interventional neurovascular
2010 $150 Gaymar Industries US Pressure ulcer management
2010 Porex Surgical US Bioimplantable porous polyethylein products
2009 ~$55 OtisMed Corp US Implant software support
2009 ~$55 Sonopet ultrasonic controls (Mutoh) Japan Ultrasonic support for bone surgery
2009 $525 Ascent Healthcare Solutions US Remanufacturing of medical devices
2007 Everest Biomedical Instruments US Handheld diagnostics
2006 $140 Sightline Technologies Israel Gastro-intestinal endoscopes
2005 $50 eTrauma US Picture Archive and Communications Systems
2005 $18 PlasmaSol US Sterilization equipment
2004 $360 SpineCore US Spinal disc technology
2002 $135 Surgical Dynamics (Tyco) US Spinal implants
2002 Dekompressor (Pain Concepts) US Interventional pain technology and products
2000 $12 Image Guided Technologies US Surgival navigation
1999 Infomedix US Medical image communication
1998 $1,650 Howmedica (Pfizer) US Orthopedic products
1998 $20 Creative BioMolecules rights US Orthopaedic reconstruction production rights
1998 Bertec Medical Canada Medical beds
1996 Osteo Holdings Switzerland Orthopedic trauma
1994 $600 Matsumoto Medical Instruments Japan Medical distribution
1992 $11 Dimso France Spinal fixation
1991 Prab Robots plants US Robotics facilities
1990 Quintron-Driskell product line US Dental implant products
1987 Hexcel Medical US Medical composites and polymers
1987 Adel Medical US Labor and delivery stretchers
1981 SynOptics US Endoscopy
1979 Osteonics US Orthopedic implants

Note: All data in exhibits 1 and 2 are drawn from public sources, including company annual reports, corporate histories, Thomson SDC Platinum, and the ReCap IQ database.

 

 

Innovating in Health Care Delivery

Senator William H. Frist, Sr., MD, Benjamin J. McMichael, and R. Lawrence Van Horn

Contact: Larry Van Horn Larry.Vanhorn@owen.vanderbilt.edu

William H. Frist, M.D., is a nationally recognized heart and lung transplant surgeon, former U.S. Senate Majority Leader, and Chairman of the Executive Council of Cressey and Company.

Benjamin J. McMichael is a post-doctoral scholar at the Owen Graduate School of Management at Vanderbilt University studying the law and economics of health care.

Larry Van Horn is a leading expert and researcher on health care management and economics. His current research focus centers around the shift to consumer purchase of health care and the impact it will have on new delivery models.

Abstract

What is the message?

As more people are enrolled in high deductible plans, they will begin to act more like consumers in any other market, who are price sensitive and willing to shop around for a service that satisfies their preferences. Innovation targeted at these consumers will be differentially rewarded, and as the health care industry becomes more consumer-centered, innovators will have more opportunity to target specific market segments based on the heterogeneous preferences of individuals.

What is the evidence?

Surveys and external evaluations provide evidence of the movement toward a consumer-centered health care industry, and brief case studies of newly developed companies illustrate the benefits of targeting specific market segments.

Submitted: March 1, 2017; Accepted after review: March 27, 2017

Cite as: William H. Frist, Sr., Benjamin J. McMichael, R. Lawrence Van Horn. 2017. Innovating in Health Care Delivery. Health Management Policy and Innovation, Volume 2, Issue 1.

Download PDF

Introduction

Gary Hamel once explained that “[m]ost of us understand that innovation is enormously important. It’s the only insurance against irrelevance. It’s the only guarantee of long-term customer loyalty. It’s the only strategy for out-performing a dismal economy” (Denning 2012).

While it is true that innovation is necessary for survival in almost any industry, not all innovation is created equal. Truly valuable innovation—not innovation for the sake of innovation—appreciates who the customer is and what that customer values.

The recent resurgence of Best Buy in the face of competition from Amazon illustrates how valuable true innovation can be (see Kelleher 2016).  Once written off as the next victim of Amazon in a world increasingly dominated by online sales of electronics, Best Buy successfully converted what many considered to be a significant liability—its large number of brick and mortar stores—into an asset. Best Buy realized that, although maintaining a network of stores was more expensive than Amazon’s warehouse and logistical system, its stores provided value to the consumers of its products.

Best Buy focused on its ability to allow customers to take a variety of electronics for a “test drive” and discuss their potential purchases with a knowledgeable staff—something online retailers could not offer. To prevent people from returning home to buy a product online, Best Buy implemented price-matching, allowing consumers to obtain their new gadget at the same price but with the added benefit of instant gratification, as they walked out of the store with it. The company essentially converted its stores into fulfillment centers, which has proven valuable to American consumers—70% of whom live within 15 minutes of a Best Buy store.

Best Buy identified an important market segment within the consumer electronics market and aggressively pursued a strategy that served the needs of consumers in that segment. Because it appreciated who the consumer was and what that consumer valued, Best Buy was able to thrive in a world dominated by online retailers.

While Best Buy understood that innovating in a way that consumers valued was critical to success, other companies have misunderstood this proposition. For example, Blackberry recently ceased producing mobile phones, despite having been one the most successful companies in this industry less than a decade ago (De Vynck 2016). While Blackberry continued to innovate as it released new phones—each successor contained new features and could do many things the previous generation could not—it failed to appreciate both the supremacy of the consumer and the changing nature of that consumer.

For instance, while some users remained nostalgic over the physical keyboard, Blackberry was left behind as other companies focused on new ways to allow consumers to type messages on touchscreen devices. Similarly, Blackberry focused heavily on the corporate market—where firms dictated which phones their employees would use—instead of focusing on the actual user of their devices. While firms obviously influence their employees’ decisions, Blackberry’s failure to focus specifically on the consumer’s needs contributed to its eventual exit from the smartphone market. These two examples illustrate that, while innovation can be value added when it is directed at the consumer, all innovation is not created equal.

The same holds true for the healthcare industry, despite its myriad differences from other sectors of the economy. In this paper, we explain that the customer in health care is shifting from third party payers to individual consumers. The focus of innovation has, to a large extent, failed to keep pace with this change, and most innovation in health care remains directed at the wrong actors. In fact, the allocation of health care spending has remained largely unchanged over the last 40 years.

In this article, we argue that innovation targeted to the proper consumer—the individual, not the payer—will be differentially rewarded in the future.  The outcomes from such innovation will be markedly different when it is consumer-focused resulting in new treatment modalities, venues, and modes of interaction with providers.  Starting a process of innovation where you begin with consumer preferences and budget constraints results in very different solutions and business models.

Additionally, as the health care industry returns to a patient-centered approach, providers will recognize increased heterogeneity in demand, as individual consumers differ from one another to a greater extent than do third party payers. This increased heterogeneity will offer more opportunity for health care companies to find solutions that serve different market segments. We provide several examples of companies that both appreciate the changing nature of the health care consumer and have begun to target individual market segments successfully.

The Changing Health Care Customer

In his popular book, Catastrophic Care: Why Everything We Think We Know About Health Care is Wrong, David Goldhill argues that what he calls “the Surrogates,” i.e., insurance companies and government programs that function as insurance companies, have assumed the role of consumers in health care markets (Goldhill 2013). These Surrogates negotiate prices, preapprove medical services, determine who can serve as a patient’s physician, and provide other intermediation services—all functions typically associated with consumers in other markets. Goldhill (2013) argues that, because the Surrogates are the true consumers in health care, health care companies—hospitals, clinics, and others—cater to them, not to the individuals actually receiving the care.

While the propriety and desirability of insurance companies fulfilling these roles has been debated extensively, Goldhill (2013) is, as an empirical matter, correct that insurance companies have come to dominate health care markets. The very language used to define the purchase makes this clear. Purchases are defined and prices assigned after the fact using CPT Codes, HCPCS, SNOMED, ICD-10, and DRGs communicated on UB and HCFA 1500 forms. But this is changing.

Although the number of uninsured has dropped in the wake of the Affordable Care Act (ACA), the percentage of individuals enrolled in high deductible plans has increased. In the individual market, nearly 90% of people in the ACA Marketplaces enroll in a plan that qualifies as a high deductible plan (Dolan 2016).[1] And in the employer-sponsored insurance market, there has been a shift towards high deductible plans over the last ten years. A survey conducted by the Henry J. Kaiser Family Foundation in 2016 found that deductibles in employer-sponsored plans have increased 67% since 2010 and that, while only 4% of workers were enrolled in a high deductible plan in 2006, 29% were enrolled in such a plan in 2016 (Kaiser 2016). Moreover, more than half of workers were enrolled in a plan with a general annual deductible of at least $1,000 for individual coverage.

While the reasons for the movement toward high deductible plans are many, the point we want to emphasize is that high deductible plans are proliferating and that this marks the beginning of the return of the individual health care consumer. Below the deductible, a patient shopping for an MRI, a strep test, or just about anything else,[2] will act just like any other customer shopping in the market for any other good or service. Because she is “paying with her own money,” she will be price sensitive and therefore willing to shop around among different providers of the same medical service.

Thus, just as Walmart competes with Target for customers on price, selection, and quality, health care providers—no longer assured of customers as a result of their negotiations with third party payers—will have to compete for patients along dimensions that matter to patients.  These dimensions are likely to differ from those that defined competition over the last 40 years. The companies that innovate to serve the needs of this emerging health care consumer are the ones that will survive and thrive, while old models of innovation—those focused on third party payers or on metrics that are largely irrelevant to individual consumers—will begin to fade away.

Innovating for a CHANGING HEALTH Care Consumer

In an article appearing in this issue, Regina Herzlinger and Kevin Schulman (2017) conclude that successful innovation targets one (and only one) of three opportunities: “[c]onsumer-facing activity; system integration; or technical advance.” We agree with this characterization but would add that any successful innovation in health care—regardless of what opportunity it targets—must appreciate the changing nature of the health care consumer in order to be successful. Innovation for innovation’s sake may (rarely) be successful, but innovation directed at the true consumer will be differentially rewarded because it creates value for those who are making the decisions regarding whether to buy a product or service.

There is no dearth of “innovation” in the health care industry. Insurance companies and government programs have been extensively experimenting with innovation over the last ten years. Out of the ACA came the Center for Medicare and Medicaid Innovation (CMMI), which—as its name suggests—is focused on innovating in health care markets. CMMI has produced innovations such as the next generation Accountable Care Organization (ACO) Model, which allows provider groups to assume higher levels of financial risk and reward, and a variety of episode-based payment initiatives, which focus on changing how certain procedures are reimbursed (CMMI 2017).

The problem with these innovations is that they are targeted squarely at third party payers and not at individual consumers.  Their objective is to change the nature of competition and conduct in health care markets. Unsurprisingly, they add essentially no value for the health care consumer, i.e., the patient receiving the care. Payment reforms, at best, have little impact on how an individual consumer receives the care she needs. At worst, American society may see a “reboot” of Helen Hunt’s famous tirade against HMOs in the film “As Good As it Gets” (TriStar 1997).

In contrast to the innovations that have been aimed at payers and providers, a number of new companies have emerged that specifically target their innovative efforts at the health care consumer. These companies appreciate what Herzlinger (1996) predicted long ago—that individual health care consumers will reassert their dominance.

Perhaps the most visible examples of consumer-focused innovations are retail health clinics, such as CVS’s Minute Clinic or Kroger’s Little Clinic. In contrast to simply tinkering with how providers and payers interact with one another, these clinics address a consumer want that is met in most every market beyond health care—convenience (see, e.g., Mehrotra et al. 2008; Spetz et al. 2013). They also compete with traditionally delivered primary care and urgent care on the price dimension, often costing substantially less than a visit to an urgent care clinic or a visit after hours to a physician’s office.

While not completely divorced from the traditional health care industry—clinic patients still often submit their claims for reimbursement by third party payers—the creators of these clinics appreciate that consumers value convenience and access more than abstract quality metrics, population health, and aligned financial incentives. Consumers appreciate the ability to receive the care they need for a lower price while “getting in and getting out” quickly.

Retail health clinics represent one type of innovation in primary care, and they target what may be described as the “convenience driven, price conscious” market segment. However, retail health clinics are not alone in innovating in the provision of health care services.  For example, in several cities in California, Heal offers a smart phone app that allows a consumer to summon a doctor to her home just as easily as she would order a ride through Uber. In Nashville, Dose offers similar on demand urgent and primary care services through the convenience of a consumer’s phone. For a price as low as $99 (Heal) or $50 (Dose), a consumer can see a board certified physician in the comfort of her home for any medical needs she may have.

The companies responsible for these apps have taken the model pioneered by retail health clinics to the next logical step and have provided the consumer—not the provider or payer—true value in the form of even greater convenience. If a consumer faces a $1,000, $5,000, or $10,000 deductible, the ability to pay less than $100 for a visit from the doctor (not to the doctor) not only makes sense from a convenience perspective, but from a financial one as well. These apps may be described as targeting the “location-specific” market segment, as individuals using these apps may be willing to pay a little more to avoid leaving their homes and offices while still receiving the care they need from highly trained providers.

The majority of interactions between a patient and physician do not require a physical assessment. In these cases, telemedicine services, which offer near instantaneous connections with health care providers, are valuable alternatives. The CDC estimates that fully one third of all outpatient encounters could be delivered through a telemedicine platform—a potential market of over 400 million (Gorevic 2016). Many companies have begun to develop a wide range of telemedicine services, with some focusing only on cash-pay consumers and others working with large employers or insurers.

The market leader, Teladoc, will deliver approximately 1 million visits this year, suggesting that there is tremendous potential for growth (Teladoc 2017). Legal barriers to telemedicine continue to crumble in many states (see, e.g., Bryan, Rhoades, and Graboyes 2017), most recently in Texas (Teichert 2016), and telemedicine services will only become more prevalent as consumers demand more access to the services they want when they want them. This expansion will occur because, when individuals are the health care consumers, companies will respond to their demands, not the demands of providers or payers.

Of course, retail health clinics, smart phone apps, and telemedicine do not represent the only innovations targeted at health care consumers. And as more consumers choose (or are forced into) high deductible plans or opt out of insurance markets altogether with the possible repeal of the ACA, consumer-focused innovations will only become more prevalent. For example, in ten years, the market for primary care services will likely be segmented very differently than it is today, i.e., large health insurers and their networks of providers forcing many into a one-size-fits-all solution.

Some consumers may choose traditional primary care practices, others may opt for concierge services, while others will choose care through apps like Dose and Heal, and still others may opt for direct primary care practices.  It is likely that we will see further innovation toward virtual primary care where the consumer has a relationship with an organization that provides not only medical advice and direction, but also advises the customer on where to receive care and what to pay.

In addition to illustrating the importance of appreciating who the consumer is when innovating, these three examples illustrate another important aspect of the changing nature of the health care consumer. As individuals become more dominant in the market for primary and urgent care services, companies will be able to target more specific market segments. Individual preferences are substantially more heterogeneous than are those of third party payers and providers—there are many more individuals in health care markets than there are payers and providers. Given this increase in the heterogeneity of preferences as individual consumers become more dominant, companies will be able to segment health care markets using more specific consumer characteristics and target particular segments as Heal and Dose have targeted the “location-specific” market.

We do not mean to suggest that valuable innovations are limited to primary care. While the first waves of innovation may be targeted toward that market, specialist and surgical markets will not be immune from innovation directed at consumers.

Perhaps the most famous consumer-focused innovations in the market for surgical care come from the Surgery Center of Oklahoma. Unlike most traditional hospitals, specialty hospitals, and ambulatory surgical centers, the Surgery Center of Oklahoma posts the prices for the many surgical services it offers on its website for the world to see (Ray 2017). Patients pay this price and only this price (with no separate bills from the facility, the surgeon, and the anesthesiologist) when receiving care at the Oklahoma City facility.

While posting prices hardly seems innovative in the majority of markets individuals participate in everyday, posting prices in health care is not only innovative, but revolutionary. Without a health care consumer paying for the cost of a surgery out of pocket, posting prices and keeping those prices low makes little sense in a world dominated by third party payers. But as the health care consumer sits down in the driver’s seat, consumer-focused innovation like that seen at the Surgery Center of Oklahoma will only become more commonplace.

MDSave was created with a cash paying customer forefront in their design. The online experience was designed to mirror other ecommerce sites found in other markets. The website enables consumers to purchase most any service (from joint surgery to basic imaging) for a cash price in 170 markets in the United States. Providers compete with an all-in cash price and receive payment from MDSave within days of service delivery. MDSave offers two value-added services to consumers shopping for medical procedures. First, the company negotiates with individual providers to offer consumers a lower cash price. Second, beyond the lower prices, MDSave offers consumers a bundled service so that they pay one price and one price only—which is not always the case when dealing directly with providers.

The discussion to this point has centered on consumer-focused innovation with respect to how health care is packaged and delivered. But the response to consumer demands is almost never limited to the market for the primary good or service, as ancillary service providers form to address the needs of consumers operating in the primary market. For example, Consumer Reports serves the needs of consumers choosing a new or used car.

In health care markets, companies like Healthcare Bluebook may become the new Consumer Reports—not in their ability to rate providers as Consumer Reports does, but in their ability to simplify a confusing market of complex goods and services. Healthcare Bluebook, in particular, is an online service where consumers can find a list of medical procedures offered in their area, prices for those services, and associated quality. As more health care consumers begin to shop around for the best, most convenient, or lowest priced services, MDSave and Healthcare Bluebook are examples of companies that will find themselves well positioned due to their attention to understanding consumer preferences and solving the customer’s health care needs.

Conclusion

While many speak to the need for innovation in health care to address its unsustainable trajectory, not all innovation is created equal. Innovation that targets the re-emerging individual health care consumer will be differentially rewarded. As health care customers again become price sensitive under high deductible plans and as these customers begin to demand products and services that satisfy their preferences instead of the preferences of third party payers, companies that understand these new customers will have a distinct advantage over those that adhere to the legacy model.

Importantly, as consumers become more dominant, the greater heterogeneity among consumers, compared to payers, will require greater market segmentation. Providers will have to focus on the specific needs of market segments to a much greater extent than they have in the past.

While we have emphasized the importance of consumer-driven innovation in creating new health care products and services, the value of this innovation is not limited to the products and services that are the subject of that innovation. For example, as Uber began providing more rides to people in New York City, taxi cabs became cleaner as they had to compete more vigorously for customers. The same is true of health care, as facilities that compete with the Surgery Center of Oklahoma have discovered—they now must post their prices online to remain competitive (Ray 2017). It is nearly impossible to predict exactly what form innovation in health care markets will take in the future, but we can be sure that innovations that target the true consumer will make everyone better off.

 

References

As Good as It Gets. 1997. Dir. James L. Brooks. Perf. Jack Nicholson, Helen Hunt, and Greg Kinnear. TriStar.

Bryan, Darcy N., Jared Rhoades, and Robert Graboyes. 2017. The Healthcare Openness and Access Project. Mercatus Center, retrieved from https://www.mercatus.org/hoap#10.

Center for Medicare and Medicaid Innovation. 2017. Innovation Models, retrieved from https://innovation.cms.gov/initiatives/index.html#views=models.

Denning, Steve. 2012. Gary Hamel on Innovating Innovation. Forbes, retrieved from http://www.forbes.com/sites/stevedenning/2012/12/04/gary-hamel-on-innovating-innovation/#6f9fae2171c2.

De Vynck, Gerrit. 2016. BlackBerry Stops Making Phones. Bloomberg, retrieved from https://www.bloomberg.com/news/articles/2016-09-28/blackberry-stops-making-smartphones-to-focus-on-software-service.

Dolan, Rachel. 2016. Health Policy Brief: High Deductible Plans. Health Affairs, retrieved from http://healthaffairs.org/healthpolicybriefs/brief_pdfs/healthpolicybrief_152.pdf.

Goldhill, David. 2013. Catastrophic Care: Why Everything We Think We Know About Health Care is Wrong. New York, NY: Random House Company.

Gorevic, Jason. “Telemedicine: Virtually Redefining the Delivery of Care.” In America’s Healthcare Transformation: Strategies and Innovations, edited by Robert A. Phillips, 163–177. Edition 1. New Brunswick, NJ, 2016.

Herzlinger, Regina. E. 1996. Market-Driven Health Care. Reading, MA: Addison-Wesley Publishing Company.

Herzlinger, Regina E. and Kevin A. Schulman. 2017. Diffusion of Global Innovations In Health Care: How To Make It Happen. Health Management Policy and Innovation, Volume 2, Issue 1. xxHMPI-URL.

Henry J. Kaiser Family Foundation. 2016. 2016 Employer Health Benefits Survey, retrieved from http://kff.org/health-costs/report/2016-employer-health-benefits-survey/.

Kelleher, Kevin. 2016. How the Geek Squad Could Be Best Buy’s Secret Weapon. Time, retrieved from http://time.com/4411333/best-buy-amazon-geek-squad-hubert-joly/.

Mehrotra, Ateev, Margaret C. Wang, Judith R. Lave, John L. Adams, and Elizabeth A. McGlynn. 2008. Retail Clinics, Primary Care Physicians, And Emergency Departments: A Comparison Of Patients’ Visits. Health Affairs 27(5): 1272–1282.

Ray, Michelle. 2017. This ‘Free-Market, Price-Displaying’ Surgery Center May Be Leading the Affordable Health Care Solution Revolution. Independent Journal Review, retrieved from http://ijr.com/2017/02/792354-this-free-market-price-displaying-surgery-center-may-be-leading-the-affordable-health-care-solution-revolution/.

Spetz, Joanne, Stephen T. Parente, Robert J. Town, and Dawn Bazarko. 2013. Scope-Of-Practice Laws for Nurse Practitioners Limit Cost Savings that can be Achieved in Retail Clinics. Health Affairs 32:1977–1984.

Teichert, Erica. 2016. Texas drops appeal against Teladoc lawsuit. Modern Healthcare, retrieved from http://www.modernhealthcare.com/article/20161018/NEWS/161019900.

Teladoc. 2017. Teladoc sets industry record, surpassing 2 million telehealth visit milestone, retrieved from https://www.teladoc.com/news/2017/01/06/teladoc-sets-industry-record-surpassing-2-million-telehealth-visit-milestone/.

[1] In 2015, a high deductible plan was any individual plan with a deductible over $1,300 and any family plan with a deductible over $2,600 (Dolan 2016).

[2] Depending on the plan, certain services may be covered with no out of pocket expense for the consumer.

Regi’s ‘Innovating in Health Care’ Cases – Battle of the Bulge & CVI A and B

In this issue of HMPI, I feature two recent case studies. One, the “Battle of the Bulge”, introduces a framework for analyzing whether an innovation is viable for evaluating its business model. The other focuses on the issues faced by the CEO of a global medical device start-up (CVI A and B). The B case contains the denouement for the A case issues. Teaching notes for both are available.

Abstract

Framing

I teach these cases using an “Innovating in Health Care” framework that enables students to evaluate the following questions:

1. How well aligned is the innovation with six aspects of the health care ecosystem: financing; structure; public policy; technology; accountability; and consumers? I call them the “Six Factors”.

If the innovation is not well aligned with the Six Factors, we discuss what, if anything, could be done to improve the alignment.

2. Will the business model work?

The business models of some innovations contain unrealistic ideas about important elements such as the strategy, financing, and management team composition. The students evaluate the business model and recommend specific changes.

I would love to hear from readers who have teaching materials (e.g., cases; syllabi; experiences with mentoring, entrepreneurship in residence; blended courses) in innovating in health care. I welcome all other feedback too.

Materials

  • Reading: Innovating in Health Care – Framework
  • Case: Battle of the Bulge
  • Case: CVI A and B
  • edX MOOC: Innovating in Health care
  • Note about access to materials: Harvard Business School holds the copyrights to most materials in this section; the links connect to the HBS case site where they may be purchased. Academic readers typically can register with the HBS site for access to complementary educator review copies of the materials.

 

 Reading: Innovating in Health Care – Framework

  • HBS case: 9-314-017 (July 8, 2015)
  • Author: Regina E. Herzlinger
  • Synopsis: This note contains three frameworks that will help you create effective health care innovations
    • Three different types of health care innovations
    • “Six Factors” alignment: Is the idea viable?
    • Business model elements: How to make it happen
  • HBS link: https://cb.hbsp.harvard.edu/cbmp/product/314017-PDF-ENG

 

 Case: Battle of the Bulge

  • HBS case
    • HBS Teaching Note: FM
  • Authors
    • A: Regina E. Herzlinger, John McDonough
  • Synopsis: Which of the many “solutions” for the obesity epidemic – incentives, drugs, devices, support, Weight Watchers, Jenny Craig, the Oprah diet – does the most good? Which of them is the best business? Which of them is the best combination of “do good” and “do well”, and why?
  • HBS link: https://cb.hbsp.harvard.edu/cbmp/product/304009-PDF-ENG 

Case: CVI A and B

  • HBS case: (A) 315045 and (B) 315087
  • HBS Teaching Note: FM
  • Authors: Regina E. Herzlinger, Andrew Otazo
  • Synopsis: Duke Rohlen, serial entrepreneur, is preparing for a Series B round of financing from one of the world’s most important venture capital firms for CVI, a firm he founded and leads to commercialize a drug eluding balloon for a stent. Is his stent sufficiently well aligned with the Six Factors? And will his iconoclastic business model decisions –such as performing clinical trials internally, without the help of a CRO, and assigning two jobs to every team member–hurt or help?
  • HBS link: CVI (A): https://cb.hbsp.harvard.edu/cbmp/product/315045-PDF-ENG
  • HBS link: CVI (B): https://cb.hbsp.harvard.edu/cbmp/product/315087-PDF-ENG

 

 edX MOOC: Innovating in Health care (HarvardX MOOC)

  • Instructors: Regina E. Herzlinger (Harvard University), Margo I. Seltzer (Harvard University), Kevin Schulman (Duke University)
  • Synopsis: Improve critical thinking about health care entrepreneurship by reading, discussing, and analyzing case studies and writing a business plan.
  • Link to archived course: https://www.edx.org/course/innovating-health-care-harvardx-bus5-1
  • Next session: The MOOC will be offered again in the fall of 2017

 

Word From The Editors

On behalf of the editorial team – Regina Herzlinger (Harvard), Kristiana Raube (Berkeley), Kevin Schulman (Duke), Lawrence Van Horn (Vanderbilt), and myself (University of Toronto) –  I am delighted to welcome you to Issue 2 of the relaunch of HMPI.  We are continuing to publish articles that are central to HMPI’s core goal: We draw from the research and experience of scholars and practicing leaders to provide relevant insights for public and private organizations in the international health sector.

Issue 2 has an exciting set of articles – directed at the transformation of health care systems in the U.S. and around the world. The authors of these articles draw from a deep base of experience and research to identify both high-level patterns of systemic changes and focal level changes for actors within healthcare systems, including hospital emergency departments, innovative healthcare providers, supply chain managers, and others in the public, for-profit, and NGO sectors.

The health sector in many countries makes up more than 10% of GNP, while facing extensive management challenges to provide affordable services, high quality, and broad access. Scholars and experienced executives in management, policy, and innovation have insights that can help improve the health care sector, but their contributions often fail to reach the right audience of practicing leaders. Quite simply, scholarly journals are typically narrowly targeted toward  technical experts, while health services research and medical journals rarely pay sufficient attention to managerial issues.

HMPI seeks to fill this void, building on work from the initial launch of the journal by an editorial team led by Professor David Dranove. HMPI contains short essays and research pieces on current issues in health sector management and public policy around the world. The articles are written for an audience of well-informed non-specialists. To ensure both high quality and accessibility, the articles are curated by the editors and the journal’s editorial board.

We welcome your comments about the ideas that the article spark. There are two ways you can weigh in. The BAHM Forum on LinkedIn [https://www.linkedin.com/groups/7042389] provides an ongoing location for discussions, as does HMPI@HMPI_Journal. In addition, we are opening Issue 2 to comments from readers. We welcome your thoughtful insights..

We welcome ideas for potential articles. If you have an idea that you would like to explore for HMPI, please send an outline of your article to our editorial team. And, of course, we welcome your comments and suggestions.

Will Mitchell
Professor of Strategic Management
Anthony S. Fell Chair in New Technologies and Commercialization
Rotman School of Business, University of Toronto

Innovations in Global Mental Health Practice

Onil Bhattacharyya, MD, and The University of Toronto Health Organization Performance Evaluation (T-HOPE) Team

Contact: Onil Bhattacharyya, MD, ‎onil.bhattacharyya@wchospital.ca‎

Dr. Onil Bhattacharyya is the Frigon Blau Chair in Family Medicine Research at Women’s College Hospital in the University of Toronto. He practices family medicine and is an Associate Professor in Family and Community Medicine and the Institute of Health Policy, Management, and Evaluation.

Abstract

What is the message?

Low and middle income countries (LMICs) face a particularly large burden of mental and behavioral disorders. Four domains of activity by private sector organizations offer potential for both near-term and longer-term impact in improving access to mental health services in LMICs: (1) education programs for health care providers; (2) advocacy/research; (3) interactive on-line platforms; and (4) comprehensive care.

What is the evidence?

The study draws from The Centre for Health Market Innovations (CHMI) database of health programs in LMICs, identifying thirteen programs founded between 1961 and 2011 that focused on mental health. The study collected information on program design from the CHMI database, complemented with other publicly available materials such as program information and annual reports.

Links: Slide

Submitted: October 1, 2016; Accepted after review: January 26, 2017

Cite as: Ilan Shahin, John A. MacDonald, John Ginther, Leigh Hayden, Kathryn Mossman, Himanshu Parikh, Raman Sohal, Anita McGahan, Will Mitchell, and Onil Bhattacharyya. 2017. Innovations in Global Mental Health Practice. Health Management Policy and Innovation, Volume 2, Issue 1.

Download PDF
|

Introduction

The importance of mental health services is rising around the world as the prevalence of infectious disease and other conditions declines. It is estimated that 7.4% of the disability-adjusted life-years (DALYs) lost in the early 2000s is accounted for by mental and behavioral disorders, compared with 5.4% twenty years earlier (Murray, et al. 2012). Unipolar depression, which has seen a 37% increase in burden over 20 years, will be the second-leading cause of DALYs lost in low- and middle-income countries (LMICs) by 2030 (Mathers & Loncar, 2006). Moreover, measures such as DALYs do not fully capture the burden since much of it falls on family members, causing loss of productive time and stress on care givers.

Addressing mental health must be part of a strategy to address health and well-being because it figures prominently in prioritized health areas such as perinatal health and non-communicable disease. More generally, mental health interventions can improve patients’ economic status, thereby contributing to community development.

Despite the existence of effective and affordable treatments, delivery of services is extremely limited in most LMICs. For example, 76% to 99% of patients with serious mental disorders in Africa are inadequately treated (Faydi et al., 2011). The World Health Organization (2011) report on Human Resources in Global Mental Health estimates treatment rates of mental health disorders in LMICs to be only 30% to 50% due in part to a shortage of 1.18 million health workers.

This article describes innovative efforts among private-sector, non-profit, philanthropic, and public-private partnerships (here-after “private providers”) engaged in providing mental health services in the resource-limited settings of LMICs. We identified striking examples of private providers in several countries that offer initial evidence of opportunities for private models of mental health services to operate as complements to public services.

Two examples provide initial insights.

The Health[E] Foundation uses computer-based courses blended with in-person sessions  to provide mental health services in more than a dozen countries in Asia, Africa, South America, and Eastern Europe.

The Anjali non-profit in India partners with the public health system in West Bengal to offer psychiatric and therapeutic services along programs to economically empower and reintegrate patients back into their communities.

We used a database of innovative efforts that address barriers and challenges in mental health services delivery. The Centre for Health Market Innovations (CHMI), managed by the Results for Development Institute, curates an open-access online database of over one thousand organizations in LMICs that catalogues novel approaches to improve health services for the poor.[1] The study draws on this dataset to map the landscape of innovation in mental health services, find evidence in practice at meaningful scale, and review the activities of the organizations in the database that describe a focus on mental health. We identify approaches to the delivery of mental health services that carry the potential to improve patient wellness, have capacity for scalability, and address barriers such as stigma and politicization to sustainability.

We identified 13 mental health organizations for the study. Nine of the 13 are private non-profits; three are public-private partnerships; and one is a for-profit organization. All 13 receive donor funding, while four are also financially supported by government sources and the for-profit venture also receives out-of-pocket payments from its clients.

[1] Available: http://healthmarketinnovations.org/programs.
Accessed 30 September 2012

Study Results

We clustered the organizations based on the activity domains they reported for their mental health services. Four domains of activity emerged from a qualitative analysis of the activities (Table 1): (1) education programs, (2) advocacy and research, (3) novel platforms for patient contact, and (4) comprehensive care.

The clustering procedure assessed the information that the organizations reported about their activities in the CHMI data base, along with information that they reported on their websites. We then aggregated the information into four categories that reflected both discussions in the literature and emergent patterns in the data.

Each of the four activity domains addresses a challenge to the access and availability of mental health services.

  1. Education programs for health care providers: Several programs offer education on mental health to multiple types of providers, reflecting the point that a lack of trained workers constrains the availability and quality of mental health services.
  1. Advocacy and research: Several organizations have established formal advocacy efforts and research programs relevant to the clinical context they work in. Some cover a wide range of mental health needs, while others target specific issues such as Alzheimer’s disease or women’s health.
  1. Novel platforms for patient contact: The availability and accessibility of mental health services can be improved through decentralization from large institutions in urban centres. Several programs have addressed this problem with low- and high-tech platforms.
  1. Comprehensive care: Current mental health services have left large treatment gaps for some populations. Private-sector organizations are seeking to address these inadequacies through comprehensive whole-person care, often designed for a particular condition.

Most of the 13 organizations engage in more than one of the four activity domains, with average coverage of two domains, but no organization participated in all four domains. Thus, no matter how important the four domains are for addressing mental health needs, no organization appears to have the resources – whether financial or organizational – to attempt to take on the full suite of demands. Instead, each has focused its efforts where it believes it can achieve impact given its resources and missions.

Discussion

Examples of programs in each of the four activity domains help illustrate the opportunities.

1. Education programs for health care providers

Lack of trained workers is a major barrier to improving mental health care. Integration of mental health care into primary care services can improve care delivery, so that education can be clinically effective. In addition, education that provides worker empowerment and experience of increased effectiveness can improve motivation.

Several of the organizations in the study educate health care workers.  For instance, among its activities across ten countries in Asia and Africa, BasicNeeds, founded in 1999, engages traditional healers in countries such as Ghana. The approach respects the prominence of these healers in the communities they serve, while addressing the delays in receiving appropriate care. Traditional healers are trained in how to recognize mental illness and to refer to psychiatric services when their own treatments have proven inadequate. Traditional healers also distribute basic household items to patients and their families.

Two other examples stand out. In partnership with the nursing faculties at Canadian universities, Rebuilding Health in Rwanda, founded in 2005, has developed a mental health curriculum that has been integrated into a general nursing training program. Strengthening Community-Based Mental Health, an organization in Vietnam and Angola founded in 2011, uses a similar educational approach while focusing on primary health care workers. Psychiatrists in the Community-Based Mental Health program provide clinical support to primary care providers, seeking to strengthen the ability of the primary-care system to manage mental illness.

These examples show how a community’s capacity to address mental health can be increased by working with both non-medical and medical stakeholders. The approaches aim to engage patients where they come to seek care, rather than attempt to change existing entrenched health-seeking behaviors.

Ideally, the curriculum of national health education programs would include more training in the issues that these private organizations are addressing. However, formal educational programs face limits in both time allocation and institutional constraints in curriculum contents. Hence, there is a meaningful educational role for private sector organizations.

2. Advocacy and research

Many barriers to improved care in mental health can be overcome by political will, especially insufficient funding of services. Challenges to improving funding include fragmented advocacy efforts, the perception that mental health care is not cost effective, and stigma. These challenges undermine the success of programs.

Advocacy must address policy, resource distribution, and funding priorities at the health systems level. One example of this is Anjali (see the “Extended Examples”) in India, an organization that works closely with the public health system in three mental health hospitals in West Bengal. Anjali has positioned itself with a broader clinical mandate within the health system, seeking to drive policy and resource allocation and carry out focused research on epidemiology. The partnership relationships allow Anjali to deliver services efficiently, while also allowing them to participate in health policy development through advocacy rooted in a rights-based framework.

Other examples of advocacy stand out. APOE Sao Paulo has engaged in advocacy efforts at the legislative level in Brazil, since 1961. In 2010, there were 30 legislative proposals at the state level and 24 at the municipal level pertaining to the rights of those living with disabilities. These are the results of collaborative efforts with other concerned organizations. In India, meanwhile, the Alzheimer’s and Related Disorders Society of India (ARDSI), founded in 1993, promotes improvement of programs directed at Alzheimer’s disease.

Some organizations also contribute to the systematic research base on mental health. Only 3% to 6% of articles on mental health in high-impact journals are from LMICs (Eaton et al., 2011; Razzouk et al., 2010). Hence, we need substantially more knowledge of challenges and practices in multiple LMIC contexts.

Sangath, founded in India in 1996, delivers a broad slate of mental health services through traditional and non-traditional workers while also linking services with research on epidemiology and the testing of delivery models. The organization has over 23 peer-reviewed publications. Sangath tests interventions such as using lay health workers through rigorous designs, describe the patient experience in LMICs with qualitative studies, describe outcomes for patients using observational designs, and make the case for addressing mental health internationally in journals such as The Lancet.

Sangath’s research efforts capture knowledge gained from extensive experience in delivering care and translate it effectively to other care providers through a credible process. This experience shows how rigorous research on models of care can be carried out in low-resource settings, identifying key mechanisms and highlighting effective ways of improving clinical practice in mental health.

The Banyan, which is an Indian organization founded in 1993 that cares for wandering women in Chennai, offers an example of advocacy and research, seeking to engage the community in order to increase awareness and reduce stigma. Banyan’s range of services now includes outpatient psychiatric care for 470 patients per month, as well as providing homes to help with the rehabilitation and community reintegration of 180 patients at any given time.

Recognizing the need for advocacy and research to identify best practices and barriers to improve care, the organization founded the Banyan Academy for Leadership in Mental Health. Its research is focused on the effect of social determinants of health on those with mental illness and its activities help empower various stakeholders to affect policy and promote access to care. Training seminars and courses address grassroots awareness of mental health issues and demand for mental health care.

The key point is that organizations like these that have been successful in delivering care have the potential to disseminate their knowledge to improve services beyond the scale and clinical reach of the focal organization.  These advocacy and research activities help to develop effective policy and health planning, and improve access to mental health services for those in need.

3. Online platforms

Online platforms based on phones, SMS, and the web offer substantial potential benefits for mental health services. Immediate counselling is an obvious target. For instance, e-Counseling PULIH (Indonesia), LinkTam (Vietnam), and Teen SMS Help Line to Stop Suicide (South Africa) use the web, phone, and SMS to provide counseling services. On-line platforms such as in these examples offer desirable options when confidentiality, geography, and/or cost are barriers to client access.

Some platform innovations also support educational and training activity. Health[e] Foundation (see the “Extended Examples”) is an innovative education program that trains health care workers in multiple countries in Asia, Africa, and South America via an online platform, in conjunction with face-to-face training sessions. BasicNeeds, meanwhile, uses mobile mental health camps to provide access to psychiatrists, therapists, and medications to rural communities in multiple countries.

4. Comprehensive care of mental health needs

Several programs illustrate approaches to providing comprehensive care that addresses ongoing mental health needs, rather than attempting to deal with individual incidents that flare up into long term problems.

Instituto Prove was founded in 2008 by a psychiatrist and professor at the School of Medicine of the Federal University of São Paulo. The institute offers free psychiatric treatment to victims of violence in São Paulo, Brazil. The Brazilian public healthcare system does not specifically target violence victims. The Institute treats people who witnessed or were victims of violence. Treatment includes targeted and specific psychotherapy sessions, as well as antidepressant and antianxiety medicines. The institute is supported by the university and also receives funding from Instituto Rukha in Brazil and private donors.

Comprehensive care programs work both independently and in partnership with public facilities. Instituto Prove and The Banyan, which we described above, are examples of specialized facilities.  The Anjali example that we described earlier, by contrast, operates within state hospitals, seeking to leverage available resources and encourage the state to engage with its responsibility towards mental health.

No one of the comprehensive care programs is a full solution. Nonetheless, they offer models for expanding the availability of care. Indeed, eight of the 13 organizations in the study address elements of comprehensive care, typically in combination with activities in other activity domains. Moreover, the gains from the other three domains – education, advocacy, and on-line platforms – can help generate systemic changes that provide the basis for additional longer-term advances in comprehensive care.

Two Extended Examples

Health[e] Foundation

The Health[e] Foundation demonstrates how online platforms can be used to educate health care workers at an unprecedented scale across multiple clinical areas and in many countries.

Health[e] Foundation was launched in 2006 as a not-for-profit dedicated to supporting nascent health care systems through the education of its health care workers. Initially developed as an HIV curriculum, the organization has expanded to include dozens of modules spanning areas such as mental health, child health and communicable diseases. The organization now operates in more than a dozen countries in Asia, Africa, South America, and Eastern Europe.

The foundation’s courses bring knowledge of best practices in care to resource poor settings using computer-based courses blended with in-person sessions. Using this platform allows for easy implementation and uptake in new settings but also allows for expansion to cover other health areas as they have so successfully done thus far. By 2014, 4,600 health care workers had been trained since inception. In 2011, ten courses were given to 867 trainees in nine countries. The budget for 2012 was under €700,000.

Anjali

Anjali demonstrates that private partnerships with resource-challenged public health systems in LMICs can improve access to services, reduce costs and affect policy through effective, collaborative advocacy efforts.

Anjali is a not-for-profit based in West Bengal, founded in 2008, with a strong dedication to advocacy. It offers a breadth of psychiatric and therapeutic services as well as programs to economically empower and socially reintegrate patients back into their communities.

Anjali operates within the public health system at three mental hospitals. This relationship increases access and also reduces costs. For instance, Anjali is able to offer rehabilitation in half-way homes at a cost of $870 per year, less than half the community average.

In India, less than one percent of health expenditures are earmarked for mental health, so the organization uses its relationship with the government to advocate for the mentally ill and put their priorities and rights on the policy agenda. They have described their relationship with the government as “a fine balance of confrontation and support”.

Conclusion

Near-term benefits in achieving impact in mental health services in LMICs can arise in each of the four activity domains. Education and advocacy both have potential for high impact beyond the life or reach of a single organization, helping to raise all boats.  On-line platforms based on phone or web technology, whether to provide client services and/or in support of education programs, meanwhile, have substantial potential for immediate impact. Comprehensive care has immediate impact for the target clients, while providing models for similar programs.

Activities in the four domains also interact to contribute to longer term gains. The organizations we studied commonly have found ways to engage education and advocacy within existing channels of care to deliver mental health services. This is being done with both traditional healers and primary care providers. Education can also be carried out using online platforms, leading to rapid expansion to train thousands of health care workers in multiple countries.

Advocacy can be done either embedded within or outside the public health system, such as through community awareness programs aimed at reducing stigma or through legislation in pursuit of recognizing the rights of those with mental illness.  Ongoing research can support advocacy, strengthening the case for making mental health a priority in development policy at local and global levels, all the while improving clinical care through thoughtful knowledge translation. Moreover, advances in health systems and related infrastructure that stem from education, advocacy, and platform innovation are likely to improve the long-term landscape for comprehensive care.

A key issue in any of the activity domains is program sustainability. All initiatives included in the study received at least part of their revenue from donor funding, which creates challenges for ongoing renewal. Nonetheless, most of the organizations in the study have operated for many years, with the oldest being founded in 1961 and a median founding year of 2000. Hence, these organizations, at least, have succeeded in meeting the pressure to maintain donor support.

One limit to the study concerns assessing the impact that the organizations have achieved. It is difficult to determine systematic outcomes of interventions of this nature because they are upstream, making measurement of relevant indicators challenging and forcing the attribution of downstream causality to be less direct. There is some evidence of programs achieving notable outputs, but a lack of evidence quantifying health impact. T-HOPE (2015) suggests a set of metrics that provides a feasible, credible, and comparable approach to measuring impact.

In addition, we must improve our understanding of the organizational characteristics and activities that are associated with scale. The organizations in the CHMI-derived subset are all private, with some working in close partnership with government sources. Further work should determine patients’ health seeking behaviors and attitudes towards private providers and to what extent this overcomes traditional barriers to accessing psychiatric care such as stigma.

This article has identified potentially promising programs that could serve as templates for addressing mental health services in LMICs. Rigorous measurement of these activities focusing on efficiency, quality, and scale will help identify the most promising approaches for support or replication by governments, donors or others.

 

Authors

[1] Ilan Shahin, MD, MBA (Research Associate, Women’s College Hospital, University of Toronto); John A. MacDonald, MD (MBA Candidate, MIT Sloan School of Management); John Ginther, MBA (Research Associate, Toronto Health Organization Performance Evaluation, (T-HOPE), University of Toronto); Leigh Hayden, PhD (Research Coordinator, North York General Hospital); Kathryn Mossman, PhD (Research Coordinator, Women’s College Hospital); Himanshu Parikh, MD, MSC (Study Delivery Leader, AstraZeneca Canada Inc); Raman Sohal, MBA, MA (PhD Candidate, Institute of Health Policy Management and Evaluation, University of Toronto); Anita McGahan, PhD (Rotman Chair in Management, Professor of Strategic Management, Rotman School of Management, University of Toronto); Will Mitchell, PhD (Anthony S. Fell Chair in New Technologies and Commercialization, Professor of Strategic Management, Rotman School of Management, University of Toronto); Onil Bhattacharyya, PhD, MD (Frigon Blau Chair in Family Medicine Research, Women’s College Hospital; Associate Professor, Department of Family and Community Medicine, University of Toronto).

 

References

Center for Health Market Innovations (CHMI). 2016. Available: http://healthmarketinnovations.org/programs. Accessed 30 September 2012.

Eaton J, McCay L, Semrau M, Chatterjee S, Baingana F, Araya R, Ntulo C, Thornicroft G, Saxena S. 2011. Scale up of services for mental health in low-income and middle-income countries. The Lancet, 378: 1592-1603.

Faydi E, Funk M, Kleintjes S, Ofori-Atta A, Ssbunnya J, Mwanza J, Kim C, Flisher A. 2011. An assessment of mental health policy in Ghana, South Africa, Uganda, and Zambia. Health Research Policy and Systems, 9: 17.

Murray CJL, et al. 2012. Disability-adjusted life years (DALYs) for 291 diseases and injuries in 21 regions, 1990-2010: a systematic analysis for the Global Burden of Disease Study 2010. The Lancet 380: 2197-2223.

T-HOPE. December 2015. Assessing health program performance in low- and middle-income countries: Building a feasible, credible, and comprehensive framework, Globalization and Health.
http://globalizationandhealth.biomedcentral.com/articles/10.1186/s12992-015-0137-5; DOI: 10.1186/s12992-015-0137-5

World Health Organization. 2011. Human resources for mental health: workforce shortages in low- and middle-income countries. Available: http://whqlibdoc.who.int/publications/2011/9789241501019_eng.pdf. Accessed 4 October 2012.

Mathers CD, Loncar D. 2006. Projections of Global Mortality and Burden of Disease from 2002 to 2030. PLoS Med, 3(11) :e442.

 

About T-Hope

Toronto Health Organization Performance Evaluation (T-HOPE) includes a diverse group of medical, management, and social science experts based at the University of Toronto’s Rotman School of Management and Department of Family and Community Medicine. This interdisciplinary research team combines health and management experience and expertise with the aim of connecting theory to practice in the field of global health innovation and performance.

Bringing together MBA students and medical residents to solve real world global heath challenges, the research group is led by Dr. Onil Bhattacharyya, Frigon-Blau Chair in Family Medicine Research at Women’s College Hospital and Associate Professor in the Department of Family and Community Medicine at the University of Toronto, as well as Dr. Anita McGahan, Rotman Chair in Management, Professor of Strategic Management, at the Rotman School and Dr. Will Mitchell, Anthony S. Fell Professor of New Technologies and Commercialization, Professor of Strategic Management at the Rotman School.

By engaging in rigorous and responsive research, the team strives to improve performance reporting of innovative health programs, understand and promote the scale up and sustainability of high-impact health initiatives, and identify successful innovations for improved health quality and access in low- and middle-income countries (LMICs).

 

[1] Authors: Ilan Shahin, MD (Resident Physician, Dept. of Family and Community Medicine, University of Toronto); John A. MacDonald, MD (Resident Physician, Department of Family Medicine, University of Toronto); John Ginther, MBA (Research Associate, Li Ka Shing Knowledge Institute and Rotman School of Management, University of Toronto); Leigh Hayden, PhD (Research Manager, Li Ka Shing Knowledge Institute, St. Michael’s Hospital, University of Toronto); Kathryn Mossman, PhD (Research Coordinator, Li Ka Shing Knowledge Institute, St. Michael’s Hospital, University of Toronto); Himanshu Parikh (Master’s Student Institute of Health Policy, Management and Evaluation, University of Toronto); Raman Sohal, MBA (Research Associate, Li Ka Shing Knowledge Institute and Rotman School of Management, University of Toronto); Anita McGahan, PhD (Rotman Chair in Management, Professor of Strategic Management, Rotman School of Management, University of Toronto); Will Mitchell, PhD (Anthony S. Fell Chair in New Technologies and Commercialization, Rotman School of Management, University of Toronto); Onil Bhattacharyya, PhD, MD (Clinician Scientist, Li Ka Shing Knowledge Institute, St. Michael’s Hospital; Associate Professor, Department of Family Medicine, University of Toronto)

[2] Available: http://healthmarketinnovations.org/programs.
Accessed 30 September 2012