Thanks for the cash, now what about health service reform?

| February 23, 2018

Reforming the health system is the only way to stymie the rising economic burden of health services but how do we deliver it? Dr David Thorp considers the advantages of new forms of community health service delivery.


The annual brawl & blame-game over health funding seems to be going remarkably smoothly this year, with NSW netting a pretty respectable 6.5% p.a. growth in hospital funding from the Commonwealth over the medium term and other States likely to fall in line soon too (given uncapped Commonwealth funding growth could never be sustainable).

But as usual, the fight over dollars has distracted from debate about what sort of reforms could deliver better health outcomes for the dollar. Wouldn’t it be good if there was a similar sustained growth in efforts to keep people out of hospital in the first place?

I’m hardly the first person to advocate a greater focus on such “primary health care”, so why isn’t anything changing? Or is it? Actually without much public debate, the Commonwealth has recently established “Primary Health Networks” (PHNs), which although limited in scope at present, have the potential to play a dominant role optimising the funding and coordinated collaboration of flexible, person-centred “social purpose” services across the entire scope of GPs, hospitals, and early-intervention/preventative family-support services such as child welfare, DV and social housing (as the Productivity Commission has advocated).

Public health is a multi-disciplinary issue, and as medical technology and social sciences advance at an accelerating rate, it is ludicrous that we still expect individual GPs to have sufficient knowledge to provide the best diagnosis and treatment for every health problem.

Though they may be reluctant to cede their power, GPs need to be supported and guided by a range of specialists, which could be coordinated by PHNs. In many cases, pharmacies would be better suited to provide what customers need – if that sector were deregulated to enable it to pursue services where they can add most value, rather than ones that are protected from competition.

Commonwealth-funded, competitive PHNs that are chosen by end customers (with government funding following their choices) could drive greater customer focus, efficiencies and service effectiveness in a sector that is otherwise forecast to place significant future pressures on government budgets (at whichever level). But are we ready for private delivery of public services, or will the concept be killed by a simplistic “for or against” privatisation argument?

A good first step would be to define what we really mean by “public services” and acknowledge that it is essentially about universal access to decent services regardless of wealth, rather than who “owns” the business delivering them – which doesn’t make much sense given staff constitute the vast majority of health system costs and nobody owns them!

From my observation, the differences between public and private sectors are not as clear cut as is often claimed.  Yes, private businesses are generally motivated by money, because they have to be to survive, but they’re still comprised of people, who funnily enough have similar motivations & failings to people in the public sector (greed, sloth, risk aversion etc).

The problem of aligning contracts, monitoring mechanisms and management & employee incentives to what society wants can be just as challenging in the public as private sector. So although the effective outsourcing of public services does require a more sophisticated approach to procurement / commissioning, which may seem an extra burden, it is really just making the problem more transparent.

The positive aspect of outsourcing is that it forces government to think about what it actually wants and contract specifically for that, rather than simply employing a lot of public servants and assuming they’ll automatically deliver what’s wanted in the most optimal way.

Creating the best incentives for PHNs to work effectively requires them to be not just responsible for delivering preventative services, but also to be beneficiaries of the hospital costs that can be avoided. That means PHNs also need to either deliver hospital services or have contractual arrangements that expose PHNs to these costs – like insurance. With sufficient scale, PHNs could then carry enough financial risk to enable governments to pay them for keeping people healthy, instead of for dealing with avoidable illnesses.

If this all sounds rather like “managed health care” in the US, it is. But we need to learn from and avoid the problems experienced there – where insurers cut costs by limiting access to services – by ensuring we have adequate public funding and a strong regulator that protects customers’ rights to a minimum level of public service, whoever delivers it (and gives clarity & assurance about what extras they may choose to buy with their own money). Alternative forms of stakeholder governance may also be used to build trust between PHNs and the communities they serve.

Will we be willing to embrace this new world of community health service delivery? I think so; we can’t afford not to.

SHARE WITH:

Dr David Thorp is an analytical, strategic reformer with a conscience, working on public service strategy and reform. His interests include finance, economics, transport, housing, sustainable energy and social services. David has a BA in engineering from Cambridge and a Ph.D in solar photovoltaics from the University of NSW. Find out more at davidthorp.net.