Optimising allocative value for populations

This is the third article in the series on population healthcare.

Triple value healthcare

In January 2017, there was a flurry of papers published on value in healthcare, and its opposite – waste^1–3 – reflecting the international adoption of value-based healthcare as the new paradigm. In Scotland, it is called as Realistic Medicine; in Wales, Prudent Healthcare; and in England, RightCare and the RightCare programme introduced the concept of Triple Value

• Allocative value, determined by how well the assets are distributed to different subgroups in the population

  • – Between programme
  • – Between system
  • – Within system

• Technical or utilisation value determined by how well resources are used for outcomes for all the people in need in the population

• Personalised value, determined by how well the outcome relates to the values of each individual

This article is primarily about optimising allocative value and the clinicians’s role in this task

The aim is to achieve maximum allocative value, namely, the allocation at which it is not possible to achieve greater benefit for the population as a whole by shifting one pound from one budget to any other budget. There is no record of this having been advised anywhere.

Although we sometimes talk about ‘the National Health Service in Italy’ or the ‘NHS in England’, namely, talk about a national bureaucracy, in most countries with a tax-based health service significant bureaucratic authority is delegated to a smaller population size.

In England, the body with delegated authority is the Clinical commissioning groups; in the other UK countries, it is the Health Board. In countries where insurance plays a bigger part than taxation there are also bureaucratically defined populations, people registered with one insurance company for example, and new names evolve to express this type of institution, for example, the Accountable Care Organisation which, in the United States of America, covers a defined population of members although it may be based on a major hospital and rarely provides all the care for a geographically defined population.

These jurisdictions have to relate to a second type of bureaucracy – the institution that provides care, for example, a hospital or a mental health trust or a primary care team, and the relationship between the two is usually mediated by a contract. The institutions themselves relate to a third type of organisation, the profession – nursing, medicine or physiotherapy, for example – and each profession has a bureaucracy responsible for education, licensing and revalidation.

The limitations of bureaucracy

Healthcare is a complex problem, probably, the most complex leadership and management challenge the human race faces, with a health service being a combination of human beings in emotional distress, high-tech science, radiation, dangerous chemicals, litigation and unpredictable work flow, to name but a few features of its complexity. What is clear now is that bureaucracies are not good at coping with complex problems, and neither are markets.

Bureaucracy became the dominant organisational pattern of the 20th century as the small family firms of the 19th century were replaced by huge organisations such as the Ford Motor Company and IBM. Bureaucracy, however, has never had a good image, in no small part due to the writing of Franz Kafka whose book The Trial was in fact called Der Progress originally, and people came to distrust bureaucracies and to criticise them. This does, however, reflect a romantic wish for some golden age of organisation in which good people made wise decisions fairly without a structured bureaucratic organisation, but the fact of the matter was that organisations operating without bureaucratic principles, but with what Max Weber called ‘traditional authority’, were often tyrannical and unstable.

The strengths of bureaucracies

Bureaucracies are essential for good healthcare provided that they stick to doing what bureaucracies do well, namely the open and fair employment of people and the uncorrupt management of money. The case for the bureaucracy is well made by one of America’s leading social scientists Charles Perrow who sets out his important justification in this quote from his book on Complex Organisation.⁴

The key elements of the rational–legal bureaucracy … include:

1. Equal treatment for all employees;

2. Reliance on expertise, skills and experience relevant to the position;

3. No extra organisational prerogatives of the position (…); that is, the position is seen as belonging to the organisation, not the person. The employee cannot use it for personal ends;

4. Specific standards of work and output;

5. Extensive record-keeping dealing with the work and output;

6. Establishment and enforcement of rules and regulations that serve the interests of the organisation;

7. Recognition that rules and regulations bind managers as well as employees; thus, employees can hold management to the terms of the employment contract.

The first task of politicians and the bureaucracies that support them is to maximise value.

Maximising value for the population

The political body responsible for allocating all public funds has to make decisions about how much money goes to health and social care from within the limit set for public expenditure. What is spent on health and social care cannot be spent on law and order, defence, higher education or any of the other calls on government expenditure. Of course these are not completely separate and unconnected services. In England, expenditure on local public health and social care services is determined locally, with strong central controls on the amounts that local authorities can levy. It is now clear that constraints on both these budgets are having an increasing effect on healthcare NHS spending with, for example, cuts in social care resulting in an inability of hospitals to discharge elderly people with frailty. The job of national government is to maximise what Mark Moore has called ‘public value’ by the way it allocates resources to these different uses but, having decided how much money should be spent on health and social care, this level of jurisdiction usually makes two other decisions:

• How much we top slice for health and clinical research?

• How much we top slice for the education of healthcare professionals?

This leaves funds that are available for the provision of services to the population.

In England, during the period from 2012 to 2014, the position was complicated by the decision to top-slice resources for specialised services before the allocation to geographical populations (Figure 1).

Figure 1.

Allocation of resources for health and social care.

Geographical allocation for maximal value

Different systems of care have different decision-making approaches to this task. Where countries have made a decision to allocate resources through insurance companies and allow insurance companies to operate across the whole of the country, as is the case in The Netherlands, decision-making is more complicated than in countries in which the vast majority of expenditure comes from government allocation through geographically determined bureaucracies, sometimes called the single-payer model, New Zealand or the United Kingdom, for example.

As shown in Figure 1, a political and bureaucratic decision has to be made about how to allocate resources to different populations within the main national jurisdiction. In England, in 2013, a decision was made about the allocation of resources to Clinical Commissioning Groups based on an assessment of need, and that assessment of need, of course, is the subject of considerable debate and discussion. The two main variables that affect the need of a population are its age distribution and the levels of deprivation and most countries have developed formulae for resource allocation which take these into account. This is usually done once, centrally, and then people involved in paying for or managing health services have to work within the amount allocated to their population.

Allocating resources to different care groups defined by real estate

In most countries, the allocation of healthcare resources follows traditional lines set out in Figure 2.

Figure 2.

Traditional allocation of health and social care resources.

The principal determinant is the location of the health service professional. Mental health services have been kept separate from other health services in most countries since the 19th century when the asylums were built. As a consequence of this, there have been very poor links between mental health services and other types of health and social care although it has been estimated that if about 10% of a healthcare budget is spent on mental healthcare directly, at least another 5% of that budget is consumed by people with either what are called medically unexplained physical symptoms or who have mental health problems that complicate the treatment or aggravate the symptom of the physical diseases they have and therefore increase the use of health services. People with pelvic pain, chest pain, headache or dizziness, to give but four examples, often have psychological issues which are sometimes caused partly by the poor healthcare that they receive which has focused only on physical aspects of their problem. The classification of services shown in Figure 2 is long standing but needs to be disrupted.

Even if it is not possible to disrupt by shifting the budgets, it is possible to disrupt the thinking by changing the language that is used to adopt a new language of the 21st century.

The new language for population healthcare

When running workshops on population healthcare, or introducing the concept, it is helpful to define terms that should or should not be used. Here are examples of ways in which language can be changed. First, it is important to stop using 19th- and 20th-century language that reflects and perpetuates not only the budgets but also the thinking expressed in Figure 2. These terms should be banned, at least for the duration of the meeting.

• ‘Primary care’ and ‘secondary care’;

• ‘Acute’ services and ‘community’ services, which imply that the hospital is not part of the community;

• ‘Outpatients’, a 19th-century term which simply means ‘not in-patients’;

• ‘Hub and spoke’ which implies that the ‘hub’ is more important.

The next step is to allocate resources to different patient groups.

Allocating resources to different care groups defined by need

The key issue in resource allocation is to get people thinking about programmes and programme budgeting to start the move towards an allocation set out in Figure 3.

Figure 3.

Allocation of resources to populations in need.

The NHS in England is the only health service serving a large population that uses programme budgeting. Its programme budgeting is based on the International Classification of Diseases, which assumes that people have a diagnosis, and only one diagnosis. For this reason, the list of 30 populations which can be observed in any health service consists of both programmes based on diseases and symptoms, respiratory health for example, and programmes for subgroups of the population with a common characteristic, elderly people with frailty for example.

The aim is to achieve a position at which the allocation of resources is such that it is not possible to gain more value by switching a single pound from one budget to another. Economists call this the point of indifference, and at the point of indifference, the allocation of resources achieved maximises value for the population served. The allocative decision-making is enabled by a process called Programme Budgeting and Marginal Analysis,⁵ considering the effect of taking a proportion of the resource from one budget and transferring it to another.

Optimising value in each programme

Population healthcare focuses primarily on populations defined by a common need. The need may be a symptom such as pelvic pain, the need may be a condition such as asthma or breast cancer, or the need may be a common characteristic such as being in the last year of life. Work to maximise value for this type of population is the responsibility of clinicians and patients rather than politicians.

It is often helpful when working with generalists and specialists to distinguish between complex and complicated clinical problems. The complex clinical challenge is posed by patients such as the 80-year-old woman with four diagnoses and seven prescriptions, cared for primarily by her 50-year-old daughter who has an alcoholic husband and unemployed son, all living in the same house. Daunting though this may seem it is a need commonly encountered in general practice or family medicine. However, when one of the four conditions becomes complicated, the generalist needs to seek the help of, for example, a cardiologist for heart failure or a neurologist for the woman’s Parkinson’s disease. Complex and complicated needs co-exist and have to be managed by generalists and specialists working together.

Within-programme, between-system marginal analysis

It is the responsibility of clinicians, managers and, if possible, patient representatives to allocate money within the programme budget to the various systems of care. For example, within the respiratory health budget resources can be allocated to three common conditions, bearing in mind the need to meet the needs of people with rare diseases also (Figure 4).

Figure 4.

Within-programme between-system marginal analysis.

There may be some local political pressure focused on a single issue, for example, pressure to develop a sleep apnoea service following a campaign by a group of patients, but the process of allocation of resources between different needs is carried out continuously by clinicians and other people who manage healthcare. Even if it is not clear how much money is being spent, clinicians constantly juggle resources in the shape of hospital beds, or physiotherapy time, or clinic time, in a process that could be called Within Programme, Between System Marginal Analysis but which is usually unconscious. The unwarranted variations demonstrated in the Dartmouth and NHS Atlases of Healthcare suggests an imbalance of investment among the different patient groups with the same type of problem, people with vision problems or people with neurological disease, to give two examples. The balance of resources is often something that has just evolved over time. The appointment of two keen young consultant ophthalmologists, both of whom have a particular interest in glaucoma, will influence the use of resources over the next decade, with the result being that there is above average activity and resource use in services for people with glaucoma. If, on the other hand, their interest had been in retinal disease, the resulting activity pattern and resource distribution would have been very different.

The final stage in allocation is within the system of care.

Within-system marginal analysis

The resources for a particular problem can be allocated to tackle different stages in the pathway of care from prevention to long-term care.

There is a now a tool that can be used to engage clinicians and patients in this process, called the Socio-Technical Allocation of Resources tool. For example, having decided how much of the resources available for respiratory disease are to be used to support the system for people with chronic obstructive pulmonary disease, the people responsible, including patients, have to decide on the optimum allocation of resources (Figure 5).

Figure 5.

Marginal analysis with the chronic obstructive pulmonary disease system budget.

Using the Socio-Technical Allocation of Resources tool, the community of practice, including patient representatives, decided to shift resources from spending on triple-drug therapy to invest more in smoking cessation and rehabilitation in what can be called within-system marginal analysis. It is essential to decide the scope of this type of analysis. Should the system budget include prevention at one end of the spectrum and terminal care at the other? Usually, the principal expenditure on prevention and terminal care is managed in two different crosscutting budgets – the health promotion budget and the palliative care budget.

Accountability for reasonableness

These are all very difficult decisions for which there is no computer programme or objective formula that removes the need for judgement to be used as well as evidence. Similarly, all these decisions have ethical as well as economic aspects. Fortunately, the public does not expect a perfect result, people know these are difficult decisions but they also know there is a difference between being disappointed with the result of a decision and being dissatisfied with the way in which the decision has been made. Daniels and Sabin have called this being accountable for reasonableness which is:

the idea that the reasons or rationales for important limit-setting decisions should be publicly available. In addition, these reasons must be ones that ‘fair-minded’ people can agree are relevant to pursuing appropriate patient care under necessary resource constraints. This is our central thesis, and it needs some explanation. By ‘fair-minded’, we do not simply mean our friends or people who just happen to agree with us. We mean people who in principle seek to cooperate with others on terms they can justify to each other. Indeed, fair-minded people accept rules of the game – or sometimes seek rule changes – that promote the game’s essential skills and the excitement their use produces.⁶

It is essential for clinicians to be involved in decisions about resource allocation and to feel a sense of responsibility for the stewardship of resources.

Declarations

Competing Interests

MG works for Better Value Healthcare which delivers training on value.

Funding

None declared

Ethical approval

Not applicable

Guarantor

MG

Contributorship

Sole authorship

Acknowledgements

None

Provenance

Not commissioned; editorial review