Governance & Innovation in the Canadian Health System


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Revised presentation from the National Health Leadership Conference in Halifax, June 2012.

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Governance & Innovation in the Canadian Health System

  1. 1. Roles for Health-System Governors: !Leading Innovation !!National Health Leadership Conference 2012!Canadian Healthcare Association & Canadian College of Health Leaders!!June 4, 2012!!Matthew Lister !
  2. 2. Governance & Innovation! Three Objectives! 1.  How has governance influenced massive system change?! How is this relevant to healthcare?! 2.  What is the relation between governance and innovation?! 3.  How do organizations enable innovation? !Copyright © 2012, Practicalignment Incorporated!
  3. 3. Two Cases: System & Industry Change!Copyright  ©  2012,  Prac3calignment  Incorporated  
  4. 4. Health Systems: An Industry Comparison (2010)! $9.1 TR! ALL GOLD MINED GLOBALLY TO DATE, 2010! $7.3 ANNUAL GLOBAL HEALTH SYSTEMS EXPENDITURES! TR! $6.1 ANNUAL GLOBAL FOREX TRADES (RETAIL & COMM.)! TR! $2.7 TR! ANNUAL MILITARY SALES! $2.2 TR! ANNUAL OIL SALES !Copyright © 2012, Practicalignment Incorporated!
  5. 5. Health Systems: An Industry Overview! 1.  High reliability industry! But… enormous variances in clinical and administrative practices ! 2. Complex systems ! Interdependent gears enable service and adoption, but differentiate and change at different rates; what benefits one stakeholder can compromise another! 3. Four Model Variants for ~ 50 functioning health systems globally (~ 25%) ! 4. Shared Concerns: value and cost-containment, accessibility and distribution, chronic illness, ageing populations! 5. ‘Perceived Need’ to Restructure—”We’re always in beta-mode” (Taiwan, Turkey, Colombia, the US, etc.):! ! A.  Status quo tinkering, or ! B.  Systemic restructuring!Copyright © 2012, Practicalignment Incorporated!
  6. 6. Canadian Health System Perspective! According to system experts (governors, professors, economists, think-tanks, industry, etc.):! ! 1.  Canadian Health System: “Crisis mode” for 50 + years! 2.  Sustainable and unsustainable: ! Proposed remedies lead to perceived Paradise (Scandinavia) or perceived Hell (United States)! 3.  We need “an adult conversation”… let’s begin!Copyright  ©  2012,  Prac3calignment  Incorporated  
  7. 7. Governance!
  8. 8. Governance: 
System Hinge b/w Operators and Regulators! ! ! Stewardship! ! ! ! ! ! ≈ Public ! Governance! Accountability! ! ! ! ≈ System ! Accountability! Management! ! ≈ Organization Accountability!Copyright  ©  2012,  Prac3calignment  Incorporated  
  9. 9. Generally speaking! Canadian Health System Governance:! ! •  Geographically differentiated! •  Functional alignment varies ! •  Disproportionately massive civil service! •  High cost, average outcomes… (value?)! Health Organization Governance:! •  Skilled in governance or management! •  Unskilled in health systems! •  Short term can hinder effectiveness! !Copyright  ©  2012,  Prac3calignment  Incorporated  
  10. 10. Governance in Context: 
“Three Modes” + One Implication! 1! Fiduciary Mode! 2! Strategic Mode ! 3! Generative Mode! People! P!©  Prac3calignment  Incorporated,  2012  
  11. 11. Governance in Context! 1 Fiduciary Mode! •  Financial Oversight! •  Asset Oversight! 1! •  Performance Oversight!Copyright  ©  2012,  Prac3calignment  Incorporated  
  12. 12. Governance in Context! 2 Strategic Mode! •  Decision Support! •  Strategic Diligence! 2!Copyright  ©  2012,  Prac3calignment  Incorporated  
  13. 13. Governance in Context! 3 Generative Mode! •  Understanding System Ambiguity! •  Interpret Operating Environment! •  Making Sense of Complexity! Absence of generative thinking:! 3! ! “A failure of imagination.”! ! Frank Borman, Astronaut, commenting on Apollo 1 disaster!Copyright  ©  2012,  Prac3calignment  Incorporated  
  14. 14. Governance Competencies in Canadian Health Systems:Actual vs. Required! Actual! Required! Comment! Fiduciary Mode! Prescribed reporting, 1! HIGH! LOW! metrics, adequate skills! Government influence, 2! Strategic Mode ! MEDIUM! HIGH! need stronger people to support executive! Very weak; should be stronger in face of SARS, 3! Generative Mode! LOW/NA! MEDIUM! C Diff, “Black Swan” events, and uncertainty!Copyright  ©  2012,  Prac3calignment  Incorporated  
  15. 15. Right People = Foundation! People: health-systems governance P   needs the right people! ! •  Vigilant! •  Committed to organization! •  Health-system understanding! •  Business leadership! P   •  Experience in planning, risk assessment, and basic finance! •  Grasp diverse strategic concepts! ! Begs the question:! … Do we have the right people?!Copyright  ©  2012,  Prac3calignment  Incorporated  
  16. 16. Governance in Context! 1! Fiduciary Mode! 2! Strategic Mode ! 3! Generative Mode! People! P!Copyright  ©  2012,  Prac3calignment  Incorporated  
  17. 17. 3! Generative Mode! Innovation!
  18. 18. Innovation: Lifecycle View! “The future’s already here, it’s just not evenly distributed.”
 ! ! ! ! ! ! ! ! !William Gibson! Adoption & Maturity TimeCopyright  ©  2012,  Prac3calignment  Incorporated  
  19. 19. Innovation! Innovation Improvement* é Value * Sustainable and greater than the system’s “natural state” of evolution!Copyright  ©  2012,  Prac3calignment  Incorporated  
  20. 20. Governance & Innovation:!How the generative mode drives value! é Value G  
  21. 21. Intersection of Governance & Innovation! Level of Governance! Level of Innovation & Risk! Organization sustainability, E! Global business / 5! service to humanity! 5! societal innovation! Business stewardship, 4! D! Global or industry 4! public good! innovation! 3! New business model 3! Strategic duty & viability! C! innovation! 2! B! New product, service, or 2! Enhancing operations! market innovation! 1! A B C D E! A! Process or program 1! Statutory compliance! innovation! ©  MVC  and  Associates,  2005  Copyright  ©  2012,  Prac3calignment  Incorporated  
  22. 22. Innovation: Health-System Examples! Level! Examples! 5! A! Fraser Health Authority:! 4! Peer Review Process for MI! 3! B! Spartan Bioscience: ! Point of Care DNA Testing! 2! C! Imaging and Wound Care:! 1! Home Care and LTC! A B C D E! D! The Narayana Hrudayalaya, Bangalore: Production Line Heart Surgery!© MVC and Associates, 2005! E! Diagnostic Related Groups (DRGs), ICD Codes!Copyright  ©  2012,  Prac3calignment  Incorporated  
  23. 23. Innovation and Value: Do Providers Differ?! Level! Examples! 5! A! Unpopular but highly valuable! 4! 3! B! 2! C! 1! A B C D E! D! E! Popular but risk-intensive—generally not a core strength for providers!Copyright  ©  2012,  Prac3calignment  Incorporated  
  24. 24. Intersection of Governance & Innovation! Innovation-Ambition Matrix! C A! Optimization of existing B   services to existing clients! c. TRANSFORMATIONAL! A B! Expanding services and creating adjacent services for adjacent markets! b. ADJACENT! C C! New services with new assets in new markets for new clients! B a. CORE! ! A   Implication: The ratio of innovation foci vary among organizations and for a given organization over time. !©  Harvard  Business  Review,  May  2012   ! Effective governance will help management prioritize and focus its innovation needs.! Copyright  ©  2012,  Prac3calignment  Incorporated  
  25. 25. Governance Roles for Innovation: General Options! 1 External! 2 Hybrid! 3 Internal! ! ! ! Government ! Collaborative Governance! Governance Enabled (Mandatory?)! ! ! •  Supports executive in •  Externally appointed and •  Collaboration between “generative mode” ! driven! private enterprise and •  Defining project dissolution •  ‘Remedies’ mechanism for government organizations! metrics! non-conformance! ! ! ! Accreditation Organization! Governance Enabled & Financed! ! •  Governance team funded (X- •  Typically for A and B levels of Prize concept)! governance! •  Prizes for priority innovations ! (aligned w strategy)! ! Institutionalized Function ! •  Office of Innovation or Knowledge Management! •  Chief Patient Experience Officer, or Chief Innovation Officer!Copyright  ©  2012,  Prac3calignment  Incorporated  
  26. 26. Governance Roles for Innovation: External Function !1 External! Findings & Observations ! ! ! Government ! Diverse Opinions ! ! ! •  Externally appointed and driven! •  Relevant for Level A and B •  ‘Remedies’ mechanism for non- governance: statutory compliance and conformance (for organizational improvement! HealthQualityOntario)! ! •  A redundant bottleneck! Accreditation Organization! ! •  A great addition to the system— •  Organizational accreditation system support for standardizing practices! (Accreditation Canada)! •  Clinical accreditation (Regulatory •  Where enforcement or ‘remedies’ college)! capacity exists, general compliance, but also process gaming! ! Copyright  ©  2012,  Prac3calignment  Incorporated  
  27. 27. Governance Roles for Innovation: Collaborative Model !2 Hybrid! Findings & Observations! ! Collaborative Governance! •  Knowledge, resources, and skills arbitrage among ! private and public partners! •  Collaboration between private enterprise and government •  Needn’t involve major capital projects! organizations! •  With IT: often a drastically more affordable alternative ! – Excel instead of ORACLE! ! McGill University Health Centre! •  Requires high degree of project management or Glen Campus, $1.3 Bn budget! portfolio management expertise! ! Fraser Health Authority, Surrey Critical •  Bail button: Preventing escalating commitment! Care Tower, $512 M budget! ! •  Suitable when the innovation’s implementation will Comcare Health Services (now create:! Revera), DuET Program: Wound Care, 1.  Better public outcomes! $1.2 M investment ! 2.  Creation of additional resources! Copyright  ©  2012,  Prac3calignment  Incorporated  
  28. 28. Governance Roles for Innovation: Internal Function !3 Internal! Findings & Observations! ! ! Governance Enabled (Mandatory?)! Governance Enabled: ! •  Supports executive in “generative The message of this presentation: this is an mode” as board committee! undeveloped and critical board function for health- •  Foresight development through system innovation; therefore, the bare minimum! scenario planning, trend forecasting ! ! ! •  Innovation priorities must address the organization’s or the system’s greatest needs! Governance Enabled & Financed! ! •  Governance team funded (X-Prize •  Innovation must be developed and demonstrated! concept)! •  Prizes for priority innovations ! •  Tolerance for ‘failure’—becomes organizational lesson, but a “bail button” is also required! Institutionalized Function ! •  Innovation Centre, Chief Patient •  Implementation plan and dedicated teams strongly Experience Officer, or Chief Innovation advocated (see The Other Side of Innovation for Officer! team design)! ! •  Saint Elizabeth Health Care ! •  High functioning project management and •  Cleveland Clinic! knowledge-management required! Copyright  ©  2012,  Prac3calignment  Incorporated  
  29. 29. Indicators: Measuring Innovation ! Before measuring innovation, boards must identify:! ! 1.  Whether they have the right people to recognize, prioritize, enable, and leverage innovation within their organizations! 2.  Whether they have the right processes to capture innovation, error, waste, value, and to know what to do with it.! 3.  What constitutes innovation – what would it look like at different levels? Where would its focus create the greatest value?! 4.  Its purpose (for example: improve patient safety) and possible outcomes and how these align with the organization’s obligations and priorities! 5.  Investment thresholds, especially for scenario planning! 6.  Is the organizational climate or environment conducive to innovation?! 7.  What adjustments must be made to enable the organization to leverage its innovation.!Copyright  ©  2012,  Prac3calignment  Incorporated  
  30. 30. Indicators: Measuring Innovation Results! Innovation Level! Return ! Indicator Focus Could Include! A. Process! 1 – 2 Years! NFP: Productivity, utilization and deployment of assets, throughput, ‘value- added’ time ratios, capacity, improved patient outcomes, improved service performance, inpatient days, congestion metrics! Private Industry: EBITDA, throughput, asset deployment, capacity! Ambiguous metrics: error-rates—they often increase and that may not be a bad thing, patents! B. New Product! 1 – 4 Years ! NFP: similar to A, also metrics around workflows, throughput, service capacity! Private Industry: revenue from new product, market share, valuation models that include future value (Future Cash Flows, etc.)! Ambiguous metrics: margin (unless that’s the intention), annualized growth, patents ! C. New Business 1 – 8 Years! NFP: model mimicry, increased service capacity, lateral system disruption! Model! Private Industry: market share pro-rated by value (a smaller market share with higher value using RFM analysis)! D. Market ! 2 – 10 Years! Combined: tendency to replace disrupted services, typically influences forward and lateral industries, improved social outcomes! Private Industry: growth sustenance, global market revenue! E. Global! 4 – 20 Years! Combined: demand for and ubiquity of innovation, influence to subsequent disruptive innovation, key stakeholder dependence, thought leadership, economic metrics of value such as productivity, PYLL, HLE! Private Industry: Compounded annualized growth rate, business valuation metrics, and improved social outcomes! Inappropriate metrics: EBITDA!Copyright  ©  2012,  Prac3calignment  Incorporated  
  31. 31. Industry Perspectives: 
Comments from Consultations with Industry Leaders! •  Boards are great at doing what they know: usually checking numbers. A good board will pose the tough questions—to itself and the executive teams.! •  Innovation gets interpreted as technology… actually, innovation involves getting people to do the right thing first, making hard to do the wrong thing, and then finding the technology that supports needs.! •  Rural and remote areas: innovation ~ improving how teams work! •  Urban areas: innovation ~ acquisition or deployment of technology! •  “Too many policies around innovation will impede it, so don’t get carried away.”! •  “We’re not a technology organization, we’re an HR intensive enterprise”. Technology can often hinder innovation and the organization’s regular work—must be planned carefully! •  Don’t bank on expensive technology. It’s helpful for some things, but there’s usually someone in your organization who can figure it out with existing resources—just give them the slack and the tools.! •  Innovation needs to be properly incented and non-innovation needs to have punitive consequences.! •  End-users must be involved in the innovation-development process! •  Innovation is part of the quality-improvement process. Organizations should link an innovation strategy to their strategy. !Copyright  ©  2012,  Prac3calignment  Incorporated  
  32. 32. Questions!
  33. 33. Consulted Resources! Publications! •  The Wide Lens, Ron Adner! •  The Innovator’s Prescription, Clayton Christensen! •  The Innovator’s DNA, Clayton Christenson! •  Collaborative Governance, John Donahue & Richard Zeckhauser! •  Wrong: Why the Experts Keep Failing Us, David Freedman! •  The Other Side of Innovation, Vijay Govindarajan and Chris Tremble! •  Willful Blindness, Margaret Heffernan! •  Complexity: A Guided Tour, Melanie Mitchell! •  The High Performance Board, Dennis Pointer & James Orlikoff! •  The Innovator’s Manifesto, Michael Raynor! •  Start Up Nation, Dan Senor and Saul Singer! ! ! !Copyright © 2012, Practicalignment Incorporated!
  34. 34. Consulted Resources!Publications and Organizational References!!•  George Cooper, “Good governance first step toward curing system ills,” The Halifax Chronicle Herald, January 13, 2012 !•  Chris Morris, “Production Line Heart Surgery,’ BBC, August 2, 2010: !•  The World Bank, Public-Private Partnerships and Collaboration in the Health Sector: An Overview with Case Studies from Recent European Experience, Irina A. Nikolic and Harald Maikisch, October 2006!•  Faye Whittleton, “Is your board ready to put out the next fire?” Fortune, December 12, 2011!•  Spartan Bioscience, referred to as new product innovation in appended presentation! © Practicalignment Incorporated, 2012!