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Daniele Navarra

Innovation, Risk and Governance

Home > Daniele Navarra > Reflecting on the Risk and Sustainability of Innovation in Medicine and Healthcare

Reflecting on the Risk and Sustainability of Innovation in Medicine and Healthcare

by Redazione FGB [1], 16 February 2005

The often mentioned need to innovate and reform health systems is the consequence of three main aspects affecting modern societies. An aging population, changes in technology and the reduction of the availability of financial resources for welfare programmes. Let us explore each in turn. An aging population means that the statistical probability of the increase in demand of health services is on the rise. As a result the tax base is eroding while the same cohort of the population is retiring. This requires the introduction of new ways to raise finance, which in turn creates the need to transform not only the way in which funding is distributed between healthcare providers, but also their methodologies for financing and service delivery.

The moderninsation of health services has become a major point of concern of reform programmes enacted by the governments of many nations across Europe in order to promote innovation, cooperation and flexibility in public service provision. Such reforms have generally two main aims: a) to deliver higher-quality health services while at the same time containing costs and limiting the extent to which the public will pay higher prices; and b) to reduce the physiological growth rate of public health-care spending. Reforms entail the codification of new legislation which aim to separate the functions of regulation, financing and provision of health care; tighter budgets and more delegation in revenue raising functions for health care providers; the introduction of incentives towards productivity, management and quality improvements.

There are widespread expectations related to the introduction of new technologies in healthcare too. Especially in relation to improvements in treatments as a result of advancements in biomedicine, which can actually increase the capacity of the individuals to be treated without the need of intrusive (and more expensive) therapies based on trial and error. Finally, it is often lamented that hospitals are underfunded and that have to introduce new performance related mechanisms and budgeting procedures to become self-sufficient and capable of raising their own finance based on either cooperation with other public and private sector stakeholders.

For instance, the recent transformation of the Italian USL (UnitaÂ’ Sanitaria Locale) into the ASL (Azienda Sanitaria Locale) marks such a passage. Organisationally it has resulted in the transformation of health care units (i.e. hospitals) into profit centres. This has seen the adoption of a financial costing system in which expenses are not anymore merely acknowledged and paid in full from the national or regional budget. Instead entail the shift to a system in which the costs reported have to be met, partly or in full, by the very same unit where they occur. This means giving each unit a much greater responsibility not only in relation to the management of such expenses, but also for their own revenue raising functions. It is implicit in such type of reform, that multiple partners form both the public and the private sector would come together in order to meet the novel regulatory demands.

Pooling together a multiplicity of actors for health services provision requires to account not only for the ways in which the diversity of these relationships will be managed differently in different localities, but also the creation of new unaccounted risks. In a recent report by the Centre of Analysis of Risk and Regulation at the London School of Economics is stressed that accounting practices and technologies for the management of risks are called up to perform a major role in the modernisation of public services in general and health services in particular.

However, the paper also points out that progress has generally been slow in the development of formal governance mechanisms in relation to performance measurement and other risk management tools. Such proposition, however, do not appear to be working smoothly, and to take the example of the most recently under attack National Health Service in England, insufficient budgeting has led some hospitals to cut on cleaning expenses and that therefore greatly increases the risks of contracting and spreading of diseases. Other complaints concern about the use of performance criteria. how can these be decided upon? And how would these affect the overall quality of the service provided for instance, if speed of treatment is preferred to the result of the treatment itself?

As Micheal Power, a leading expert in the field of risk management at the London School of Economics, has recently pointed out: 'all this raises the essential critical point of the risk management of everything: organisations may get safer because they simply transfer risk to those less able to transfer it themselves, namely the general public.' Audits, independent committees and public fora will be essential to express the various concerns that the introduction of such reforms would entail. These would need to be set up to control the operationalisation of good governance practices and to guarantee that the appropriate level of feedback is guaranteed before, during and after the process of reform. This could constitute a 'poiesis intensive' risk management approach, which, contrary to the common understanding of the term, is not just ex ante, but ongoing. Can this be a way to make innovations in this field more sustainable?

If you would like to contribute with your comments or ideas on this subject please join the Call for Comments about Professor Daniel Callahan latest book [2]'An Impossible Medicine' hosted in this website, and forthcoming in this year's Bassetti Lecture at the Cattolica University of Milan.

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