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What is Cost Effective Healthcare?

What is Cost Effective Healthcare?. Professor Chris Chapman. Overview. Academics are increasingly asked “what is the value of what you do? We benefit from three amazing gifts that potentially seem self-indulgent in the face of such questioning

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What is Cost Effective Healthcare?

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  1. What is Cost Effective Healthcare? Professor Chris Chapman

  2. Overview • Academics are increasingly asked “what is the value of what you do? • We benefit from three amazing gifts that potentially seem self-indulgent in the face of such questioning • A degree of license to pursue our own curiosity, A longer time horizon, Our understanding of theory • Together these form the essential basis of our distinctive approach to framing and answering questions • The three gifts allow for the refining of precise and rigorously answerable questions that inform bigger questions through their attention to collectively answered smaller ones • Journal ranking risks to undermine the basis of academic contribution (including for highly ranked journals) by limiting this framing process • Big questions resist individually small answers • Small answers build to big questions from a broad base • Let us consider the question “What is cost effective healthcare?”

  3. Rising cost of healthcare is a global concern • Journard, I., Andre, C., Nicq, C., & Chatal, O. (2008). Lifestyle, environment, healthcare resources and efficiency, Economics department working paper 627: Paris, OECD • Anderson, G., and K. Chalkidou. (2008) Spending on Medical Care: More is Better? Journal of the American Medical Association 299 (20):2444-2445. • The OECD study suggests 10% increased spending might lead to 3-4 months more life on average

  4. { { Cost £ System Inputs System Outputs HealthOutcomes { Economy Efficiency Effectiveness e.g. Average length of stay e.g. unit costs e.g. Quality Adjusted Life Year What is cost effective healthcare? • Breaking the question down into yet smaller questions offers a variety of further opportunities to produce questions that might be answered • Different notions of interesting and robustly answerable questions arise • Different forums will offer debates to engage in patterned by local choices with regards notions of relevance and rigour • Kaplan, R., & Porter, M. (2011). How to Solve the Cost Crisis in Healthcare. Harvard Business Review, 47-64. • [Heath outcomes / Cost ] where Cost measured by Time Driven ABC • I will now briefly outline something of the diversity of knowledge and research that might help us to evaluate this ambitious proposition

  5. Payment by Results introduced in late 90’s • Costing has a tricky legacy in healthcare which raises levels of cynicism • PBR was introduced to increase activity and bring down waiting lists it only became linked to cost management later on • The costing methodology of PBR departs from ABC in important respects • No hierarchy of costs and over-attention to cost driver at expense of cost pool structure in costing guidance Monitor Costing Patient Care, (20th Nov 2012) P13 http://www.monitor-nhsft.gov.uk/costingpatientcare Source: Appleby, J., R. Crawford, and C. Emmerson. 2009. How cold will it be? Prospects for NHS funding: 2011–17: The Kings Fund.

  6. The “ABC Paradox”? • ABC has a tricky legacy in the academic literature raising levels of cynicism • Bhimani, A., Gosselin, M., Ncube, M., & Okano, H. (2007). Activity Based Costing: How far have we come Internationally? Cost Management, 21(3), 12-17. • Tendency in the literature towards asplit between enthusiasts and critics talking at cross purposes • Interpreting this finding requiresus to consider the nature and purposes of ABC

  7. What role might the costing system play? • Product selection purpose • Briers, M., & Chua, W.F. (2001). The role of actor networks and boundary objects in management accounting change. A field study of an implementation of activity-based costing. Accounting, Organizations and Society 26, 237-269 • The “system” was designed to answer a question as to the desirability of producing a particular product. Once it had done that job it was duly abandoned • Cost management purpose • Gosselin, M. (1997). The effect of strategy and organizational structure on the adoption and implementation of activity-based costing. Accounting, Organizations and Society 22, 105-122 • Activity Analysis – Prospectors • Activity Cost Analysis – Prospectors • Activity Based Costing – Large centralisedbureaucracies • We find that the “system” is not the interesting bit for many organizations what matters is the decisions

  8. ABC works through visibility • Banker, R.D., Bardhan, I.R., & Chen, T.-Y. (2008). The role of manufacturing practices in mediating the impact of activity-based costing on plant performance. Accounting, Organizations and Society 33, 1-19. • ABC has an indirect effect on performance through operational decision making • ABC -> World Class Manufacturing -> Performance • Pizzini, M. J. (2006) The relation between cost-system design, manager's evaluations of the relevance and usefulness of cost data, and financial performance: an empirical study of US hospitals. Accounting, Organizations and Society 31 (2):179-210. • Candidates for what make a cost system “Better” • Frequency • No effect on outcomes • Variances • No effect on outcomes • Cost behavior classification • If “Detail” removed as a criteria then +cashflow • Detail • Effects as follows:+Operating margin + Cashflow/bed –Admin expenses

  9. Visibility continued • Merchant, K.A., & Shields, M. (1993). Commentary on when and why to measure cost less accurately to improve decision-making. Accounting Horizons 7, 76-81. • Focus employees attention on specific factors chosen by managers • Armstrong, P. (2002) The costs of activity-based management Accounting, Organizations and Society 27(1–2), 99-120 • ABM as a programme of standardisationand resultant deskilling of staff functions • “From this point of view, ABM, in its most ambitious expositions, constitutes a claim that management accountancy can now construct regimes of accountability applicable to all staff functions.” p103 • Powerful people don’t necessarily run towards enhanced visibility

  10. Contrastive thinking • The preceding slides showed very different ways of looking at ABC • A single study cannot integrate all extant views but must define a narrower audience for itself • Tsang, E. & Ellaeser, F. How Contrastive Explanation Facilitates Theory Building Academy of Management Review36(2) 404-419 • Q: “Why do you rob banks?” • A: “Because that is where the money is.” • What is the allomorph? What is the fact and foil? • Balakrishnan, R., S. Hansen, and E. Labro. 2011. Evaluating Heuristics Used When Designing Product Costing Systems. Management Science 57 (3):520-541. • E.g. Does “The Willy Sutton Rule” work? • “work” here is a complex bundling and inter-relating of theory, studies, people, trajectories of development in questions, problems (solved and unresolved), contrasts with particular others • This is how we use terms - within communities of practice Willie Sutton FBI File Photo

  11. Problematisation • Alvesson, M., and J. Sandberg. 2011. Generating Research Questions Through Problematization. Academy of Management Review 36(2) 247-271. • Problematising is a question of making explicit what assumptions might “fruitfully be challenged” • “Gap spotting” – under problematises • “Critical” – Over problematises? • Journal ranking risks to construct knowledge creation in terms of the path dependent rationing of prestige • “World Elite Journals - There are a small number of grade four journals that are recognized worldwide as exemplars of excellence within the business and management field broadly defined and including economics. Their high status is acknowledged by their inclusion as world leading in a number of well regarded international journal quality lists” • There are many feasible tradoffs between relevance and rigour yet such activity risks to suggest individual journal sets are meaningfully complete • Journal ranking risks to exacerbate both problematisation problems identified abovetherefore • We risk to over-specialise and under-integrate our knowledge

  12. Conclusions • Our key skills build on the framing and answering questions • The risk of journal ranking is that it limits us development of skills required to publish in journal X constraining both knowledge creation and dissemination within the scope defined by a subset of journals) • In my experience an instrumental approach is less successful • Important to consider our knowledge of topic X in relation to a diversity of streams of work in and around it • We need to develop more effective forums for discussing the differences and complementarities of qualities in research • Research quality begins with individual’s passion for a topic and their ability to communicate how and why that can be useful to a wider audience • Enthusiasm for, and skill in, teaching is a useful marker • Understanding the cost effectiveness of healthcare is an area with huge possibilities for academic contribution, please do join me…

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