LEADERSHIP. It’s a common, much-used, age-old and elusive concept that has more definitions and descriptors than almost any other in the English lexicon.

“Value-based health care” is a not so common, much more recent, yet similarly elusive concept with just as many definitions and descriptors.

Despite the perpendiculars and parallels between these two concepts, both are unified by a common and dependent thread. There can be no effective health leadership without value creation, and there can be no value created in health care without effective leadership.

The developed world’s differing health systems are moving inevitably towards the adoption of value-based health care models. Some are hurtling and others are crawling at glacial speeds, but it is happening. The most notable reason why is the non-sustainability of heath expenditure in its current form. The association between the two concepts of “leadership” and “value-based health care” is becoming increasingly essential and decidedly imminent.

As Dr Thomas Lee states in his webinar for the Harvard Business Review:

“To successfully shift to a value-based health care business model, organisations must leverage leaders that understand strategy and the competition that brings strategy to life.”

We need leaders who are able to generate enough momentum to trigger the medical industry out of any mistaken sense of complacency about the future of health care. Then we need these leaders to maintain this momentum, going forward.

Frequently touted definitions of a good leader invoke imagery of a great visionary, a courageous strategic planner, possessing the exact mix of technical skill, IQ and the right degree of emotional intelligence to inspire confidence in their followers.

In 1998, psychologist Daniel Goldman stated:

“IQ and technical skills are important, but emotional intelligence is the sine qua non of leadership.”

While each of the above traits is applicable to value-based health care leadership to differing degrees, I believe adaptability is the sine qua non of leadership.

Adaptability is a key attribute that requires a leader to embrace a state of perpetual anticipation and preparation, to be able to be flexible to changing business or industry contexts, to be agile to overcome any obstacle, and ultimately to just get the job done.

Value-based health care is the very embodiment of such a changing industry context that is currently in flux. It is a concept that requires a significant shift in mindset, to create systems that reward the quality of care delivered instead of the current drivers that reward the volume of care provided. If we are to seriously consider value-based health care principles or to influence the adoption of value-based models within our existing health systems, we need to appreciate the crucial role that leadership plays in that process. Individual leaders’ capabilities and the impact their leadership styles have within organisations and its internal culture are key to shifting volume towards value.

Robert Pottharst, in the August 2018 issue of the NEJM Catalyst, writes of four distinct leadership personas that have been observed across two health care organisations, both of which excelled in their transition to value-based care in the United States. Specific elements intrinsic to these leadership personas are crucial in the movement toward value-based health care in Australia.

Community connectors

These are leaders who think and act beyond the traditional health care organisation’s borders to address social determinants of health. A disruptive entrant to the health care market with a leader that personifies this community connection aspect of value-based health care leadership is the company Oak Street Health in Chicago.

Its business mission statement is: “Delivering the world’s best primary care to the poorest and sickest elderly.” Mike Pykosz, the Chief Executive of Oak Street Health, “created an integrated model that provides measurably higher quality care, a vastly improved patient experience, at a lower cost … and is rebuilding healthcare as it should be”. He is a leader who identified a community need and responded in kind using a value-based business model, which has now expanded to 46 locations across the US. They use an innovative prospective payment model to fund valuable care to a disadvantaged population segment that most other health care providers would have dismissed as an “unprofitable market”.

The Oak Street Health prospective payment model is based on partnering with funders that provide Medicare benefits to eligible patients, including health insurance funds that offer Medicare approved private health plans to such patients. A partnership agreement replaces the usual contractual model, with payments structured around clinical outcomes instead of volume of services provided. This results in the funder and provider both assuming the same financial risk and aligning their incentives for achieving better clinical outcomes to patients. By increasing the value (better outcomes and improved patient experience), they reduce the costs with hospitalisations, readmissions and increases in their net promoter scores, resulting in increased membership growth. This results in value creation for all stakeholders involved.

In the Australian context, this would require identifying and building relationships with community organisations that address holistic aspects of patient wellbeing, such as housing, social supports, education and psychological wellness. There would need to be a particular focus on Aboriginal and Torres Strait Islander communities, elderly residential care contexts and mental health patient cohorts.

We need leadership that can redesign a health care organisation’s internal processes and actively connect those processes with community organisations. We need leaders to actively develop or to redesign our current service delivery models, including our patient coordination processes, our data sharing mechanisms, and how we assist patients to navigate through the complex layers of our health system, and find ways to integrate the currently siloed and disjointed clinical care models across our states. By making these community connections that will lead to holistic patient wellbeing and an improved patient experience, we will be reducing unwarranted variation in our health care system, which at its very core is value creation itself.

Coordinated care champions

The shift to value-based health care requires each component of our largely legacy-based and fragmented health system to coordinate, to align and to function toward a unified and common goal. Building such coordinated care models requires leaders who are “coordinated care champions”. These leaders approach value-based models by redesigning the ways in which existing processes, workforce and systems are organised, and by overcoming the obstacles that legacy systems and long-established status quo create. This type of leadership requires us to set new goals that are focused on coordinated care outcomes, and bolster these with funding models that reward these same outcomes. These leaders need to encourage and inspire stakeholders to consider new financial models and enable them to compare the long term benefits of shifting from fee for service models to value-based financial reimbursements.

Omada Health is a US organisation that uses digital and other modalities for behaviour change and weight loss as part of a coordinated care approach to reduce the burden and risk of chronic diseases. Omada Health embodies the value-based concepts of outcomes-based reimbursement in that their pricing model is dependent on the coordinated health outcomes of individual patients. As an example, Omada Health uses outcome-based billings on the clinical measurement of individual patient’s weight. Digital software that is wirelessly connected to the patient’s Omada account allows daily weigh-ins from the convenience of patient’s homes to be automatically transmitted and tracked. In addition, tools and support are offered to patients on an individualised basis and progress towards reducing the risk of type 2 diabetes is monitored. If the outcomes are not positive, or as anticipated, the organisation doesn’t get paid by the health funds.

Dyad leaders

A third leadership persona that Pottharst identified focuses on the crucial alignment required between health care providers and health care payers, to match clinical outcomes with financial results, and the sharing of accountabilities between a clinical leader and a business leader. Termed “dyad leaders”, this type of leadership needs establishment and sustainability of interpersonal relationships based on transparency and accountability, geared towards establishing a funding framework that ties clinical outcomes to financial reimbursement.

In the Australian context, this would see health insurers and governments developing powerful and collaborative relationships with public and private providers towards developing value-based contracting and value-based funding models, in a mutual effort to improve clinical outcomes.

Value evangelists

The final and most powerful leadership persona required in the transition to a value-based health system, is that of “value evangelists”. These leaders are those who challenge the status quo, and inspire organisations and executive teams to embrace transformational changes that disrupt and reshape established systems. They are able to create a sense of optimism, and hope. They motivate others to break free not just of the inertia of resistance but of the scepticism of change.

These four personas can and should be developed in Australia’s health care leaders. Adaptability is the key. As health care leaders, we need to recognise this and we need to be wary of pre-conceived notions and widely accepted definitions of leadership. We need to break free of outdated theoretical leadership frameworks, disrupt limitations in our thinking and adapt to what is required of us. We need to adapt to what our health system requires of us, what our communities require of us and, ultimately, what our patients require of us. And right now, that means we need to open our minds, consider, reflect, and finally adapt to lead this concept of value-based health care.

Dr Sidney Chandrasiri is the Chief Medical Officer of the Alexandra District Health Service, and Group Director of Academic and Medical Services at Epworth HealthCare.


The statements or opinions expressed in this article reflect the views of the authors and do not represent the official policy of the AMA, the MJA or InSight+ unless so stated.

One thought on “When leaders create value: transitioning to value-based health care

  1. Rhonda Kerr says:

    A very important article on how we achieve the improvements we seek for healthcare through effective leadership.
    ”Never doubt that a small group of thoughtful, concerned citizens can change world. Indeed it is the only thing that ever has.” —Margaret Mead

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