RESEARCH AND PRACTICE
Assessing Entrepreneurship in Governmental Public Health Peter D. Jacobson, JD, MPH, Jeffrey Wasserman, PhD, Helen W. Wu, PhD, and Johanna R. Lauer, MPH
Despite the public health system’s significant past achievements, many observers have questioned whether it can adequately respond to the nation’s existing public health needs, let alone to emerging disease threats.1 The governmental public health system faces declining public investment, sustained attacks from opponents (including affected industries and antigovernment political groups), limited political power, and competitors encroaching on its responsibilities. From 2008 to 2010, the local health department (LHD) workforce declined by approximately 19%.2,3 As a result, the governmental public health system must either develop new and innovative strategies to generate revenue or face increasing declines in its ability to protect the public’s health.4 If maintaining the status quo is untenable, what alternatives might be considered? One possibility is for public health to develop an entrepreneurial strategy that supplements public funds with revenues from other sources, what we call public health entrepreneurship (PHE). We conducted an exploratory case study examining PHE and assessing its feasibility within governmental public health. Because there is no consensus definition of entrepreneurship as applied to governmental activities,5---8 we define PHE as the application of entrepreneurial skills to advance the public health mission. Indicia of PHE include skills in appraising human and resource needs, building constituent and stakeholder partnerships, generating revenue, and ensuring sustainability.9 PHE describes 2 closely linked dimensions: public health as an economic activity generating revenue and entrepreneurial innovations to provide more efficient services.
METHODS Our research question was whether governmental public health officials pursue PHE to generate new sources of revenue and new service delivery innovations. To address
Objectives. We assessed the feasibility and desirability of public health entrepreneurship (PHE) in governmental public health. Methods. Using a qualitative case study approach with semistructured interview protocols, we conducted interviews between April 2010 and January 2011 at 32 local health departments (LHDs) in 18 states. Respondents included chief health officers and senior LHD staff, representatives from national public health organizations, health authorities, and public health institutes. Results. Respondents identified PHE through 3 overlapping practices: strategic planning, operational efficiency, and revenue generation. Clinical services offer the strongest revenue-generating potential, and traditional public health services offer only limited entrepreneurial opportunities. Barriers include civil service rules, a risk-averse culture, and concerns that PHE would compromise core public health values. Conclusions. Ongoing PHE activity has the potential to reduce LHDs’ reliance on unstable general public revenues. Yet under the best of circumstances, it is difficult to generate revenue from public health services. Although governmental public health contains pockets of entrepreneurial activity, its culture does not sustain significant entrepreneurial activity. The question remains as to whether LHDs’ current public revenue sources are sustainable and, if not, whether PHE is a feasible or desirable alternative. (Am J Public Health. 2015;105: S318–S322. doi:10.2105/AJPH.2014.302388)
this question, we used a multiple-site qualitative case study, with LHDs as the unit of analysis. Using a semistructured protocol, we conducted interviews between April 2010 and January 2011 with chief health officers (CHOs) and members of the senior management staff (e.g., financial officer or assistant director) at 32 LHDs in 18 geographically dispersed states. For other perspectives, we interviewed representatives from 3 fiscal sponsorship organizations, 3 port authorities, each of the major national public health associations, 5 health authorities or taxing districts, and 4 public health institutes. Each interview was designed to ascertain the range of PHE initiatives and potential barriers and lasted approximately 1 hour. To identify entrepreneurial LHDs, we conducted an in-depth literature review, spoke with relevant experts (including representatives from the major national public health associations), and examined National Association of County and City
S318 | Research and Practice | Peer Reviewed | Jacobson et al.
Health Officials survey data.10 We used a snowball sample, asking each expert to identify specific entrepreneurial programs or individual contacts to pursue. The sample varied geographically to include a mix of rural and urban departments, small and large departments, and centralized and decentralized governance structures. For the analysis, we synthesized the interview data and documentary evidence collected to portray current entrepreneurial strategies. The primary form of analysis was descriptive, comparing and contrasting information across sites along several dimensions of interest.
RESULTS Given the abstract nature of entrepreneurship, it is difficult to depict PHE’s scope. Nevertheless, respondents generally identified practices that fell into 3 overlapping tiers:
American Journal of Public Health | Supplement 2, 2015, Vol 105, No. S2
RESEARCH AND PRACTICE
strategic planning, operational efficiency, and revenue generation.
Strategic Planning According to our interviews, strategic planning is a foundation for entrepreneurship. Strategic planning is focused primarily on whether to establish or expand private-sector partnerships to better meet public health goals. As one respondent explained, If you’re going to follow your mission and serve those individuals that are underserved, you can’t do it if you’re in a weak position. So you need to think of it strategically to be a strong, viable health department.11
Approximately 50% of respondents preferred to retain services rather than contract to the private sector because retaining services allowed them to control quality, keep qualified employees, and ensure the primacy of the public health mission. As a strong PHE proponent observed, “It would be a fool’s errand to make public health a fee-for-service enterprise. The danger is the loss of mission, vision, and passion.” By contrast, the other 50% mentioned several important benefits of private-sector partnerships. First, private entities can fill gaps in expertise and provide services when current demand might not warrant hiring government employees. Second, they can hire staff quickly and use accountability metrics, improving operational efficiency. Third, partnering with private entities allows LHDs to focus on core competencies. As one health official explained, In the area of primary care, we didn’t do a good job. It was not our core strength, and it was costing us $800 to see a client. . . . We weren’t doing immunizations and communicable disease or family planning, which are all part of the core mission of public health.
Operational Efficiency The second type of entrepreneurial practice is operational efficiency, in which improvements can yield significant cost savings. Entrepreneurship proponents indicated that the systematic examination of business processes can reduce waste and costs and improve client and employee satisfaction. As one CHO stated, “The best way to get more money is to prove how efficient you’ve been.” Other respondents mentioned organizational
improvements, such as combining programs under 1 manager instead of maintaining multiple programs and managers. In this context, entrepreneurship is consistent with the emphasis on assessing the quality of public health services12 (see also http://www. phaboard.org for more information). Focusing on efficiency can lead to revenuegenerating programs and building public health’s political capital. For example, an LHD director made a deal with the board of supervisors, promising not to ask for any funding increases until he made the department more efficient. In 1 year, the LHD made operational improvements that doubled its client load without a budget increase. Consequently, the department avoided budget cuts and gained the board’s trust; the board then agreed to create a public health district with designated sales tax revenue. A smaller number of LHDs targeted clinical services for efficiency improvements, such as co-locating similar programs to achieve savings. Larger LHDs invested in practice management systems and eligibility verification software to increase reimbursement. In conjunction with these systems, the LHDs also applied efficiency strategies to nonclinical services to improve customer satisfaction. Using business process analysis techniques, we got all our environmental health inspections completed at a higher rate than we’ve ever done, so even though it’s a down economy, we’ve collected more revenue than in the past. Every number is up. We didn’t add staff, we just improved the processes.
Unfortunately, large quality improvement and efficiency initiatives can be difficult to implement in small LHDs, particularly those with limited access to discretionary funding and staff with advanced training. Strict civil service systems can also limit the use of incentives. At one smaller LHD, the pressures of responding to H1N1 and reduced funding forced the organization to put its quality improvement initiative on hold. “There’s no discussion of what could we do differently or try to do better. I don’t see us doing planning ahead.”
New Revenue Sources In the final PHE tier, LHDs develop new programs that generate revenue through fees, reimbursement, or grants. Almost all
Supplement 2, 2015, Vol 105, No. S2 | American Journal of Public Health
respondents acknowledged the need for LHDs to diversify revenue streams to address growing financial constraints. Public goods. Respondents also acknowledged the limitations of finding sources of revenue for services that are purely public goods and the difficulty of sustaining the initiatives. For instance, even though a majority of respondents have successfully received grants that stay within the department, most indicated that grant funding is not sustainable, often citing their experience with bioterrorism preparedness grants. Likewise, most respondents were skeptical that marketing public health services, such as surveillance surveys, is a sustainable revenue measure. As a respondent explained, “Public health functions are not billable services. . . . If there was money, the private sector would be providing the service.” Another added that it is hard to “make an overarching for-profit business model to provide 3 core functions and 10 essential services.” Finally, respondents voiced concerns about political or philosophical issues related to developing revenue-generating programs. For example, several respondents argued that because LHDs serve as the provider for low-income populations, fees for services should be as low as possible. Nonetheless, other respondents are raising fees to replace declining general revenue. Strategies. An alternative strategy for generating revenue is providing services to other governmental entities. For instance, one LHD now handles safety and occupational health for the city at a lower cost than a private contractor, which brings in a steady stream of funding. By successfully reducing the number of accidents, thus lowering workers’ compensation insurance rates, it saves the city money. Consistently, however, respondents noted that the savings from similar efforts rarely accrue to the department. A city health department developed wellness and occupational safety programs for city agencies, but concluded that both the wellness and the occupational safety [programs] are internal entrepreneurial things that . . . save dollars, but don’t really make money for us. But it’s strategic, because . . . the more I can get staff showing some sort of revenue or being part of a valued program, the more secure they are.
Jacobson et al. | Peer Reviewed | Research and Practice | S319
RESEARCH AND PRACTICE
In a related approach, a few respondents were able to generate revenue through financing mechanisms. Four respondents created independent 501(c)(3) organizations to capture private funds from foundations or donors who only contribute to a nongovernmental entity. Significantly, after raising more than $1 million to create a new health center, a CHO noted that “as important as the money is, it’s really about getting influential people involved.” Aside from creating independent financing mechanisms, several LHDs are funded through stable property tax revenues. Reflecting on the LHDs that have an independent source of funds from dedicated property taxes relative to those without, one CHO noted, We are independent. We have millage from the property tax. It’s a pretty stable source of funding for us; it’s more stable than state funding. . . . We haven’t laid anyone off during the recession, but the state has had to cut a number of positions. The health departments that rely on a property tax are doing well. We’re not flush, but we can begin new programs.
A skeptical CHO remarked, “If you just wait for a property tax to be passed, you’re going to have difficulty.” More important, this option may not be legally available in all states. In any event, similar strategies are legally complex. A number of respondents argued that clinical services present revenue-generating opportunities. Although many LHDs nationwide have abandoned clinical services, proponents indicated that they raise revenue through established reimbursement methods.13 For example, one LHD runs a highly productive dental practice that has been expanded to 10 local cities, improving access to care with little cost to local governments because of a strong Medicaid patient base. At another LHD, administrators developed a nurse midwife program to manage the prenatal care of and delivery for undocumented mothers. The midwives have achieved significantly lower rates of infant mortality and cesarean deliveries than the rest of the community. Both programs improve community health while simultaneously securing stable Medicaid revenue. Proponents of using clinical services suggested that the Patient Protection and Affordable Care Act’s14 worksite wellness programs and the community health needs
assessment process are feasible revenue opportunities. However, generating revenue through wellness programs or the act’s population health provisions is a work in progress that not all respondents agree is feasible. Generating revenue allows LHDs to retain reserves that can lead to significant public health benefits. As a CHO noted, It allows you to be like a business and anticipate the economic cycle and squirrel away some money. It has helped us weather the economic downturn since we could use our strategic reserves. We did have to throttle back a little during the recession, but we could still maintain some measure of continuity.
Recently, the LHD built a new $7 million health center, paid for in cash.
Barriers Facing Public Health Entrepreneurship Our interviews revealed substantial barriers to PHE. A key concern is the risk to governmental public health’s mission and core values when the emphasis shifts to profit-oriented services and strategies. Politics. The obstacles to PHE are largely rooted in a governance model that is generally unsuited to developing revenue-generating programs. Respondents consistently mentioned politics as a barrier because entrepreneurship requires more independence than most elected officials are willing to provide. As one respondent put it, “in most communities, there’s not much political will, there’s not much courage, there’s not much vision, and it takes guts to do these things.” To be sure, political considerations are a fundamental and appropriate aspect of governmental public health delivery. Yet the willingness to lessen political control, a precondition for PHE, rarely exists. There were only 2 exceptions in our sample in which elected officials permitted LHDs to convert to independent health authorities. Bureaucratic barriers. The most commonly cited bureaucratic hurdles to PHE are related to personnel and purchasing. Almost every respondent cited staff hiring and firing as major governmental constraints. Civil service rules make it difficult to fire underperforming employees and limit pay to levels that are too low to attract the best candidates. Workforce capacity constraints are serious limitations,
S320 | Research and Practice | Peer Reviewed | Jacobson et al.
both in staffing size and in the skills needed to be entrepreneurial. Public budgets. PHE is dependent on retained earnings that can be reinvested in strategic opportunities, but fees and revenues that LHDs raise are usually returned to general funds. Because many respondents suggested that the “county would cut the department’s budget by the amount of the new revenue stream,” they lack incentives “to grow the business, because the money doesn’t come back to the health department.” Indeed, many respondents expressed concern that elected officials might reduce future funding for efficient health departments, believing that they do not need the same level of funding to provide the mandated services—effectively punishing successful organizations. Culture. The vast majority of respondents indicated that the current governmental public health culture does not support PHE. Governmental public health tends to be risk averse and rule bound and cannot move fast enough to take advantage of entrepreneurial opportunities.15 According to respondents, entrepreneurship would be a disruptive change to the existing culture because public health professionals are averse to business concepts. Therefore, LHDs would “need to inculcate a new philosophy of business.” Visionary leaders and project managers are needed to develop a culture of entrepreneurship. As 1 respondent explained, “You need a motivated staff who look outside the box and ask how it can be done better. They need to ask, what are we doing that we don’t need to do?” The skills respondents identified as most lacking, and essential for entrepreneurship, are grant writing, data analysis, and basic financial aptitude.4 A lack of employees with these essential skills inhibits innovation.
Factors Supporting Public Health Entrepreneurship An important prerequisite for entrepreneurship is access to stable and discretionary funding as seed money for new programs or developing new strategies and approaches. Traditionally, much of public health has been funded with categorical grants for predefined programs. By contrast, our entrepreneurial respondents reported receiving a fraction of
American Journal of Public Health | Supplement 2, 2015, Vol 105, No. S2
RESEARCH AND PRACTICE
their local property tax levy or, alternatively, generating a percentage of their revenue through reimbursement for clinical services. In both, the funding tends to be relatively stable, allowing LHDs to respond rapidly to entrepreneurial opportunities. Given the benefits of discretionary funding, a few respondents recently embarked on a political campaign to secure a portion of their local tax revenue for public health.16 In one county, voters agreed to create a public health taxing district, which could generate as much as $5 million annually for the LHD, relieving the pressure to be “subject to the disease of the month.” For most LHDs, though, tax funding may not be an option. The second factor is political independence. The most entrepreneurial organizations we found were public health authorities—politically independent governmental entities with an entrepreneurial governance model. Health authorities usually have their own board, a separate hiring system, and the ability to retain reserves. This model allows the director to manage staff without civil service constraints, improve accountability, retain adequate funds to take advantage of entrepreneurial opportunities, and make quick decisions.
DISCUSSION Our case study suggests ongoing PHE activity that has the potential to reduce LHD reliance on unstable general public revenues. Yet under the best of circumstances, it is difficult to monetize public health services. With rare exception, our interviews revealed that traditional public health services were not consistent revenue sources. The results also provide insight into process-related dynamics of pursuing PHE, including barriers and other organizational characteristics. We conclude that governmental public health currently contains pockets of entrepreneurial activity, but it lacks a culture and other supporting factors to sustain significant entrepreneurial activity. Changing the culture of public health involves several simultaneous considerations and a long-term strategy. First, our results suggest considerable disquiet about the sustainability of the current public health system, but no consensus on what the
optimal structure would be. We therefore encourage health officials to consider PHE as an important component of meeting the public health mission. To begin the process of changing the culture, health departments should invest in training leaders and staff to develop the entrepreneurial skill set described earlier.16 Second, the major national public health organizations should collect data to provide a more detailed portrayal of entrepreneurial activities and results. Entrepreneurial innovations, both successes and failures, should be shared widely and debated. Third, state legislators should reconsider the nature of political control over public health. A key lesson from the more entrepreneurial organizations in our sample is that political independence both encourages and permits entrepreneurial initiatives. This is not to suggest removing political control; instead, expanding special taxing districts or health authorities is a cost-effective way to generate the revenue necessary for sustainable governmental public health. Fourth, the Patient Protection and Affordable Care Act presents new PHE opportunities through the community health needs assessment and community transformation grants processes. The act also encourages the integration of population health and personal medical care, which could stimulate new strategies to improve population health. The question remains whether the current organizational structure, heavily reliant on intergovernmental transfers of funds or contracting to purchase public health services, is sustainable. Moving toward PHE would represent disruptive change, with uncertain consequences.17,18 It is important to consider that LHDs are not operating in either an organizational or a services delivery vacuum. Beyond competition from the private sector, our interviews (not reported here) suggest that public health institutes and health authorities are emerging as competitors to LHDs for grants and other revenue sources. As entrepreneurial organizations unconstrained by governmental restrictions, they pose a potential threat to the current structure, financing, and delivery of public health services. The primary limitation of our study is the range of interviews conducted. As with any
Supplement 2, 2015, Vol 105, No. S2 | American Journal of Public Health
qualitative research, generalizability of the results is a concern. Although our sampling strategy was designed to identify organizations likely to be engaged in PHE, we have no way of knowing whether our respondents represent the full range of entrepreneurial activities underway, particularly PHE focused on expanding social or policy networks. Given the absence of data to guide site selection, we decided that a snowball selection strategy would provide the most useful information. Just as important, our case study will generate research hypotheses and questions for others interested in PHE to explore. The public health system is not a static structure. Instead, it evolves and adapts incrementally as the scientific basis of population health changes and as new threats emerge. Right now, disruptive change, in the form of PHE, may be necessary, even though we acknowledge the inherent risk of this approach. j
About the Authors Peter D. Jacobson and Johanna R. Lauer are with the School of Public Health, University of Michigan, Ann Arbor. Jeffrey Wasserman and Helen W. Wu are with the RAND Corporation, Santa Monica. Helen W. Wu is also with the Pardee RAND Graduate School, Santa Monica, CA. Correspondence should be sent to Peter D. Jacobson, JD, MPH, University of Michigan School of Public Health, 1415 Washington Heights, Ann Arbor, MI 48109-2029 (e-mail: [email protected]). Reprints can be ordered at http://www.ajph.org by clicking the “Reprints” link. This article was accepted October 7, 2014.
Contributors P. D. Jacobson and J. Wasserman designed the study, conducted many of the interviews, and participated in all aspects of data analysis and article preparation. H. W. Wu and J. R. Lauer conducted interviews and participated in data analysis and article preparation.
Acknowledgments We appreciate the financial support we received from the Robert Wood Johnson Foundation’s Public Health Systems Research Program at AcademyHealth. P. D. Jacobson has been a board member of Public Health Foundation Enterprises, Inc. (a nonprofit fiscal sponsor). His board duties have not been in conflict with this research project. We especially express our gratitude to Sharon Arnold, Bonnie Austin, and Kate Papa for their input and support throughout the project. In conducting the research, we were fortunate to have outstanding student research assistants. They are Dustin Lipson, MHSA, Michelle Yu, MHSA, Sejica Kim, MHSA, and Shelley Jazowski, MPH. We also thank the National Association of County and City Health Officers for making its health department profile surveys available for this project. We are also grateful for the excellent suggestions from 2 anonymous
Jacobson et al. | Peer Reviewed | Research and Practice | S321
RESEARCH AND PRACTICE
reviewers. Finally, we express our gratitude to the many individuals whom we interviewed. It is their insights that have shaped this article.
15. Jacobson PD, Wasserman J, Botoseneanu A, Silverstein A, Wu HW. The role of law in public health preparedness: opportunities and challenges. J Health Polit Policy Law. 2012;37(2):297---328.
Human Participant Protection
16. Baker EL. Investing in public health leadership. J Public Health Manag Pract. 2011;17(3):291---292.
Institutional review boards from the University of Michigan and the RAND Corporation determined that the project was exempt from ongoing institutional review board review per Exemption 2 of 45 CFR 46.101(b).
References 1. Lurie N. The public health infrastructure: rebuild or redesign? Health Aff (Millwood). 2002;21(6):28---30.
17. Studnicki J, Gipson LS, Berndt DJ, et al. Special healthcare taxing districts: association with population health status. Am J Prev Med. 2007;32(2):116---123. 18. Scott WR, Ruef M, Mendel PJ, Caronna CA. Institutional Change and Healthcare Organizations: From Professional Dominance to Managed Care. Chicago, IL: University of Chicago Press; 2000.
2. National Association of County and City Health Officers. Local Health Department Job Losses and Program Cuts: 2008-2010. Washington, DC: National Association of County and City Health Officers; 2011. 3. Trust for America’s Health. Shortchanging America’s health: a state-by-state look at how public health dollars are spent and key state health facts. Available at: http://healthyamericans.org/assets/files/ TFAH2010Shortchanging05.pdf. Accessed December 6, 2010. 4. Neumann PJ, Jacobson PD, Palmer JA. Measuring the value of public health systems: the disconnect between health economists and public health practitioners. Am J Public Health. 2008;98(12):2173---2180. 5. Weerawardena J, Mort GS. Investigating social entrepreneurship: a multidimensional model. J World Bus. 2006;41(1):21---35. 6. Abu-Saifan S. Social entrepreneurship: definition and boundaries. Technol Innovation Manage Rev. 2012; (February):22---27. 7. Wei-Skillern J. Networks as a type of social entrepreneurship to advance population health. Prev Chronic Dis. 2010;7(6):A120. 8. Oliver TR. Policy entrepreneurship in the social transformation of American medicine: the rise of managed care and managed competition. J Health Polit Policy Law. 2004;29(4---5):701---733. 9. Orton S, Umble K, Zelt S, Porter J, Johnson J. Management Academy for Public Health: creating entrepreneurial managers. Am J Public Health. 2007;97(4):601---605. 10. National Association of County and City Health Officials. Model practices. Available at: http://www. naccho.org/topics/modelpractices. Accessed September 8, 2014. 11. Cox G. The “clean sheet exercise” in Tulsa health planning. Available at: http://www. publichealthgrandrounds.unc.edu/cleansheet/Clean_ Sheet.pdf. Accessed March 15, 2009. 12. Corso LC, Lenaway D, Beitsch LM, Landrum LB, Deutsch H. The National Public Health Performance Standards: driving quality improvement in public health systems. J Public Health Manag Pract. 2010;16(1):19---23. 13. National Association of County and City Health Officers. Billing for clinical services: findings from the 2014 Forces of Change Survey. Available at: http:// www.naccho.org/topics/research/forcesofchange/ upload/Billing.pdf. Accessed September 8, 2014. 14. Patient Protection and Affordable Care Act, Pub Law No. 111---148, 42 U.S.C. §§ 18001-18121 (2010).
S322 | Research and Practice | Peer Reviewed | Jacobson et al.
American Journal of Public Health | Supplement 2, 2015, Vol 105, No. S2
Assessing Entrepreneurship in Governmental Public Health Peter D. Jacobson, JD, MPH, Jeffrey Wasserman, PhD, Helen W. Wu, PhD, and Johanna R. Lauer, MPH
Despite the public health system’s significant past achievements, many observers have questioned whether it can adequately respond to the nation’s existing public health needs, let alone to emerging disease threats.1 The governmental public health system faces declining public investment, sustained attacks from opponents (including affected industries and antigovernment political groups), limited political power, and competitors encroaching on its responsibilities. From 2008 to 2010, the local health department (LHD) workforce declined by approximately 19%.2,3 As a result, the governmental public health system must either develop new and innovative strategies to generate revenue or face increasing declines in its ability to protect the public’s health.4 If maintaining the status quo is untenable, what alternatives might be considered? One possibility is for public health to develop an entrepreneurial strategy that supplements public funds with revenues from other sources, what we call public health entrepreneurship (PHE). We conducted an exploratory case study examining PHE and assessing its feasibility within governmental public health. Because there is no consensus definition of entrepreneurship as applied to governmental activities,5---8 we define PHE as the application of entrepreneurial skills to advance the public health mission. Indicia of PHE include skills in appraising human and resource needs, building constituent and stakeholder partnerships, generating revenue, and ensuring sustainability.9 PHE describes 2 closely linked dimensions: public health as an economic activity generating revenue and entrepreneurial innovations to provide more efficient services.
METHODS Our research question was whether governmental public health officials pursue PHE to generate new sources of revenue and new service delivery innovations. To address
Objectives. We assessed the feasibility and desirability of public health entrepreneurship (PHE) in governmental public health. Methods. Using a qualitative case study approach with semistructured interview protocols, we conducted interviews between April 2010 and January 2011 at 32 local health departments (LHDs) in 18 states. Respondents included chief health officers and senior LHD staff, representatives from national public health organizations, health authorities, and public health institutes. Results. Respondents identified PHE through 3 overlapping practices: strategic planning, operational efficiency, and revenue generation. Clinical services offer the strongest revenue-generating potential, and traditional public health services offer only limited entrepreneurial opportunities. Barriers include civil service rules, a risk-averse culture, and concerns that PHE would compromise core public health values. Conclusions. Ongoing PHE activity has the potential to reduce LHDs’ reliance on unstable general public revenues. Yet under the best of circumstances, it is difficult to generate revenue from public health services. Although governmental public health contains pockets of entrepreneurial activity, its culture does not sustain significant entrepreneurial activity. The question remains as to whether LHDs’ current public revenue sources are sustainable and, if not, whether PHE is a feasible or desirable alternative. (Am J Public Health. 2015;105: S318–S322. doi:10.2105/AJPH.2014.302388)
this question, we used a multiple-site qualitative case study, with LHDs as the unit of analysis. Using a semistructured protocol, we conducted interviews between April 2010 and January 2011 with chief health officers (CHOs) and members of the senior management staff (e.g., financial officer or assistant director) at 32 LHDs in 18 geographically dispersed states. For other perspectives, we interviewed representatives from 3 fiscal sponsorship organizations, 3 port authorities, each of the major national public health associations, 5 health authorities or taxing districts, and 4 public health institutes. Each interview was designed to ascertain the range of PHE initiatives and potential barriers and lasted approximately 1 hour. To identify entrepreneurial LHDs, we conducted an in-depth literature review, spoke with relevant experts (including representatives from the major national public health associations), and examined National Association of County and City
S318 | Research and Practice | Peer Reviewed | Jacobson et al.
Health Officials survey data.10 We used a snowball sample, asking each expert to identify specific entrepreneurial programs or individual contacts to pursue. The sample varied geographically to include a mix of rural and urban departments, small and large departments, and centralized and decentralized governance structures. For the analysis, we synthesized the interview data and documentary evidence collected to portray current entrepreneurial strategies. The primary form of analysis was descriptive, comparing and contrasting information across sites along several dimensions of interest.
RESULTS Given the abstract nature of entrepreneurship, it is difficult to depict PHE’s scope. Nevertheless, respondents generally identified practices that fell into 3 overlapping tiers:
American Journal of Public Health | Supplement 2, 2015, Vol 105, No. S2
RESEARCH AND PRACTICE
strategic planning, operational efficiency, and revenue generation.
Strategic Planning According to our interviews, strategic planning is a foundation for entrepreneurship. Strategic planning is focused primarily on whether to establish or expand private-sector partnerships to better meet public health goals. As one respondent explained, If you’re going to follow your mission and serve those individuals that are underserved, you can’t do it if you’re in a weak position. So you need to think of it strategically to be a strong, viable health department.11
Approximately 50% of respondents preferred to retain services rather than contract to the private sector because retaining services allowed them to control quality, keep qualified employees, and ensure the primacy of the public health mission. As a strong PHE proponent observed, “It would be a fool’s errand to make public health a fee-for-service enterprise. The danger is the loss of mission, vision, and passion.” By contrast, the other 50% mentioned several important benefits of private-sector partnerships. First, private entities can fill gaps in expertise and provide services when current demand might not warrant hiring government employees. Second, they can hire staff quickly and use accountability metrics, improving operational efficiency. Third, partnering with private entities allows LHDs to focus on core competencies. As one health official explained, In the area of primary care, we didn’t do a good job. It was not our core strength, and it was costing us $800 to see a client. . . . We weren’t doing immunizations and communicable disease or family planning, which are all part of the core mission of public health.
Operational Efficiency The second type of entrepreneurial practice is operational efficiency, in which improvements can yield significant cost savings. Entrepreneurship proponents indicated that the systematic examination of business processes can reduce waste and costs and improve client and employee satisfaction. As one CHO stated, “The best way to get more money is to prove how efficient you’ve been.” Other respondents mentioned organizational
improvements, such as combining programs under 1 manager instead of maintaining multiple programs and managers. In this context, entrepreneurship is consistent with the emphasis on assessing the quality of public health services12 (see also http://www. phaboard.org for more information). Focusing on efficiency can lead to revenuegenerating programs and building public health’s political capital. For example, an LHD director made a deal with the board of supervisors, promising not to ask for any funding increases until he made the department more efficient. In 1 year, the LHD made operational improvements that doubled its client load without a budget increase. Consequently, the department avoided budget cuts and gained the board’s trust; the board then agreed to create a public health district with designated sales tax revenue. A smaller number of LHDs targeted clinical services for efficiency improvements, such as co-locating similar programs to achieve savings. Larger LHDs invested in practice management systems and eligibility verification software to increase reimbursement. In conjunction with these systems, the LHDs also applied efficiency strategies to nonclinical services to improve customer satisfaction. Using business process analysis techniques, we got all our environmental health inspections completed at a higher rate than we’ve ever done, so even though it’s a down economy, we’ve collected more revenue than in the past. Every number is up. We didn’t add staff, we just improved the processes.
Unfortunately, large quality improvement and efficiency initiatives can be difficult to implement in small LHDs, particularly those with limited access to discretionary funding and staff with advanced training. Strict civil service systems can also limit the use of incentives. At one smaller LHD, the pressures of responding to H1N1 and reduced funding forced the organization to put its quality improvement initiative on hold. “There’s no discussion of what could we do differently or try to do better. I don’t see us doing planning ahead.”
New Revenue Sources In the final PHE tier, LHDs develop new programs that generate revenue through fees, reimbursement, or grants. Almost all
Supplement 2, 2015, Vol 105, No. S2 | American Journal of Public Health
respondents acknowledged the need for LHDs to diversify revenue streams to address growing financial constraints. Public goods. Respondents also acknowledged the limitations of finding sources of revenue for services that are purely public goods and the difficulty of sustaining the initiatives. For instance, even though a majority of respondents have successfully received grants that stay within the department, most indicated that grant funding is not sustainable, often citing their experience with bioterrorism preparedness grants. Likewise, most respondents were skeptical that marketing public health services, such as surveillance surveys, is a sustainable revenue measure. As a respondent explained, “Public health functions are not billable services. . . . If there was money, the private sector would be providing the service.” Another added that it is hard to “make an overarching for-profit business model to provide 3 core functions and 10 essential services.” Finally, respondents voiced concerns about political or philosophical issues related to developing revenue-generating programs. For example, several respondents argued that because LHDs serve as the provider for low-income populations, fees for services should be as low as possible. Nonetheless, other respondents are raising fees to replace declining general revenue. Strategies. An alternative strategy for generating revenue is providing services to other governmental entities. For instance, one LHD now handles safety and occupational health for the city at a lower cost than a private contractor, which brings in a steady stream of funding. By successfully reducing the number of accidents, thus lowering workers’ compensation insurance rates, it saves the city money. Consistently, however, respondents noted that the savings from similar efforts rarely accrue to the department. A city health department developed wellness and occupational safety programs for city agencies, but concluded that both the wellness and the occupational safety [programs] are internal entrepreneurial things that . . . save dollars, but don’t really make money for us. But it’s strategic, because . . . the more I can get staff showing some sort of revenue or being part of a valued program, the more secure they are.
Jacobson et al. | Peer Reviewed | Research and Practice | S319
RESEARCH AND PRACTICE
In a related approach, a few respondents were able to generate revenue through financing mechanisms. Four respondents created independent 501(c)(3) organizations to capture private funds from foundations or donors who only contribute to a nongovernmental entity. Significantly, after raising more than $1 million to create a new health center, a CHO noted that “as important as the money is, it’s really about getting influential people involved.” Aside from creating independent financing mechanisms, several LHDs are funded through stable property tax revenues. Reflecting on the LHDs that have an independent source of funds from dedicated property taxes relative to those without, one CHO noted, We are independent. We have millage from the property tax. It’s a pretty stable source of funding for us; it’s more stable than state funding. . . . We haven’t laid anyone off during the recession, but the state has had to cut a number of positions. The health departments that rely on a property tax are doing well. We’re not flush, but we can begin new programs.
A skeptical CHO remarked, “If you just wait for a property tax to be passed, you’re going to have difficulty.” More important, this option may not be legally available in all states. In any event, similar strategies are legally complex. A number of respondents argued that clinical services present revenue-generating opportunities. Although many LHDs nationwide have abandoned clinical services, proponents indicated that they raise revenue through established reimbursement methods.13 For example, one LHD runs a highly productive dental practice that has been expanded to 10 local cities, improving access to care with little cost to local governments because of a strong Medicaid patient base. At another LHD, administrators developed a nurse midwife program to manage the prenatal care of and delivery for undocumented mothers. The midwives have achieved significantly lower rates of infant mortality and cesarean deliveries than the rest of the community. Both programs improve community health while simultaneously securing stable Medicaid revenue. Proponents of using clinical services suggested that the Patient Protection and Affordable Care Act’s14 worksite wellness programs and the community health needs
assessment process are feasible revenue opportunities. However, generating revenue through wellness programs or the act’s population health provisions is a work in progress that not all respondents agree is feasible. Generating revenue allows LHDs to retain reserves that can lead to significant public health benefits. As a CHO noted, It allows you to be like a business and anticipate the economic cycle and squirrel away some money. It has helped us weather the economic downturn since we could use our strategic reserves. We did have to throttle back a little during the recession, but we could still maintain some measure of continuity.
Recently, the LHD built a new $7 million health center, paid for in cash.
Barriers Facing Public Health Entrepreneurship Our interviews revealed substantial barriers to PHE. A key concern is the risk to governmental public health’s mission and core values when the emphasis shifts to profit-oriented services and strategies. Politics. The obstacles to PHE are largely rooted in a governance model that is generally unsuited to developing revenue-generating programs. Respondents consistently mentioned politics as a barrier because entrepreneurship requires more independence than most elected officials are willing to provide. As one respondent put it, “in most communities, there’s not much political will, there’s not much courage, there’s not much vision, and it takes guts to do these things.” To be sure, political considerations are a fundamental and appropriate aspect of governmental public health delivery. Yet the willingness to lessen political control, a precondition for PHE, rarely exists. There were only 2 exceptions in our sample in which elected officials permitted LHDs to convert to independent health authorities. Bureaucratic barriers. The most commonly cited bureaucratic hurdles to PHE are related to personnel and purchasing. Almost every respondent cited staff hiring and firing as major governmental constraints. Civil service rules make it difficult to fire underperforming employees and limit pay to levels that are too low to attract the best candidates. Workforce capacity constraints are serious limitations,
S320 | Research and Practice | Peer Reviewed | Jacobson et al.
both in staffing size and in the skills needed to be entrepreneurial. Public budgets. PHE is dependent on retained earnings that can be reinvested in strategic opportunities, but fees and revenues that LHDs raise are usually returned to general funds. Because many respondents suggested that the “county would cut the department’s budget by the amount of the new revenue stream,” they lack incentives “to grow the business, because the money doesn’t come back to the health department.” Indeed, many respondents expressed concern that elected officials might reduce future funding for efficient health departments, believing that they do not need the same level of funding to provide the mandated services—effectively punishing successful organizations. Culture. The vast majority of respondents indicated that the current governmental public health culture does not support PHE. Governmental public health tends to be risk averse and rule bound and cannot move fast enough to take advantage of entrepreneurial opportunities.15 According to respondents, entrepreneurship would be a disruptive change to the existing culture because public health professionals are averse to business concepts. Therefore, LHDs would “need to inculcate a new philosophy of business.” Visionary leaders and project managers are needed to develop a culture of entrepreneurship. As 1 respondent explained, “You need a motivated staff who look outside the box and ask how it can be done better. They need to ask, what are we doing that we don’t need to do?” The skills respondents identified as most lacking, and essential for entrepreneurship, are grant writing, data analysis, and basic financial aptitude.4 A lack of employees with these essential skills inhibits innovation.
Factors Supporting Public Health Entrepreneurship An important prerequisite for entrepreneurship is access to stable and discretionary funding as seed money for new programs or developing new strategies and approaches. Traditionally, much of public health has been funded with categorical grants for predefined programs. By contrast, our entrepreneurial respondents reported receiving a fraction of
American Journal of Public Health | Supplement 2, 2015, Vol 105, No. S2
RESEARCH AND PRACTICE
their local property tax levy or, alternatively, generating a percentage of their revenue through reimbursement for clinical services. In both, the funding tends to be relatively stable, allowing LHDs to respond rapidly to entrepreneurial opportunities. Given the benefits of discretionary funding, a few respondents recently embarked on a political campaign to secure a portion of their local tax revenue for public health.16 In one county, voters agreed to create a public health taxing district, which could generate as much as $5 million annually for the LHD, relieving the pressure to be “subject to the disease of the month.” For most LHDs, though, tax funding may not be an option. The second factor is political independence. The most entrepreneurial organizations we found were public health authorities—politically independent governmental entities with an entrepreneurial governance model. Health authorities usually have their own board, a separate hiring system, and the ability to retain reserves. This model allows the director to manage staff without civil service constraints, improve accountability, retain adequate funds to take advantage of entrepreneurial opportunities, and make quick decisions.
DISCUSSION Our case study suggests ongoing PHE activity that has the potential to reduce LHD reliance on unstable general public revenues. Yet under the best of circumstances, it is difficult to monetize public health services. With rare exception, our interviews revealed that traditional public health services were not consistent revenue sources. The results also provide insight into process-related dynamics of pursuing PHE, including barriers and other organizational characteristics. We conclude that governmental public health currently contains pockets of entrepreneurial activity, but it lacks a culture and other supporting factors to sustain significant entrepreneurial activity. Changing the culture of public health involves several simultaneous considerations and a long-term strategy. First, our results suggest considerable disquiet about the sustainability of the current public health system, but no consensus on what the
optimal structure would be. We therefore encourage health officials to consider PHE as an important component of meeting the public health mission. To begin the process of changing the culture, health departments should invest in training leaders and staff to develop the entrepreneurial skill set described earlier.16 Second, the major national public health organizations should collect data to provide a more detailed portrayal of entrepreneurial activities and results. Entrepreneurial innovations, both successes and failures, should be shared widely and debated. Third, state legislators should reconsider the nature of political control over public health. A key lesson from the more entrepreneurial organizations in our sample is that political independence both encourages and permits entrepreneurial initiatives. This is not to suggest removing political control; instead, expanding special taxing districts or health authorities is a cost-effective way to generate the revenue necessary for sustainable governmental public health. Fourth, the Patient Protection and Affordable Care Act presents new PHE opportunities through the community health needs assessment and community transformation grants processes. The act also encourages the integration of population health and personal medical care, which could stimulate new strategies to improve population health. The question remains whether the current organizational structure, heavily reliant on intergovernmental transfers of funds or contracting to purchase public health services, is sustainable. Moving toward PHE would represent disruptive change, with uncertain consequences.17,18 It is important to consider that LHDs are not operating in either an organizational or a services delivery vacuum. Beyond competition from the private sector, our interviews (not reported here) suggest that public health institutes and health authorities are emerging as competitors to LHDs for grants and other revenue sources. As entrepreneurial organizations unconstrained by governmental restrictions, they pose a potential threat to the current structure, financing, and delivery of public health services. The primary limitation of our study is the range of interviews conducted. As with any
Supplement 2, 2015, Vol 105, No. S2 | American Journal of Public Health
qualitative research, generalizability of the results is a concern. Although our sampling strategy was designed to identify organizations likely to be engaged in PHE, we have no way of knowing whether our respondents represent the full range of entrepreneurial activities underway, particularly PHE focused on expanding social or policy networks. Given the absence of data to guide site selection, we decided that a snowball selection strategy would provide the most useful information. Just as important, our case study will generate research hypotheses and questions for others interested in PHE to explore. The public health system is not a static structure. Instead, it evolves and adapts incrementally as the scientific basis of population health changes and as new threats emerge. Right now, disruptive change, in the form of PHE, may be necessary, even though we acknowledge the inherent risk of this approach. j
About the Authors Peter D. Jacobson and Johanna R. Lauer are with the School of Public Health, University of Michigan, Ann Arbor. Jeffrey Wasserman and Helen W. Wu are with the RAND Corporation, Santa Monica. Helen W. Wu is also with the Pardee RAND Graduate School, Santa Monica, CA. Correspondence should be sent to Peter D. Jacobson, JD, MPH, University of Michigan School of Public Health, 1415 Washington Heights, Ann Arbor, MI 48109-2029 (e-mail: [email protected]). Reprints can be ordered at http://www.ajph.org by clicking the “Reprints” link. This article was accepted October 7, 2014.
Contributors P. D. Jacobson and J. Wasserman designed the study, conducted many of the interviews, and participated in all aspects of data analysis and article preparation. H. W. Wu and J. R. Lauer conducted interviews and participated in data analysis and article preparation.
Acknowledgments We appreciate the financial support we received from the Robert Wood Johnson Foundation’s Public Health Systems Research Program at AcademyHealth. P. D. Jacobson has been a board member of Public Health Foundation Enterprises, Inc. (a nonprofit fiscal sponsor). His board duties have not been in conflict with this research project. We especially express our gratitude to Sharon Arnold, Bonnie Austin, and Kate Papa for their input and support throughout the project. In conducting the research, we were fortunate to have outstanding student research assistants. They are Dustin Lipson, MHSA, Michelle Yu, MHSA, Sejica Kim, MHSA, and Shelley Jazowski, MPH. We also thank the National Association of County and City Health Officers for making its health department profile surveys available for this project. We are also grateful for the excellent suggestions from 2 anonymous
Jacobson et al. | Peer Reviewed | Research and Practice | S321
RESEARCH AND PRACTICE
reviewers. Finally, we express our gratitude to the many individuals whom we interviewed. It is their insights that have shaped this article.
15. Jacobson PD, Wasserman J, Botoseneanu A, Silverstein A, Wu HW. The role of law in public health preparedness: opportunities and challenges. J Health Polit Policy Law. 2012;37(2):297---328.
Human Participant Protection
16. Baker EL. Investing in public health leadership. J Public Health Manag Pract. 2011;17(3):291---292.
Institutional review boards from the University of Michigan and the RAND Corporation determined that the project was exempt from ongoing institutional review board review per Exemption 2 of 45 CFR 46.101(b).
References 1. Lurie N. The public health infrastructure: rebuild or redesign? Health Aff (Millwood). 2002;21(6):28---30.
17. Studnicki J, Gipson LS, Berndt DJ, et al. Special healthcare taxing districts: association with population health status. Am J Prev Med. 2007;32(2):116---123. 18. Scott WR, Ruef M, Mendel PJ, Caronna CA. Institutional Change and Healthcare Organizations: From Professional Dominance to Managed Care. Chicago, IL: University of Chicago Press; 2000.
2. National Association of County and City Health Officers. Local Health Department Job Losses and Program Cuts: 2008-2010. Washington, DC: National Association of County and City Health Officers; 2011. 3. Trust for America’s Health. Shortchanging America’s health: a state-by-state look at how public health dollars are spent and key state health facts. Available at: http://healthyamericans.org/assets/files/ TFAH2010Shortchanging05.pdf. Accessed December 6, 2010. 4. Neumann PJ, Jacobson PD, Palmer JA. Measuring the value of public health systems: the disconnect between health economists and public health practitioners. Am J Public Health. 2008;98(12):2173---2180. 5. Weerawardena J, Mort GS. Investigating social entrepreneurship: a multidimensional model. J World Bus. 2006;41(1):21---35. 6. Abu-Saifan S. Social entrepreneurship: definition and boundaries. Technol Innovation Manage Rev. 2012; (February):22---27. 7. Wei-Skillern J. Networks as a type of social entrepreneurship to advance population health. Prev Chronic Dis. 2010;7(6):A120. 8. Oliver TR. Policy entrepreneurship in the social transformation of American medicine: the rise of managed care and managed competition. J Health Polit Policy Law. 2004;29(4---5):701---733. 9. Orton S, Umble K, Zelt S, Porter J, Johnson J. Management Academy for Public Health: creating entrepreneurial managers. Am J Public Health. 2007;97(4):601---605. 10. National Association of County and City Health Officials. Model practices. Available at: http://www. naccho.org/topics/modelpractices. Accessed September 8, 2014. 11. Cox G. The “clean sheet exercise” in Tulsa health planning. Available at: http://www. publichealthgrandrounds.unc.edu/cleansheet/Clean_ Sheet.pdf. Accessed March 15, 2009. 12. Corso LC, Lenaway D, Beitsch LM, Landrum LB, Deutsch H. The National Public Health Performance Standards: driving quality improvement in public health systems. J Public Health Manag Pract. 2010;16(1):19---23. 13. National Association of County and City Health Officers. Billing for clinical services: findings from the 2014 Forces of Change Survey. Available at: http:// www.naccho.org/topics/research/forcesofchange/ upload/Billing.pdf. Accessed September 8, 2014. 14. Patient Protection and Affordable Care Act, Pub Law No. 111---148, 42 U.S.C. §§ 18001-18121 (2010).
S322 | Research and Practice | Peer Reviewed | Jacobson et al.
American Journal of Public Health | Supplement 2, 2015, Vol 105, No. S2
