Environmental, Social and Governance principles in Australian publicly funded healthcare: an extension of value-based care

Environmental, Social and Governance principles as an extension of value-based care

The Environmental, Social and Governance (ESG) principles, summarised in Table 1, have gained significant societal traction. Integrating these principles into value-based healthcare (VBHC) definitions is crucial for creating a sustainable, resilient healthcare system. This approach enables effective climate response, financial optimisation, and meeting evolving patient and societal needs. Integrating ESG principles and VBHC creates a mutually reinforcing framework that promotes sustainable, ethical and patient-centred care. This alignment provides a robust foundation for enabling policy changes that address both societal and environmental imperatives while optimising health care outcomes.

Greenhouse gas emissions from healthcare organisations have increased by 36% since 2016.¹ Environmental principles in health care aim to reduce this ecological footprint while potentially improving public health outcomes. This involves reducing emissions, improving energy efficiency and adapting to climate risks.² Reducing air pollution, for instance, benefits both environment and respiratory health.

Social principles encompass human rights, labour practices and community engagement, revealing critical health disparities evident in the unequal health outcomes across ethnic groups and rural−urban populations.² Implementing ESG principles involves resolving biases within the healthcare system, building positive relationships with communities, supporting community development, promoting workforce diversity and minimising adverse social impacts.³ ESG broadens the perspective of patient satisfaction to the system’s overall societal impact, which includes healthcare institutions’ roles as employers and economic drivers in diverse communities.⁴

Governance in Australian healthcare ensures transparency and accountability within the complex federal−state structure and ensures fair and efficient resource allocation across jurisdictions that are responsive to diverse population needs.⁵ Current Australian healthcare governance frameworks remain misaligned with VBHC principles, particularly in financial management and the utilisation of systematic patient outcome data. Advancing toward VBHC governance will require strategic policy reforms, with the integration of predefined ESG outcomes offering a promising pathway to facilitate systemic transformation.

The ESG principles involve robust risk management practices to identify, assess and mitigate financial, operational and reputational risks, particularly during climate-driven disasters.⁶ The National Safety and Quality Health Service Standards⁷ provide a framework for quality improvement and risk management in healthcare organisations. Integrating ESG principles and a data-driven VBHC approach with these standards could enhance sector governance by enshrining ethical decision-making, stakeholder engagement and long-term sustainability.

Environmental, Social and Governance principles defining value-based healthcare

VBHC focuses on achieving the best possible health outcomes for the cost incurred.⁸ It represents a shift from volume-based care to a model that prioritises quality, efficiency and person-centred care.⁹ A key component of VBHC is defining and measuring ‘value’, which is based on data and definitions developed by patients, providers, payers, suppliers and society.¹⁰ The ESG principles expand this approach by incorporating broader societal and environmental considerations as key determinants of value. In the environmental domain, ESG expands on value-based care’s efficiency focus to consider wider ecological impacts. For instance, although telemedicine might be favoured in value-based care for cost reduction and increased consumer satisfaction, an ESG approach would also value the reduced carbon emissions from decreased patient and practitioner travel.

By integrating ESG principles within a value-based care framework, healthcare organisations can deliver care that not only improves patient outcomes but also contributes to the overall health and wellbeing of communities and the environment. This approach represents a natural evolution of VBHC to expand the definition of ‘value’ to encompass broader societal and environmental considerations driven by the people receiving the care. For example, VBHC strategically targets cost reduction and service optimisation by eliminating unnecessary medical tests or implementing innovative care models, such as nurse-led approaches in rural and remote areas. These targeted interventions simultaneously promote sustainability, consistency and transparency, which fosters a culture of continuous improvement to enhance the overall value delivered to patients and the healthcare system.

Implementing Environmental, Social and Governance principles in Australian publicly funded healthcare

Here are some key steps we recommend for extending VBHC using ESG principles in the public healthcare system:

Conclusion

ESG principles can enhance VBHC in Australia’s public healthcare by considering environmental impact, social responsibility and ethical governance alongside health outcomes and financial metrics. As Australia faces escalating climate impacts and corresponding health inequities, adopting, defining and reporting ESG principles as part of VBHC is crucial for creating sustainable, equitable and effective future healthcare systems. Like Australian Securities Exchange’s ESG reporting mandate for listed companies, Australia’s public healthcare should embrace these principles to ensure long-term resilience, cost effectiveness, transparency and societal-driven definitions of value in their health care.