Theory to Practice

Public-private hybrids in the Italian healthcare system: Value-generation dynamics

The context

Public-private hybrids (PPH), as the name suggests, join together public and private players who undertake various forms of collaboration. Such models have emerged as solutions to complex social needs that traditional organizations are incapable of fulfilling. PPHs can generate social value, economic returns, and efficiency by engendering innovations and providing services that otherwise would be lacking. But to be sustainable, hybrids must capture a share of the value they produce. The dynamics at play between producing and acquiring value are fundamental. Not only do they affect the likelihood that public and private players will partner together to form hybrids, they also shape the ways in which PPHs generate value over time. 


Hybrids are unique agreements among partners in overlapping segments of market sectors. They come in a variety of shapes and sizes, building on relationships between public institutions, for-profit businesses or non-profit enterprises, from joint ventures to newly created, independent organizations. PPHs incorporate and maintain an equilibrium, as far as aims and methods, balancing multiple – often conflicting - institutional approaches. Hybrids also have the potential to generate value for society, thanks to the shared skills that develop in the context of these endeavors.  


Till now, researchers have emphasized the duality of economic and social aims with regard to PPHs. But more recent reflections have centered around a holistic conception of the value produced by hybrids. This value is defined as an increase in the utility of society’s members through better welfare outcomes, greater efficiency and innovative solutions. According to this view, hybrids produce social value, but must retain a part of that value to ensure growth and sustainability. Value acquisition happens when the hybrid appropriates a portion of the value produced, after factoring in the cost of the resources mobilized. In any case, capturing excess value at an organizational level could be detrimental to value generation at a societal level. 


The attention of researchers is focusing more sharply on mechanisms and processes associated with value generation by hybrids, and how organizational and institutional dynamics fit into the picture. In fact, at an organizational level, two complementary perspectives zoom in on governance as a key driver, both for value generation and for preventing mission drift or causing imbalances in value capturing.  


  • Organizational governance ties into the strategic direction the hybrid follows as it develops, the internal control functions that are established, and how the hybrid manages its relationship with other stakeholders. 
  • System (or “field-level) governance, is linked to managing the relationship between PPHs and local external stakeholders. Here we’re referring to the “measures in place regulating how organizations should tackle social problems.” 


By raising concerns regarding the social value the PPH produces, or the economic feasibility, local stakeholders can prevent mission drift or prompt a realignment. At an institutional level, field-level governance is particularly important to explain the dynamics of value generation: managing relationships with stakeholders is crucial to allow PPHs to remain true to their social purpose and maintain their societal vitality. So much so that if this relationship is not handled properly, it can lead to the end of the PPH.  


Generally speaking, studies highlight how over time, organizational governance mechanisms implemented by leaders, partners, and employees of hybrids, can facilitate the balanced generation of value, prevent imbalances or offset instances of imbalance if they do occur.  


To analyze the multi-level process by which hybrids generate value in the long term, in our article we examined the longitudinal trajectory of value generation by PPHs in the regionalized Italian healthcare system. Our reference period is 1992 to 2018. 


The study

In 1992, the Italian National Health Service (NHS) adopted a series of managerial reforms to encourage the participation of the private sector; these new regulations also allowed for healthcare service provision via public-private hybrids. PPHs, as partnerships between public and private players, represented a radical change with respect to the suppliers that existed at the time, which were entirely public, or entirely private and accredited by the NHS.  


In this context we ran a multi-level, longitudinal study on long-term value generation dynamics among 41 PPHs, merging information from surveys, archival data, interviews and focus groups.  First, we compiled tables describing PPHs and how they evolved; based on this, we categorized PPHs in relation to two alternative organizational models, “autonomous” or “integrative.” Next, we tracked three different trajectories and analyzed the underlying variables that guided them. Last, we discerned two dimensions of organizational governance: strategic orientation embraced by the leaders of hybrids based on prioritizing social, public and economic objectives; and monitoring bodies established both internally and among external local stakeholders. 


Conclusions and takeaways

We mapped out three ideal trajectories: a) long-term value generation via stable PPHs; b) long-term value generation via transitory PPHs; and c) interrupted value generation by terminated PPHs.  


We discovered that these trajectories are shaped by the interaction between regional governance agreements and organizational governance mechanisms. The former are institutionally integrated regulations that establish who has the right to generate value for the sector, the possibility to capture organizational value, and the system of institutional monitoring. The second consist of the strategic orientation of individual PPHs and their internal monitoring functions. 


Our article contributes to theory by conceptualizing the multi-level mechanism that we call a “double filter.” We define this as a set of compensatory governance mechanisms at a field level and an organizational level that, when taken together, make long-term value generation by hybrids possible.  


In addition, our paper problematizes the relationship between value generation and the persistence of hybrid organizational forms, tracing this to different field governance agreements. By doing so, we conceptualize “transitory hybrids” as a distinct organizational form for long-term value generation. 


Finally, our results are likely transferable to similar regionalized systems with multi-level governance agreements and a plurality of participants, in sectors such as education or culture. In these cases, we would expect the mechanisms that we’ve identified, which organizations leverage to merge their efforts, can be useful in shaping long-term value generation by hybrid organizations.