In most industry sectors costs tend to fall with time, due to productivity gains. Look at the electronics industry which is a great example of this. In the health care sector, the opposite holds true. Costs have been rising year on year. Between 1960 and 2005 health care costs have risen at GDP +2.0% (OECD countries) and in the US by GDP +2.5%. In the US 16% of GDP is today spent on Health Care. In Sweden the equivalent number is approximately 9%.
Last week Vistage member Dag Andersson was invited to participate in a seminar at the Swedish embassy in Berlin on the topic “Health and Care of tomorrow: How to handle limited resources and a growing demand.” Present were H.R.H. Crown Princess Victoria and Price Daniel together with Göran Hägglund, (Sweden’s Minister for Health) and Social Affairs Daniel Bahr (Federal Minister of Health in Germany) and Alan Milburn (Former Secretary of State for Health in Britain 1999-2003) who is also a board member of Diaverum.
It is clear that health care is facing enormous challenges over the coming year. The population is growing older. We are living longer. In the 20th century life expectancy increased with 30 years in the OECD countries. An amazing increase! And it is predicted that 50% of all children born after year 2000 will celebrate their 100th birthday (OECD countries).
This is obviously good news, but a longer life unfortunately does not necessarily mean a healthier one. Currently, 2/3 of all deaths in the USA are attributable to one of five chronic disorders: cancer, chronic obstructive pulmonary disease, diabetes, heart disease and stroke. And with this comes a giant bill – 75% of total health care expenditure in USA is spent on treating chronic diseases!
The picture is similar in other industrialized countries. It is not uncommon for governments to spend 10% of their gross domestic product (GDP) or more on public health care. At the same time, there is an increased demand for improved quality and accessibility.
As the CEO of Diaverum Dag is fully aware how the needs of dialysis are constantly increasing due to the growing number of people with Chronic Kidney Failure (which eventually results in End Stage Renal Disease).
So, how do we handle the seemingly impossible equation of limited resources and growing demand? The seminar in Berlin did point at some possible solutions.
Freedom of choice drives innovation
Current trends in health care include giving the patient more freedom of choice. Studies show that this has a positive impact on both cost and the quality of care provided. Freedom of choice increases competition and this in turn drives innovation.
Outcome based payment models
Another possible solution is outcome based payment models. The health care industry has a tendency to look more at the quantity than actual results of the care provided. Several countries, including Argentina, are now implementing outcome based reimbursement models.
Results are no longer measured by the number of patient visits or medication prescribed. Instead the quality of care, seen from the perspective of patients, is put into focus. This trend will definitely increase in the coming years.
The WHO believes that 80% of chronic disorders could be eliminated by implementing appropriate preventive measures. However, a very small portion of the health care budgets is dedicated to prevention. In the USA less than 4 cents of every dollar spent on health care goes to preventive and public-health measures, and the numbers are not much higher in other countries.
Leadership in Health Care
Studies in the UK have shown that hospitals with an autonomous status and clear organisation/leadership are performing better than hospitals and health care institutions with no clear organisation and leadership. The more autonomous the units become, the better they perform both medically and operationally.
It is clear that the challenges are great and Dag can only urge all health care providers to think how they can contribute to a more efficient and successful health care structure in the future. Focusing on preventive care is such a measure to be taken.