Megatrends in the healthcare industry

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Megatrends in the Healthcare Industry

Madrid, September 12th, 2006

2PricewatershouseCoopers

PricewaterhouseCoopers September 2005

The HealthCast Series

HealthCast 2010

Disruptive Drivers of This

Decade

HealthCast Tactics

Success Strategies for

Next 3 to 5 Years

HealthCast 2020

Sustainability through Global

Lessons

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Sustainability is ThreatenedProjected Health Spending as Percent of GDP

OECD countries are converging in spending trends

Global health spending will triple to $10 trillion in 2020

7%9%

11%13%15%17%19%21%23%

US OECD w/o US

21%

16%

Drivers:• Technological

advances• Aging• Rising standard

of living• Consumerism• China Source: OECD data, PwC

estimates

2003 US per capita spending on healthcare -- $5,670

Rest of OECD -- $2,3521



Despite High Spending, Patients Often Don’t Get the Care They Need

0%10%20%30%40%50%60%70%80%

BreastCancer

Low backpain

High bloodpressure

Depression Diabetes Asthma SexuallyTransmitted

Disease

Hip Fracture

Source: McGlynn, et al., New England Journal of Medicine, 2003.

On Average, Adults Receive 55% of the Recommended Care for Many Common Conditions



Medical Errors Are a Leading Cause of Death

Number of Deaths per Year

Sources: National Vital Statistics Report, Institute of Medicine

Medical Errors Compared to Other CommonCauses of Death

Medical Errors44,000-98,000

Motor Vehicles47,000

Breast Cancer41,000HIV

14,000



Is Healthcare Spending Worth It?

0

50

100

150

200

250

300

350

400

1980 1990 2000

Mortality from Heart Attacks in Relation to Advances in Care

1980s

Blood thinnersBeta Blockers

CABG

Metal stents

ThrombolyticsImplantable defibrillators

Drug-eluting stents

1990s 2000s

StatinsACE inhibitors

Death Rate per 100,000

Source: www.cdc.gov/nchs; The Value of Investment in Health Care



Adaptable Delivery

Roles and Structures

Quest for Common Ground

Quality and Safety Standards

Realignment Incentives

Digital Backbone

Climate of

Innovation

Strategic Resource

Deployment

Building the Sustainability Core:Seven Features of a Sustainable Health System



Sustainability Feature 1.Common Ground

A vision and strategy balance public versus private interests and provide basic health benefits within the context of societal priorities.



Efforts to Encourage Competition

Germany Public hospitals are privatizedReduction in costs, competition among private hospital groups

The Netherlands

Insurance companies contract with providers independently, forcing providers to differentiate themselves.

Begins in 2006

Singapore MediShield plus, a government plan that paid for hospital care, is privatized Under way

U.S. Medicare outsources drug benefit to private companies, which compete for beneficiaries Benefit starts in 2006

England, Ireland

Services, such as cataract surgery, outsourced to private companies Waiting lists reduced

AustraliaGovernment offers 30% tax rebate to encourage consumers to buy health insurance; premiums are cheaper to early buyers

Number of insured Australians increased from 30% in 1998 to 45% in 2002

CanadaIn 2005, the Canada Supreme Court rules long waiting lists violate patients' "liberty, safety and security" under the Quebec charter.

Enforcement delayed til 2006 while debate continues



Transferable Lessons: Common Ground

- Collaborate across traditional sectors and territory boundaries

- Determine what care or benefits are basic to public health and structure an insurance system for the rest

- Use regulation to encourage and strengthen competition

- Access new sources of capital to remain competitive

• New Dutch system has mandatory insurance and basic benefits package.

• German hospitals privatized• Outpatient drug benefit

outsources to PBMs



Sustainability Feature 2. Digital Backbone

Interoperable electronic networks accelerate integration, standardization, and knowledge transfer of administrative and clinical information



The necessary digital transformation of the healthcare system

“Paper kills”

Newt GingrichFormer US House Speaker in describing the problems of paper health records




Patient

Doctor

Information and clinical decisions

Medical knowledge

Clinical record




MolecularMolecular(Genetic character(Genetic character of self pathogens) of self pathogens)

CellularCellular(Types, counts,(Types, counts,

receptors)receptors)

TissuesTissues(Metabolism(Metabolismpathology)pathology)

Organ SystemsOrgan Systems(Anatomic detail)(Anatomic detail)

InterventionsInterventions(Orders, meds,(Orders, meds,

procedures)procedures)

PatientPatientDecision SupportDecision Support

Clinical DecisionClinical DecisionSupportSupport

Computerized Computerized Patient RecordPatient Record




M.D.M.D.

PatientPatient

EHR/EnterpriseEHR/EnterpriseSoftwareSoftware

Trusted Sources /Trusted Sources /Info. BrokersInfo. Brokers

Search Engines /Search Engines /AgentsAgents

GossipScience

CollectivePatient

Experience

Case ManagerCase Manager

KnowledgeDomains

ConsensusCare Pathways

InfomercialsCollective

M.D.Experience



Transferable Lessons: Digital Backbone

- Invest in shared IT infrastructure

- Leverage technology to eliminate duplication and administrative inefficiencies

- Make technology a reason to gather together

• EU health ministers move toward trans-European e-health system by 2010

• NHS investing £6.2 billion in national electronic network

• 200+ RHIOs under way• 40% of general practices in

Australia process claims electronically

• CAQH centralizes credentialing and moves toward streamlining claims administration



Sustainability Feature 3.Incentive Realignment

Incentive systems ensure and manage access to care while supporting accountability and responsibility for healthcare decisions



Transferable Lessons: Incentive Realignment

Transferable Lessons:

- Establish shared incentives to accomplish mutual goals

- Make wellness the preferred, if not mandated, lifestyle

- Make consumers more personally responsible for the cost of seeking care

- Put prices on the menu; disclose charges

- Reinforce clinicians’ roles as facilitators of appropriate care

• Italy finds limited results from co-pays, focuses on physician referrals

• Employers raise consumer contributions through co-pays, savings accounts and co-insurance



Rules-based clinical referral

Co-pay effect

appropriate unnecessary

Level of Demand

Combining Co-Pays and Physician Incentives



Effect of co-pay on physician utilization in Germany, 2004-2005

-8.7%All physicians

-11.3%Orthopedist

-17.5%Dermatologist

-15.1%Gynecologist

-11.6%Surgeon

-7.9%General practitioner

Source: German Resident Doctors Association



Designing Incentives for Healthy Lifestyles

Obese Overweight NormalBack problems 9.9% 8.9% 6.9%

Hypertension 23.4% 12.5% 4.9%Diabetes 9.2% 3.4% 1.3%

Heart Disease 7.5% 4.7% 3.7%

Source: The Rise in Prelevance of Treated Disease: Effects on Private Health Insurance Spending, Health Affairs, June 2005

Prelevance of Treated Disease by Body Mass Category



Sustainability Feature 4.Quality and Safety Standards

Defined and enforced clinical standards establish mechanisms for accountability, enhance transparency, and build trust



Transferable Lessons: Quality and Safety Standards


- Harmonize quality standards

- Make error reporting voluntary and anonymous

- Incentivize clinicians for outcomes, not activity, through pay-for-performance

- Learn from existing systems when designing performance-based reimbursement

- Publish or perish

- Leverage quality to move the market

% who said pay-for-performance efforts had not started in their area

0%

5%

10%

15%

20%

25%

30%

35%

2002 2005

Source: HealthCast 2020 Survey



Sigma Defects/Million 1 690,000 2 308,000 3 66,000 4 6,210 5 230 6 3.4

CEO Expectations: Six Sigma Quality



Six Sigma Quality

Airline Deaths

Airline Baggage Handling

Missed diagnoses of acute cardiac ischemia in ERs



Six Sigma Quality

Airline Deaths - better than 6 Sigma - < 3 deaths per million boardings

Airline Baggage Handling - approx. 4 Sigma – 6000 mishandled bags/million

Missed diagnoses of acute cardiac ischemia in ERs – approx. 3-4 Sigma – 45,000 misses/million

Source: Pope, et al, NEJM 342:16 pp 1163-1170, April 20, 2000



Sustainability Feature 5. Strategic Resource Deployment

Resource allocation – capital, people and service lines -- appropriately satisfies competing demands for access and cost control



Transferable Lessons: Strategic Resource Deployment


- Organise care around the patient

- Move information, not people

- Anticipate cream-skimming

- Think small

• Norway uses telemedicine to decrease costs of transporting patients to central centres

• In Australia, 45 hospitals offer “Hospital in the Home”

• Spain is building a regional network of 37 small, digital hospitals in Andalusia



Sustainability Feature 6. Climate of Innovation

Technology and process changes are fostered to continuously improve care, efficiency and outcomes



Transferable Lessons: Climate of Innovation


- Help workers and clinicians change jobs and processes

- Customise drugs and care to patients’ genetic and cultural levels

- Value technology’s impact on productivity and lifespan

- Listen to consumers

• Homecare providers in the Netherlands and US are training nurses and aides to use laptops and handheld computers that are Internet- or cellular-enabled

• Beverly is making long-term care centers with family-style meals and family areas

• Kaiser trains physicians to talk to patients with a “third person” computer in the room



Sustainability Feature 7. Adaptable Roles and Structures

Flexible care settings and jobs provide avenues for care that is centred on the needs of the patient



Transferable Lessons: Adaptable Roles and Structures


- Broaden and leverage nursing more widely

- Challenge conventional training and licensing models

- Anticipate ways to deliver care to patients who increasingly move and travel

• Australia gives NPs limited prescribing rights

• In Africa, former patients learn to repair fistulas

• The EU has a system for mutual recognition of medical professionals’ qualifications



An exploration on the megatrends in the Healthcare industry

1. Healthcare is the industry growing most in the economy2. Demographic changes and changes in the patterns of diseases3. Great impact of the new medical technologies4. Great impact of the innovation, mainly related to IT5. Concern about quality6. Appearance of the “new consumer”7. Changes, but not radical ones, in the way of providing services8. Change of the paradigm of the biomedical model9. The emerging health economy10. A place for new global players?



1. Healthcare is the industry growing most in the economy

Evolution and forecast % GDP in healthcare in the US

Health Spending Projections Through 2013Stephen Heffler et alHealth Affairs-Web Exclusives, W4-79

1993

1998

2001

2002

2003

2004

2005

2013

13,4%

13,1%

14,1%

14,9%

15,3%

15,5%

15,7%

18,4%



2. Demographic changes and changes in the patterns of diseases

• Ageing of the population

• More importance place on chronic diseases

• More more importance place on mental diseases



3. Great impact of the new medical technologies

Health and Healthcare 2010 The Forecast, The Challenge. Second Edition. The Institute for the Future, 2003

RATIONAL DRUG DESIGN

ADVANCES IN IMAGING

MINIMALLY INVASIVE SURGERY

GENETIC MAPPING AND TESTING AND PHARMACOGENOMICS

GENE THERAPY

VACCINES

ARTIFICIAL BLOOD

XENOTRANSPLANTATION

Development of new chemical entitities by looking at the physical structure and chemical composition of the target and designing drugs that bind to those molecules

Advances in the four key areas: energy sources, technology of detection, analysis of the images and display technologies

Advances in the fiber-optic technolgy, miniaturization, image digitization and navigational systems for vascular catheters

To date, clinical test have been develop for more than 500 human genetic disorders, a number that will continue to grow. That permits predictive medicine and more personalized treatments

The insertion of a functional gene into targeted cells of a patient to correct and inborn error or to provide the cell with a new function

New uses of vaccines for non-infectious diseases. It is foreseen a new role to prevent virus related cancers and also to treat some cancers

The FDA has recently approved products with synthetic hemoglobin, that could be an ideal substitute of blood transfusions

That will avoid the scarcity of organs and also to treat some other diseases, such as diabetes and Parkinson

STEM CELL TECHNOLOGIESThe impact could be really huge. Damaged heart muscle could be substituted, also pancreatic islet cells in diabetics or some kind of neurons in patients with Parkinson’s disease



3. Great impact of the new medical technologies

1. MRI and CT 2. ACE inhibitors to treat high blood pressure 3. Balloon angioplasty to open blocked blood vessels of the heart 4. Statins to improve lipid metabolism and reduce risk for coronary heart disease and

other vascular diseases 5. Mammography 6. Coronary artery bypass graft 7. Proton pump inhibitors and H2 blockers to treat gastro-esophageal reflux disease 8. Selective serotonin reuptake inhibitors and new non-SSRI anti-depressants 9. Cataract extraction and lens implant

10. Hip and knee replacement

“Physicians’ Views of the Relative Importance of Thirty Medical Innovations,” Victor R. Fuchs, Ph.D., and Harold Sox, Jr., M.DHealth Affairs, 2001



4. Great impact of the innovation, mainly related to IT

1. Pay-for-performance programs 2. Introduction of electronic health records into medical practices 3. Add-ons to EHRs--instant medical histories, coding devices, prescription-enabling

modules, or Web sites that permit registration, virtual visits, prescription refills and open-access scheduling

4. Software facilitating office dispensing and prescription writing 5. Software enabling self-care, self-service and self-empowerment of consumers 6. New practice business models (concierge, cash and retail) 7. High tech/high touch remote patient monitoring with patient interactive capacity 8. Personal health records with and without EHRs 9. Disease management programs 10. The transparency movement as part of the consumer-driven care movement

The Top 10 Healthcare Innovations for 2006By Richard L. Reece, M.D., for HealthLeaders News, August 1, 2006



5. Concern about quality



6. Appearance of the “new consumer”



7. Changes, but not radical ones, in the way of providing services

It is not foreseen the appearance of any new healthcare organization capable to substitute the individual medical visits and the hospitals as predominant ways of healthcare provision

New complementary ways of provision:

• On line healthcare services

• E-visits

• Telemedicine

• Focused factories



8. Change of the paradigm of the biomedical model

Biomedical model Future

Episodic care Management of chronic diseases

Objective: cure Control and adaptation to the disease, when there is no cure

Fee for services Subscription

Process leaded by the provider

Process leaded by the consumer

Curative medicine Predictive medicine



9. The emerging health economy

Cosmetics

Food and Supplements

Fashion

Security

Building Supplies

Wellness

Traditional Health Care



10. A place for new global players?

USA, Hong Kong, India, Malaysia, The Philippinnes, Portugal

Sweden, Denmark, Finland, Norway, France, Germay, United Kingdom, Spain

United Kingdom, Australia, Ireland, Saudi Arabia, Spain, Thailand, Hong Kong

Germany, Belgium, The Netherlands, Luxemburg, Portugal, Check Republic, Norway, Sweden, Spain and China (representation office)

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Megatrends in the healthcare industry

Healthcare

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