System Stuck

People are worth more to the healthcare sector sick than healthy. Current payment systems are supply driven and reward treatment, rather than prevention or outcome-based interventions. The payer is the centre of the current healthcare system, not the patient, and the result is that both parties and the wider economy are losing out.

Today, new approaches have emerged that are more collaborative, cost and resource efficient and ultimately, more financially sound. These are set out in this article.

The challenges the current system faces are well illustrated by the fact that as many as 50% ¹ of patients don’t adhere to their prescribed therapy, at a shared cost to pharmacists and health insurers of $478bn in the United States alone ² – and that’s before accounting for the costs of lost productivity and employee absence due to illness, which remain an externality to the industry, picked up by the public purse or employers.

Even in areas where the shared benefits are obvious, with big incentives to resolve this challenge, healthcare systems seem unable to adapt to change.

Current systems remain largely closed, highly siloed, and resistant to creating the right environment and framework for ‘value based healthcare’ ³ (VBHC). Currently, industry research assessments suggest that only two out of 25 developed countries (Sweden, UK) have a very high or high alignment with VBHC. ⁴

GoodBrand carried out a study of healthcare sector expert opinion this year, focusing on one advanced healthcare market, Germany, to understand what prevents the industry from innovating to contribute to addressing wider societal needs. In line with the findings of other studies, we identified four barriers preventing current treatment-based payment systems and healthcare structures from adapting.

Four Barriers

1. Failure to incentivise VBHC interventions

2. Fear of loss of control, share and profit when collaborating across sectors

3. Focus on compliance rather than health economic impact and innovation

4. Innovation gaps in patient-centricity, digitisation and new business models

Unlocking opportunities

So how can the sector evolve to overcome these barriers, and create ‘total value’: to benefit both the private sector and wider society?

New game-changing systems and players have emerged, that point towards a new model for success, combining innovatively financed, coalition-based solutions that create total value. Here, success is measured in terms of wellness, as opposed to revenue from treating the sick.

We have found that challengers setting out to make a difference in healthcare need to combine the following three actions. These are set out below, with case studies available in our free to download paper.

1. Create a collaborative ecosystem

All stakeholders including service payers need to be more open and imaginative in defining their role in a more holistic system of healthcare. In some cases, this may spur a redefinition of role, but it will always require partnering with other agencies and service providers, which will challenge existing paradigms and unsettle ‘comfort zones’.

Case Study: Health Leads

2. Deploy scalable patient-centric models that leverage technology

Technology is a source of data-driven, continuous improvement 
and a disruptor in improving patient experience and adherence. Fortunately, this meets the demands of healthcare sector organisations that need to be more proactive and service oriented, informing patients about their conditions and ultimately mitigating the risk of conditions becoming more chronic.

Case Study: Kaiser Permanente

3. Establish new innovative impact finance solutions

As the for-profit sector seeks to address wider public health issues and internalise industry externalities, there will be openness and willingness to co-invest against multiple outcomes. Whilst public sector funding may be shrinking in many countries, public funds will be available for proven interventions and new blended capital structures can serve to bring in other sources of capital.

Case Study: Nurse-Family Partnerships

Impact-led Innovation

At GoodBrand we believe it’s possible for the private sector to work with the public sector and civil society organisations to create a people-centered healthcare industry that creates total value. By this we mean, capturing the economic value of sustained and long-term good health of citizens – for society, the economy and for individuals – while still incorporating the economic value of treatment when ill health does occur.

Through our Sociovation® process we identify impact-led opportunities and design solutions. Further, we have experience in acting as an intermediary to build pilots for scaling, expertise in innovative financing and a low-risk approach to gaining experience and competence in innovative and collaborative health focused ecosystems.

As new solutions emerge, stakeholders in healthcare now have a choice. It will be possible to put the patient at the centre of our healthcare systems instead of the payer; and redefine the patient as a person with discretionary needs as a citizen, consumer and patient.

Stakeholders can either defend their existing business model and continue to focus narrowly on delivering products, rather than solutions. Or they can show they understand that today’s environment requires collaborative approaches, different health ecosystems, new business and financing models; and ultimately better patient outcomes. The system will not continue in its present form as the costs of inaction are too high. Those that seize the opportunity will win and shape the future of healthcare.

Research Methodology

We conducted 24 interviews, with stakeholders in the healthcare and pharmaceutical sectors. These included patient advocates, politicians and executives from the health insurance, healthcare provider and pharmaceutical industries. They were conducted over the phone or face to face, with a duration of 20-60 minutes each. The research was conducted between March and May, 2017.

¹ World Health Organisation

² Capgemini Consulting 2012, Estimated Annual Pharmaceutical Revenue Loss due 
to Medication Non-Adherence

³ Value based healthcare aims to increase the value that is derived from the 
resources available for a population (BMJ)

⁴ International study from Economic Intelligence Unit initiated by Medtronic in 2016

⁵ Deloitte High-value Health Care: Innovative Approaches to Global Challenges

⁶ Deloitte High-value Health Care: Innovative Approaches to Global Challenges