Common Issues

Causes of poor care include lack of universal coverage and/or inadequate capacity of the healthcare system, creating uneven access to care, and gaps in quality from the underuse, overuse or misuse of care or services. Rising costs leave an increasing number of people without coverage and/ or access to care, and often restrict the services they are allowed access to. Numerous studies support the fact that underuse of effective services is a huge problem.

Indeed, people who would benefit from services — be they preventive in nature (such as screening for colon cancer) or helpful in controlling the symptoms or progression of a chronic disease — receive those services only half as often as they should. Similarly, with respect to overuse, many studies have shown that 30% to 50% of services offer no value to the individual receiving them. In fact, in some of these cases the individual is more likely to suffer harm than benefit. While there is less information to support the incidence of misuse, this dimension of poor quality also contributes significantly to the challenge of providing quality care. These gaps in quality can be linked to specific problems within the healthcare system. They include (in no specific order of importance):

• Flawed payment methodologies
• Information gaps relative to patients’ health needs in planning and at the point of service
• A lack of or diffuse accountability for results
• Fragmentation of the care delivery system, with poor coordination or communication between caregivers
• Little experience in collaborating between organizations

All of these have contributed to the complexity of the healthcare system and make it difficult for providers, not to mention patients, to navigate. While these system issues are responsible for the gaps in quality, other forces are the major drivers of costs. The three major factors driving the unsustainable trends in healthcare costs are aging populations, resultant increases in chronic diseases such as diabetes, cardiovascular conditions and cancers, and the proliferation of new technology. In addition, it is clear that compensation methods for providers are a major enabler — if not an absolute driver — of current cost trends.

Solutions

Managing Chronic Disease

While nothing can be done about the aging of populations, we can certainly do a far better job of preventing or managing chronic diseases. There is great promise in care redesign via patient-centered medical homes (PCMH) or advanced primary care models (which I will discuss later). That said, the most promising results in fostering improved health behaviors in individuals are coming from efforts such as the Robert Wood Johnson Foundation’s Aligning Forces for Quality (AF4Q) initiative, which helps providers, individuals and communities in the United States redefine their roles and responsibilities and work together to deliver more effective healthcare. Such programs work because much chronic disease stems from individual decisions about behaviors — diet, exercise, smoking, and seeking proven effective preventive services such as cancer screenings.

One example: In 1994 Brazil launched the Family Health Program, which is now the world’s largest community-based primary healthcare program. Under this program, teams of at least one physician, one nurse, a medical assistant, and four to six trained community health agents delivermost services at community-based clinics. They also make regular home visits and conduct neighborhood health promotion activities. Between 1999 and 2007, hospitalizations in Brazil for ambulatory-care-sensitive chronic diseases, including cardiovascular disease, stroke and asthma, fell at a rate almost twice that of hospitalizations for all other causes. In municipalities with high Family Health Program enrollment, chronic disease hospitalization rates were 13% lower than in municipalities with low enrollment, when other factors were held constant.

Accountable Care Organizations

In the United States, there is considerable interest in a new approach to managing care — accountable care organizations. ACOs are seen as a way to provide better-quality care at lower costs. The need for more accountability in caring for patients is clear. Unfortunately, there is too much talk about the organizations that will do it and not nearly enough about what accountable care looks like when done well. Providing accountable care means using a specified amount of money to maintain or improve the health of a defined group of people. Health insurance companies have had this responsibility for some time. Unfortunately, the contractual relationships with the providers, as well as the payment systems and/or methodologies, have not transferred this accountability effectively. While some insurers have put payment systems in place to reward providers for better outcomes, in large part providers have been rewarded for delivering volumes of services without regard to cost. The healthcare reform enacted in the Netherlands in 2006 goes a long way toward addressing this problem. The new system uses a combination of regulation and an insurance equalization pool run by the state to transfer responsibility. Insurance companies are mandated to provide at least one policy that meets a government-set minimum standard level of coverage, and all adult residents are obliged by law to purchase this coverage. Insurance companies receive funds from the equalization pool to help cover the cost of coverage and compensate for different risks presented by individual policy holders; insurance premiums cannot be based on health status or age. Patients dissatisfied with one insurer have an opportunity to choose another at least once a year. As a result of this system, health insurers are effectively responsible for the health

of a self-selected population. Because it is built around a fixed price, they have every incentive to keep that price down and deliver better outcomes. In a 2010 study, the Netherlands’ healthcare system was ranked first in a comparison with systems in Australia, Canada, Germany, Great Britain, New Zealand and the United States.

Patient-Centered Medical Homes

There is mounting evidence that the efforts to develop patient-centered medical homes (PCMH) or advanced primary care practices are making significant progress in delivering quality care. A PCMH practice is accountable for defined elements of care for a specific patient population. Reimbursement models differ among PCMH models, but there is movement away from fee-forservice reimbursement. The Colorado Clinical Guidelines Collaborative, a nonprofit coalition of health insurance plans, physicians, hospitals, employers, government agencies and other entities working together to improve healthcare in Colorado, recently instituted a PCMH pilot. The pilot was initially set up with 16 family medicine and internal medicine practices, representing a total of 17 sites. Health insurance plans, large employers, key hospital groups, physician societies, the Colorado Department of Public Health and Environment, and the University of Denver Health Science Center were also involved in the implementation and operation. The outcomes, both financial and clinical, are impressive, and include a return on investment of 3:1 and a 22% decrease in emergency room visits, for example, at one health plan.

Information

What information will be needed for each population of patients is a key issue and will take a lot of effort to decide. The local or regional disease burden will be unique to each area’s population. So decisions on which services are needed and how they should be delivered should reflect the needs of the population, the values and priorities of the region, and the capabilities of the region. Local stakeholders should have much more say about how resources should be allocated than should a central resource like the U.S. government health program administrator Centers for Medicare & Medicaid Services (CMS) in Washington or a health department authority in some state capital.

When discussing accountable care organizations, policymakers should ask to whom and for what these organizations are accountable. It is not enough to understand what care they will be required to provide. It must also be very clear who will be responsible for making sure that care is provided well and adequately. Of course providers will answer to CMS about Medicare enrollees, but there needs to be similar accountability to state, local and regional stakeholders for both Medicaid and commercial enrollees.

Technology

While technology has been an incredible tool in advancing healthcare, it is only a means to an end. Healthcare will remain a relationship “business” where the trust and relationships between people set the stage for better results. Current payment systems and policies have encouraged the rapid and sometimes premature adoption of new technologies. In the United States, where more than 30% of Medicare spending is devoted to highly technical care during the last few months of life, many individuals could benefit from more discussion about how to approach care decisions at this time.

Clearly the coordination of care and communication will be enabled by technology such as electronic health records and health information exchanges. Understanding the needs of patient populations will require information technology new to many organizations. Physician groups and hospitals have previously not needed to profile the populations of patients they serve in order to understand the disease burden the population carries. Predictive modeling tools to identify those patients at highest risk of experiencing an adverse event will allow the allocation of resources to help avert those situations. In 2001 health insurance provider BlueCross BlueShield of Tennessee (BCBST) began applying predictive modeling techniques to member health and claims data in an effort to improve both the delivery and the quality of care. BCBST first used these techniques to make sense of mountains of clinical information and to pinpoint clusters of diagnoses, procedures and patterns of illness. Having this information allowed for the deployment of specialized service programs, such as promoting the use of beta blockers, enhancing medication compliance and coordinating care. This allowed them to avoid disease progression while providing a high level of patient support, which in turn drove down costs by reducing the amount of acute care these patients needed. Today BCBST has a sophisticated data warehouse and business analytics operation. It can, or will shortly be able to, serve up analytics to major consumers, deliver individual history and predictions to members, give near-real-time performance management, and capture structured and unstructured information.

Regional Planning

In the United States, regional health planning authorities have played an important role in helping to allocate resources. In New York these regional authorities were mostly eliminated in the late 1980s and early 1990s. One of the few that remained active and effective was in Rochester. Six years ago, the state put together the Berger Commission to make recommendations about downsizing health system capacity across New York to better reflect the actual healthcare needs of each region. The only region that didn’t require any downsizing: Rochester. France recently undertook a similar effort that underscored the importance of regional planning. It rationalized eliminating service duplication and excess capacity according to the needs of regional populations. In both cases the emphasis on understanding the region’s capabilities and its population’s needs led to rational decision-making. In the United States, population health assessments such as the recent work published by the University of Wisconsin Population Health Institute can be used as a basis for assessing the overall health needs of groups within a specified geographic region. Once the geography has been defined and the health needs of the population have been carefully delineated, the next important task is determining the workforce needed to provide the requisite services. The right mix of caregivers — primary care physicians, specialists, nurses, pharmacists and other professionals — will depend on both the population’s health needs and the chosen care delivery model.

New Roles

Both the teamwork within the primary care practices and the coordination of care between primary care physicians, specialists and other providers speak to the need to have clearly defined roles and responsibilities within the systems of care. New roles for care coordinators, health educators, community case workers and clinical informatics experts will all be important building blocks as we better understand the gaps in the care system and how best to close them.

Co-Opetition

The inevitable decrease in total resources available for healthcare means that countries, states and regions will have to learn how to do more with less. Here is where the concept of “co-opetition” comes into play. Many investments can be made — particularly in the area of IT — in which competitors or nontraditional partners may find that investing together lets them lower costs and increase collaboration while continuing to preserve a strong basis for competition. Some regional health information organizations, such as the Western New York Clinical Information Exchange, are good examples of this. Seven competing healthcare organizations in the Buffalo region have joined to create a dedicated information system that preserves the ability of the individual organizations to compete on the use of their own data. Areas that can strike a balance between collaboration and competition will enjoy a significant advantage in the resourceconstrained future.

Conclusion

To ensure maximum value for the resources invested in healthcare, several things must happen: Accountability needs to be defined; data systems and standards have to be established for tracking populations’ health needs as well as for evaluating the success of interventions; new roles must be defined, with teamwork and communication more important than ever before; and new skills must be brought to bear, not the least of which is the ability to collaborate across previously impenetrable boundaries. Only by doing these things can we bring people the healthcare they deserve, at a price they can afford.

Even if the perfect system could be divined by selecting the best from everywhere, implementing it anywhere would range from painful to impossible. The large number of stakeholders in any country’s healthcare system — patients, providers, government, insurers, regulators — plus the fact that healthcare is an emotionally charged issue means that change is never easy.

But there are some lessons that each country can learn from others, including what developed countries can learn from developing ones about the necessary role of government and the pivotal role of local communities. To focus on some of these lessons, FTI Consulting convened a roundtable of healthcare experts chaired by Mark Malloch-Brown, FTI Consulting’s Chairman, Europe, Middle East and Africa.

In conversation with him were Michael W. Cropp, M.D., President/ CEO, Independent Health; Anne-Toni Rodgers, Payer Capability, Regional Lead — Europe, AstraZeneca; Meg Guerin-Calvert, Vice Chairman and

Senior Managing Director, Compass Lexecon; Vicky Pryce, Senior Managing Director of FTI Consulting’s Economic Consulting practice; Liz Shanahan, Senior Managing Director, Health & Life Sciences, Strategic Communications, FTI Consulting; and Dan Corry, Director, Economic Consulting, FTI Consulting.

Mark Malloch-Brown: I feel I perhaps know less about this subject than anyone else here today. But I was involved in running large international public-development organizations for a decade at a time when communicable diseases and the absence of healthcare investments in developing countries were as salient a pair of development issues as you could find. So I will press you during this discussion to not forget the 2 billion people at the bottom of the economic ladder in our solutions for healthcare coverage worldwide. Meg, what are the underlying drivers for change in healthcare?

Meg Guerin-Calvert: The single greatest challenge for developed economies is the proportion of GDP going for healthcare expenditures in virtually every country. In general, for major Organisation for Economic Cooperation and Development countries it’s somewhere between 8% and 16%. As we have moved through the financial crisis, the rate of economic growth in many countries has slowed or stalled, yet the rate of healthcare expenditure has not. As a result, the proportion of overall GDP consumed by healthcare in many countries is increasing. Depending on the importance of public sector funding, a very high proportion of government budget is allocated to healthcare. And despite that level of spending, certain countries, such as the United States, believe that quality and access achieved do not meet expectations. Those are substantial challenges.

Vicky Pryce: The developing world, where population growth is high, faces huge pressures to provide any kind of sensible healthcare system. At the same time, in some of those countries the emerging middle classes are looking for much more than just the basics.

Michael W. Cropp, M.M.: The cost of care relative to the value created is an increasing challenge that is emerging in every country. Everyone is or should be grappling with how we can afford to provide care for the entire population and get the maximum value. It is quite simply the cost of doing business as a nation, and it has huge economic implications.

Malloch-Brown: Since this is a global challenge, what lessons can we learn from each other? China, for instance, has made good progress against smoking through social marketing. It didn’t have fully developed healthcare options available. Can other countries learn from such successes?

Cropp : I think so. I just visited France, where government statistics show the country spends 11% of its GDP on healthcare. France has compelling statistics to suggest the results are worthwhile. For example, I was struck by the percentage of money spent on the physician component of healthcare overall, and that pharmaceutical spending is overrepresented relative to the United States; hospital expenditures are too. But smokingrelated cancers aside, France stacks up exceedingly well on most of the mortality measures, such as deaths related to diabetes and heart disease.

Anne-Toni Rogers: Many people are taking note of what’s being done by the United Kingdom’s NICE [National Institute for Health and Clinical Excellence]. But while most of the focus is on technology appraisals of drugs and devices, the way they developed clinical guidelines was quite clever. NICE funded the Royal Colleges and the professional associations to produce the guidelines, so the guidelines were being produced for the professionals by the professionals. That has made the guidelines much more likely to be widely adopted. Therefore they are likely to have a greater impact on healthcare overall.

Malloch-Brown: How transferable are practices? Can you easily take them from one country and implement them in another?

Dan Corry: It is very difficult to make sound cross-country comparisons on health expenditure; even if we did have the right figures, would that persuade us that if something worked for France or the United States or wherever, we should change our system to match? I think that’s very questionable. Each system has evolved over a long period of time, which creates significant inertia that makes it very tricky to completely change it. And there may be reasons that it works in one country and not in another. Another challenge for policymakers is that it’s very hard to say what the right answer really is. As economists, we like to know we’ve done our analyses and econometrics so we can tell you the right answer. But in healthcare there are so many complications that make it very, very hard to model well. But progress is being made. So you’re seeing proposals in the United Kingdom for changes in health that some people are convinced would work. Yet there’s another set of people — just as genuine, just as clever — who don’t think they will work. And the public is sitting there thinking, “What’s the right answer?”

Guerin-Calvert: Looking behind the successes to understand the sources of improvement is critical. I would agree with your sense that sound analytics are important tools. In addition, there needs to be a way to measure and track on a common basis.

liz Shanahan: I agree that healthcare systems can learn from each other, but analytics and metrics are not sufficient on their own to drive change. The way the learnings are communicated, cognizant of cultural differences, will also be pivotal to their success.

Rodgers: There are structural issues in the way, too. In Europe, technology that’s been around for 30 years could enable patients to be treated at home. But they’re not given the choice because the system rewards physicians for providing care at a medical office or hospital. For example, there is hardly any home-care dialysis in Germany, as compared to the rest of Europe, possibly because German physicians are rewarded for owning and running the treatment centers.

Malloch-Brown: France is a fascinating example to me because I believe that French health statistics are entirely driven by red wine consumption. And let me add that most of the FT I Consulting leadership would agree. But joking aside, there’s a serious point here: Many French policy leaders argue that there are broad lifestyle issues involved. This is, after all, a country that has championed a kind of quality-of-life index where work-lifestyle balance is a key issue.

Rodgers: I think lifestyle issues are very relevant, and you don’t only see differences between countries. There’s actually strong regionalization within France, and you see incredibly different statistics across the regions, as indeed you do in other countries.

Cropp : That is a very important point. We see tremendous variations in the United States as well. Even though Buffalo might have a culture very similar to those in Pittsburgh and Cleveland, the differences in health statistics are dramatic. When you trace the underlying drivers, they often relate back to chronic diseases and simple personal choices about exercise, eating and smoking.

Guerin-Calvert: In the United States there has been extensive study of the drivers of spending on Medicare [the U.S. government health insurance program covering everyone age 65 and older], looking at not just cost but also utilization — for example, the use of inpatient services vs. preventive care or the rate of readmissions. As an economist, what I find intriguing are the large variances in the utilization of services such as diabetes care, cardiac care, testing and so on across geographies. There are many factors that account for these differences, and demographics play an important role.

Malloch-Brown: How important are local structures and incentives?

Cropp : As we’ve mentioned, local conditions are very different, so there has to be local ownership and accountability to make things happen effectively. Whatever works in Buffalo may or may not work in the next community. So I’m a strong believer that local solutions must emerge in every country we’re talking about. But sometimes it’s going to require support at the state or federal level to facilitate the right dialogue. Key to effective local implementation is balanced metrics. It can’t just all be about cost and affordability. Only now is the United States beginning to go from a robust set of economic data — which is mostly complete for the Medicare population — to an almost equally robust set of quality data and a less robust data set on patients’ experience. Pulling all of that together is essential to being able to say, “Hey, they’ve figured something out in Cleveland that’s worth replicating.” And to understand what it was that made Cleveland a success. You can see from the data, for instance, that La Crosse, Wisconsin, is a very efficient area where the annual costs per Medicare enrollee are about $5,000. That’s at the bottom of the national range, which is $5,000 to $25,000. Plus, the quality of care and the patient experience are good. If you ask people from La Crosse what’s going on, they’ll tell you that as a community — of physicians, patients, faith-based institutions and others — they’ve tackled end-of-life issues. So if you live in the La Crosse area and you’re over 65, you have a 95% chance of being enrolled in hospice and only a 5% chance of dying in a facility, which is the opposite of the rest of the country. And that’s a local solution.

Guerin-Calvert: We can learn a great deal from cross-community comparisons as to what types of structures, incentives and metrics worked well to achieve desired cost, quality and access goals.

Shanahan: In the United Kingdom, general practitioners have been heavily incentivized to achieve improvements in screening and managing high-risk patient groups such as those with diabetes. The GPs have hit almost all of the relevant targets, capitalizing on the many exclusion criteria, and have been generously reimbursed for doing so. Still, it’s hard to know the true benefit, and we have yet to see the improvements in outcomes promised by these incentives.

Malloch-Brown: For healthcare systems being built in the developing world, how much of this is relevant? What would be your top lessons for someone in Chengdu, China, or wherever, which he might or might not learn from Buffalo as he starts to build a healthcare system?

Pryce: The first thing to note is the huge differences between countries in the developing world, as well as between them and developed countries. You can’t just take what works in the developed world and superimpose it on developing countries; it’s not going to work.

Rodgers: These developing markets often trust the industry more than the Western markets do, and they are keener to have partnerships. They will often accept that the industry is investing in infrastructure because they want the right medicine to go to the right patient at the right time, and they want that inward investment. In India, for example, some device manufacturers have worked with local communities to figure out how to get dialysis to a population that doesn’t have refrigerators or electricity. They’ve come up with entirely different products and solutions, because that’s what the community needs — for example, a box that delivers clean water to do the dialysis. They don’t really need to know how it does it, and they just accept that it does it. So my biggest recommendation is to capitalize on the level of trust and not start to overregulate, because the minute you do, you stifle innovation and increase cost.

Guerin-Calvert: I agree completely; you do not want overregulation. You want to rely on the market as much as possible. But you need to take a realistic look at what the market can easily provide and what things you might need to do to encourage new or different sources of funding to make that happen. By encourage, I mean new kinds of coordination, organizations coming together to exchange data and practices. Critical elements are the availability and use of data on quality, cost and other metrics.

Rodgers: If you look at what’s happened in China, you’ll see that wealthy Chinese are spending on plastic surgery and the diseases of wealth, and therefore it’s more attractive for clinicians to go into plastic surgery, cardiology, etc. For the health of the country as a whole, China needs hematologists, pediatricians and mental
health physicians — specializations that perhaps aren’t as appealing. How you regulate and how you reward the clinicians in those markets will have a big impact on how the healthcare system develops.

Malloch-Brown: We’ve talked a lot about how national and local variations make it difficult to transfer learnings from one place to another. What are some other impediments to change?

Guerin-Calvert: I have seen many industries go through transformative change, from regulation to deregulation, and in my experience healthcare is the most challenging. To make change possible will require a complex balancing of competition, government and consumer choice, combined with development of new organizations and increased coordination.

Corry: As Meg says, there are some very complicated economics, very complicated stakeholder issues in all countries, and an awful lot of emotion. People care about nothing more than health. You only have to see how every newspaper in every country wants to have a health story high up every day. So it’s a very interesting but very difficult area of policy.

Shanahan: Very few market sectors are as emotive as healthcare, and this makes it very challenging. There are clear tensions between physicians, management, insurers, pharmaceutical companies and providers. Balancing the needs and biases of each group demands a good understanding of the commitment phases individuals and groups go through, where they move from self-concern to exploration to adoption, and finally where the changes become institutionalized. This can take many years.

Corry: In addition, in most industries we think that competition is a good thing and it’ll drive down costs, but in healthcare that may not be the case. In fact, for various reasons — asymmetrical information among them — we think it may be the opposite: that more competition might lead to higher costs.

Shanahan: Dan is right. Competition vis-à-vis health is viewed differently in some countries, though not universally. There is mixed evidence of benefit, with some recent data from the United Kingdom showing that local competition has raised standards and improved patient outcomes.

Cropp: Physicians are generally smart. They want to do good, and they want to do right. But they haven’t had the right kind of accountability structure to deliver a value proposition for a defined population. So if we sit down with physicians and say, “Let’s talk about what excellent care looks like,” they’ll describe it, they’ll be consistent about it, and they’ll think they’re doing it all the time. But they don’t know what they don’t know.

Shanahan: Inertia and entrenched habits play a role here too. I’ve done a lot of work in psychiatry, where the clinical community has recognized that there is a serious problem of obesity and diabetes in the patient population. To address this, they galvanized the support of their relevant cardiology and diabetology colleagues at a European level to develop pan-European guidance. However, four years down the line patients have yet to see any tangible benefit. Wanting to do the right thing and then actually doing it require huge investments in time and education, which often don’t follow from the original well-intentioned concept.

Rodgers: As spending on pharmaceuticals moves increasingly toward prevention or lifestyle conditions, such as vaccines or even obesity, a challenge I see is the length of time to payback. The budget may go up now, but the real economic benefit is in 30 or 40 years. So people see the budget going up, and they may object to
their money being spent on antiobesity therapies, even though in 30 years the benefit to the public balance sheet may be substantial.

Malloch-Brown: We’ve talked already about the importance of local structures and incentives to making implementation successful. Are there any other things that can help overcome those barriers?

Rodgers: Education is critical. The original purpose of NICE was to drive innovation because U.K. doctors were some of the slowest to adopt new technology, and access to treatment varied by postal code. As I recall, when NICE looked at taxanes for breast cancer, only two out of 10 women who could benefit got access to the
medication. Within eight weeks of NICE saying these women should have access, it had gone up to eight out of 10. It’s also important to educate young people. All the evidence shows that educating the young drives change. Recycling was a good example. And it’s as true of doctors. When you’ve introduced change in clinical guidelines, for example, you might find that the consultant who’s been in practice for 30 years isn’t following them, but the junior doctors are all trained to work within guidelines now and are doing so. There’s also a role here for pharmaceutical companies to communicate directly with patients, which is one of the things the European Union has been trying to effect for about four or five years now. Patients want to communicate with the people who have data on their products. But it’s been continually blocked by member states who are afraid “communication” is going to turn into advertising prescription drugs on TV.

Cropp : Key for me is that we think beyond organizational boundaries and figure out how to bring various organizations and parties together to collaborate. I’ve started two nonprofit organizations in our community. One brings different parties together to create a culture of health in the community by looking at behaviors and helping individuals make choices and reinforce those choices across the community. The other is a regional health information organization through which all the health information in our community flows. We need competition to spur innovation, but I am sure we also need more collaboration in order to affect the cost/benefit ratio for healthcare.

Shanahan: Patients and consumers can be major drivers of change, and the growth in social media has removed many barriers. New data show that 70% of consumers now get their health information online, and doing so has increasingly become an interactive experience, with consumers asking each other for advice and guidance on their treatments/interventions. Given that their patients are armed with this knowledge, physicians often have little choice but to change.

Malloch-Brown: What do you all think is the role of innovation in helping us make progress?

Shanahan: I think a major challenge for innovation, particularly for the pharmaceutical industry, is the relentless pressure on costs, reducing medicines to no more than a cost base rather than an investment in patient health. Almost every new medicine or health technology has been developed by the commercial sector. If governments and healthcare providers continue to drive down reimbursement and undervalue these innovations, where will the hundreds of millions of euros that are required to develop new medicines and technologies to treat or prevent conditions such as Alzheimer’s come from?

Cropp: There’s another challenge too. According to the Institute of Medicine, it takes 17 years from the time when something’s proven to be effective to its finding its way into everyday use. With the profusion of new technology has come an implementation/innovation gap that could be better managed. So while there might be an innovation gap at the front end [in developing new therapies], you could argue that there is a bigger gap when it comes to getting proven technology to reach and have an impact on the broader population.

Malloch-Brown: To wrap up, it’s clear that there’s value in this iterative global knowledge exchange around what works, which is not just one approach. The point was made that some of the most interesting broader public health interventions are learned from developing countries that couldn’t rely on fully developed hospital systems. Second, we should not defer to markets alone, but also have a kind of strategic hidden hand. A 20-year view of where the shortages are is key. An example of that is the World Health Organization’s big push this year on noncommunicable diseases. It is an astonishing fact that obesity is now a bigger global problem than famine. So I think there is a sense that we’ve started to create a little bit of a global public policy health debate, which helps set some priorities. Finally, we’ve seen that structures, incentives and collaboration locally are essential to effective implementation.

From a patient’s perspective, all care is local and personal. But healthcare is a global industry, so declining resources and physician shortages in one country may be acutely felt in others. In the United States, almost 25% of the 680,000 practicing physicians were born or trained in other countries, and some of those physicians are heading home, lured by higher salaries. To take one example, more than 1,200 physicians will be recruited from around the world to staff a $1.3 billion public-private enterprise sponsored by the government of Kuwait, which has the resources to pay very well.

Such market-driven shifts in medical manpower come on top of demographic trends that could also lead to imbalances. In many developed countries, older doctors are preparing to retire just as those nations’ aging populations need more and more care. But solutions to physician shortages aren’t likely to come from cash-strapped government health ministries. Rather, private enterprise, well-funded and free to innovate, will increasingly fill the gap.

More than Government can do

Poland is a good example of a nation where entrepreneurs are adding capacity to a system that has struggled to keep up with demand for medical services. Two years ago, the government delivered all of the country’s healthcare; there were waits of six months or more for some surgical and diagnostic procedures.

But because the government lacked the resources to develop enough specialty care capacity, it began to aggressively engage private industry, physicians and investors to develop and run such healthcare enterprises. Now, medical specialty facilities are springing up, both in cities that had lacked healthcare services and in densely populated areas where there haven’t been sufficient physicians and hospital beds. Many of the new clinics are single-specialty facilities — for orthopedics and cardiology, among others — that have been able to leverage specialized staffs and equipment to achieve stellar clinical outcomes.

For investors in both the operations and real estate of healthcare, meanwhile, such ventures often provide substantial returns. Specialty clinics in two cities in western Poland aim to earn more than 20% for the investors who own the real

estate (comparable projects in the United States routinely see returns in only the high single digits and low teens). In just two years, 7% of Poland’s specialty care has been privatized, and the government projects — probably incorrectly — that within another four years, 40% of such care will be delivered privately.

India, in contrast, has a long history of private healthcare, which now accounts for 80% of all medical expenditures and the majority of new enterprises. Government-run facilities are vastly overcrowded and have a reputation for delivering substandard care. India continues to struggle with access to care: There are only 1.5 hospital beds per 1,000 people, compared with 2.5 beds in China, 3.2 in the United States and 8.3 in Germany. Meanwhile, the rapid growth of India’s middle class has led to escalating demand for higher-quality medical services.

Until two years ago, there was just one comprehensive diabetes clinic to serve the 7.5 million people in Chennai. (India has the world’s highest prevalence of diabetes, which affects 50 million people.) That meant many cases went undiagnosed until complications had set in. A newly planned diabetes clinic, ambulatory surgery center and hospital in Chennai, funded by a group of investors that includes physicians, an insurance company and real estate developers, will help meet that demand. Soon many patients will be diagnosed earlier and will be better able to manage this condition.

These new facilities are marketed to those who can afford to pay for care out of pocket (only 6% of Indians have private insurance), employers offering employee benefits, and state governments seeking to meet their social mandate through the provision of private insurance to citizens. It’s possible that as more patients with private insurance or the ability to pay flock to new private clinics and hospitals, the government will be able to redirect its resources to providing care for the poor.

Stretching technology

Using private equity to finance medical services is only one solution to providing greater access to healthcare. Another approach, undertaken by the owners of the Aravind Eye Care System in India, is to use technology more effectively. As part of its mission, the nonprofit eye institute serves the poor in rural areas, but rather than send an ophthalmologist to small villages, it dispatches a mobile kiosk and a technician to take digital photos of villagers’ eyes and record their symptoms. Then an ophthalmologist can use that information to make a diagnosis and determine whether treatment is required. Because of its strong reputation, 40% of Aravind’s patients pay for care, enough to allow it to subsidize care for the rest of its patients.

Integrating less expensive providers (such as nurse practitioners and physician’s assistants) with physicians can also reduce costs without sacrificing quality of care. Technicians can be trained to take patients’ blood pressure, for example, and nurses can handle many aspects of routine patient care. Telemedicine and other digital technologies can help mitigate the physician shortage by connecting patients with medical consultants in another locale or even another country. But governments and private payers have to be willing to create a regulatory environment and payment schemes that support such entrepreneurial solutions. How, for example, should providers in Turkey be paid to diagnose a patient in Algeria? And how will liability for careor misdiagnosis through digital and telemedicine consultations be handled? Without answers to such questions, digital technologies may fall short of their considerable potential.

The health dividend

Private healthcare enterprises may also eventually upend conventional reimbursement practices that reward providers for treating patients and performing procedures rather than for keeping them well. The publicprivate integrated health maintenance organization that the Hammes Company and FTI Consulting are involved with in Kuwait will charge a single annual premium to cover all care that a patient may need. Organized as a public company, the HMO will own its hospitals and clinics and employ its own physicians, helping it manage costs and boost quality of care while enhancing the return on investment.

In Kuwait the expatriate population will have only one HMO choice, but in other countries patients may choose among HMOs, private insurance and other private enterprises, all competing on the quality of their care. It seems reasonable that in integrated systems such as HMOs, in which the enterprise collects a premium and provides care, owners will decide which resources will be allocated to treatment and promoting good health. For example, if yoga is proven to keep patients healthy — and to make them less likely to require highcost treatments — then offering yoga classes will make good business sense. Crisis, too, can be the mother of invention, and the global health system is close to a crisis point. It’s time to let the entrepreneurial process work to improve healthcare for all.

Programs target wide-ranging conditions

Among companies currently offering NCD-oriented health and wellness programs, eight in 10 have initiatives aimed at preventing cardiovascular disease, with almost as many helping workers quit smoking. Diabetes, obesity and women’s health (family planning and pre- and post-natal care) tied for third at 68.4%.

Both kinds of programs - for communicable and noncommunicable diseases - have been effective

Eight in 10 companies offering noncommunicable disease programs reported the programs have made a difference, with 34% terming that impact “significant.”

Private vs. Public Responsibility Companies viewed business as having a responsibility at least equal to that of government for addressing diabetes, obesity and behavioral issues such as alcohol abuse and physical inactivity.

Where Companies Can Make A Difference Respondents ranked comprehensive wellness as the area in which corporate NCD programs can make the strongest impact, followed by physical inactivity and cardiovascular disease.

13.8% 10.3%	Alcohol abuse	8.6% 5.2%
5.2% 13.8%	Cancer	6.9% 22.4%
8.6% 10.3%	Cardiovascular disease	13.8% 5.2%
8.6% 13.8%	Chronic respiratory disease	10.3% 15.5%
13.8% 3.4%	Comprehensive wellness	27.6% 3.4%
8.6% 8.6%	Diabetes	12.1% 8.6%
8.6% 13.8%	HIV/AIDS	10.3% 15.5%
5.2% 36.2%	Lack of clean water	3.4% 43.1%
10.3% 19.0%	Malaria	6.9% 22.4%
6.9% 22.4%	Maternal & child health	5.2% 25.9%
10.3% 12.1%	Mental health issues	6.9% 19.0%
6.9% 20.7%	Nutritional deficiences	5.2% 13.8%
8.6% 6.9%	Obesity	10.3% 10.3%
17.2% 5.2%	Physical inactivity	17.2% 6.9%
12.1% 13.8%	Tobacco use	8.6% 19.0%
8.6% 22.4%	Tuberculosis	6.9% 25.9%

The root causes of this disparity range from government corruption to a lack of access to clean water and electricity to shortages of medical equipment and clinical acumen. Addressing these myriad issues is daunting. Yet, since 2004, Developing Health Globally™, an initiative from GE , has been combining product resources, engineering expertise and best practices drawn from business to create holistic “enterprise solutions” for health facilities in Africa, Latin America and Southeast Asia. Through DHG, GE has invested $40 million in more than 100 hospitals and clinics in 13 countries, an effort that has affected an estimated 4.8 million lives. In the process, the company has also created a model for addressing the global health crisis — a model that’s driven by innovations in planning, implementation and sustainability.

What’s the problem?

The first step in this approach is to define the needs of each country by working with local ministries of health. Tim Reynolds, project and infrastructure consultant for Assist International, has been involved in DHG projects in Cambodia, Ghana, Honduras, Rwanda and other countries. “GE starts with a countrywide assessment of selected hospitals to determine the specific equipment needs of each facility,” says Reynolds. “How many beds and patients does it have? How many surgeries and deliveries per month? What are the mortality rates? Is it lacking power, water or communications infrastructure?”

A typical blueprint for improving a hospital may include an ultrasound machine, patient monitors, incubators, an X-ray machine and sterilization equipment, though gauging the needs of a particular facility requires a holistic understanding of local conditions. Air-conditioning units, for instance, a creature comfort in the developed world, might be essential to keep an operating theater sterile in a hot, buggy, humid area. And water filtration systems that can be cleaned manually are better than those depending on expensive, difficultto- replace cartridges.

Once needs have been established, GE teams create appropriate equipment configurations for local conditions. Assist International, a nonprofit humanitarian organization with more than two decades’ experience in the developing world, gets the gear to the hospital, where GE engineers and specialists install the units and train local clinicians. This approach has already had an impact, with infant mortality rates dropping by about 40% at six DHG sites in Honduras. And in Rwanda, referral rates from outlying hospitals to the hospital in the capital, Kigali, plunged from 42% to 3% with no spike in mortality, a sign that the
remote facilities were better able to handle cases on their own.

Learning to think outside the box

But this delivery model isn’t only about getting up-to-date equipment and basic user training where it’s needed. The model also aims to bring medical expertise to the countries in which DHG operates. Rachel Moresky, an emergency physician and assistant professor at Columbia University’s Mailman School of Public Health, directs the Systems Improvement at District Hospitals and Regional Training of Emergency Care (sidHART e) program, another GE partner. Since 2009, sidHART e has run training programs for doctors and nurses at district hospitals in Ghana. Using GE - donated equipment, sidHART e trainers teach medical providers to use available resources to treat cases locally rather than automatically referring patients to more advanced facilities in distant cities.

For example, a district hospital may have an ultrasound machine but not a CT scanner. Though ultrasound is used most often in obstetrics cases, physicians working with sidHART e trainers learn how to employ that technology to see whether traffic accident victims, for example, have internal lacerations. Those who don’t have complicated injuries can be treated on-site, slashing costs and making care more immediate. Integrating equipment donations with training in clinical acumen, Moresky says, is essential to creating sustainable improvements in care.

Engineering sustainability

Of course, modern medical machines are of little use if they’re not working, and according to the WHO, at least half of the laboratory and medical equipment in “resource poor” settings is partially or completely out of service at any given time. To improve on that dismal statistic, GE has partnered with Engineering World Health, a nongovernmental organization based in the United States, to implement a threeyear training program for biomedical equipment technicians in Cambodia, Ghana, Honduras and Rwanda. Local technicians are taught more than 100 basic technical assistance and troubleshooting skills, and they learn to make creative use of whatever resources are available. They might take the bulb from a car’s headlight to fix a lamp in an operating theater, for example, or use the plastic liner from the inside of a bottle cap and a standard sewing fastener to fashion a reusable pad for an electrocardiograph machine. Equipment that’s beyond repair can be cannibalized to keep other machines in working order.

To gauge the impact of such training, the Duke University Department of Biomedical Engineering, which partners with EWH, recently conducted a study of the biomedical engineering technician training program in Rwanda that involved 10 hospitals and more than 500 pieces of essential medical equipment. On average, the study found, equipment in hospitals in which technicians had been trained by EWH was 54% more likely to be in service than was equipment in hospitals whose technicians had not yet undergone the training. In addition, trained technicians were 27% more likely to be able to resolve problems with the medical equipment. The ultimate goal is to make the training sustainable, allowing the current generation of technicians to teach the next.

“As in most developing countries, our needs are many in terms of human resources, equipment and financial resources,” says Agnès Binagwaho, minister of health in Rwanda. “The GE program has been very helpful in terms of medical equipment maintenance and the training of local personnel to keep that equipment operating. The program has provided crucial support for our district hospital initiative, which focuses on delivering high-quality medical care as close as possible to where people live. Ensuring that medical equipment in these district hospitals is available and operating is very important to the success of this program, and the GE training initiative has dramatically improved equipment availability.”

Such gains could be duplicated in many other regions with similar needs, suggests Robert Malkin, a co-founder of EWH, who believes the broader engineering mind-set that drives the seemingly simple techniques put to use in the Developing Health Globally program could have a far-reaching impact. “Situations in the developing world look very different to an engineer than to the average person,” Malkin says. “We’ve seen the kinds of solutions engineering has brought to the developed world, and now that kind of innovative thinking is being translated into advances for the developing world as well.”

(A model of health promotion in Rwanda and other developing countries, the GE-sponsored program is attacking the scourge of preventable maternal and infant deaths.)

Across the world the provision of this politically sensitive service is running into a core contradiction. Technological and scientific advances do not make healthcare cheaper, as happens, say, with computing power, electronics, or other consumer goods and services; rather, like defense technology, science increases costs as treatments grow in their ambition. Life can be extended by clinical and drug programs that may amount to tens of thousands of dollars per year for a life extended.

Yet growing numbers of people expect access to such life-extending treatments. Nobody fighting for care foroneself or a loved one can be expected to stop and weigh the accumulated GDP cost of these interventions to the national economy.

So where health administrators cannot gather the authority or courage to ration and make choices — and, understandably, few can — the market steps in. Whether a health system is deemed public or private, rising costs are returning spending choice, beyond basic public or insurance coverage, to individuals and their capacity to pay. Hence, across the world, the rich enjoy the prospect of access to a glistening new array of treatments while poorer patients are returning to fearful patterns of denial of illness as the health outcomes they yearn for slip out of their reach.

It is a moral and public dilemma of enormous consequence at a time when I meet growing numbers of health entrepreneurs from countries such as India who casually observe that with the current pace of medical breakthroughs, there is no reason a child born now should ever die. That is a dangerous dream to old out because whatever its literal truth, miracle health solutions will drive up health spending ever further, keeping the financially and the politically powerful alive rather than the middle class and the poor well.

There are areas that we in the FTI Consulting family are engaged in that can help mitigate some of this and contribute to keeping healthcare as broadly available and affordable as possible.

First, through our Strategic Communications practice, we are assisting clients in the pharmaceutical and health management sectors to drive home the message that disease patterns globally are shifting with the sharp rise of noncommunicable diseases. Effective primary care and social messages, together with lowercost primary, nonhospital care, can sharply reduce a huge unnecessary cost for health services.

Second, through our Economic Consulting practice, we can bring clear analysis to the choices that healthcare faces around value — both ethical and financial — in the care provided and the care excluded. Similarly, we contribute to the debate on fair drug pricing and the impact on R&D as well as the debates about public and private provision and competition.

Third, through our work on restructuring healthcare systems, we can both help ensure massive cost reductions and establish appropriate allocation of funds between primary care physicians and hospitals. We can assist those developing countries still increasing their health spending to build new systems wisely, learning from the mistakes of others.

And within this restructuring work, we can address one of the ironies of healthcare. While within the laboratory and the operating theater a technology revolution is taking place, the support systems frequently are antiquated. In the back office, billing, accounting and administrative systems often remain mired in a largely pre–information technology age. In Britain, where doctors still write out prescriptions by hand, sometimes in a dangerously illegible hand, the NHS has just given up on its controversial and hugely expensive effort to computerize medical records.

When policy, restructuring of healthcare delivery and innovation come together, costs can come down dramatically. When I took charge of U.N. development activities around the world, treating a single person with AIDS with an effective cocktail of antiretroviral drugs that controlled the illness cost more than $15,000 a year. Consequently, almost nobody in Africa was being treated. In a few years, the cost had dropped to a few hundred dollars a year. As a result, there are now millions getting treatment — although many more still do not receive it.

The Economist attributes this “to an alliance of science, activism and altruism.” In fact, it was some hard bargaining among activists, the health community and pharma chiefs who accepted that they must move to a marginal cost pricing model for these markets and recoup their R&D costs elsewhere. This was combined with simple innovations in delivery, which largely empowered the patient, and which overcame concerns that the drugs would not be properly administered and would therefore build up resistance.

Now infection rates are down 25%, and 5 million lives have been saved. This public health achievement, even though there is still much more to be done, makes my broader point: Costs can come down and treatment reach can be expanded when the right coalition of players is assembled.

Health is a matter of life and death for all of us. In the poorest countries, expenditure per head, beyond AIDS treatment, remains in the tens of dollars as expenditures soar elsewhere. We all want health, and we need to tackle every step in the critical path of its provision if more of us are to enjoy it. After all, it is a matter of life and death.

Healthcare costs of approximately $2.4 trillion are substantial (about 17% of GDP in 2008/2009 up from about 15% in 2005 and a mere 5% in 1965) and are anticipated to increase to about 19.5% of GDP by 2017, without comprehensive reform. The growth rate of healthcare expenditures has exceeded that of GDP by more than double over the past four decades. During the same period, there have been dramatic improvements in technology, communications networks, electronic media, treatments for a vast array of illnesses, better understanding of preventive care, improved longevity, and substantial evolution in the organizational structures for delivering care in the U.S. across plans and providers.

Pending legislative proposals involve a wide array of alternatives for addressing costs, quality and extension of care. The national discussion has been focused on cost reduction efforts, including widespread discussion of organizations that have accomplished substantial cost reduction while enhancing quality of service. For example, in his September speech to the U.S. Congress, President Obama mentioned two such organizations – InterMountain Health and Geisinger Health – as examples of healthcare organizations with success in both improved quality and cost reduction (other frequently touted studies include other examples). An open question, which is subject to both policy and empirical examination, is how these ‘localized’ examples can best be replicated in more localities or at the national level. What are their secrets to success and how can they be taken into consideration in forming national policy? The effort to replicate those experiences, and to identify how and why such gains were accomplished, has become a key part of the legislative agenda. The intense focus on cost-reduction solutions is also reflected in the proposals made by healthcare industry representatives – including pharmaceutical manufacturers, insurers, hospitals and physicians.

The discussion focused around three key themes:

• What are the common elements/reasons for the actual or perceived successes at cost reduction with improved quality?
• What works to align incentives among market participants – insurers, hospitals, physicians, employers, and consumers – to accomplish greater cost savings while enhancing quality of care and of life?
• What are the impediments or challenges to achieving greater gains at the local or national level?

Meg Guerin-Calvert: The most frequently cited examples of institutions that have achieved success in cost reduction and improvement of quality of care include some of the nation’s largest and most highly integrated private healthcare organizations. Some of these organizations provide the full spectrum of inpatient and outpatient care and others are more specialized. Kaiser, for example, may be the most fully integrated of the examples mentioned – within this single organization there are physicians, clinics, hospitals and insurance, with fully managed inpatient and outpatient care. It’s also noteworthy that these entities coexist and compete with other organizational forms in the provision of physician services, insurance and hospital care, demonstrating that the healthcare marketplace supports a variety
of entities.

There are several common themes from these examples. First, most of these organizations are very large for their locality or region. This suggests that even as a single firm these organizations are able to get relatively complete information on the local population, its healthcare needs and characteristics, as well as on providers.

Second, these highly integrated organizations can use this access to develop and implement solutions to identify higher costs, to reward improved quality and cost reduction, and to induce providers and patients to take preventive care steps so as to reduce more costly inpatient or outpatient care. A common element of cost reduction successes are organizations that have made use of their own data and information on procedures, outcomes and costs, and then developed systematic and comprehensive analyses both internally, and relative to external standards, to identify the sources of variation and to develop solutions. They have developed metrics, and can track and implement them.

Third, the gains from improvements and cost reductions can be internalized by the organization, and thereby create greater incentives to invest in activities such as improved IT and electronic records.

Fourth, these are largely examples of private organizations, not public or government-funded ones, which have relied on market mechanisms to accomplish their goals. These include a variety of contractual arrangements with many different healthcare market participants.

Charles Overstreet: The most common element in achieving cost reductions is how readily any cost reduction can be measured. Cost reduction success stories are often best illustrated by how the reductions were tallied up. That is to say, whether the reduction or improvement is large or small and how easy it is to track. Many reductions have to do with the overall change in the actual outlay of cash. Supplies, hourly wage, medicines, devices, etc. all have a cost. If we can identify these costs, reduce these costs and then track the reduction, we have a success story.

But cost reduction is often illustrated in more complex scenarios where there may be many variables or components that are being improved (or are perceived to have been improved). The key to success in these more complex scenarios is not in just tracking individual component improvements, but in developing and tracking simple overall statistics of improvement. One classic example is the great strides in improving cost and quality in cardiac surgery. Over the past several years we have seen many improvements in this area of medicine. Why? Yes, medical science has advanced and we have improved medicines, techniques and other factors. But I would argue that one of the major reasons for the improvement in quality and cost in this area is the ease with which one can actually gauge and track improvements.

Some simple statistics that are easily tracked are the real contributing factors of the improvement in this area – Length of Stay (LOS) and Cost per Case. These two statistics are easily calculated and they complement each other. Moreover, most would agree that a reduction in the LOS of a hospital stay is an improvement in clinical quality, and agree that a reduction in Cost per Case is also a success. Both metrics do not allow for much argument or difference of interpretation – ‘they are what they are.’

Martin Cohen: Historically, hospitals and physicians have addressed cost reduction through enhanced management of labor and non-labor (i.e. medical supplies, cost of implants, cost of contract services, etc) costs. Also, in the early ’80s (with the introduction of DRG’s) and the late ’80s and early ’90s (with the expansion of HMOs) significant improvement was achieved in reducing clinical costs, through better management of the clinical care process. However, much is left to accomplish in this area.

Although hospitals and physicians must (and will) continue to look for ways to reduce labor and non-labor costs, in order to reduce the cost of care in a meaningful way it is essential to continue enhancing clinical care processes through better coordination and management of care delivery. On a day-to-day basis that would call for better coordination of preventive, diagnostic or therapeutic modalities provided by patients’ primary care and specialty physicians. In an acute inpatient setting, this would entail not only coordination of care among the physicians but also the nursing, diagnostic and other professional staff providing care in the hospital.

There are several key elements required to bring about improved coordination and management of the clinical care processes including (1) improved access and transparency of patient medical information (electronic medical records), (2) the development and implementation of best practices with respect to clinical treatment protocols, (3) the need to better track and monitor clinical quality outcome measures and finally (4) the need to align the economic incentives for hospitals and physicians. Each of these is an essential component necessary to improve the effectiveness and efficiency of clinical care processes and all must be addressed.

Charles Overstreet: One of the reasons why reductions/improvements on a broader and deeper scale get bogged down, or do not reach their full potential, is that we get sidetracked in arguing over the metrics of reduction/improvement, or we cannot develop sound and systematic metrics of measurement. In my example of the cardiac surgery improvements, we can quickly get into a debate over measuring other factors of reduction/improvement when we get into more complex measures such as outcomes, readmission rates, volume of diagnostic procedures, etc. These types of factors are important and need to be measured, but we do not have a recognized commonality of ‘how to keep score.’ Thus I would assert that greater reductions/improvements in overall healthcare will require a common (and agreed-upon) method for measuring the change.

Martin Cohen: Although there have been attempts to address the essential elements I described earlier, they have not been addressed in a comprehensive way and accordingly have met with varying degrees of success. For example, the establishment and growth of HMOs have provided a significant reduction in the cost of care. However, these reductions in cost have been primarily driven from the economic incentives provided to providers and reduced access to services. Absenting the transparency of medical information, development of clinical pathways and better tracking and monitoring of meaningful clinical quality measures, this method of reducing costs has a limited upside and is certainly not grounded in clinical effectiveness.

On the other hand, substantial work has been done in the development of electronic medical records, development and tracking of quality measures and establishment of enhanced clinical protocols/pathways. But until providers, both physicians and hospitals, are reimbursed for services in a manner that provides aligned economic incentives, and until quality becomes a component of how providers are paid, history has proven that behaviors are not likely to change and significant cost reduction impact will not likely be achieved.

In order to achieve the real efficiencies available through enhanced coordination and management of care, the Federal Government, through modifications to the Medicare system of reimbursing physicians and hospitals, will have to lead the way.

Meg Guerin-Calvert: The examples of individual organizations are the most dramatic and perhaps most informative, but may obscure other sources of gains in the management and reduction of costs. During the 1990s and early 2000s, there was substantial consolidation of hospitals, the vast majority of which raised no antitrust concerns and which resulted in substantial and well-documented efficiencies. In addition, efforts on the health insurance and provider sides have focused on mechanisms to create incentives for improved preventive care, pay for performance, and metrics. 

Celia Hall: The United Kingdom’s National Health Service (NHS), which oversees the delivery of healthcare to all UK citizens, has pursued some noteworthy reforms that deserve more attention as the United States looks for opportunities to control costs and preserve quality.

One initiative has been to break up the organization into smaller, more flexible and more autonomous units such as NHS foundation trusts covering both hospital and primary care. These are self-governing organizations that run hospitals and provide healthcare to the general public but are able to raise their own capital and save and invest any savings they generate. They work to nationally agreed standards, in order to provide consistent standards of care across the country. Hospitals can only obtain and maintain foundation trust status if they are able to prove and show good financial control and governance.

The foundation trusts are similar to medium-sized businesses, and there is a belief that it will be easier for these locally focused organizations to contain costs and cut waste. According to the independent regulator of NHS foundation trusts, the trusts spent £22.7 billion in 2008/09 and generated a retained surplus of £269 million. While this is a tiny amount compared to total spending, each of the 122 trusts in England is under an obligation to make efficiency savings every year or face loss of their foundation trust status.

Edward Reilly: We can also look to employers as innovators in developing ways to reduce healthcare costs while improving quality of life for their employees and families. For example, Coca-Cola has taken very innovative steps to control costs, by focusing on behavioral changes, and incentivizing people to live a healthy lifestyle. By next year, it is going to cover 100% of the cost of preventive screening for its employees. The program is projected to save an average of $300 in healthcare costs per employee per year, and reduce the company’s healthcare costs by 8%, annually.

Another example is the tremendous transformation we have observed at Walmart. It is counseling employees on how to take advantage of government healthcare options. And it is very active in promoting wellness programs, taking a more progressive approach, while putting more responsibility on employees.
Some may be surprised by the fact that one of the elements we’re seeing in our ongoing public opinion research is that employees perceive employers to be a primary steward of their interests.

So employers have an even more critical role to play in communicating with employees what can be done to better manage costs to the business, and what individuals can do to change their behavior in ways that will help to reduce healthcare costs. The human resources departments in particular are playing valuable roles when employees interact with an insurance company – educator, explainer and advocate.

Our research shows that people are willing to make sacrifices to keep their employer-provided health insurance. Indeed, a recent FTI survey found that 70% of all respondents are willing to take a pay cut to keep the healthcare insurance currently provided by their employer. The same survey found that while 29% of those surveyed blame employers for rising health insurance premiums, five other groups were identified more frequently as the source of such increases (health insurance companies, hospitals/medical facilities, lawyers, government, and consumers/employees).

Charles Overstreet: In continuing my theme on the need for common measurement, I think that measurement and tracking are essential for aligning incentives for all those participating in the healthcare marketplace. Reduction in the costs to consumers must be balanced with the real or perceived loss of revenue from the perspective of the provider.

The promise of truly managed care allowed for some of this balance. Payments for care were to be placed in a pool and used as needed by a patient population. Through responsible management of that care and a focus on ‘health maintenance,’ the total outlays from the pool were to be reduced. When the year was over, whatever was left in the pool was shared between payer, provider and beneficiary, and thus, all of those involved had aligned incentives. This is the simplest way to initiate and sustain real reductions and improvements.

Meg Guerin-Calvert: Even where there is sound measurement and metrics, there still needs to be sufficiently broad data (both cross-sectional and time-series) to be able to conduct a sound empirical assessment of the variation in costs and quality, while controlling for the wealth of factors that can affect both. As Charles notes, there are often many factors that explain a given result, meaning that empirical analyses must be sufficiently sophisticated to deal with the complexity.

A hallmark of the FTI professionals working in the healthcare area is knowledge of healthcare data, extensive experience with empirical analyses at the most disaggregated and detailed level, and a thorough understanding of the approaches and mechanisms used to improve costs and quality – whether for firms in financial distress, those seeking process improvement, others via merger, or in the development of new ventures.

Celia Hall: There are similar challenges in the United Kingdom, which is battling the problems of an insatiable demand for healthcare, little incentive to use the service responsibly and an ageing demographic. In the UK, two generations have got used to the idea of free healthcare and the NHS is very much seen as a sacred cow. There is little incentive for politicians to tackle the cost issues head-on so any changes will be a case of evolution rather than revolution.

Similarly, small hospitals in medium-sized towns are very inefficient. It is impractical for these hospitals to provide every single service or expertise that can be provided by larger regional hospitals. But there are huge political constraints, particularly for local representatives, in addressing this.

Another issue in the UK is that in trying to reduce costs, implementing comprehensive reforms can prove to be quite costly. There have been well-publicized delays and cost overruns on a central IT operation for the National Health System. The IT was designed to link 30,000 GPs and 300 hospitals to a central system and contain information on 50 million patients. It was projected to save more than £1 billion a year. But it is now four years behind schedule and it may also end up costing four or five times the original £6.2 billion budget.

Edward Reilly: As a result of the healthcare reform debate, irrespective of the final resolution, there will be greater scrutiny on healthcare providers and the cost and effectiveness of what is being delivered. Although not directly included in health reform, the Government has set aside billions of dollars for comparative effectiveness trials to look at the relative benefits of various treatments for the same indication or diagnosis. For example, a trial would look to compare rehab therapy to surgery for a specific orthopedic procedure, review the outcomes and assess the relative benefits. The tools are available today to design and implement patient registries, studies and technologies for evaluating real world outcomes for safety, effectiveness, quality and value.
 
Meg Guerin-Calvert: As my colleagues in this roundtable have indicated, achieving clear gains in costs and quality depends on developing and assessing sound empirical evidence, which must then be connected to effect changes in performance, whether by physicians, hospitals, insurers, employers or patients or some combination of them. That involves organizational structures, including some internal to firms, and others that require coordination across otherwise independent players. I can envision that such extensive empirical analyses could be conducted by individual health systems, by insurers, by physician groups, as well as by combinations of such entities. While there are opportunities for substantial cost savings at the individual provider or insurer level, there are likely to be even greater potential gains from finding the means to develop sufficient data to conduct sound studies by multiple entities in an area and to implement the results across firms and markets. That is a challenge because it requires development of contractual arrangements to accomplish data-gathering, development of the empirical analyses, and then implementing solutions for cost reduction and alignment of incentives.

The experience of successful healthcare organizations shows that in a market-oriented healthcare system, the market can function to achieve substantial cost savings, where it can replicate by contractual arrangements what integrated firms have been able to develop internally. However, increased coordination can lead to a reduction in competition. And so antitrust authorities will need to provide greater guidance about the standards by which any new types of arrangements between and among participants will be evaluated, because existing guidelines suggest that many of these arrangements fall outside of recognized safety zones. For example, would antitrust issues arise if hospitals and physicians, hospitals and plans, or smaller independent plans within a region, pool data and information on claims or procedures, collectively fund empirical research on the sources of cost increases, and then implement initiatives to change behaviors so as to reduce costs?