Category Archives: Health Reform

“Triple Aim” for regulation

We are awash with regulation. Healthcare and medicines are particularly affected.

For instance, in their wisdom, European lawmakers have deemed it inappropriate for medicines to be advertised. And this in the 21st century, with open information access, calls for transparency and the empowered and informed patient. Of course, the logic of such restrictions reflect real-world anxieties, but they also reflect the anxieties of another age. If we examine regulatory practices, we’ll find that in the main they use instruments that would have been popular in the 1950s and 1960s. Today, more subtle and information rich tools are available.

We regulate to coerce people and organisations to behave in certain ways that they would not, of their own volition, otherwise do. This coercion is legitimate if it arises through due process and democratic accountability, and not just the whim of the regulator or government. Sometimes this coercion has perverse consequences, such as with medicines where the legitimate manufacturer of a product is prohibited from publicising a product, but all manner of snake-oil salesman can make all manner of inappropriate claims for medicines, each pits or peanut butter as a sunscreen! The truth lies somewhere but regulations make truth-telling more difficult and not always in the public interest.

What I want to propose draws its inspiration from the US, with Don Berwick and colleagues suggested Triple Aim tool for determining high-value intervention targets (the three are: quality of care, patient satisfaction, and cost).

The Regulatory Triple Aim would comprise three tests, the simultaneous failure of which would indicate that the proposed regulation should not be considered further.

  1. Will the regulation produce poor quality or substandard outcomes? This is likely to be measured through evidence or insight into perverse consequences, weak enforcement, lack of suitable performance data, etc.
  2. Will the regulation produce dissatisfaction amongst the regulated? This is comparable to the patient satisfaction and goes to whether the regulation is appropriate and proportionately coercive and will it enjoy high degrees of compliance.
  3. Are there avoidable costs associated with the regulation? This is an interesting test as it actually asks two things: [1] is there an incremental burden of costs associated with regulation and [2] is the cost proportionate to the benefits.

As a formula, we have Quality (#1) + Satisfaction (#2)  divided by Costs (#3) = Value for Money.

We need ways to sharpen our focus on regulation, and we need to ensure that there is not too much of it for the value we seek to achieve.

Let’s test it with the regulation that was intended to control refillable olive oil containers or pots in restaurants, something that more insightul minds eventually decided was a silly thing to do (I’ll wager though that has just gone into hibernation while a study is commissioned to find evidence that such refillable containers are full of fake olive oil or somesuch and then it will re-emerge), but it did get a long way along the regulatory process without anyone (group think?) challenging it — are people really that dumb? I wonder how that happened — did no one apply a Wilson matrix to this to see if the distribution of costs and benefits was properly understood? Anyway, back to Triple Aim.

Olive Oil in Refillable Pots or Containers

Would regulating olive oil in refillable pots or containers …

1. … produce poor quality or substandard outcomes?

2. … produce dissatisfaction?

3. … create avoidable costs?

Triple failure, meaning answering YES to each question, would suggest this would not be a good idea.

Post your assessments and comments. Obviously, if you’ve got better examples, (such as regulation of clinical trials or whatever) please feel free to expand the scope.



Will baby boomers with the help of Gen X, Gen Y and Gen Z fix healthcare?

A recent report from the Royal Bank of Canada on baby boomers (2013 report) got me thinking about whether generational factors will drive health system reform; this report notes that baby boomers are more likely to worry about their health than their finances. What might that mean if we generalise our thinking to embrace generational profiles of the world that baby boomers have grown up in and the expectations of Gen X, Y and Z?

And what a brain it is!

Think (Photo credits:

Let’s start with the boomers. Apart from the critical view that baby boomers have had it really good, they did invent much of the world we see today, and which the next generations are driving forward.

Baby boomers have become accustomed to things like one-stop shops, not waiting, being kept informed, and prepared to pay for both  quality and service. They are unlikely to sit around waiting for home care to decide when it is convenient to show up, they are impatient when their appointment with the doctor is delayed. They are not used to be told what to do and are problem solvers because that is what baby boomers had to do with some of the stuff left behind from the 1950’s and 1960’s.

Gen X, Y and Z are inheritors and translators of that tradition. What came before the boomers is the problem.

Why hasn’t this translated to healthcare?

Regardless of institutional and political inertia, Integrated care is a response to disruptive patient expectations that healthcare meet their needs.

Our healthcare systems were designed with notions of structure and function that date back to at least the 1920s (hospital management) and use policy instruments popular in the 1950s and 1960s. Countries that are modernising today, have different notions of healthcare and have not adopted the European-type social models, despite hyperactive people pushing this logic at them. We don’t live in that kind of world any more. Baby boomers who have seen substantial economic and social change certainly understand that, while the Gens are growing up without that sort of historical millstone.

Tired nostrums and the moaning of healthcare managers are hardly useful, when we see entrepreneurialism all around us. There is a Silicon Valley of healthcare but where is the Silicon Roundabout of healthcare?

A note on the Gens

Gen X, born between 1966 and 1976 experienced the trials and tribulations of divorcing baby boomer dual income parents. They are sceptical but very well educated. They are more pragmatic and cautious, given what they have been through, but will have little trouble with unstable systems as long as they understand how they work. Not afraid of chaos perhaps? And healthcare is a complex adaptive system, a.k.a, a system characterised by chaotic behaviours.  Policy is uncomfortable with disruptive chaos, yet it is that which creates the seeds for health system reform.

Gen Y, born betwen 1977 and 1994 are the largest population cohort beside the baby boomers. Very technologically sophisticated, they’ll certainly wonder why they can book a doctor’s appointment off an app! Apparently, they are not very brand loyal according to advertisers, so perhaps they not going to worry so much about sacred cows of social institutions, but look beyond that to the fundamental purpose of these institutions. I like people in this group a lot for their unconventional thinking and lack of faith in tried and test solutions and willingness to think new thoughts.

Gen Z, born between 1995 and 2012/now are growing up a world that is digital, connected, always on (McLuhan would understand). They expect things to be customisable, not one size fits all. That sounds like they’ll not be happy with being regimented through a care pathway that doesn’t work for them. Twenty odd years from now when they start to take the reigns of power, I would be very surprised if they didn’t engineer radical rethinking of healthcare. I, for one, would like to get inside that room today to see why we can’t think those thoughts today.

Driving Integrated Care


A model of integration — ants do it

Two items in the publication, Public Finance (pledge to integrate care and integrated care a long way off), illustrate the frustrating nature of health system reform in the NHS.

Is integrated care hard to do? Are there perverse incentives in the system (things like free-riders and moral hazard, even NIMBY) that work agains effective change in healthcare, and in particular the neverending saga of the NHS? I suggest the problem lies in the methods chosen to solve the problem of integrated care, rather than the value of the goal itself.

  1. Over the years, the NHS has made great strides improving the quality of managers (I used to teach them and co-direct an MBA full of NHS managers) but many appear to be unwilling to speak ‘truth to power’ and take full responsibility for dealing with, in this case, integrated care. Instead, we continue to seek both permission-seeking behaviours in the executive suites of the providers and purchasers (just hate the commissioner language, so gutless), and reluctance to challenge the status quo, perferring the herd mentality.
  2. Foundation trust status has done wonders for improving institutional governance, but operational performance (as we know from Francis) is still uneven. I believe this is in part due to NHS organisations being incredibly weak in terms of their analytical capacity (working with data, modelling etc.) to understand and respond to day to day challenges, which undermines the ability to plan and structure strategic direction in response to changing health dynamics.

Integrated care is not hard to do but does require understanding the patient journey through the system and how best to organise the bits. So where does the NHS go wrong is solving this particular problem?

The models used, and the two articles evidence this are broken. What models does the NHS use? It uses approaches which I liken to ‘team hugs’ and ‘pass the teddy’, feel-good leadership approaches, which do not focus on the outcomes to be achieved, but processes, which may or may not lead to a solution. The result is an overuse of:

  1. “joined up care” rhetoric continues to confuse, yet we still don’t know what it means though it sounds like something we would want; I think it is what we thought we were paying for all along!
  2. “commitments” by those involved become contractual type language of agreement, and which are used to “clarify” what can and cannot be done. But again we see no focus on the problem, but on regulatory and other controls, which if they need clarifying, are perhaps useless if not actual barriers, so why do they exist in the first place? When do we bell this cat?
  3. “ambitous plans”, which is code for more paper which no one will read but which will clutter people’s diaries with meetings about meetings about meetings….
  4. “examples” of what can be done is supposed to demonstrate to people that what they want to do can be done; but if these folk are truly in charge of their organisations and have taken ownership of the problem, would already be probing the possibilities
  5. “pioneer status” is code for people who get to the early money first and get to take one of the examples and try it out by developing a plan which people can talk about, and around we go again.
  6. “top-down” is to be avoided, but is said as a reminder that ‘you are in charge’ just in case you were confused, but given the wider context, you actually aren’t in charge as if you were, we wouldn’t be having this conversation.

The reliance of policy-based tools, though, drives a logic that may not be as flexible as possible to achieve integrated care. If it is such a good idea, what is stopping people?

Integrated care can be driven on the purchasing side by, for instance:

  1. Incentivising providers through bundled payments for whole packages of care that cross institutional boundaries;
  2. Incentivising the emergence of new types of providers to achieve care integration;
  3. Tracking outcomes for processes of care.

Integrated care can be driven on the provider side by, for instance:

  1. Pursuing forms of vertical or horizontal integration that achieves a measure of care integration for specific populations of patients, by avoiding the problems of inter-institutional referrals;
  2. Creating new units of care activity that overcome internal organistional barriers, such as bolting on primary care onto the front-end of the hospital, using step-down units and other alternative provision for different strate of risk;
  3. Ensuring the urgent does not wag the dog and draw resources away from better service stuctures — why does is emergency service so overwhelmed yet the capacity of the system to anticipate and predict so weak?
  4. Bridging skill mix cartels and protected working practices embedded in professional regulation to enable flexible working.
  5. Did I mention working 7 days a week and running at least 18 hours a day? An example of the failure of integrated care is a hospital not discharging a patient on a Friday because [1] the lab doesn’t work late or [2] social services won’t start home care on a Friday afternoon. Integration means doing things when they need doing, not when it is convenient to do them.

It all comes down, in the end, to how you solve a problem. The NHS continues to use methods that have failed in the past, yet these tools continue to be trotted out over and over again.

There are better ways. Email if you want to know more.


Pathways to markets: beyond mere price

The title it a bit obscure, but makes the distinction between people who pay for medicines and those who prescribe them.


There is a pathway for new medicines into markets, and increasingly it is not by marketing to doctors. The pharmaceutical industry to a great extent still sells medicines like the Avon sales person, or the old Fuller brush salesman. It feels almost door to door, and for the pharmaceutical reps, it is doctor’s door to doctor’s door.


But let’s think about this again. A medicine may be priced per-pill, and perhaps that is the essential cost to patients paying cash or with a co-payment. To the payer — the insurance company or government — it is that unit price times the number of patients perhaps taken over 5 or 10 years. I prefer to think of medicines costs in that way as it better captures the longer term population level investments and costs that are involved. Granted there is the selling of the clinical benefits of a new medicine, but increasingly this is an evidence-informed decision making process involving such analyses as health technology assessment. By using my model, the numbers get big and scary really quickly and illustrate the real boundaries of decision making and the adoption of a new medicine.


That means, medicines need to be brought to market as a structured offering, costing perhaps a few hundred million dollars over say 5 years, with associated clinical and outcome benefits to patients and incprporating true value and not just price. In that respect, this will better capture the challenges facing payers, who must weigh out the pros and cons of particular health investments.


In a recent interview by the McKinsey Quarterly, Chip Heath, co-author of a new book on decision-making notes “The typical Fortune 500 manager will run projections from the market data. …  The entrepreneur’s reaction is, “I’m gonna experiment. I’ll find my way into the market as opposed to project my way into it.” The entrepreneurs’ impulse to experiment is right.”


Now, this is quite interesting, and echos Clayton Christensen on the dilemmas of innovation. Running the market numbers does not capture the essential challenges new medicines


English: Example of promotional "freebies...

face and I believe inappropriately positions new medicines as commodity products, rather than what in many cases are true innovations. Mistakenly, companies price new medicines to compete against incumbent products on the market, as though this product had got the price/value equation right. The way forward is to examine the essential cost drivers of payers and linking pricing to these challenges — engage with a payer on the real value and benefits of medicines, taking account of patient and clinical adoption, patient adherence, and longer term value.


So it is time to stop selling and marketing medicines in the old way. Time to move beyond advertising blitz, to true value pricing. One benefit will be smarter discussions between industry and payers. But that will necessitate companies overcoming their own highly fragmented market-facing organisational structures.


Just a word of caution: payers must become more sophisticated buyers of medicines as they will frequently fall into the trap of asking for a discount, rather than negotiating for more value to patients. By the same token, industry may fail to present what today are the essential value drivers of their products. This of course means that in most countries the reimbursement/pricing models are broken or nearly broken, and has not been helped by the sloppy decision-making where austerity is concerned.


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What is the cost of excess hospitalisation in Europe?

Continuing with my thoughts today on excess costs (last post was on medicines waste), I thought I think about excess hospitalisation, another type of waste.

Excess risk of hospitalisation is calculated as the difference between observed hospitalisation (for a condition) and expected population rates.

What are the determinants of excess hospitalisation?

  • Excess hospitalisation can be driven by factors which increase population risk, such as influenza/epidemics, and seasonal and weather variation (e.g. respiratory/COPD, asthma, stroke).
  • Readmissions are viewed as excess hospitalisation.
  • There is some research, in the US, showing ethnic and gender variation in hospitalisation.
  • Complex conditions indicate potential for excess admission with failed primary care but that is a design feature of the health system. Complex/high risk patients disproportionately account for hospital activity. Depending on the other co-morbid conditions, some conditions signal excess costs some of which translate into (excess?) hospitalisation (e.g. Alzheimers), depending on how care is managed.
  • Not having a primary care doctor is a factor in excess use of emergency services and hospital emergency departments, and in turn to excess hospitalisation. On average, perhaps 10% of excess (inappropriate) emergency visits convert into admissions.
  • There is also misdiagnosis and excess length of stay caused by adverse hospital events (such as hospital acquired infection, accidents, patients falls, dropping patients, medicine errors).
  • Excess capacity (where utilisation is less than about 70%) leads to over-provision of care and obviously excess hospital admission. Incentives in reimbursement systems can drive hospitalisation.

Just so you don’t think I’m making this up, consider:

  1. US data show 17.6% of all Medicare hospital admissions were readmissions costing $15 billion annually, of which $12 billion was deemed preventable admission.
  2. The number of BSIs caused by MRSA and G3CREC was extrapolated from EARSS prevalence data and national health care statistics. Prospective cohort studies, carried out in hospitals participating in EARSS in 2007, provided the parameters for estimating the excess 30-day mortality and hospital stay associated with BSIs caused by either MRSA or G3CREC. Hospital expenditure was derived from a publicly available cost model. Trends established by EARSS were used to determine the trajectories for MRSA and G3CREC prevalence until 2015. In 2007, 27,711 episodes of MRSA BSIs were associated with 5,503 excess deaths and 255,683 excess hospital days in the participating countries, whereas 15,183 episodes of G3CREC BSIs were associated with 2,712 excess deaths and 120,065 extra hospital days. The total costs attributable to excess hospital stays for MRSA and G3CREC BSIs were 44.0 and 18.1 million Euros (63.1 and 29.7 million international dollars), respectively. Based on prevailing trends, the number of BSIs caused by G3CREC is likely to rapidly increase, outnumbering the number of MRSA BSIs in the near future. [de Kraker M, et al. Mortality and Hospital Stay Associated with Resistant Staphylococcus aureus and Escherichia coli Bacteremia: Estimating the Burden of Antibiotic Resistance in Europe, PLOS Medicine, October 2011]
  3. A total of 538,580 admissions generated 4,310,654 hospital bed-days and total costs of €940,026,949. People with diabetes accounted for 9.7% of all hospital discharges, 13.8% of total stays, and 14.1% of the total cost. Of the total cost for individuals with diabetes (€132,509,217), 58.3% were excess costs, of which 47% was attributable to cardiovascular complications and 43% to admissions for comorbid diseases. Individuals 45–75 years of age accounted for 75% of the excess costs. The rate of admissions during the study year was 145 per 1,000 inhabitants for individuals with diabetes compared with 70 admissions per 1,000 inhabitants for individuals without diabetes. [Oveira-Fuster G, et al. Excess Hospitalizations, Hospital Days, and Inpatient Costs Among People With Diabetes in Andalusia, Spain,Diabetes Care, August 2004]
  4. Schwartzberg studied health literacy among patients, and noted that patients with low literacy skills were twice as likely to be hospitalised and twice as likely to report poor health. She argues that low health literacy may cost $73 billion [US figures] annually in excess hospitalisation days alone. Much depends on improving the ability of patients (with help from their families) to carry out complex health instructions on their own. [Schwartzberg J. Patient safety. Low health literacy: what do your patients really understand? Nursing Economics, 20(3-2002), 145-147]

Want to know more?

As you local hospital to tell you what they do.


Health Policy Responses to the Financial Crisis: update

A recently released report from the European Observatory on Health Systems and Policies has produced a retrospective on what over 40 European countries did in


Financial policy trumps health policy (Photo credit: Tax Credits)

response to the financial crisis, triggered in 2007. The report “Health policy responses to the financial crisis in Europe” (by Mladovsky, Srivastava, Cylus, Karanikolos, Evetovits, Thomson, McKee) is here.

The report finds that a range of policy responses characterised what European countries did, ranging from doing nothing, spending more to spending less, from increasing benefits to cutting them, from cutting salaries, increasing co-payments, and curtailing capital spending. In many cases, plans to expand were put on hold, while in others, plans in place to drive efficiencies were accelerated. The price of medicines went up, down, reimbursements dropped, co-payments went up, retail prices were capped, prices to the pharmaceutical industry went down, or were modified. The response to crisis in some countries was hampered by powerful stakeholder groups (mainly clinical vested interest groups, e.g. pharmacists, doctors) resisting changes and governments backing down.

The authors note that, in the end, “…little has been done to enhance value through policies to improve public health…” We agree that this was a missed opportunity, though the continuing financial difficulties suggest the crisis is hardly over. My guess is that this will be a generational crisis, as the policy responses still need to feed through the system and lead to either increased ill-health, postponed treatment, or in some cases, simply delaying the inevitable future financial crunch.

Unfortunately, the report is a descriptive study; their assessment of the different policy choices made is based on research conclusions in the literature. What that means is that we don’t know whether the choices made were effective, appropriate, or mere compromise. The appendices provide useful summaries of individual country policy actions. I just wish the authors had assessed these actions.

I would also have liked to have known how individual governments made the policy responses they did; clearly some were unpopular, but that does not preclude making evidence-informed choices and sticking to them. What is evident is that political will in many cases is lacking, and the ability to leverage various policy instruments is seriously hampered by powerful vested interests. Clearly, the financial crisis and the need for austerity in indebted sovereign states, has not hampered the effectiveness of lobbying, only demonstrated that these groups are sufficiently powerful to resist reform even when it is most needed — what hope is there when change is optional?

On pages 28 and 29 the authors useful summarise policy tools that either promote or undermine health system goals, assuming of course that countries have in place strategies for their health systems that correlate with these instruments — it is not unusual for a country to require complex strategies simply to deal with the mis-behaviour of existing instruments — an example is where a country permits balance or extra billing, then needs public funds to cover the costs of underinsured individuals, then needs to have resource shifting policies simply because the co-payment/reimbursement system incentivises inappropriate prescribing or treatment, leading to serious regional variations in outcomes. Situations like this  (there are a number of countries in Europe with this specific problem) illustrate the failure to take a whole system approach to the use of health policy instrument selection. This report does not help either by failing to put the individual country policy responses into the context of the country’s system objectives. That might have produced a more useful report for policy-makers.

In the end, we are left undernourished and want to know whether any of these are likely to have perverse consequences (unintended consequences, perverse incentives, including increase in medical fraud and pharmaceutical crime).

The commercial realities for NHS Overseas

The UK’s Department of Health and UK Trade and Investment are, once again, exploring how to commercialise the NHS ‘brand’ overseas. Drawing examples from where some highly recognisable UK hospitals have set up, notably in the Middle East (Moorfields, Great Ormond Street) the spectre of a steady income stream coming into the NHS from these commercial enterprises has apparently got some folks in government all excited.

It is not uncommon, certainly amongst naive entrepreneurs, to say that if they only got 1% of the market they would earn billions. It seems that some civil servant has run some numbers, and come up with some sort of business case that has big numbers at the bottom of the page — otherwise, why would the DH and UKTI be claiming there would be financial benefits to the NHS into which all these global profits will be ploughed. The DH has a poor track record with commercially-oriented projects, tried with a Texan, tried with local talent, and wasted so much taxpayers’ money on ideas that were obvious failures from the beginning: NHS University, Modernisation Agency, and so on.

Criticism aside, let’s consider the real commercial environment. Let me first say that I am not against this sort of activity, and there is considerable opportunities for success. So, let’s look at the world out there.

All countries in the world are grappling with the costs of care. Others are facing that plus the need to expand their healthcare infrastructure. Rising numbers of middle class taxpayers in many countries are now informed and affluent purchasers of healthcare from a range of sophisticated, domestic suppliers. The countries that are most likely to be interested in expanding the services on offer are also countries with high levels of profit-motivated healthcare, private clinics, extensive and often high patient co-payments. All these are a long way from the experience an NHS hospital would have with a fixed tariff, publicly funded NHS.

No doubt, setting up a hospital in China or India involves a degree of approval, but unless the services are particularly hard to structure, require considerable capital expense or rare expertise, these countries are quite capable of building their own clinical facilities, training their clinicians (many of whom had in the past emigrated to work in the NHS), and supplying the necessary equipment (much of which they already make, in Workshop China). Many poor countries incur substantial losses on buying healthcare from abroad, without creating any domestic value.  Nigeria, for instance, wants to increase tertiary care investments as this is where they most frequently must sent patients abroad. Commercial enterprises from the NHS could contribute to the problem if they are seen as remitting their profits back to the UK.

Medical tourism is something high on the agenda of many countries, such as India or Singapore and they are streets ahead of the NHS when it comes to the commercialisation of their clinical services. The Medical Tourism Association, based in the US, has no UK members, though organisations from France, Spain, Hungary and Poland are members. Medical tourism, of course, is offering less expensive care at world-class levels of clinical excellence (and not just a hip op in the sun!). Indeed, the Middle East used to be medical tourists to the UK, until they started buying in what they needed. It is clear, therefore, that there is some market for medical tourism, and it depends on marketing domestic excellence internationally, rather than necessarily setting up shop in these other countries.

The DH and UKTI refer to the success of US hospitals in exerting an international presence. These US organisations are highly commercial organisations, and have well-developed clinical costing systems, and access to capital, as well incentives to align staff. True, not all are overtly commercial though and Research Triangle Institute (RTI) in North Caroline is worth thinking about as a way of structuring NHS global objectives. In effect, the US is good at this sort of thing as are European counterparts where commercial hospitals are part and parcel of the public healthcare system.  The NHS has discouraged in the past this sort of entrepreneurialism, as counter to the values of the NHS (the Patients Association has used this argument).

The apparent lack of commercial entrepreneurialism by the NHS is likely to put NHS organisations at some risk unless they make greater domestic efforts to test out and understand healthcare markets, many of which are not planned or regulated in the way the UK market is. Take for instance walk-in clinics. a sensible idea, but why are the ones at the train stations private? US instincts to be responsible to consumer preferences has led to an explosion in retail clinics, for instance, to respond to co-payment and cash patients — many countries would see these as particularly interesting.

Now let’s look at these profits. As any company will tell you, they spend considerable time thinking of ways to manage taxation across many countries. If an NHS hospital were to set up in another country, and it generated a profit, then I would think that country would want to tax it. If the hospital has set itself up as a non-profit, they that country would most likely expect any such surplus revenue to be put back into the services available in their country. Think about it. Why should, say, India, permit an NHS hospital to generate profits there which would be sent back to the UK to bulk up NHS services? The NHS and the UK are hardly broke despite the hand-wringing of government, and have no real barriers to service development except those that are self-imposed. India, on the other hand, or China or Malaysia or whereever, are using the private sector to build domestic capacity to benefit their own citizens. How should the NHS feel about shifting overseas profits from a low income country with serious health challenges, to wealthy olde GB, simply because the UK government doesn’t want to spend any more money than it has to?

And just to close the circle at this stage, other countries have similar ideas, and had spectacular failure, or lacked the necessary domestic knowledge and skills to work in this international arena. Any proposed activities will be overseen by some new review board called Healthcare UK, and what will it do?

So what are some conclusions?

I would think the best approach is to focus on helping build a country’s domestic capacity; but this sounds more like an aid programme than a commercial enterprise which DH and UKTI have identified. I might focus on India, China, Brazil, and other countries in Asia where there is considerable investment available and the need for services a priority. It may be worth noting that in many countries, the real problems lie in primary care, as patients already have direct access to specialists on a cash/copayment basis. SInce citizens/patients are used to paying cash or large co-payments, governments tend only to be concerned with regulation, rather than owning or running their own facilities. In India, Tata Steel, for instance, run their own chain of hospitals to world standards. Well-structured commercial thinking that address a country’s economic and healthcare priorities would also help them stem the flow of money to 3rd countries for the costs of care of patients sent abroad — perhaps someone in the UK will try to understand Nigeria’s objectives and offer to set up a productive tertiary centre and perhaps link it to some training facilities so they can build domestic expertise (however, Nigeria’s ICU at University College Hospital, Ibadan, is described as the best in Africa for cardiac care and was built as a public/private initiative by UCH and JNC International, based in Nigeria).

Obvious examples where I have had some inkling that opportunities exist (and not engage in vampire economics) include Libya which needs a complete refit of its healthcare delivery infrastructure (not just ambulances though that is no doubt worthy), including higher education (some hotel chains are looking to expand into hospital construction…), and other countries which have emerged from periods of conflict, and then there are those in the throws of revolution to consider — post-conflict reconstruction would bring the added benefit of advising on building fully integrated service structures (primary and secondary/tertiary/quaternary capacity) which in the end is what we all preach, isn’t it.

There is some market for contract management of hospitals, but many countries are taking a more nationalistic approach with a preference for local talent, than imported talent to run hospitals — I run seminars for health managers from many countries and they were quite sophisticated in their knowledge). Health management training centres in the UK are not really addressing the blend of commercial issues with healthcare, in the way that other countries, are able to (I’ve taught in one in the UK). Expertise is the real issue and few UK universities offers a post-graduate qualification in commercial hospital management, strategic capital planning and all that (they do offer courses more suited to public officials managing state-run hospitals, e.g. Leeds and Anglia Ruskin University’s Hospital MBA; but there is no UK or European equivalent of AUPHA in the US/Canada, so standards and practices reflecting real-world requirements are weak).

Now, if the few that could do this do it well, then it would do wonders for host countries and build the reputation for excellence that the NHS has been losing. Whether it returns profits to offset NHS underfunding is another matter.

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Healthcare and the Euro-zone crisis, part 2

Euractiv has reported on Commissioner Dalli’s comments that the Euro-zone crisis should not turn into a public health crisis. He added: “difficult times can indeed

Johnny C Fiddle

Policy options may look good, but do they actually play decent music? (Photo credit: Cindy Funk)

provide an incentive to think creatively and push forward in-depth reforms and contain costs, while building modern, responsive, and sustainable health systems fit for the future.”

I agree, yet despair.

Countries have healthcare systems for good reasons and allocate resources because they believe the system in place is the best solution. What we are now seeing is that these systems are very costly, perhaps with weak GDP, almost unaffordable in terms of medical inflation and the impact of demographic factors on services, which outstrip society’s ability to afford more, given other competing demands.  The ability to affect needed healthcare reform is further complicated by governments with limited policy instruments or imaginations. Some may have been literally captured from a policy perspective by powerful vested interests.

My hope is that the current austerity will be a spur to reform; however, in this case, my thinking is that governments need to see themselves as encouraging innovation, and not protecting the status quo.  We can no longer afford to continue to put taxpayers’ money into unreformed governmental and healthcare systems.

As I have written elsewhere, governments fear the creative destruction of public institutions, yet these are frequently the ones most likely to be the barriers to system reform.

The Euractiv article gave some illustrations of the responses by government, none of which involved in-depth reforms. Let’s take a look at some of the examples in the Euractiv article and deconstruct them a bit: (the Euractiv’s text is italicised, my deconstruction follows).  The following comments are not intended to be comprehensive, and I have not addressed in detail whether in some cases there was fundamental logic in the actions. I am looking at these actions in the context of IF you’re thinking like this, THEN you are NOT thinking of more sustainable strategies. You are only, as they say, kicking the can down the road for others to deal with in a few years.

  1. Many countries in Europe have cut public health budgets drastically since the beginning of the global financial crisis in 2008. Regretfully, this is usually the simplest and easiest thing for governments to do. I accept that healthcare system reform is not easy, particularly because of the perceived influence and power of healthcare professionals, and the public’s deep lack of knowledge of how healthcare funding can be mis-spent. That expenditure might be too high for the delivered value of the expenditure actually buys is of course the real issue, not whether budgets can be cut per se.
  2. In France, the government expects to reduce spending by €2.4 billion on the health insurance side. Some 40% of these reductions will be made through a shift to generic medications and savings on medical devices, while measures in favour of greater efficacy in hospitals are expected to lower cost by €1.5 billion. France has failed to balance its public accounts since the 1970s — why should now be any different? The centrality of government in France makes it hard to use local or regional drivers of change as there is the bureaucratic overhang of the centre — what is surprising in France is that despite this overhang, and the central ministry of health employing over 15,000 people (what do all these do all day??) regional outcome differences exist.  Despite some regional level reforms (the ARS), hospital cost structures and payment to doctors (in France doctors can extra-bill!) are the real cost drivers. Shifting to generic medicines is a typical knee-jerk approach. But medicines spending often suffers from poor, even irrational, prescribing practices, weak medicines use management, and weak patient adherence programmes — perhaps 30% is misused, unused or disposed of so much of this expenditure may be suspect.  France has a weak record in biotechnology (despite what they say) and its research has worried the Ministry of Health as it lacks global visibility across a broad spectrum. But investment in life sciences R&D is, for most countries now, seen as a critical driver of economic growth (despite the fact that few countries actually have the research, development, university or commercial infrastructure to do just that). So as generics replace branded medicines, so investment in life sciences research will leave to more congenial countries (other macroeconomic policies may encourage this). The same can be said of trying to save money on medical devices; though devices are not priced like medicines and do not behave like medicines — there are no generic devices in that sense. So it is hard to image what might be meant by savings here. As for hospitals, the great sink hole of healthcare expenditure in any country, what tools are available to drive ‘greater efficiency’?  Country after country is grappling with this. However, €1.5 billion is not a lot of money in the French system which accounts for 11.8% of French GDP (3rd highest in the OECD), which translates into €3872 per person, of which €1639 per person is spent on hospitals. I would be looking for significant analysis of hospital cost structures, skill and service mix, utilisation, etc. to know how efficiency gains will be realised through resource releasing strategies.
  3. In Estonia since July 2009, the sickness benefit rate has been reduced from 80% to 70% of the insured person’s income. The sickness benefit rate in the case of caring for a child under 12 was reduced from 100% to 80%. Cost-shifting to the patient is a regretfully increasing tendency; it also affects lower incomes more than higher incomes. The likely ability to alter patient behaviour and use of healthcare is not completely clear, though the research does show that increasing or even the existence of co-payments reduces the likelihood individuals will seek healthcare and hence lead to increased burden of ill-health, particularly amongst those most price-sensitive. Better to have targetted the underlying costs, first; however, with a shift to a larger co-payment, there is the potential to increase public awareness of healthcare costs and use consumer behaviour to drive faster and more thorough-going reform than simply through government diktat.
  4. The Greek government this year decreased its mental health services by 50%, and the budget was further reduced to cover only 45% of the psychosocial rehabilitation services. In the end, I suspect that this will have a longer term negative impact on mental health status, the problems from which Greece will not be able to export to other EU member states, under the cross-border health rules. Reductions in budgets alone, though, do not tell the whole story as embedded in these services may be higher overheads and administrative burden, inefficient work patterns, and poor use of available expertise (perhaps low case loads); these comments do not say Greek therapists may not be up to the challenge, but the system they work in may constrain their ability to deliver better care through infrastructural and systemic inefficiences. This is where I would look. My view is that as these are broadly predictable costs within known demographic factors, decoupling this debt component from the total would be sensible as it can in the end by better managed than through short-term quick fixes.
  5. In Latvia, nurses’ salaries have fallen 20-40% since 2009. Between 2006 and 2010, the number of hospitals in Latvia have decreased to 39 from 106 and the number of hospital beds decreased to 493 from 761. Reducing the number of hospitals, in and of itself, is not a problem, nor is the reduction in numbers of beds. Bed utilisation is what matters and the intensity with which beds are used, such as length of stay and whether people are hospitalised inappropriately, or held in hospital because of poor discharge facilities (e.g. step-down units, community care) all of which can be provided at substantially lower costs (owing partly to different skill mix, and partly to lower capital costs). Cutting nurses’ salaries (and presumably doctors, physiotherapists, pharmacists, etc., too, though I doubt it) may be counterproductive as it will simply create a reason for people to leave; there is a global shortage of nurses. Better, is to focus on work processes. We know that up to 30% or more of a nurse’s time can be unproductive in terms of patient care. By simply reducing this waste of time through systematic reform of work practices, staffing can increase the equivalent of 15% or so; equally, nursing is a highly stressful job, and nurses tend to have very high absenteeism rates; perhaps 10% of the nurse complement exists simply to respond to absenteeism.

Medical Debts and the Euro-zone Crisis

The financial markets have broadly spoken and find the leaders of the Euro-zone patently unable to implement the solutions to the crisis.  Knowing what the problem

Confused Man Reading a Bill or Bank Statement

Where did it all go wrong? I thought there was enough money…. (Photo credit: s_falkow)


really is is very important and it now appears that the core structural reforms necessary seem too hard for doctrinaire European thinking. If you keep trying to implement the same solutions and keep getting the same results — namely a sovereign bailout — that is a rational clue that you are doing the wrong thing.

Medical indebtedness is a big part of the problem, as much of the debt arises from state controlled or funded health systems, and therefore the payment from public funds to pharmacists, doctors, hospitals, etc. adds to the debt load. Indeed, going forward, the debt rating of Euro-zone countries may be in part determined by their ability to handle these types of debts. So far, though, the prognosis is not good.

A summary: figures arising in the period February 2012 to date [Sources: Financial Times, Reuters]

  1. overall, pharmaceutical companies are owed €12 billion in unpaid bills for medicines (debts more than 30 days unpaid).
  2. about €6 billion of that is apparently in Spain; overdue bills in Spain are approaching 800 days unpaid; recently, though, the Spanish central government found €17 billion euros to pay suppliers of the autonomous communities — 73% of this amount was for unpaid medical bills
  3. medical device makers are owed about €4 billion
  4. one device company recently took back about €4 million in unpaid inventory
  5. an insulin supplier shifted to cash on delivery for Greece and has threatened to withhold new drugs from the market
  6. many pharmaceutical companies are reprofiling their product portfolio in high risk payment countries, with a focus on medicines where there is no alternative source of supply or where there is higher clinical need
  7. there is in some cases a broad strategic shift away from customers who don’t pay their bills (e.g. hospitals) to the patients, thereby avoiding high risk local or regional government payers
  8. many health industry intermediaries are diversifying their business away from this sector
  9. some companies have written down their debt selling sovereign bonds; amounts in the tens of millions of Euros are involved.
  10. some of Greek national debt arose from hospital capital expenditure and the failure to properly account for these in national accounts, despite the fact that their hospitals are in poor physical condition; there is a comparable risk associated with capital expenditures across the Euro-zone as it generally involves public bodies and public debt
  11. and so on….

What does this mean?

Consequences to health systems are unlikely to be short term. The suppliers are bearing the costs of granting credit to governments with increasingly fragile credit ratings. They are going to be more cautious in future, no doubt. But a few consequences can be anticipated based on current actions:

  1. There is an evident shift from state payers to patients, forcing patients to pay full costs and then recover these costs from payers. This can be serious hardship for some patients. To some extent, increasing copayment/full payment increases price awareness amongst patients, and increases their awareness of true costs and medicines or device availability. Where national policies may act to suppress introduction of innovative products, public salience of this will rise. Increased public salience will have the effect of limiting the ability of governments to act to constrain costs and availability. This alone could lead to calls for radical reform of state controls in health systems.
  2. Innovative medicines and devices are unlikely to be supplied to at-risk countries until there are assurances of payment. Indeed, medicine reimbursement policies which seek to drive down medicines prices or encourage generic substitutions are likely to have a perverse consequence as industry has the option of restricting to supply to manifest demand, or delaying the introduction of innovative medicines for fear not only that they won’t get paid, but the price paid may be punitive.
  3. Infrastructure renewal in the healthcare system will come under considerable scrutiny. Do we need to renovate hospitals; should new ones be built or should we be looking at newer ways to deliver healthcare at lower costs (e.g. e-health), and how will the vested interest groups (health professionals) react to far reaching system reform to reduce the capital costs of hospitals?
  4. Reduction in availability of supplies has a variety of consequences: shortages of medical/surgical supplies delay operations; shortages of gloves can increase the risk of spread of hospital infections (which can cost upwards of €100,000 per incident to clean up, a lot more than gloves cost); general cost containment can compromise linen supply and sterilisation, increase the risky use of reusable surgical instruments and encourage staff to take risks with reusing equipment in general; given the scale of infrastructure, staff shortages (not hiring replacements) can lead to increased patient loads for health professionals and thereby shorten time available for patient care. This list can go on and on.

The point is that healthcare is a system, and shocks to that system, whether unpaid medicine bills, staff shortages, hospital infections, whatever, have consequences throughout and many of these consequences are likely to be far more costly than the savings and could lead to widespread risks to public health.

Solutions? In my view, the time is ripe for the at-risk countries, in particular, to reflect on the cost-drivers in their systems and focus on substantial reform of the delivery system, as well as the financing itself. Long-term sustainability is needed, so short-term or ill-thought through reforms will only make things worse. We’ve already seen the consequences of that with current Euro-zone leadership.

Email me your suggestions and let’s start building a list of possible solutions that protects the integrity of the public’s health without bankrupting the country.


Commercialisation is a bet on the future

In this Age of Austerity, good ideas risk being lost. The dynamics of funding of innovations has always been full of risk. But as various debt-laden governments try to balance bloated public balance sheets, should we worry about where the ‘next big thing’ will come from? Yes, if you believe that governments can find and fund winners (the evidence says they can’t by the way, but can act as catalyst or midwife), no if you believe that the wisdom of crowds, otherwise known as markets, might be a useful driver of innovation development and adoption.

The diagram below summarises the funding of innovation, identifying in particular the so-called ‘valley of death’ where good and bad ideas go to die for lack of funding. The risk we, as taxpayers, face is that governments will continue to fund innovations into the valley of death, perpetuating what I call the ‘research funding welfare state’, where research happens, but innovations don’t. Hyperactive civil servants with indelible portfolios will continue to pursue dead-end projects despite evidence that the world has moved on. The real problem for governments isn’t finding money for funding research (though that is hard enough), but realising a simple algorithm:

  1. the world is characterised by change
  2. the world will change faster than our ability to respond
  3. this will not change.

Europe has a shortage of innovation gorillas compared to other countries, and if the politics of some countries are to be believed, would rather retreat into a safe haven of social solidarity and protected interest groups, than face the harsh realities of the modern world. This Fortress mentality will not keep the disruptive wolf from the door and will only add to domestic turmoil as native talent packs up and leaves for more encouraging countries.

The harsh reality of innovation is that it can be violent, overthrow trusted ways of doing things, and challenge what may be thought of as defining cultural norms and social innovation is just as much part of innovation as the inventions themselves. The other true thing about innovation is that it knows no favoured nation or culture — anyone and any country can do this.

Find the risk