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Impact of Technological Developments on the Costs of Healthcare

NAMAF Conference 22nd SeptemberMark Brand

www.brandtechconsulting.co.za

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Necessity is the mother of all invention 

AESOP

Moore’s Law predicts that every 2 years the cost of computing will fall by half.

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Today’s Topics

• Economic drivers of health costs

• Economic realities

• What is health technology

• How does health technology impact costs/demand

• Opposing perspectives

• Factors for increasing or decreasing costs

• Defining and creating value

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Demographics(growing & aging

population)

Information(increased expectations from

doctors and consumers)

Standard of Living (demand)

(patient choice and expectations of quality)

Relative price effects

(labor costs; provider services, skill intensive)

Chronic Diseases(HIV/AIDS)Structure

(incentives; reimbursement;coding; guidelines)

High valueinnovation(increase in pace and price of new

technology)

Economic Drivers of

Healthcare Costs

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Economic realities

• Technology has made a major contribution to improving health status of populations

(improvement in morbidities and mortality; productivity; quality of life etc)

• Comes with a health expenditure growth that outpaces economic growth rate in

most countries

• Focus on costs merely as a problem overlooks the value patients and society in

general derive from improved health on the whole.

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Economic realities cont.

• Greater focus on technologies that offer the most health gain for unit of money

– value.

• Pressure continues to build to understand and control spending

• Technology is considered principle controllable driver of health spending

growth.

Garber et al (2014) reports that according to some estimates the economic value of improvements in survival in the United States has far outweighed the costs of medical care and nearly equalled measured gains in all other aspects of material well-being. Reconciling these alternative views of the role of technology is central to the debate about how to control health spending growth. There can be little doubt about the great value of medical technology when put to its best use.

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What is health technology?

• procedures, drugs, devices, equipment and processes (support systems) by

which health care is delivered.

• Developments in technology would include:

• new medical and surgical procedures (angioplasty; joint replacements; MIS)

• Drugs (biologic agents)

• Devices/equipment (CT/PET scanners; ICD’s etc)

• New support systems eg ICT (electronic patient records; mHealth etc)

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How does health technology impact costs?Some thoughts........

• Relationship between tech advances and expenditure is not straightforward or static, with intervening factors that influence this dynamic.

• Some would exert more upward pressure than others, with others down• Whether a particular technology increases or decreases costs depends on whether a

given technology: Substitutes or an existing service; expands the number of treatable conditions, allowing providers to treat conditions

they previously could not treat or could not treat effectively or aggressively; intensifies level of use of the technology for the same condition; impacts the delivery of care (eg, improves the capacity of the system to treat more

patients); broadens the definition of diseases; and extends life, for which each patient bears

(or induces) additional years of health care consumption.

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• Difficult however to measure the impact

Continuous and incremental improvement (thousands)

Ironically represents about 10-15% of spending

Impact may be interrelated

Health care economists (Callahan 2008) estimate that 40–50% of annual cost increases can be traced to new technologies or the intensified use of old ones. That makes the control of technology the most important factor in bringing costs down.

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Health System

PractitionersI have a patient

with a diagnosis, how can I treat it?

Opposing perspectives…

PatientsI have this

condition, where can I get the best

treatment?

PoliticiansHow does

everyone have access to

quality care?

PayersI have limited budget, what do I pay for?

IndustryI have this technology,

what can I do with it?

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Factors for increasing or reducing costs?

• What is the cost of treating individual patients over the full treatment care pathway? Does the new technology supplement or substitute current treatments and what

is the incremental cost? Does it effect/offset the use and/or cost of other services?

• What is the likely utilisation of that technology? Does it treat previously untreatable conditions? Diagnose new populations for existing treatments? Extend existing treatments to new conditions?

• Is the investment now worth the benefit later? Diagnostics (PoC) capacity that allows more targeted treatments Vaccines now avoiding more expensive treatments later?

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Defining value

V =_____ = _______outcomes condition specific

cost total cost of cycle of care

Porter (2012) questions how we define value in health care when there is a myriad of conflicting and divergent goals amongst role players? Achieving high value for patients must become the over arching goal of health care delivery

• Cost reduction without regard to the outcomes achieved is dangerous and self defeating, leading to false “savings” and potentially limiting effective care.

• Simply put, focus on single event costs and outcomes ignore the full value that should be realised by the patient.

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Health System

Government•Invest•Partner •R&D incentives

Payers•Reward compliance

•Pay for performance

•Reward innovation

•Efficiencies

Industry•Positioning•Evidence •Education•Fit for purpose

Patients•Wellness.•Compliance.

Hospitals•Specialization

•Consolidation

•Site of care•Efficiencies•Employ doctors

HCP•Peer review•Guidelines•Reduce admin

•Appropriate

Creating value

Smart phone based ECG Ultrasound Patient monitoring

(oxygen; pulse; BP; glucose etc) – realtime (bluetooth technology)

PoC diagnosis

Look outside of mainstream healthcare – go digital (harness it to Moore’s Law?)

• mHealth platforms • Electronic health

records• Social networks for

educationOperational efficiency• more output for less

inputPay for performance• Reward innovation

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Some take aways...

• Innovation cannot be stopped, and focus should be on the healthcare

ecosystem in which it is used

• Clearly in need of an integrated care model that ensures use where

there is greatest gain

• Technology needs a mechanism for assessment

• Need a huge paradigm shift towards demonstrating value

“any process of examining and reporting properties of a medical technology used in healthcare, such as safety, efficacy, feasibility and indications for use, cost, and cost-effectiveness, as well as social, economic and ethical consequences, whether intended or unintended” IOM

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Impact of Technological Developments on the Costs of Healthcare

Thank you!

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