Want to reduce healthcare spending? It’s all about looking in the right places

Posted by MedTech Europe on 25/07/11

Just last week I was sitting in a presentation by a large Group Purchasing Organisation (GPO) which cited an Ernst & Young report in which hospitals had ranked their goals for cost savings. What struck me is how a majority of the surveyed hospitals want to reduce costs by cutting in the spending on medical devices. Why is this so striking? Because spending on medical devices, and more in particular medical device consumables, accounts for only 3% of total health expenditure, whereas spending on hospital organisation (internal processes, staff, …) accounts for 70%. So if hospitals want to reduce costs as efficiently as possible, can greater savings not be made in areas other than those that make up a minority of the total expenditure? And do we really want to slay the goose with the golden egg, the medtech industry, whose tremendous innovative capacity will be a conditio sine qua non for sustainable high quality healthcare for the citizens of Europe into the future?

A recently published report by Frost and Sullivan points to what is required: “Innovative Products, Thoughtful Strategies and Involvement of all Stakeholders Crucial to Implementing Successful Reform”.

We currently occupy a ground where the different players and stakeholders appear to spend most of their time defending their own turf, finger pointing at others and claiming that the problem lies with them. The stark reality is that with 70% of the costs in healthcare involving people, the whole focus needs to be on how to deploy those people more efficiently and productively. Healthcare is a service industry and the processes that are used are often designed for the convenience or economic advantage of those delivering the service rather than those in receipt of the service or those paying for it. This is radical but necessary if the pace of healthcare inflation is to be contained.

Targeting suppliers of enabling technology to reform the system as key elements of the cost reduction programmes of governments is extremely short-sighted. We need all the innovation that we can get our hands on, albeit innovation that is perhaps better aligned with the challenges of the 21st century rather than the 20th century where incremental improvement in clinical outcomes was the sole focus of suppliers. This approach has been successful and delivered all sorts of interventions and treatment improvements which we all now take for granted but the world is changing and like all the other participants in the healthcare ecosystem we have to change with it.

The focus really should be on changing internal processes and organisational optimisation as that is the key:  hospital organisation accounts for 70% of the healthcare expenditure but only 4% of the hospitals seem to want to focus on this area to implement cost reduction programmes. This is no easy matter as there are big economic and political stakes in this battle and many will defend their practices to the death. Those need to be ostracised and brought to book because we cannot afford to be delayed and hectored by the 21st century equivalent of the Luddites (an English group that smashed early farm equipment) driven by fear of change and short-term financial loss.

John Wilkinson
Eucomed Chief Executive

One Response to Want to reduce healthcare spending? It’s all about looking in the right places »»

  1. Comment by Carol | 2011/07/26 at 11:01:06

    This is an excellent article and one which needs further airing and additions including.

    As Healthcare has moved forwards from the pure reactive issues that befell the last century to the pro-active and the preventative area we might consider the needs of adding to this issue some obvious areas where the various national governments within the EU (and indeed beyond!) do not take or implement the powers that they have to recoup some funding sources to which they are entitled. Here I would like to cite that there are some examples that are not fully accounted for despite the fact that the recipients pay for them outside their taxation systems.

    1] Healthcare after road transport accidents….
    despite the fact that these incidents can occupy a very large proportion of the budgets of all health care providers – the sums involved we hear can be as much as 30% of the total – and the knowledge that every driver has to furnish adequate insurance to cover both for his and third party injuries as a matter of course to fulfill his driving permit, the drivers do in fact get away with considerably less costs than the consequences. This readdressing for we read and understand that with the healt servives’ costs associated with accidents running into €10s of 10,000s per incident that these costs should be more equably covered by the insurance industry rather than the collective tax payers. When you think also that many of the persons involved in post-operative recuperation receive an income substitute (from the insurers) of up to €1500-00 per week it is amazing that these costs are not fully paid back!
    2] Healthcare after Sports Activities…..
    This same issue applies as for road transport providers.
    3] Latent Healthcare Provisions from Industrial Accidents.
    As for the above…..all companies have to be insured.
    4] Healthcare Consequences from Beverage Manufacturers….
    Let’s now fully open up the can of worms here by placcing a surcharge on the Point-of-Sale of various Alcoholic Drinks to cater for Healthcare provisions that result from this! We are gradually walking into a time-bomb of future alcoholic-related diseases that will cost the EU member states around a third of all healthcare costs from this alone, but nothing is done to redress this issue. A Point-of-Sales Tax levied at such a rate as to make people aware of these consequences is long overdue. Adding 15 to 25% as a levy would for this would be an appropriate mechanism that could be implemented without much fuss. And whilst we are at it a similar cost addition to cigarettes and tobacco products would also be appropriate.
    5] Healthcare consequences of Life-Style goods…..
    You may ask waht are we getting at here? Well a typical example is inappropriate “High Heel” shoes for females. These should be given health warnings as much as any other garments for they have consequences of inducing major knee and hip surgery that would be totally avoidable for some people if the users were advised that the consequences were a €35,000–00 operation to their skeletal frame in 20 or so years’ time. Yes a premium could be applied to the Point-of-Sale product but the real culprits are the Fasion Designers who should be made to provide the insurance provisions for same.
    There are of course other areas where lax management of Government and Health Protection is needed and none is more so evident than the providers of the “Fast Food” chains of companies (such as perhaps those resulting from eating MacDonalds, Kentucky Fried Chicken, Burger King, Pizza Hut etc etc etc ) who in evidential instances across the World are alleged to be the reason for the growing obesity problems we see developing not just in the EU but in South Africa and the PRC and SE Asia where the occurrences of 25+% of children under the age of 16 are being reported to be “obese” by current measures – if we hear what is stated in the BBC and various other media networks in China Russia and the likes.
    So whilst we concentrate on ensuring that the efficiency of the practice locations for our healthcare provision is adequately addressed here are a few additional areas to consider.


Leave a Reply »»

*
To prove you're a person (not a spam script), type the security word shown in the picture.
Anti-Spam Image

The MedTech Europe blog rss

A blog on trends, issues, opinions and views about the medical technology industry. It is a collection of former Eucomed blogposts and brand new MedTech Europe ones. more.



Advertisement