Financial pressures, the escalating cost of treatment, ageing populations, unhealthy consumer lifestyles and a shift in the burden of ailments from treatable to chronic are putting pressure on medical payers across the value chain – whether public sector, insurers or hospitals paying manufacturers.
All of these factors have created a new buying world where size is most definitely important, value must be proven and decisions are led by professional administrators, rather than clinicians and sales reps.
Health structures across the world are fundamentally changing. In the US, for example, 60% of physician group practices are owned by IDNs or Integrated Delivery Networks – large healthcare delivery organisations that either own or manage multiple points of patient care – from hospitals to clinical practices, to long term care.
It’s not just the US, look at the Trust system in the UK and the trend for GP practices to hook up with national buying groups. In today’s healthcare landscape, size matters – scale is used to negotiate with suppliers; who in turn have responded with mass mergers and a drive for scale.
Focus on outcomes
With scale comes power. Payers are renegotiating the way they pay; and they only want to pay for treatment that works. At the moment, payment by results rather than by volume of operations (for example) is still piecemeal, but this is changing rapidly.
In the UK, the NHS began a major pay-for-performance initiative in 2004, known as the Quality and Outcomes Framework (QOF). General practitioners agreed to an increase in income according to performance, based on the quality of treatment of around 10 chronic diseases, the organisation of care and the patient experience. So, health providers in turn are looking to avoid financial penalty by reducing the risk of unsuccessful or negative outcomes. Some manufacturers have capitalised on this trend, for a competitive edge.
Increasingly, hospitals, pharmas and device manufacturers that cannot prove the genuinely substantial value of their procedures, medications, and products will lose out. They’ll also need to become more flexible and open to integration, networking and partnerships.
In general, this greater focus on results is supported by the increasing availability of data and technological systems for joined up tracking of patients’ treatment and recovery, at both a patient and “hospital results” level – so that the efficacy of individual treatments can now be evidenced. Without this, payment by results isn’t possible.
Changing seller-buyer relationships
In the past, the crux of the healthcare sales model was the relationship between the manufacturer’s sales people and the clinical professionals, who then specified and administered care to their patients. Nowadays relationships are still important but they’re focused on a broader, different set of people with different priorities.
With procurement decision making at scale, it’s the professional administrators who now define treatment protocols – not clinicians, who now have varying degrees of influence as advisors only.
All decisions, especially any changes, must be justified not only in terms of cost but in terms of value – clinical efficacy. Health economics is becoming increasingly important – the overall financial impact of a decision to the organisation. For example, if a new piece of consumable equipment has a high cost per item but has a huge impact on successful procedures, then overall the cost of successfully treating each patient may be lower. We explore this change in more depth in our article How seller-buyer relationships have changed in healthcare.
Another key shift is the changed perception of patients. With the prevalence of medical insight online, nowadays patients are more likely to self-educate on their diagnosis and treatment plan, rather than simply accept what their doctor says.
An increasing number of patients are using online forums for information not just about their condition but about their treatment options too – right down to specific doctors. US sites such as Netdoctor and Mayo Clinic are popular worldwide and are being replicated in national markets such as the UK. Boots were riding a trend with their recent partnership with Web MD. It’s easy to envisage less restriction on providers marketing to consumers in public-paid markets such as the UK in the future, since patients are already getting more involved.
In many cases patients also voting with their feet – and wallet, increasingly paying to choose their own course of treatment. The rising affluence of the over 50s (those most likely to need treatment), the rising cost of PMI and reduced confidence in public healthcare means an increasing number of UK patients are proactively seeking a direct private healthcare solution. This is particularly evident in cardiology, radiology, dermatology and gastroenterology. But it’s also occurring within the public sector. NHS patients are now encouraged to choose their consultant and/or hospital and even choose how their ‘personal health budget’ should be spent.
In theory, all of these changes are ultimately better for patients, resulting in high quality care and successful treatment. Trends which are truly transforming health.
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