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(originally published by Booz & Company)


Global Lessons for Controlling Healthcare Costs

Rising costs and rising demand have been exacerbated by the inability of governments to fund healthcare systems. The global economic turmoil that began in 2008 continues to reverberate in the form of individual national crises and a slow, halting recovery.

The magnitude of the challenges that these conditions are creating varies among healthcare systems. Former Canadian Prime Minister Brian Mulroney recently pointed out that his country’s government-funded universal healthcare system is not financially sustainable. “We face a crisis if efforts are not made to avert disaster. Health-care costs are exploding, increasing by 5 per cent to 7 per cent annually. Yet, GDP and tax revenue — which finance health care — are growing much more slowly,” he wrote in an editorial in the Globe and Mail. “At this rate, health care will make up 80 per cent of total program spending in Ontario by 2030, leaving all other programs to be funded from the remaining 20 per cent.… This same trend can be seen across all the provinces and territories.”

Canada isn’t alone. In the U.S., Medicare went “cash-flow negative” in 2008. And even though the reforms in the 2010 Affordable Care Act improved the outlook, the boards of trustees of the Social Security and Medicare trust funds still report that the Hospital Insurance Trust Fund will be insolvent by 2029.

The bottom line: For many healthcare systems, and the payors within them, the challenges of cost and demand have created a looming crisis and have given rise to the specter of systemic collapses.

Searching for Sustainability

All healthcare systems are facing challenges in terms of sustainability. But the value for payors in taking a global approach in their quest for more effective medical management strategies lies as much in the diversity of healthcare systems as in their commonalities. Simply put, incremental approaches in siloed national markets are unlikely to be enough to rebalance the cost equation.

The structures and payment schemes within systems vary widely, as do the development levels of their care-delivery infrastructure and care provider bases, and the needs of the people they serve. This has led to a broad range of solutions to the issues of cost and demand.

More and more payors are reaching outside their home systems to explore and capture the value these solutions offer. Their efforts take three common forms.

1. Treatment guidelines. Treatment guidelines are used by doctors and hospitals to standardize care, improving outcomes as well as reducing ineffective treatment, medical errors, and waste. These actions translate directly into lower costs for payors, which are increasingly encouraging (and, in some cases, measuring) guideline development and adoption.

So many government payors were interested in creating and implementing clinical guidelines that in 2008, the U.K.’s National Institute for Health and Clinical Excellence, which develops guidelines for the National Health Service, formed NICE International. NICE International is a nonprofit organization whose goal is to help develop healthcare systems globally. Its work is funded by government agencies and international organizations, such as the World Bank and the World Health Organization. And although NICE was developed for application in the U.K., its impact is broadening as other systems adopt NICE recommendations and engage its capabilities directly.

In 2009, for example, the ministry of health in the Indian state of Kerala, which funds public healthcare, tapped NICE International for its expertise in clinical guideline development. Kerala has a healthy population and a well-educated base of doctors, but the ministry of health is seeking to stem the decline in some of the state’s health indicators by learning how to more effectively develop and implement guidelines, especially for rural clinics and for diseases, such as leptospirosis, that carry a high burden of care, but are relatively simple to treat. NICE International has also worked with the ministries of health in China, South Africa, Turkey, and many other nations.

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