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(originally published by Booz & Company)


U.S. Health Care’s Technology Cost Crisis

The most important question in establishing a value paradigm is the level at which value assessments would be made. One possibility is to use a federal agency, such as the Food and Drug Administration, akin to the national authorities that evaluate new technologies in Canada, France, the United Kingdom, and other countries. Another possibility would be to create a public/private partnership between existing government entities and private health-care groups. Both options have advantages and disadvantages; it seems more likely in the short term, however, that the U.S. will opt for a smaller-scale approach (versus creating a national body), for example, contracting the work to several small private entities, similar to the privately run centers that currently perform technology assessments.

Some may view the push for cost containment in health care as a threat, but it is far more productive to look at it as an opportunity.
A wide range of cost-management possibilities exists at the level of individual health-care plans. Differing levels of co-payments can be introduced, as they have been in some plans, for various diagnostic imaging techniques. Another potential strategy is to align the incentives of payers and providers to reduce overutilization of technology.

All players, especially technology manufacturers and health-care providers, need to prepare for, or even step in to shape, the almost certain changes in the way medical technologies are paid for and deployed. Manufacturers should be thinking about ways to more thoroughly document the value of their technology, to better understand what changes in product positioning and pricing may be required, and to critically review product-development portfolios. Health-care providers may want to consider more extensive patient and provider education programs, supported by incentives that better align desired outcomes. Both sets of players should get involved in determining the best way to perform value reviews with other health-care constituencies and in creating joint forums for discussion.

Some may view the push for cost containment in health care as a threat, but it is far more productive to look at it as an opportunity for different stakeholders to work out a feasible solution for all.

Charles Beever ([email protected]) is a vice president with Booz Allen Hamilton based in New York. He assists companies with strategic, organization, and performance improvement in the fields of medical products, pharmaceuticals, and health care.
Heather Burns ([email protected]) is a senior vice president in Booz Allen Hamilton’s McLean, Va., office. She focuses on strategy and technology solutions in the health-care and environmental industries.

Melanie Karbe ([email protected]) is a principal in Booz Allen Hamilton’s San Francisco office. Her work focuses on strategy development, in particular commercialization and innovation strategies, as well as strategy-based transformation for clients across all health-care sectors.
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  1. “What’s Driving Prescription Drug Costs?” by Heather Burns, Charles Beever, and Robert Hutchens, s+b enews¸ 09/29/03. Click here.
  2. “Patient Safety: A Data-Driven Prescription,” by Heather Burns and Charles Beever, s+b enews, 02/13/03. Click here.
  3. “Health Care’s New Electronic Marketplace,” by J. Philip Lathrop, Gary Ahlquist, and David G. Knott, s+b, 2Q 2000. Click here.
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