Impact of Technological Developments on the Costs of Healthcare NAMAF Conference 22 nd September

1. www.brandtechconsulting.co.za Impact of Technological Developments on the Costs of Healthcare NAMAF Conference 22nd September Mark Brand

2. Necessity is the mother of all invention  AESOP Moore’s Law predicts that every 2 years the cost of computing will fall by half.

3. Today’sTopics • 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

4. High value innovation (increase in pace and price of new technology) Information (increased expectations from doctors and consumers) Demographics (growing & aging population) Economic Drivers of Healthcare Costs 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)

5. Economicrealities • 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.

6. Economicrealitiescont. • 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.

7. 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)

8. 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.

9. 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.

10. Opposing perspectives… Payers I have limited budget, what do I pay for? Politicians How does everyone have access to quality care? Industry I have this technology, what can I do with it? Health System Practitioners I have a patient with a diagnosis, how can I treat it? Patients I have this condition, where can I get the best treatment?

11. 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?

12. Defining value V =_____ = _______ 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 outcomes condition specific cost total cost of cycle of care • 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.

13. Creating value • Look outside of mainstream healthcare – go digital (harness it to Moore’s Law?) • mHealth platforms • Electronic health records • Social networks for education • Operational efficiency • more output for less input • Pay for performance • Reward innovation • Smart phone based • ECG • Ultrasound • Patient monitoring (oxygen; pulse; BP; glucose etc) – realtime (bluetooth technology) • PoC diagnosis

14. 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

15. www.brandtechconsulting.co.za Impact of Technological Developments on the Costs of Healthcare Thank you!