Healthcare and innovation. The prescription for a better Australian health system

Transcription

1 Healthcare and innovation The prescription for a better Australian health system

2 Contents Healthcare and innovation... 3 The Innovation Index of Australian Industry... 3 Healthcare less innovative... 3 Why innovation matters... 4 Costs of poor treatment... 4 IBM s healthcare vision... 4 Opportunities for innovation... 5 Innovative business models... 5 Innovative technology... 6 Innovative thinking and progressive policy... 6 Denmark: innovative healthcare in action... 7 Conclusion... 8

3 Healthcare and innovation Australia can proudly point to its long history of medical pioneers, from Howard Florey s contribution to the discovery of penicillin to the international success of Graeme Clarke s cochlear implants and the Nobel Prizewinning stomach ulcer research of Barry Marshall and Robin Warren. These achievements and the ongoing efforts of the new generation of Australian researchers and biotechnology innovators should be saluted. It is vitally important to keep generating new ideas and new technologies to help us provide better healthcare. However, the way in which Australia as a society delivers healthcare services, from the macro level of government policy to the micro level of individual hospitals and healthcare providers, is severely lacking innovation. The business processes and models on which we run our hospitals and healthcare networks, the management style and culture of healthcare organisations and the policy frameworks have remained virtually unchanged for 30 years. Without making significant changes to these areas, how can we expect healthcare outcomes to improve? The Innovation Index of Australian Industry The Innovation Index of Australian Industry, published by the Melbourne Institute and IBM Australia, thoroughly examined the changing levels of innovation in Australian s healthcare and other industries. It is the first study to reflect the complex nature of innovation using inter-industry, multiindicator analysis. Innovation is widely accepted as a key driver of economic growth and productivity. The Innovation Index of Australian Industry addresses the many contributors to industry innovation by analysing six data groups: research and development intensity; patent intensity; trade mark intensity; design intensity; organisational and managerial transformation; and productivity. The index captures innovation trends across healthcare and 12 other categories of Australian industry over 15 years from It tracks the evolving innovation performance of the Australian economy to give business leaders, analysts and policy makers a rigorous and insightful measure to assess industry and national economic performance. Healthcare less innovative The Innovation Index of Australian Industry found that the healthcare industry under performed the industry average through most of the 1990s and into the new millennium. Healthcare innovation rose appreciably between 2004 and 2005, most significantly in trade mark activity, which more than doubled. There was also strong improvement in research and development activity, rising 71 percent. However, there were only marginal improvements in organisational and managerial innovation and productivity. The index noted that like many service industries, healthcare providers may find it difficult to improve productivity because it is so reliant on highly skilled people whose work cannot be easily replicated or automated. However, it noted there was scope for further productivity growth through the application of information and communication technologies. 3

4 Why innovation matters If this were simply a matter of benchmarking healthcare against other industries or Australian healthcare against other countries for status or kudos, this lack of innovation would be unimportant. But the reality is, lives depend on it. 1 Each day, 25 patients die in Australian hospitals from preventable causes and another 22 suffer preventable permanent disability, according to the Medical Journal of Australia. Healthcare costs are spiralling upwards, but risks are still increasing and patient outcomes are not improving. The media regularly reports systemic failures in the healthcare system, often with dire results. There is an urgent need for a dramatic shift in the way this country addresses healthcare through more innovative use of technology, business models and policy. For example, the Australian Centre for Healthcare Research (ACHR) found that 25 percent of Australians suffer some form of chronic illness. Its report E-Health and the Transformation of Healthcare puts it bluntly: nearly every one of them would be better off if the medical practitioners who care for and treat them were more in touch with each other. It is hard to understand how Australians can tolerate the fact that they re not. Costs of poor treatment In 2001, the Australian Institute of Health and Welfare estimated the annual treatment cost of cardiovascular diseases was $5.5 billion, in addition to $3.7 billion for respiratory diseases and another $3.7 billion for mental disorders. In January 2007, Diabetes Australia estimated there were more than 766,000 diagnosed diabetics in Australia and that this number was growing at nine percent per year. The organisation believes there are at least twice as many undiagnosed cases. It estimates the direct cost of treatment at $3 billion per year. ACHR s research found that inadequate care management leads to percent of chronic illness sufferers being hospitalised. And although it is accepted that coordinated care plans could drastically improve treatment outcomes, fewer than 14 percent of chronic illness sufferers are placed on care plans and less than one percent are tracked to see if they are following the plans. ACHR believes improved knowledge sharing and care plan management for patients with chronic diseases would save the health system $1.5 billion a year in direct costs. Adding the relief of associated costs to the community and increased workforce participation, the benefits could total $7 billion each year, which is approximately 8% of Australia s annual health expenditure. IBM s healthcare vision IBM believes that if we continue along the current path, the Australian healthcare system will become unsustainable within the next decade. The IBM Institute for Business Value s report Healthcare 2015: Win-win or lose-lose? points to fundamental problems with rapidly rising costs, poor and inconsistent quality and lack of access or choice. Combined with the impact of globalisation and consumerism, the increased burden of disease and the cost of new technologies and treatments, these factors will force policy makers and providers to make fundamental changes in healthcare delivery and management. To address these issues, the way societies address healthcare needs, will undergo three transformations: Focus on value. Consumers, providers, and payers will agree upon the definition and measures of healthcare value and direct healthcare purchasing, the delivery of healthcare services, and reimbursement accordingly. 1 Van Der Weyden, Martin B The Bundaberg Hospital scandal: the need for reform in Queensland and beyond. Medical Journal of Australia? 183(6):

5 Develop better consumers. Consumers will make sound lifestyle choices and become astute purchasers of healthcare services. Create better options for promoting health and providing care. Consumers, health insurers and providers will seek out more convenient, effective and efficient means, channels and settings for health promotion and care delivery. This will require significant changes from all parties in the healthcare system. Healthcare providers must move from their current focus on episodic, acute inpatient care to managing chronic diseases and the lifelong prediction and prevention of illness. Consumers must take more responsibility for their health. Public or private health payers must help consumers remain healthy and get more value from the healthcare system and help providers deliver higher value healthcare. Medical Suppliers must work collaboratively with providers, clinicians and patients to produce products that improve outcomes or provide equivalent outcomes at lower costs. Society must make realistic, rational decisions regarding lifestyle expectations, acceptable behaviours and how much healthcare will be a societal right versus a market service. Federal and State Governments must address the unsustainability of the current system by providing the leadership and political will to remove obstacles, encourage innovation and guide Australia to sustainable solutions. Opportunities for innovation We believe there are three main areas where the Australian healthcare system can innovate to address these serious and pressing challenges: the business models we use to deliver healthcare, the way providers and administrators use technology and the way policy makers and consumers think about health. Innovative business models One of the major problems with healthcare is that it operates on outdated and inefficient business models. In some areas, it is generous to say healthcare uses a business model at all. For example, state health systems spend billions of dollars each year but have difficulty obtaining a consolidated set of accounts. They have a multitude of different payroll, human resources and supply chain systems. According to The Economist Intelligence Unit, this kind of redundancy and inefficiency accounts for percent of the world s health costs. It is not just a question of spending money: it is about spending money more efficiently and treating the business of healthcare like any other business. One obvious example of the need for innovation is in the way healthcare providers divide up responsibility for core and non-core functions. Most organisations concentrate on their core business, letting others provide non-core supporting functions. However, this business model is in its infancy in the Australian healthcare system. Some Australian hospitals use external providers for laundry or catering, but still maintain their own, payroll, financial management, procurement systems and IT infrastructure. It would make more sense to pass responsibility for these functions to specialists who can deliver them more efficiently and cost effectively. 5

6 Public-private partnerships have lately received bad publicity in Australia, but there are many cases overseas where the private sector has successfully collaborated on projects with the public health system and shared some of the risk of these projects. Examples include the National Health Service in the United Kingdom and other European countries such as Denmark. Innovative technology The healthcare industry spends vast sums on expensive, high-technology equipment for diagnosis and treatment. Unfortunately much of this equipment works in isolation in the cottage industry of healthcare and little of the data obtained is shared and turned into information that supports clinical care. In addition, the health sector has yet to realise the value of investing in information technology as one of the building blocks of a sustainable and, safe health system. The Economist Intelligence Unit estimates the health sector invests approximately two percent of its revenues on information technology, compared with 10 percent in other information-rich industries. To make matters worse, 60% of this investment is wasted on running legacy systems. People can bank, trade shares, file taxes and renew registrations online, but centrally accessible online health records for Australians are still many years away. This is despite the many obvious benefits: Health Affairs journal estimated that a fully interoperable electronic health record system would yield benefits the equivalent of five percent of a country s annual healthcare spending. The Australian Centre for Healthcare Research estimates an online home monitoring system for patients with chronic illnesses could reduce emergency department visits by up to 40 percent, hospital admissions by up to 60 percent and length of stay by 60 percent. And according to The Economist Intelligence Unit, an electronic drug ordering system could reduce medication errors by 86 percent. Other technologies that are showing promise and improving clinical and business outcomes include: automatic vital sign capture, electronic notes for nurses and doctors, electronic clipboards for patient registration, intelligent voice communication devices, real-time patient tracking, radio frequency ID tags and bar codes to streamline drug delivery and continuous infection monitoring. IBM believes that these systems will only achieve their full potential if they are designed and implemented in a way that encourages healthcare practitioners to use them. Clinicians are particularly reluctant to change the way they work unless they can be convinced of the benefits of adopting a new system. Innovative thinking and progressive policy To escape the trap of spiralling costs and worsening outcomes, healthcare policy makers need to take bold and decisive steps. Governments must pay increasing attention to preventing as well as curing illness. A study conducted by the New England Journal of Medicine, the Harvard Centre for Cancer Prevention and Scientific American found that lifestyle changes could prevent or significantly delay more than 90 percent of Type II diabetes cases, 80 percent of heart attacks and up to 70 percent of cancers. Federal and state governments in Australia are starting to use public health campaigns to encourage these lifestyle changes, but there is a great deal more work to be done. Unfortunately, the Australian health system is hamstrung by the complicated way in which healthcare is governed and the constant debates between federal and state governments over jurisdiction. This makes it extremely difficult to institute country-wide programs or take a unified view of patients as they move through the system. 6

7 Denmark is often put forward as the leading example of a country taking an innovative approach to healthcare policy. Working with IBM, the Danish government has implemented a universal electronic health record. This required a nationally coordinated approach, significant ongoing funding and incentives to encourage doctors and healthcare organisations to use the system. Health and lifestyle issues are not just the domain of government policy. Progressive employers are also taking responsibility for staff health. For example, IBM gives its employees financial incentives to fill out health risk appraisals and has over 40 different programs advising them how to reduce the risk of illness through preventative care, exercise and diet. As a result, the injury rate for IBM employees is lower than the industry average. In the US, where IBM pays for employees health insurance, its premiums are six percent lower for families and 15 percent lower for singles than the rest of the industry. This saves the company US$100 million each year and has follow-on productivity benefits because staff are sick less often. Denmark: innovative healthcare in action Denmark has successfully developed a healthcare data network and is now implementing a national health portal and a clinical data repository. Its success is due to a careful alignment of incentives, a culture of collaboration and maintaining a correct balance between central and local leadership. In 1994, the Danish government founded MedCom, a coordinating organisation for healthcare IT, to develop national standards for electronic data interchange communication and ensure their widespread adoption in primary care. By May 2006, 98 percent of Denmark s 3,500 GPs had adopted these standards, in addition to the majority of specialists, all 37 hospitals, all 331 pharmacies and more than 130 local authorities. In 2006, market research firm Empirica estimated the country had saved 336 million euros as a result of implementing the system. It found a typical GP serving 1,300 patients saved 30 hours per week of administrative work by using the MedCom standards. There is also considerable anecdotal proof that the system enables more effective, efficient and widespread communications in the healthcare sector. GPs and hospitals spend less on administrative processing and get reimbursed faster. Local authorities spend less on handling transfers of patients between hospital and home care. Patients receive more efficient health services, better and more rapid communication of patient data and access to information about their health. While there are significant differences between Denmark and Australia that make direct comparisons difficult, many of the lessons learned could easily apply here: Start with basic needs; then add other things Establish a process for continual monitoring and evaluation. This must include measuring improvements in the quality of care Align the incentives of providers, health insurers and vendors Develop an approach to privacy and security that satisfies the demands of clinicians and patients, and then implement it consistently Keep an appropriate balance between central coordination and local leadership Devote plenty of resources to local implementation and training to ensure clinician adoption. 7

8 Conclusion Australia has produced breakthroughs in health research and invests strongly in innovative technologies for diagnosis and treatment. However, the Innovation Index of Australian Industry, published by the Melbourne Institute and IBM Australia, found healthcare was significantly less innovative than many other industries. While healthcare focuses on high-technology treatments and tools, it lacks the frameworks to efficiently and effectively share information about patients between different parts of the care environment. In addition, many hospitals and healthcare networks use outdated business processes, models, management styles and policy frameworks. IBM s vision for a sustainable healthcare sector requires significant transformation from all parties in the healthcare ecosystem. Australia can benefit particularly from more innovative business models, information technology and policy. With a collaborative approach, experienced partners and the political will, this innovation will create a stronger health future for all Australians. IBM Australia Limited Level Pacific Highway St Leonards, NSW 2065 Printed in Australia 07/07 IBM, the IBM logo and the What Makes You Special? logo are trademarks or registered trademarks of International Business Machines Corporation in the United States, other countries, or both. Other company, product and services names may be trademarks or services marks of others. References in this publication to IBM products and services do not imply that IBM intends to make them available in all countries in which IBM operates. Grafxlab GL_8837 The case studies referred to in this publication are based on information provided by IBM Clients and illustrate how certain organisations use IBM products and services. Many factors have contributed to the results and benefits described; IBM does not guarantee comparable results elsewhere. Subject to any rights which may not be excluded or limited, IBM makes no representations or warranties regarding non- IBM products or services. About IBM Global Business Services With consultants and professional staff in more than 160 countries globally, IBM Global Business Services provides clients with business process and industry expertise, a deep understanding of technology solutions that address specific industry issues, and the ability to design, build, and run those solutions in a way that delivers bottomline business growth. For more information please contact: Dr Mark Parrish Associate Partner Healthcare IBM Global Business Services mparrish@au1.ibm.com Steve De Laurier Healthcare Partner IBM Global Business Services sdelaur@au1.ibm.com Megan Kennedy Marketing Manager IBM Healthcare & Life Sciences mkennedy@au1.ibm.com ibm.com.au/healthyoutcomes