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Global Healthcare Megatrends: Financial models

There are more than 7 billion people on the planet today. Our growing global population has triggered some of the biggest healthcare challenges we’ll ever face. Listening to clients in Australia, Canada, Singapore, United Kingdom and United States, I believe many of these issues are universal. This is the third post in a five-part series that explores the clinical, population health, financial, regulatory and technical challenges we share as a global healthcare community.

Healthcare costs are rising around the world. Financial pressure may be the most uniform challenge we face as a global healthcare community. Every country is trying to find ways to deliver better care at a lower cost.

Reimbursement models differ by country

Each country has a different way of funding health care. For example, Canada has a single-payer system. Physicians bill the national health insurance plan for services rendered. England’s publicly funded healthcare system, National Health Service (NHS), provides most health care in that country.

In Germany, insurance companies must provide a minimum base coverage without profit. They can only make profit through add-on services. The United States does not have universal coverage, although the Affordable Care Act is heading us in that direction.

Every country is wrestling with different ways of covering the costs of health care. The global industry continues to try new reimbursement models with varying degrees of success.

Capitated care models didn’t work in the 1990s

New reimbursement models aren’t so new. About 20 years ago, several countries tried variations of capitated care models. In these payment arrangements, physicians received a set amount for each enrolled person based on his age, occupation and other factors.  Whether or not the person sought care did not affect these payments.

The goal of capitated care models was similar to the goal of today’s value-based care models: to change the incentives. Even then we understood that fee-for-service models – where providers are paid for every service – encourage volume of care, not necessarily quality of care.

Capitated care models failed in the 1990s because we didn’t have enough IT capability. We couldn’t monitor the work to make sure it was efficient. We were not able to make sure patients were receiving the care they needed. We simply didn’t have the analytics to ensure success.

Today’s reimbursement models have a far better chance of success, because we have greater IT capabilities than ever before.

Success is still a moving target

What will work best? For example, in the United States, will hospitals own ambulatory? Or will ambulatory sites hold the contract for population health? Both of these models are playing out and it is still unclear. My guess is that in the United States, where market forces can play a greater role, there will be multiple solutions.

There is more central control in countries like Australia, England and Canada. Governments in those countries have more control over the financial structure of health care.

In your experience, are financial models evolving fast enough? Too fast? What are the signs that we have efficient reimbursement models?

Editor’s Note: In Dr. Samo’s next blog post, he’ll describe regulatory environments. Previous posts covered clinical challenges and population health.

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