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Optimizing E-Health Value - Viewpoint


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Using an investment model to build a foundation for program success

Using an investment model to build a foundation for program success

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  • 1. Perspective Chris Bartlett Klaus Boehncke Vanessa Wallace Andrew Johnstone-Burt Optimising E-Health Value Using an Investment Model to Build a Foundation for Program Success
  • 2. Contact Information Beirut Düsseldorf Milan Sydney Ramez Shehadi Michael Ruhl Pietro Candela Vanessa Wallace Partner Partner Partner Partner +961-1-985-655 +49-211-3890-183 +390-2-72-50-91 +61-2-9321-1906 Jad Bitar Frankfurt New York Klaus Boehncke Principal Rainer Bernnat David G. Knott Principal +961-1-985-655 Partner Senior Partner +61-2-9321-2813 +49-69-97167-0 +1-212-551-6541 Walid Tohme Chris Bartlett Principal Hong Kong Gil Irwin Senior Associate +961-1-985-655 Ting Zhao Partner +61-2-9321-2839 Principal +1-212-551-6548 +86-21-2327-9800 Berlin Tokyo Marcus Bauer San Francisco Paul Duerloo Partner London Dr. Sanjay Saxena Partner +49-30-88705-834 Andrew Johnstone-Burt Principal +81-3-6757-8615 Partner +1-415-263-3729 +44-20-7393-3216 Delhi andrew.johnstone-burt@booz. Suvojoy Sengupta com São Paulo Partner Ivan De Souza +44-20-7393-3314 Senior Partner +55-11-5501-6368 Phillip Davies (professor of health systems and policy, University of Queensland School of Population Health), Tommy Lim, Liang Ma, Jason Kang, Dr. Christian Rebhan, Dr. Martin Siess, Alfred Sivathondan, and Charles Wong also contributed to this Perspective. We would also like to acknowledge the significant contributions by Sebastian Schneeweiss, associate professor in the Department of Epidemiology, Harvard Medical School, to the medical modelling in our e-health investment analysis tool. Booz & Company
  • 3. EXECUTIVE Electronic health (e-health) initiatives that apply information technology to the delivery of healthcare services for patients SUMMARY and management of clinical information are an essential weapon in the battle against the rising costs and other sys- temic problems in healthcare. For all their promise, however, the introduction of such initiatives has been a slow and ardu- ous process in many healthcare systems. Large e-health programs are often policymakers as they seek to define, severely hampered by ill-defined user implement, and gain acceptance of requirements, low levels of stakeholder viable e-health programs. Such a engagement, slow solution adoption model must yield a multidimensional rates among providers, and an business case that accurately calculates unwillingness to invest the often large and compares the different types of amounts of capital required. When benefits that can be achieved, the value e-health programs have successfully of various e-health applications, the moved into their development and stakeholder groups that will incur implementation phases, they often related costs, and the stakeholder encounter massive cost overruns and groups to which the benefits will schedule delays. accrue. This then allows transparent engagement with stakeholders, These problems often cause e-health appropriate design of incentive initiatives to bog down and fail, structures, and a program focus on but they can be overcome. The those components with the potential solution begins with a customisable to rapidly deliver benefits. investment model that can help guide Booz & Company 1
  • 4. HIGHLIGHTS • Developing a business case for any major reform of a complex networked system such as healthcare requires a holistic approach to determining the costs and benefits derived by multiple stakeholders. • Investment in comprehensive e-health programs can lead to substantial savings in annual national healthcare expenditures (in the case of Australia, this will equate to a conservatively estimated AU$7.6 billion in 2020 alone, representing 3 percent of the nation’s total healthcare WHY E-HEALTH • The fragmented nature of the health systems in many countries and their expenditures, given current trends). These numbers only reflect direct INITIATIVES FAIL lack of centralised management and savings in healthcare expenditures leadership and do not include economic flow-on effects, which can also be To overcome these barriers and substantial. achieve a successful implementation The healthcare industry lags and acceptance of e-health initiatives, • The largest type of benefit from behind other information-intensive each of the major stakeholder groups e-health is the reduction of adverse industries, such as financial services, in a system must agree that the ben- drug events caused by the lack telecommunications, and now many efits of the project will exceed its costs. of access to pertinent patient government agencies, in the use of But this presents a problem too. Costs information at the point of care. information technology. There are and benefits are often misaligned several reasons: in healthcare: Stakeholders that are • Of the core e-health applications required to invest significant resources and capabilities, the one with the • Reluctance of healthcare providers in e-health may only reap a smaller greatest benefits is medication to adopt technology or change their portion of apparent benefits, and management. Other capabilities, clinical practices without what they those with the most to gain may incur such as quality and performance consider to be a compelling medical fewer costs. For example, the majority management and electronic reason of the benefits from e-health typically medical records (EMRs), offer accrue to the stakeholders that pay for significant but secondary benefits. • The absence of an agreed-upon set healthcare services, but many of the • The implementation of e-health of performance targets that can be financial and nonfinancial costs are capabilities in primary care drives accomplished through the use of IT inevitably incurred by the providers. the majority of systemic benefits. in healthcare However, these benefits are not Governments are best positioned to realised in the primary care setting • The perceived opportunity costs of intervene in this distorted market and itself but flow on to acute settings IT investments in healthcare—too better align costs and benefits. But through the avoidance of hospital often, a dollar spent on IT is seen as that requires that policymakers, and visits. a dollar that has been diverted from those who seek to influence them, fully delivering services directly to the understand the e-health programs they • E-health is an essential factor in patients are considering. This understanding is modern healthcare reform. It has often limited for a variety of reasons: the potential to reduce the overall pressure on patients, providers, and payers; enable quality and performance measurement; and enhance capabilities. 2 Booz & Company
  • 5. • The business cases for e-health • The quantification of benefits does In our work on the strategy and programs tend to be skewed by not include the ripple effects that an implementation of healthcare IT initia- taking the sole perspective of the investment in one care setting can tives in various countries, including stakeholder making the largest have in other areas of the system. the United States, Canada, Germany, investment. Italy, UAE, China, and Singapore, • Business cases often take a narrow it has become clear that bolstering • The evidence needed to get clini- focus on a single application. For the success rate of e-health programs cians to support the program and instance, an electronic medical depends on the development of robust adopt the proposed technology is record (EMR) application may business cases and benefits realisation not compelling and sometimes is be proposed without considering scenarios. These must measure and even completely omitted from the the full spectrum of application or compare the value of applications, business case. capability options that could be as well as identify major stakehold- prioritised to address the problem. ers and the distribution of costs and benefits among them. Costs and benefits are often misaligned in healthcare: Stakeholders that are required to invest significant resources in e-health may only reap a smaller portion of apparent benefits, and those with the most to gain may incur fewer costs. Booz & Company 3
  • 6. THE NEED FOR and refining it in eight major e-health initiatives in Europe, the Americas, the makers to estimate benefits and costs as accurately as possible. In the AN E-HEALTH Middle East, and Southeast Asia over Booz & Company model, the method- INVESTMENT the past decade. These experiences reveal that it is essential to construct ology for estimating benefits is under- pinned by a high-level scan of more MODEL e-health business cases using a holistic than 2,000 academic research papers approach that encompasses four key and a detailed analysis of more than dimensions (see Exhibit 1). 400 academic studies. On the cost side, the benchmarks used are based The most effective means for build- Using a holistic, multidimensional on actual costs of existing e-health ing a business case that can help approach to considering e-health programs and then adjusted for policymakers navigate through the programs enables decision makers anticipated adoption rates and imple- complexities of e-health initiatives is to create a fact base that includes mentation schedules. In both cases, a rigorous investment and benefits costs and benefits, the stakeholders the research and evidence on which realisation model. The power of such to whom they will accrue, the specific the assumptions are based are refined an e-health investment model extends applications that drive them, and and updated as new findings emerge. beyond the clear understanding of the the implementation time frames they Finally, the model and its inputs are application options, costs, and benefits require. Decision makers can draw validated by a team of distinguished of a program. It also increases imple- on this fact base to construct alterna- international e-health experts, medical mentation success rates by creating a tive e-health strategies that feature doctors, and academics. foundation for developing effective different combinations of options in incentive frameworks and change each dimension. Thus, the investment The power of such an investment management plans, as well as enhanc- model is an essential tool for plan- model in e-health programs (as well ing accountability by enabling the ning the scope of an optimal e-health as the value that can be derived from ongoing monitoring and measurement program and setting its priorities. successful e-health programs) can be of the projected benefits. demonstrated by applying it to the In addition to managing multiple Australian healthcare system (see Booz & Company has developed an dimensions, an effective e-health “Customising the E-Health Investment e-health investment model, testing investment model must enable policy- Model for Australia”). Exhibit 1 Four Dimensions of E-Health Financial Model Framework Stakeholder Dimension Application Dimension - Enables identification of “winners” and - Enables ROI calculation based on “losers” from e-health capabilities application/infrastructure component - Identifies and quantifies the incentives - Allows prioritisation of e-health capabilities needed for adoption for implementation planning - Examples: GPs, polyclinics, public - Examples: Electronic medical records, hospitals, private hospitals, specialist personal health records, medication centres, long-term care management, decision support Financial Model Framework Cost-Benefit Category Time Frame - Enables logical grouping of costs/ - Identifies when costs and benefits will benefits for marketing/communication accrue based on implementation road map purposes - Factors in the complexity and effort to - Identifies impacts on national health deploy applications/components and their outcomes and performance metrics adoption/take-up by stakeholders - Examples: Quality, reduced errors, productivity - Examples: One- to 10-year time horizon and beyond Source: Booz & Company 4 Booz & Company
  • 7. An Application Example: Customising the E-Health Investment Model for Australia To customise the Booz & Company Global E-Health Investment Model for this study, model inputs were based on publicly available healthcare statistics, and key assumptions were adjusted to reflect the financing structure of the Australian healthcare industry. Where research identified a range of potential benefits, conservative figures were applied. Where Australian data was not readily available, benchmarks derived from previous Booz & Company e-health engagements were used. Our high-level modelling for Australia is focused on the perspectives of stakeholder groups within four major areas: • Healthcare providers, including the nation’s general practitioners (GPs), public hospitals and outpatient centres, private hospitals, and nursing homes • Patients—individuals who access Australian healthcare services • Governments, including the Federal Government (through its role operating Medicare Benefits Scheme, Pharmaceutical Benefits Scheme, and Department of Veterans’ Affairs) and the governments of the states and territories • Private payors, including the nation’s private health insurance organisations Note that the investment model is very flexible and that different stakeholders and applications can be added at any time to derive new perspectives and insights. The investment model is an essential tool for planning the scope of an optimal e-health program and setting its priorities. Booz & Company 5
  • 8. INTRODUCING Australia has one of the world’s healthiest populations in terms of history, thus eliminating price discrimi- nation based on age, health status, and AUSTRALIA’S average life expectancy and infant claims history. HEALTHCARE mortality rates. Australian healthcare spending per capita is far lower than For all of its advantages, Australia’s SYSTEM that of the highest-spending nations, healthcare system, like the systems of such as the United States. The total most developed nations, is under annual spend on healthcare is approxi- increasing pressure due to a shortage mately AU$103.6 billion (US$96.7 of trained health professionals, the billion) with almost 69 percent of the suboptimal distribution of services, total funded by Australia’s Federal and and the increasing demand for care, State Governments.1 which is driven in part by demo- graphic change. The patient journey With the exception of emergency within the current system is hampered visits, patient flow in the Australian by disjointed communication and healthcare system is generally routed limited access to quality information. through general practitioners (GPs). These problems are compounded by These physicians play a gatekeeper Australia’s dispersed population and role and help to coordinate other the significant distances patients and healthcare services for their patients. providers must travel in remote and rural areas. A majority of the Australian popu- lation has access to a guaranteed As a result, the Australian healthcare minimum level of care through public system is exposed to delays in access- funding, and thus employers play a ing information and services. The limited role in healthcare decisions. ability to make sound decisions about Public health insurance and primary care is often impaired, and there are a care are funded largely at the Federal significant number of adverse effects level; hospital-delivered acute care is and high levels of frustration, particu- funded at the state level. Australian larly among patients who are elderly, private healthcare insurance is based disabled, or suffering from chronic on community health ratings, as conditions or mental health disorders. opposed to an individual’s medical A majority of the Australian population has access to a guaranteed minimum level of care through public funding, and thus employers play a limited role in healthcare decisions. 6 Booz & Company
  • 9. THE STATE Australia was one of the first nations to recognise the potential and benefits ity between hospitals and community healthcare providers remains a key OF E-HEALTH of e-health, which led to a number of issue that only a handful of projects IN AUSTRALIA initiatives in the 1990s designed to encourage GPs in private practice and have begun to address. Furthermore, there is an overall lack of investment, other primary care providers to com- accountability, and shared goals in puterise their facilities and use shared Australia’s e-health programs. This electronic health records (EHRs) for is creating insecurity, confusion, and specific patient segments. As a result, frustration among the healthcare sys- today 95 percent of Australia’s GPs are tem’s primary stakeholders, especially computerised versus 46 percent in the patients who expect clinicians to have United States.2 access to meaningful information at the point of care. E-health in Australia gained further momentum with the creation of Although a national e-health strategy the National E-Health Transition has been developed for Australia, a Authority (NEHTA) in 2005 and general reluctance to commit fund- with subsequent efforts to identify a ing, resources, and political weight common set of standards for shar- to the implementation effort remains. ing information and to create greater Missing key elements are a clear, levels of stakeholder engagement. In shared understanding of the benefits parallel, a series of state-based e-health e-health investments can bring and initiatives focussing on the public the quantification of the financial hospital sector also emerged and impact that e-health initiatives have began rolling out EMR solutions to on the system’s major stakeholders. selected sites. The e-health investment model has been applied in this study to highlight Despite the relatively high adoption of these issues. IT amongst Australian GPs, connectiv- Booz & Company 7
  • 10. DEFINING AND providers, and through better self-management of their health This analysis clearly reveals that approximately two-thirds (AU$5.1 QUANTIFYING by patients billion) of the quantifiable e-health E-HEALTH • Better utilisation of healthcare benefits in Australia can be attributed to two benefit categories: reduced BENEFITS infrastructure, including reductions errors and enhanced adherence to best in the average stay length and wait practices. times The majority of savings stem from • Avoidance of the duplication of the reduction of errors in medication. To calculate the benefits of e-health, efforts (e.g., lab tests, X-rays) Adverse drug events (ADEs) occur the investment model must organise when the wrong drug or the wrong them into distinct categories. In our • Optimise use of pharmaceuticals dose of a drug is prescribed or study, the categories were clearly (including generics) dispensed, when a drug’s effects are defined to avoid double counting and dangerously altered by a patient’s to ensure internal consistency and • Enhanced health workforce preexisting conditions, or when a comprehensiveness. In the Australian productivity due to greater dangerous reaction occurs with one or case, only the benefit categories that efficiencies in obtaining patient more other drugs the patient is using. could be quantified based on current information, record keeping, In Australia, ADEs are estimated literature and publicly available administration, and referrals to affect 10.4 percent of patients statistics were incorporated into the treated by GPs each year, and about investment model. These categories When the e-health investment model half of these events are classified as are as follows:3 is used to calculate the economic value moderate or severe, with 138,000 of these benefit categories, we find that cases requiring hospitalisation.4 • Better health through reduced the successful rollout and adoption of It has also been estimated that as errors in diagnosis, medication, and core e-health capabilities in Australia many as 18,000 Australians die each treatment without medication are expected to be worth an estimated year as a result of ADEs.5 The most AU$7.6 billion annually by 2020 (see commonly acknowledged causes of • Better health through enhanced Exhibit 2 ). ADEs are disjointed patient/provider adherence to best practices by communication and limited access to Exhibit 2 Economic Value of Australian E-Health in 2020 by Benefit Category STEADY-STATE ANNUAL BENEFIT CATEGORY BREAKDOWN (%, AU$ BILLIONS) Total Annual Benefit = AU$7.6 billion Optimal use of pharmaceuticals (including generics) 2.3% ($0.2B) Reduction of errors 36.0% ($2.8B) Eliminating duplication of effort 8.1% ($0.6B) 8.2% Improved use of infrastructure ($0.6B) 14.7% ($1.1B) 30.6% Enhanced workforce productivity ($2.3B) Enhanced adherence to best practices Source: Booz & Company Global E-Health Investment Model 8 Booz & Company
  • 11. patient information at the point of model can also quantify well-being potentially lead to the deferment of care. E-health capabilities such as and efficiency benefits, such as the other capital investments in public medication management applications number of deaths, care visits, X-rays, primary care clinics, hospitals, or can significantly reduce ADEs. and tests that could be avoided. See additional emergency care facilities. Exhibit 3 for our analysis of the The second most economically cumulative value of these benefits to As previously mentioned, there are valuable benefits category is enhanced Australia over the next 10 years, based also significant additional benefits adherence to best practices. Decision on a conservative rollout schedule for from e-health that we have not support tools for providers that e-health applications and adoption quantified, such as enhanced disease incorporate prevention guidelines rate by patients and practitioners. surveillance and reductions in the and best practice care plans can inappropriate use of healthcare reduce unnecessary admissions. Risk The investment model reveals that a services. For example, e-health stratification and targeted disease commitment to a full e-health program security and identity management management programs are additional now could help Australia avoid an applications can significantly reduce best practice applications that can estimated 5,000 deaths annually the incidence of fraudulent claims create substantial savings. Further, once the system is in full operation.6 made on public and private healthcare e-health services and tools, such as Furthermore, the model estimates that schemes. The National Health Care PHRs (personal health records that more than 2 million primary care and Anti-Fraud Association in the U.S. allow patients to track and control outpatient visits, 500,000 emergency conservatively estimates that 3 percent their own health information) linked department visits, and 310,000 of all healthcare spending is lost to with medical devices, can help hospital admissions could also be fraud, and other international studies patients, particularly those with avoided per year. These results would have had similar results, giving an chronic conditions, better manage represent substantial improvements indication of the potential savings in their own health. in the convenience of care and this area.7 satisfaction for patients, as well as Besides calculating the economic relieve the current supply pressure in benefits of e-health, the investment the healthcare system, which could Exhibit 3 Additional E-Health Benefits Quantified, 2010–2020 DEATHS AVOIDED VISITS AVOIDED LAB AND X-RAY TESTS AVOIDED 10,418 2,200,000 7,331,933 2,028,002 7,000,000 10,000 # of deaths avoided (extrapolated from # of avoided # of avoided 1,800,000 outpatient visits 6,000,000 lab tests RAND study)* 8,000 5,000,000 1,400,000 6,000 5,273 4,000,000 1,000,000 3,000,824 3,000,000 4,000 # of # of deaths avoided 541,486 600,000 2,000,000 avoided ED visits 2,000 (conservative) 310,352 # of avoided # of 1,000,000 X-ray exams 200,000 avoided 0 0 hospital 0 2010 2012 2014 2016 2018 2020 admissions 2010 2012 2014 2016 2018 2020 2010 2012 2014 2016 2018 2020 - Reduced Errors - Reduced Errors (enabled by medication - Reduced Duplication of Efforts (enabled by medication management) management) (enabled by summary care record) - Enhanced Best Practices (enabled by quality and performance management) 1 Localized estimates from RAND study J. Bigelow et al (2005) * Localised estimates from RAND study, J. Bigelow et al., 2005. Note: Well-being benefits that are expected to accrue over the years will also lead to reductions in capital infrastructure costs which have not Notes: Figures are annual estimates. Well-being benefits that are expected to accrue over the years will also lead to reductions in capital infrastructure costs, which have not been been captured in modeling to maintain a conservative view captured in modelling in order to maintain a conservative view. Source: Booz & Company Global E-Health Investment Model Booz & Company 9
  • 12. ANALYSING An e-health investment model must be able to analyse a core set of e-health Political jostling and powerful special interests often affect the E-HEALTH applications and capabilities if it prioritisation of different applications APPLICATIONS is to provide adequate support to decision makers (see “Core E-Health and capabilities in healthcare systems. In systems that are heavily funded AND Applications and Capabilities by governments, like Australia’s, CAPABILITIES Defined,” page 12). this often skews decisions towards care settings that receive the most All e-health applications and public funding. For example, EMR capabilities require an infrastructure systems are often the first e-health to connect providers within and application implemented, even though across healthcare settings. Shared implementing networked medication infrastructure often represents the management capabilities for private majority of the investment required GPs can deliver more economic for an e-health program, but it is benefits and do more to relieve the core e-health applications and pressure on hospital infrastructure. capabilities that drive the anticipated benefits. Further, the core applications A rigorous investment model can and capabilities are not always help the leaders of large healthcare entirely exclusive of one another. systems avoid suboptimal decisions They are often combined according to and priorities by quantifying the group and end-user functionality so benefits of different applications that features can be prioritised and capabilities. See Exhibit 4 for for implementation. the results of such an analysis and Political jostling and powerful special interests often affect the prioritisation of different applications and capabilities in healthcare systems. 10 Booz & Company
  • 13. the relative benefits for each major capabilities are essential prerequisites fied in terms of benefits. This does e-health application capability in for this capability, so it requires addi- not mean that the respective ROI is Australia. tional investment. zero or negative; rather, it means that in our rigorous evaluation (based on Our analysis reveals that a shared The benefits of a stand-alone EMR academic research, including thorough medication management capability capability are also significant. They randomised control trials), there was would deliver a third of the estimated center on efficiency and productivity not sufficient proof to quantify these AU$7.6 billion in total annual benefits improvements. Additional efficiency factors. As such, the quoted total ben- that could be realised from e-health gains are also possible through the efit numbers are conservative. in Australia. This is largely due to avoidance of duplicated lab tests and its potential to reduce the ADEs that X-rays. But it must be noted that the Moreover, the results only quantify result in unnecessary outpatient visits, benefits of EMR systems are less sig- direct savings in the healthcare system emergency care visits, and hospital nificant if summary clinical informa- itself. They do not include economic admissions. tion for patients is not shared across flow-on effects that can be substantial. other healthcare institutions and For example, a GDP impact of A quality and performance manage- care settings. between AU$7 billion and AU$9 bil- ment e-health capability also has lion by 2019 as a result of a shared substantial potential for estimated Note that there are capabilities such electronic health record service in benefits of AU$1.6 billion per year, as connected care and identity and Australia has been estimated.8 but EMR and summary care record access control that were not quanti- Exhibit 4 Annual Value of E-Health Applications and Capabilities STEADY-STATE ANNUAL VALUE (10-YEAR INVESTMENT HORIZON, 2010–20) AU$ B Total = AU$7.6 billion 3.0 2.7 2.0 1.6 1.5 1.0 0.9 0.5 0.4 0.0 Medication Quality and EMRs Patient Self- Decision Summary Management Performance Management Support Care Records Management Source: Booz & Company Global E-Health Investment Model Note: Due to a lack of detailed Australian data, EMR benefits have been extrapolated and adapted from overseas modelling results. The number indicated is a best estimate which may vary widely, depending on individual institutional implementation status and best practice use of these systems. Booz & Company 11
  • 14. Core E-Health Applications and Capabilities Defined Connected care enables the electronic transfer of referral information from one provider to another and supports shared care plans where multiple providers are involved with the case treatment of a patient over time. Decision support provides clinicians with access to guidelines, reminders, and best practices to improve patient outcomes by helping them to make more informed and cost-effective decisions. Electronic medical records extend a clinical information system with comprehensive patient records, imaging, specialised clinical tools, and interfaces to the local administrative systems within a healthcare organisation. Identity and access control provides the security infrastructure needed to maintain patient privacy, effectively identify and authenticate providers and patients, and control access to facilities and health information. Medication management provides clinicians, patients, and dispensing pharmacies with information regarding a patient’s current and past CONSIDERING medications, allergies, and basic medication-related decision support in STAKEHOLDER the quest to eliminate medication errors. GROUPS Patient self-management provides patients with a portal view for managing their health records and researching health topics. In addition, the capability can provide secure, private patient communications with clinicians, enabling more effective participation in disease management programs and avoiding unnecessary visits to a clinic. Although quantitative insights into the Quality and performance management provides a comprehensive benefit levels of e-health applications database supporting intelligent performance reporting, monitoring, and and capabilities help to prioritise and the revision and improvement of care guidelines and best practices. It can justify funding, a robust understanding also support clinical trials and academic research. of the various stakeholders is also required to quantify the flow-on effects Shared summary care records (also referred to as EHRs) provide clinicians of the applications and capabilities. with summarized descriptions of the medical events in a patient’s history The stakeholder dimension in that may pertain to the current treatment, along with electronic access to economic modelling also provides detailed procedure, laboratory, and radiology reports. insight into the change management effort that will be needed to implement applications and capabilities successfully. For example, this dimension enables the identification of stakeholders that may offer resistance or require financial incentives to adopt the new technology. When we apply the investment model to major stakeholders in Australia’s healthcare system, the gross annual benefits by stakeholder group are revealed (see Exhibit 5). 12 Booz & Company
  • 15. Note that the analysis of e-health healthcare system. In healthcare of the total AU$7.6 billion in annual value differentiates between its systems such as Singapore’s, where e-health benefits in a steady-state sources (the stakeholder group that there is a greater out-of-pocket scenario arise from the connectivity has implemented e-health within payment for healthcare services, one of private GPs. This suggests that a care setting) and its beneficiaries large payor group are the patients even though 95 percent of GPs (the stakeholder group that actually themselves. In Australia, they in Australia already have stand- realises the benefit). This confirms are mostly the State and Federal alone EMR systems, they lack the and highlights the misalignment of Governments, and they would share connectivity needed to gain the full costs and benefits in the Australian a combined 68 percent of the benefits benefit of sharing event summaries and healthcare system. from e-health, an estimated AU$5.2 medication details about their patients billion annually. with other providers. One potential What is often not recognised is that explanation for this is that private the greatest beneficiaries of e-health The analysis of stakeholder benefits GPs are reluctant to connect their are usually the payors within the also indicates that nearly AU$5 billion EMR systems without some form of Exhibit 5 Annual E-Health Benefits by Stakeholder Group in Australia STEADY-STATE ANNUAL BENEFITS (YEAR 2020) AU$ M 5,000 $4,850.2 By source (total gross benefits in 2020 = AU$7.64 B) 4,000 By beneficiary (total gross benefits in 2020 = AU$7.64 B) 3,000 $2,561.5 $2,602.7 2,000 $1,527.3 $1,171.1 $1,005.9 1,000 $625.6 $143.6 $211.3 $108.2 $150.7 $145.8 $180.3 $0.3 $0.0 $0.0 $0.0 $0.0 0 Private Public Public Private Long-Term Patients State Gov. Fed. Gov./ Private GPs Hospitals Outpatients Hospitals Care Medicare Insurance Providers Payors Source: Booz & Company Global E-Health Investment Model Booz & Company 13
  • 16. incentive or subsidy that would enable primary care setting. This is confirmed would be sharing EMRs for their them to recoup their investment, thus by an analysis of the flow-on benefits patients; it does not include program allowing other stakeholders to realise from shared e-health capabilities overheads to develop a shared the full value of this benefit. across GPs (see Exhibit 6). e-health infrastructure. The benefits will accrue through reduced errors Further, the bulk of Australia’s The analysis of primary care value and enhanced adherence to best e-health investment to date and the generation reveals that the flow-on practices, and result in a reduction planned focus of current programs benefits of this investment would be in unnecessary visits to public and are directed mainly towards acute AU$668,000 per annum per GP clinic private hospitals. The analysis also care settings. This is a response to the at a direct cost of approximately makes a highly compelling, effective growing demand for services within AU$3,000 per annum per practice to case for Australia’s State and Federal the hospital sector, but it fails to establish and maintain connectivity. Governments to fund the required address the underlying driver for this Note that this cost reflects the infrastructure to connect GPs because demand and the area from which the majority of GP clinics already being the governments will be the primary greatest value could be gained—the computerised and assumes they recipients of the resulting value. Exhibit 6 Annual Value Generation from Primary Care, per GP Clinic Benefit Type Realised Beneficiary AU$ (in thousands) Long-term $668 $668 care 15 $668 Patient 700 7 17 Approximately 10% of 21 17 GPs 600 21 clinic events affected: Private Private health 161 132 - 66 emergency department hospitals insurance 500 286 visits avoided 400 - 36 inpatient hospital 241 State gov. admissions avoided 300 Public - 245 outpatient visits avoided 439 200 hospitals 337 - 84 X-rays avoided 263 Federal gov. 100 - 0.7 patient lives saved 46 GPs 0 Breakdown of Locations in Which Breakdown of Benefit Types Benefits are Realised Beneficiary Stakeholders Avoiding duplication of efforts Increased workforce productivity Optimised use of generic pharmaceuticals Better health through adherence to best practices Better health through reduced errors Note: Number of GP clinics = 7,261. Source: Booz & Company Global E-Health Investment Model 14 Booz & Company
  • 17. BETTER The failure to understand and effectively communicate the benefits capabilities to connect primary care as a priority. Its key conclusions are HEALTHCARE of e-health has been a major applicable across healthcare systems IN AUSTRALIA impediment to the implementation of e-health in Australia and many other and bear emphasis: AND ELSEWHERE developed countries. But with the • Developing a business case for right tools, sound, informed decisions any major reform of a complex can be made that are based on a networked system such as clear understanding of how value is healthcare requires a holistic created from e-health applications and approach to determining the capabilities in different care settings, costs and benefits derived by and how value flows through to multiple stakeholders by providing different stakeholders. a combination of different capabilities over time. This is important because the value inherent in computerising the • Investment in comprehensive healthcare sector has wide-ranging e-health programs can lead to implications and can significantly substantial savings in annual enhance reforms, including those national healthcare expenditures currently being discussed in Australia. (in the case of Australia, this will For example, activity-based funding equate to an estimated AU$7.6 and better performance transparency billion at minimum in 2020 in the system are enabled by the alone, representing 3 percent quality and performance management of the nation’s total healthcare capability, while, as previously noted, expenditures, given current trends). demand on emergency departments is influenced by medication management • The largest type of benefit from and decision support. As such, e-health is the reduction of adverse e-health is an important enabler for drug events caused by the lack any modern healthcare reform effort. of access to pertinent patient information at the point of care. The economic analysis described above outlines this rationale and • Of the core e-health applications highlights the importance of and capabilities, the one with the providing e-health infrastructure and greatest benefits is medication E-health is an important enabler for any modern healthcare reform effort. Booz & Company 15
  • 18. management. Other capabilities, defines the standards for sharing explicit infrastructure proposed for such as quality and performance information across different Australia and it is difficult to compare management and electronic medical organisations costs from other countries since each records (EMRs), offer significant country’s e-health program is at a but secondary benefits. • A comprehensive set of user different stage and invariably includes requirements sourced from clinical different applications. However, • The implementation of e-health representatives and encompassing experience and published figures from capabilities in primary care drives the findings of the latest research Canada, Germany, the U.S. and many the majority of systemic benefits. into e-health benefits others, suggest a typical investment in However, these benefits are not the range of AU$200 to AU$400 per realised in the primary care setting • A fully considered implementation head, although some countries spend itself but flow on to acute settings approach that gives appropriate much less—or much more. That through the avoidance of hospital weight to stakeholder engagement translates to roughly AU$4 billion to visits. at each step in the transformation AU$8.5 billion for a full deployment process, as well as guaranteeing of e-health functionality throughout Of course, an investment model privacy and security Australia. In other countries, these alone cannot guarantee the successful costs are most often borne by implementation of e-health initiatives • An implementation road map Governments, although there are or realisation of their anticipated that ensures the prioritisation of innovative approaches including benefits. Indeed, there are many capabilities in a way that delivers large-scale private/public partnerships critical success factors that need to the most benefits and alignment (PPP) that have been successful in be considered when taking a holistic with policy and regulatory reforms bringing the private sector into the approach to an e-health strategy. equation. Among them: • Effective incentive schemes that encourage the early adoption—as As Australia and other nations con- • An appropriate governance model well as the appropriate ongoing tinue to take cautious steps towards or innovative public–private use—of e-health application the large-scale implementation and partnerships to help fund, capabilities and information adoption of e-health, many lessons implement, and operate the sharing throughout the system have been learned and the potential e-health solution benefits of e-health have been compel- • Robust benefits realisation lingly confirmed. Now more than • Consideration of long-term framework and tracking ever, we need the leadership, the trends in e-health, such as mechanisms that ensure that willpower, and the tools to invest enhanced provider technologies, anticipated benefits are accounted wisely in the future of healthcare home care, personal medicine, for during the life of the delivery services and proactively and Medicine 2.0 implementation program address the mounting pressures our healthcare systems are facing. Our • A clearly defined national We have not mentioned costs in this health and collective futures demand interoperability architecture that Perspective as there has not been an nothing less. 16 Booz & Company
  • 19. Endnotes 1 “Health Expenditure Australia 2007–08,” Australian Institute 5 AHHA, 2008. of Health and Welfare, September 2009. asp?StoryID=469420 publications/index.cfm/title/10954 6 Based on the assumption that the pattern for adoption and 2 “A Survey of Primary Care Physicians in 11 Countries, 2009,” technology rollout will be similar to e-health projects in other Commonwealth Fund, 2009. developed countries. Content/Publications/In-the-Literature/2009/Nov/A-Survey-of- 7 “The Problem of Health Care Fraud,” National Health Care Primary-Care-Physicians.aspx Anti-Fraud Association. 3 There are additional categories for less quantifiable e-health aspx?webcode=anti_fraud_resource_centr&wpscode= benefits that could be considered, such as reduced fraud and TheProblemOfHCFraud enhanced disease surveillance, but these were excluded from 8 “Economic Impacts of a National Individual Electronic Health Australia’s economic modelling due to the limited availability of Records System,” Allen Consulting Group, July 2008. public data. 4 “Adverse Drug Events: Counting Is Not Enough, Action Is Needed,” Medical Journal of Australia, 2006. About the Authors Chris Bartlett is a Vanessa Wallace is a Booz & Company senior Booz & Company partner associate based in Sydney. based in Sydney. She is a He specialises in strategy leader in the financial services development and technology practice and has held multiple innovation, mainly for clients in governance roles at the highest the healthcare and telecommu- level within the firm’s global nications industries. partnership. During her 20 years of experience, her strategy work Klaus Boehncke is a has involved agenda-setting, Booz & Company principal capability-building programs based in Sydney. He leads the across multiple industries firm’s health practice in the including consumer products, ANZSEA region. He focuses healthcare, insurance, wealth primarily on large-scale e-health management, and banking. transformation programs. Andrew Johnstone-Burt is a Booz & Company partner based in London. He leads the firm’s global public sector business. Andrew specializes in providing strategic advice and leading major transformation engagements with private- and public-sector clients. Booz & Company 17
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