Evaluating the health care trends around the world.
By Irad Mustafa
As governments and private sector stakeholders strive to deliver effective and efficient healthcare, they do so in an ecosystem that keeps undergoing dramatic and fundamental changes in business, and operating models. This shift is being fueled by aging and growing populations, the rise of chronic diseases, increased focus on care quality and value, evolving quality regulations and financial conditions, more informed consumers and the development of innovative treatments and technologies. All of these factors are leading to rising costs and an increase in expenditures of healthcare, infrastructure improvements, and technological innovations.
Demographic Shifts:
An ageing population and growing middle class are changing healthcare priorities.
People are getting older. Ageing populations in both emerging and developed nations are leading to higher healthcare demands. According to the United Nations, the world’s population is expected to increase by one billion people by 2025. 300 million of that billion will be people aged 65 or older, as life expectancy around the world continues to rise. Without additional healthcare resources and service innovations, the prospects of being able to deliver long-term care and chronic disease management services to this rapidly increasing senior population will become increasingly difficult.
At the same time, developing countries are observing significant growth in their middle classes. The Brookings Institute estimates 65% of the global population will be in the middle class by 2030. This can only lead to accelerated urbanization and access to middle-class comforts which will result in sedentary lifestyle changes that will inevitably increase the likelihood of diabetes, obesity, and other costly health conditions.
Rising middle classes and ageing populations will fuel the increasing demand for more health options. As such, effective partnerships between public and private sectors will be required to meet these expectations. Technology and analytics are ushering in new ways of disease prevention and providing patient-centric care. These advances need to be properly utilized by both private players and governments, as they bring greater precision to predicting patient behavior and detecting and diagnosing diseases.
Different parts of the world will be impacted differently by the demographic and societal shifts. To achieve successful and sustainable change across the globe, flexible and adaptive models will be required to fit the new health economies.
The Proliferation of Chronic Diseases:
Costly chronic and communicable care needs are exerting considerable demand on healthcare systems.
The ageing population and changes in societal behavior are contributing to a steady increase in chronic diseases and conditions, worldwide.This will push obesity rates and cases of diseases such as diabetes, cardiovascular diseases, hypertension, and dementia upward. According to the World Health Organization, chronic illness prevalence is expected to rise by 57% by the year 2020. Developing nations will be hit the hardest, as population growth is anticipated to be more significant in the emerging markets. This increased demand on healthcare systems due to chronic disease has become a major concern. The current number of people with diabetes is 387 million globally, and that figure is expected to increase to 592 million by 2035, according to the International Diabetes Federation.
Another rising health concern is global pandemics. The epidemics of the past decade have demonstrated the speed at which infections can spread across the globe. Ebola, SARS, MERS, and H1N1, and so on, all demand coordinated and agile healthcare responses.
Fortunately, research into treatments is generating promising results, and new delivery models are emerging. The Pharmaceutical Research and Manufacturers of America (PhRMA) estimates that 180 new diabetes drugs are in late-stage development. Seven new treatments have secured U.S. Food and Drug Administration (FDA) approval in the past two years. New immune-oncology drugs are showing great promise against cancer, as well. Efforts to reverse the rise in obesity have also gained momentum, particularly initiatives to influence consumption patterns.
Technology will play a vital role. Advancements in precise detection and diagnoses of diseases will be instrumental in reducing the costs of treating chronic conditions. New entrants into the healthcare market are helping the system evolve in this regard. With the health sector placing greater emphasis on preventive and patient-centric care solutions, new avenues will be opened for industries such as retail, telecommunications, technology, wellness and fitness. These industries must use these openings to come up with innovative solutions to chronic disease prevention and management issues.
Informed and Empowered Consumers:
Consumers are taking advantage of the easier access they have to information and using it to become more diligent and informed about their health.
Today’s consumers are better informed, and more financially responsible for their health care decisions. They also have higher expectations regarding the services and products they receive. More and more consumers are defining their ideal health care experience by including convenience, amenities and service quality to the traditional clinical elements.
Providers, health plans and governments are slowly adapting to these evolving expectations by focusing on consumer-centric strategies and service enhancement schemes. These changing consumer attitudes are prompting the health sector stakeholders to invest more in newer customer engagement capabilities. Both public and private providers who wish to retain existing patients and engage new ones need to invest in improving the overall consumer experience by training employees to be more customer-focused and utilizing technological advancements to make services and information more accessible.
The Evolving Financial Condition:
The public sector will face challenges in their efforts to meet the needs of their growing and aging populations.
A large portion of the global healthcare industry is funded by government expenditure. However, challenging economic conditions are making it difficult for governments in some regions to devote the necessary finances to cope with expanding healthcare demands especially when they’re being accompanied by ever-rising costs. Looking at some of the global economies, the U.S. is faring well, but some of the others are struggling. Russia is besieged by sanctions and falling oil prices; the economy in Japan is stagnating; China faces rising debt levels, significant growth slow-down, and currency devaluation; and Latin American countries are battling inflation and recession.
Health system expansions are typically accompanied by public and private sector partnerships to control costs and encourage more efficient resource utilization.
Income and Spending Correlation:
The positive correlation between income levels and household expenditure on healthcare means growing economies will experience higher healthcare spending.
A brief glance at expenditures by different countries reveals a high correlation between income levels and health costs. According to the World Health Organization’s Global Health Expenditure Database (2015), advanced economies like the U.S., Europe, and Japan spend around twice as much of their income (12% of GDP) on health care as emerging markets and developing economies (6% of GDP, on average). Overall, about two-thirds of the $8 trillion in global health care spending occurs in advanced economies, with the U.S. accounting for $3 trillion, or 40% of the total.
Consumer expenditure on health varies with income levels for two reasons. First, health care is a “superior” good, so its demand rises more than proportionately with income. As countries become wealthier, households are naturally more willing to forego consumption on other goods for medical advances capable of improving the quality of their health. Secondly, advanced economies also tend to be older societies. Their share of the population over 64 years of age is equal to about 24% of the population between 15 and 64.
Medical Advances and Digital Innovations:
Keeping the industry afloat while battling cost issues.
Advancements in the field of medicine and healthcare have been fundamental to the sector’s development for decades. However, medical innovations come with a high price tag as advances in health technologies drive up costs in all markets. For example, four new drugs have been approved in the U.S. to treat and possibly cure hepatitis C patients. In addition, the new treatments can save further costs in the long-run by decreasing the risk of liver failure, cancer, and the need for possible transplants. However, the costs of these drugs are considerably high, and some state Medicaid programs and other insurers have placed strict restrictions on their availability.
The demand for value and increasing competition are prompting healthcare organizations to find new and more efficient ways to improve service delivery. This includes making services more accessible and potentially less expensive through innovative ideas which can allow connectivity “anytime and anywhere.” Five areas in digital health — telehealth, mHealth, electronic patient records, wearables, and social media — are growing rapidly and hold considerable implications for the advancement of the sector.
Advancements in digital health technology are leading to advancements in connected health. Data being acquired by wearable devices, mobile health apps (mHealth), and from social media platforms are being used to transform aspects of health care. For example, developing nations who lack adequate healthcare resources and infrastructure, especially in the rural areas, are bridging the gap by exploring the use of digital care delivery models. Health IT is the fastest growing segment in India, where digital health’s potential benefits were particularly compelling in a country which has a large proportion of its population living in rural areas, with poor affordability and limited access to health care services.
The size of the global digital health market comprising of wireless health, EHRs, Electronic Medical Records (EMR), mHealth, and telehealth, and so on was $60.8 billion in 2013 and expected to increase to $233.3 billion in 2020.
Conclusion
Rising living standards and aging populations in emerging markets make the healthcare sector an attractive destination for capital expenditures. A passive approach to the industry from its stakeholders will fail to take advantage of the coming shifts in spending patterns and market shares. Alternatively, investors should invest strategically. That is the only way they can capture the opportunities and openings being created by rapid emerging market health infrastructure growth and the incoming era of innovation and cost consciousness in advanced economies.
