Value Based Healthcare Delivery

I recently came across this talk by Michael Porter about healthcare that he had delivered at Harvard  Business  School though the  talk was  generally about the healthcare system in the US  however  i felt that  it was quite  relevant  to healthcare  systems in general across the globe.

One  of the  most  important things that he talked about was  Value Creation and  improving the  Value delivery system. But then the question which arises is what is the  true value.  How do we  define Value becomes  critical , is it just patient outcomes , is it cost of delivery , could it be a  generalised figure and  he defines  it quite comprehensively  he says that it the patient health outcomes achieved  relative to the money spent to achieve those outcomes.  Which becomes a  simplified outcomes as numerator and cost as denominator.

This is  quite  a shift  in our existing way of  measuring success  which are either  based around profit maximisation, or Volume  delivered, or  access to healthcare in general. Quality as  it stands currently is  based entirely around the  process definition and  improvement. Be it any guideline we  follow NABH or JCI its  mostly process based. Process improvement  is very important  however outcomes  are  even more important.  And  are we really measuring the  clinical outcomes. If the  system is to improve  then the competition has to move from being profit or  process based to becoming outcome based and then to value creation and thats the  only way we can get a  handle on the spiralling costs of healthcare delivery.

So how do we really shift the  focus to value.

Lets Look at Outcomes outcomes need to defined per  patient and  his / her medical condition. We need to look at survival,  functional status, independence, residual defect / illness. Yes it is an intensive  exercise  but the  results would truly be  enlightening and  a true move towards the  goal  of quality. Define the  Outcome parameters for any surgery / medical treatment that is meted out including survival rates, extension of survival period, dependence of medication etc etc.

Secondly identify your costs. For some strange reason healthcare seems to shy away from a  practice which is so commonly followed in the manufacturing  sector and this is ABC (Activity based Costing ) .For Healthcare i would suggest a  time related Activity based  costing. Whats even more  specific is that it will  be a  patient based time related activity based costing.  We tend to see ourselves as distinct departments and subunits and we tend to do our costings similarly too(that  is if we do our costings). However a  true costing exercise must capture the entire cost related to the  patients  journey through  care  pathways. And through this way we should be able to define  the true value of a  patient outcome. The focus needs to be on the  Outcome , and  existing technology in terms of HIS  systems must integrate these costing parameters  but  the  end result could truly be transformational .

I personally look  forward to a  day where  we will focus on the right performance indicators though that  is a  different post in itself. But  i think this could very well be a move  in the right direction be it for a private hospital, a charitable trust or a  public trust.  Efficiency , effectiveness  both would be  effectively measured and  documented and  true value would lead to better profits / access/ volumes so this is a  win win no matter  which way you take  it.

Here is the  Video if you are  interested , apologies for the poor sound quality.

Disclaimer: The views expressed in this  post are my own and  are  not meant to be derogatory  to any institution or organisation. These are just my thoughts and  these are open for further  discussion and  development. Please do comment and  share and  let’s get some universal cognition into this. Thank you for your patience and  tolerance.

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Primary Healthcare in Rural Areas- A collective approach

As awareness is increasing towards health related issues, entrepreneurs & companies are coming forward with various initiatives for providing healthcare services in urban & rural India. Urban landscape is still satisfactory but rural areas are still void of such services.  These Initiatives vary from use of technology like telemedicine to tackling financial issue through rural insurance with microfinance or public-private partnership to setup health centres and many more. But sometime I wonder that what would be chances of setting up a successful rural healthcare model when the efforts are made in isolation keeping specific areas in mind. Is it feasible to apply it across country without understanding what the rural India wants & what is their needs?

I prefer to see the issue from patient’s perspective as what they require from healthcare delivery system. In my view, basic but affordable treatment at appropriate time by an adequately skilled physician is enough for the most of the rural population. For preventing diseases we should also address issues like basic hygiene, malnutrition & sanitation.

Incidence of non-communicable disease is around 35% in rural areas which contribute almost 68% of total Indian population in 2009. NCD anyways require tertiary care with advance intervention but must be diagnosed in early stage to reduce the adverse impact. Major cause of mortality among rural population is communicable diseases which usually require medical treatment not surgical intervention hence a basic infrastructure with proper medication in sufficient.

Then what are the obstacles for providing primary healthcare to rural India? Do we require magic to get it changed? I see it’s a mix of Infrastructure, Financing, cost of care and administrative policies issues. This is combined with absence of people awareness towards their health needs.

We already have an old infrastructure but needs to be expended so that PHC get setup in every small town having mix of doctors from different discipline of medicine (Allopath, Ayurveda, Homeopathy) to have cross discipline plan of care. These PHC to be covered by BLS equipped ambulances stationed strategically and shared between nearby villages. Cluster of PHCs to be supported by secondary care hospital. These PHC & secondary care hospital can be run by private healthcare providers on a contract basis that will give efficiency and effectiveness to the system. Comprehensive system to be setup for collecting, evaluating & monitoring healthcare performance indicators to be setup for future planning & identifying the effectiveness.

There is a need of various awareness campaigns focusing separately on preventive aspect of communicable diseases & life style alterations to prevent non-communicable disease. A nation-wide network of NGOs, healthcare providers should be built for training and developing local resources.

Policy makers should focus on promoting innovation in field of affordable medical consumable, equipment & technology by creating favourable environment for entrepreneurs & investors. Separate tax structure for the doctor and health care workers working in rural area, Conducive environment for pharmaceutical companies supplying in rural areas, tax exemptions for equipment used in rural areas & promoting new comers in healthcare delivery are some of the measures that may inspire service providers to work in rural areas. Healthcare should be priority in the local government’s agenda.

Promoting & structuring medical tourism is important to strengthen private sector financially and make them to lower indigenous pricing by cross subsidization. State sponsored health insurance coverage including medicines and making health insurance as mandatory. NGOs can initiate and create a pool of volunteers willing to support rural family for their healthcare needs by financing their health insurance.

Controlling the cost of care is the most important aspect for continuing primary healthcare delivery model. Now it’s time to realize the power of indigenous medicines system (AYUSH) which is known to most of the rural India. Focusing on preventive medicine & lifestyle improvements, wide use of technology for communication and information sharing and developing resources in local community for spreading awareness can help us to reduce the cost of care. Inventory management system to be developed & run by the private sector including medicine & consumable.

It doesn’t require Magic to create primary healthcare as right to every citizen. It can be achieved by a collective & systemic approach with full commitment. This has to be a joint effort from policy makers, healthcare industry, NGOs and every individual that can make a difference.

Disclaimer: The views expressed in this post are purely the thought of the author and are not meant to be derogatory to any institution or organisation. The author is open to further discussions. Thank you for your patience and tolerance.

Analysing the common Primary Healthcare Model

Have  you ever wondered why there  is such little  investment in primary healthcare setups by established  healthcare  players. Though there have  been models like the  Apollo Clinics, or the  Manipal Cure and care. But why the  limited expansion and why only such few players.

A population of over 1.2  billion surely deserves a  better  primary healthcare setup and  honestly though individual private clinics are sprouting up  day in and day out why is it then that corporate healthcare chains are finding it so difficult in  establishing their presence .

The very evident answer to that probably would be the  bottom line the  EBITDA margins.Let us  consider what  exactly are the  revenue streams in  a Primary healthcare setup and what are the approximate gross margins associated with them.

OPD consultation – The  base of the stream  is the  Opd consultation and other than a basic one time registration charge the Consultation fee can be split with the consultant  according to various models. Though from my limited  knowledge the most common model is the  70 – 30 split, though in other cases a base rental model can also be selected specially if the  clinic  is located  in a  prime location. But consider this, this is a prime revenue  stream , the stakes can’t be changed much unless we are looking at growing consultants. The reason for this is our direct competition with hospitals, tertiary care providers , and established consultants if they do choose to visit a  primary care setup would ideally do it atleast on similar terms as with most established  corporate  hospitals. And there are a few hospitals out there who are  not looking at gaining anything from the  opd consultation component. It’s a  tough market ,  thus unless  we devise a  new model maybe even profit  sharing model could be considered, which promises larger returns once the  clinic is established  its difficult to see how this particular component can change, honestly for me  the  profit sharing model would eliminate two major problems of  community clinics ,  the  consultant  attrition and the Cash flow drying up . Another  way around it could be to review the  entire  community clinic model in terms of clinical manpower selection (growing  consultants) and have a  strategy in place there  to increase share in revenue , but of course this would come with longer break-even times, and maybe higher  marketing expenditures.

The LAB  –  i think this probably is the  king maker in the  community healthcare centre. To make the clinic setup profitable in-house investigation facilities are important.  And probably the critical factor here is reaching a  certain critical mass to make on site  batches optimal.  The  Health checkup vertical  as well as the opd will feed this. In addition it’s also important to establish the centre as a  really good competitive  path lab, and  competition just increases manifold from there. Another  problem here  is  insecurity if you are  looking  at establishing you lab as a  critical revenue earner there  will always be the  insecurity with GPs about patient poaching and this needs to be dealt  with effectively.  The  gross margins here are  around the  60 to 80% mark i think  from what  i have heard. But  then it all depends  on volumes.  I think an important  strategic decision here is  how we enter the market. We ideally  should look at reaching a  critical  number  of  clinics in a  geography / city so that a  central lab can be established and we can get some economies of scale.

The Pharmacy  – this is another very important  factor for the  primary healthcare  setup , the  in-house pharmacy the margin  here would be around the  25-32% gross. When compared to hospitals and surgical consumables  this is less. Again the  strategy ideally would be to establish the brand independent of the  clinic, as a  stand alone pharmacy. Again the  model would gain from a  centralized purchase department, to gain from economies of scale. However external factors such  as the DPCO if they are to be implemented stringently would affect our margins further  here, both in terms of negotiation abilities as well as  margins .

The referral revenue – This is specially applicable to primary setups linked  with corporate hospitals where a  certain revenue inflow  occurs from patient  referral and conversion

It makes  me wonder why other  corporate giants don’t entre this arena. It seems to be profitable, and  im certain the capital expenditure associated is comparatively negligible. I mean it’s just the  Land / property cost associated and most diagnostic machineries now are  available on the consumables model thus decreasing the  basic cap ex required.  The associated operation expenditure  is similar to hospital opds in   terms  of proportioning costs on scales. But then consider this most marketing departments  from corporate hospitals are ready to support primary care setups, for star referral doctors.  They are  willing to provide  free consultations in lieu for conversions, then must primary care setups for hospitals be considered as separate cost units. Could they be an extension of marketing activities  outreach community setups . Just a  thought need to look at  the financials of this.

Another  solution to the  primary care setup would be the  PPP model and I think this has been discussed before. However  most  corporates would be a  little  apprehensive about the pricing with PPP models and the  SE stratum they would be targeting might differ. Though the  volumes would definitely increase and the associated costs will decrease as associated  land / rent costs will be removed. But then again wont the mid ranged primary care setup models like the  Aushadhi  / med plus mode in AP gain from such an association.

Well lets see what the future holds  for us here, but primary care definitely needs some good effective players the gap between demand and supply is enormous and  not just that  ,  I personally feel that honest ,  transparent primary care  setups  could gain loads from a highly knowledgeable  and aware  middle class population who  would love to be associated with quality primary care brand , where  there  is continuity of care and honest  and transparent referral pathways  for when  secondary and tertiary care is required.

Disclaimer:

The views expressed in this  post are my own and  are  not meant to be derogatory  to any institution or organisation. These are just my thoughts and  these are open for further  discussion and  development. Please do comment and  share and  lets get some universal cognition into this. Thank you for your patience and  tolerance.