TORONTO, June 25 /CNW/ - The way that healthcare is paid for is in flux
as governments around the world seek ways to control costs without further
compromising quality at a time when the needs of the aging population threaten
to overwhelm health system resources. A new report published by
PricewaterhouseCoopers' (PwC) Health Research Institute finds that two-thirds
of health leaders, including government and private payers from 20 different
countries, see problems with their current payment system, and they are
exploring new payment models that use incentives to better balance access,
quality, efficiency and demand.
"Health systems are at risk of a major financial cavitation, and there is
a tremendous focus on cutting costs," says Tom Wong, Canadian Healthcare
Services Leader for PwC. "But you get what you pay for, as one executive told
us, 'If the government paid for Christmas trees, hospitals will produce
Christmas trees.' Cutting costs at the expense of quality and efficiency is
economically and socially devastating. This is why the right reimbursement
model is so vital to future sustainability, and it must be reimbursement that
properly aligns incentives versus the current perverse incentive structures
that exist today."
The report entitled "You Get What You Pay For: A Global Look at Balancing
Demand, Quality and Efficiency in Healthcare Payment Reform" provides a
comprehensive overview of how payment models are changing in 20 different
countries, lessons learned from the experiences of other health systems and
findings of a survey of 200 health industry executives including government
payers, private payers, hospital executives, and physicians.
Key findings in the report include:
- Most industrialized countries use gatekeepers such as physicians to
control the demand for healthcare, ensure patients receive the right
treatment and prevent over-use or use of more expensive treatments
than needed. Yet, traditional gatekeeping systems are broken or
breaking down, according to PwC.
- Case-based prospective payment that groups reimbursement rates into
diagnostic related groups (DRGs) is the emerging standard for hospital
payment, having proven to improve efficiencies. This type of hospital
reimbursement already has been adopted by 70% of countries part of the
Organisation for the Economic Cooperation and Development (OECD).
However, it does have drawbacks, particularly with managing patients
across the continuum of care and forces the focus onto transactional
- A number of countries that have historically had tax-funded or social
systems are adding market-based competition to spread the burden of
payment and to encourage efficiencies. But multiple funding systems
and payers operating together in the same market creates conflicting
incentives and causes confusion if incentives are not coordinated and
- Reimbursement to general practitioners and primary care physicians is
far more varied among different countries and regions than
reimbursement to hospitals. Models that integrate hospital and
physician payment have proven best at creating mutually aligned
"The optimal payment system is one that is totally based on providing the
best possible outcome for patients and the community, but that is very
challenging given the current demands being placed on the system," says Wong.
"Each country needs a hybrid health payment system, one that balances cost
containment and efficiency with quality and demand. There is no global
cookie-cutter solution that will work universally, which is why each country
needs to take parts and pieces that work given their culture, social goals and
Balance of Cost, Quality, Efficiency and Demand
PwC's research found clear trends around the world in how governments are
- Meeting demand by caring for an increasingly aging population was
rated the most difficult challenge facing health systems around the
- Cost control was ranked as the most important factor in developing
payment systems in the future. It ranked more important than quality,
efficiency or demand.
- "Better informed patients" or consumerism ranked highest as a way to
better manage demand. Increasing out-of-pocket payments ranked lowest.
- Approximately eight in 10 (81%) global health executives said that
better coordination of care would do the most to improve quality in
their countries. Bonuses for care coordination to physicians and
hospitals were among the top five methods needed to improve quality
- To better reward quality, quality information must be gathered,
measured, and acted on. Data is becoming increasing available to
compare quality measures, but PwC found that patients and gatekeepers
aren't acting on the data because patient choice is still largely
driven by subjective perceptions of quality versus quantifiable
medical or technical data. Payers are still reluctant to base
reimbursement on quality alone.
Information technology has been identified as an effective means of
improving efficiencies and better coordinating care. Payers often express
concerns about financing advancements in technology because medical technology
such as better diagnostics to detect illness earlier may lead to increased
utilization. PwC recommends that if investment in IT and adoption is desired,
countries that do not already do so should build incentives for IT investment
into their payment formulas.
Globalization Drives Need for Rational Pricing
There is a potential need for rational pricing across different countries
and territories, particularly in Europe, as the healthcare marketplace becomes
more global. Patients who are paying more out-of-pocket for care are shopping
around for care in non-traditional venues and locations. Countries need to
prepare to develop rational pricing for competing in the global market for
PricewaterhouseCoopers' Health Research Institute commissioned a global
survey of more than 200 healthcare executives from 20 countries, including
A full copy of the report is available at http://www.pwc.com/hri.
About the PricewaterhouseCoopers Health Research Institute
PricewaterhouseCoopers Health Research Institute (http://www.pwc.com/hri)
is an unparalleled resource for health industry expertise. By providing
cutting-edge intelligence, perspective and analysis on issues impacting the
health industry, HRI assists executive decision-makers and stakeholders
worldwide in navigating their most pressing business challenges.
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healthcare research unit, capitalizing on fact-based research and
collaborative exchange among our network of professionals with day-to-day
experience in the health industries.
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For further information: Carolyn Forest, PricewaterhouseCoopers, (416)